‘Free market’ rules don’t work for health care

For those Americans who have a religious faith in the free market, health care is a frustrating test of that faith. It doesn’t comform to supposed free market dictates. Competition doesn’t decrease costs.

For the better part of two decades, health care costs have been rising at more than the rate of inflation — straining the federal budget, eroding workers’ wage increases and even forcing some small businesses to drop health care coverage for their employees.

This year, businesses plan to pass more of the cost increase on to their employees, according to The Wall Street Journal:

Employers passed health-insurance costs onto employees at a sharply higher rate this year, and businesses’ premiums grew more slowly than they have in a decade, according to an annual survey of companies.

The increased cost-shifting reflected an acceleration of a trend that has been on the rise for years. (Emphasis added.) As companies struggle to cut costs amid difficult economic times, more of them are reducing benefits they offer workers or making workers pay more for them. Still, companies are paying nearly three-quarters of workers’ health-care premiums.

Employees paid an average of about $4,000 toward their family coverage this year, up 14% from last year, according to a report by the Kaiser Family Foundation and the Health Research and Educational Trust. But total insurance premiums paid by the employer and the employee rose just 3% for a family plan—the slowest rate of growth in 10 years, according to the data.

The chart below shows how rising health care costs have affected business costs and employee salaries.
Average Heath Insurance Premiums for Family Coverage 2005-20102

Meanwhile, some health insurance companies, continuing their practice of hiking premiums, are blaming the new health care reform law, according to the WSJ:

Health insurers say they plan to raise premiums for some Americans as a direct result of the health overhaul in coming weeks, complicating Democrats’ efforts to trumpet their signature achievement before the midterm elections.
Aetna Inc., some BlueCross BlueShield plans and other smaller carriers have asked for premium increases of between 1% and 9% to pay for extra benefits required under the law, according to filings with state regulators.

These and other insurers say Congress’s landmark refashioning of U.S. health coverage, which passed in March after a brutal fight, is causing them to pass on more costs to consumers than Democrats predicted.

The rate increases largely apply to policies for individuals and small businesses and don’t include people covered by a big employer or Medicare.

About 9% of Americans buy coverage through the individual market, according to the Census Bureau, and roughly one-fifth of people who get coverage through their employer work at companies with 50 or fewer employees, according to the Kaiser Family Foundation. People in both groups are likely to feel the effects of the proposed increases, even as they see new benefits under the law, such as the elimination of lifetime and certain annual coverage caps. . .
Aetna, one of the nation’s largest health insurers, said the extra benefits forced it to seek rate increases for new individual plans of 5.4% to 7.4% in California and 5.5% to 6.8% in Nevada after Sept. 23. Similar steps are planned across the country, according to Aetna.

Regence BlueCross BlueShield of Oregon said the cost of providing additional benefits under the health law will account on average for 3.4 percentage points of a 17.1% premium rise for a small-employer health plan. It asked regulators last month to approve the increase.

In Wisconsin and North Carolina, Celtic Insurance Co. says half of the 18% increase it is seeking comes from complying with health-law mandates.

The White House says insurers are using the law as an excuse to raise rates and predicts that state regulators will block some of the large increases.

“I would have real deep concerns that the kinds of rate increases that you’re quoting… are justified,” said Nancy-Ann DeParle, the White House’s top health official. She said that for insurers, raising rates was “already their modus operandi before the bill” passed. “We believe consumers will see through this,” she said.

Previously the administration had calculated that the batch of changes taking effect this fall would raise premiums no more than 1% to 2%, on average.

(Note that insurers are raising their premiums more than the amount they suggest is necessary because of the health care law.)

The greatest failure of the new health care reform law is that it fails to restrain costs, as advertised. Despite what opponents say, the law raises costs only marginally. From The Wapo:

The average annual growth in health care spending will be just two-tenths of 1 percentage point higher through 2019 with Obama’s remake, said the analysis. And that’s with more than 32 million uninsured gaining coverage because of the new law.

“The impact is moderate,” said economist Andrea Sisko of Medicare’s Office of the Actuary, the nonpartisan unit that prepared the report.

Factoring in the law, Americans will spend an average of $13,652 per person a year on health care in 2019, according to the actuary’s office. Without the law, the corresponding number would be $13,387.

A more ambitious reform would have waded into health care practices to force new incentives into the system. But that proved politically impossible. Republicans even objected to a plan to study the best procedures to see what actually works.

359 comments Add your comment

Joel

September 9th, 2010
9:14 am

CT, you dont think medicare drives up the cost of health care and health insurance? As someone stated earlier, the paying parties have the costs transferred to them.

Josh

September 9th, 2010
9:14 am

@ctucker

are you conviently forgetting the cost that are being forced upon businesses that will cause jobs to be lost and small businesses to shut down? $7000 per employee anually to the federal government. How is that right? That is robbery and socialist and marxist. How are the people free under this bs?

WAR

September 9th, 2010
9:16 am

@mystified

okay… i kinda understand. but the gov’t runs other things at a loss and we use them like the postal service, military/defense, department of ed.,

i’m just thinking about people who don’t have insurance and could care less who provides it as long as they get good quality care.

thanks.

Nothing Is Free

September 9th, 2010
9:17 am

ctucker?

The greatest failure of the health bill is that is was never meant to become law in it’s current form. It was written to be bounced between the Senate and the House, but the partially completed bill was in the Senate when Kennedy’s seat fell and it couldn’t go back to the House because it could then be filibustered. Because of this there are so many mistakes and problems with the very structure of the bill that there was no clause written to protect the bill if any part was declared unconstitutional. So if any of these lawsuits prove to be the least bit effective, the entire bill crashes and burns.

“Competition doesn’t decrease costs.”

Huh? Of course competition decreases costs. But more than that, price transparency decreases costs. No one knows what their doctor charges and the charges are usually set by the rent amount on the office space other than the competence and level of care by the physician. That’s changing.

you may have noticed that several Health Insurance Companies are now advertising that they are offering data bases for their clients to search to find the best doctor for the best price. This transparency will lead to more competition and much better care for everyone.

So once again, the solution is not the government. It is the private sector correcting and improving it’s product.

So when does the government EVER correct and improve it’s product?

ctucker

September 9th, 2010
9:17 am

PearlJam@8:48, let’s use your suggestion in just one area of health care: Well baby visits. Suddenly, parents would be forced to pay out-of-pocket for immunizations, which can soar into several hundred dollars. And babies need lots of those shots. (I know because I have a toddler.) So parents who are short of cash don’t get the shots for their babies. Two things happen: Infant mortality soars, and the United States suddenly has a reprise of epidemics we had been rid of — such as whopping cough and diptheria. You think that’s a good idea?

WAR

September 9th, 2010
9:19 am

something needs to happen because insurance, taxes, and retirement takes up the bulk of my paycheck! i haven’t seen a tax cut or tax break since i’ve been in education.

ctucker

September 9th, 2010
9:19 am

Nothing is Free @9:17, Please point to an area where competition has decreased cost in health care. Show me one region, one procedure, one anything.

Cynthia Is Sexy!!

September 9th, 2010
9:20 am

CT – And how is the little one these days?

ctucker

September 9th, 2010
9:20 am

Josh@9:14, Where are you getting that $7,000 figure from? Show me the data

Josh

September 9th, 2010
9:20 am

ctucker

September 9th, 2010
9:17 am
PearlJam@8:48, let’s use your suggestion in just one area of health care: Well baby visits. Suddenly, parents would be forced to pay out-of-pocket for immunizations, which can soar into several hundred dollars. And babies need lots of those shots. (I know because I have a toddler.) So parents who are short of cash don’t get the shots for their babies. Two things happen: Infant mortality soars, and the United States suddenly has a reprise of epidemics we had been rid of — such as whopping cough and diptheria. You think that’s a good idea?

Show us where the infant mortatily rate has been out of control because babies could not get there shots. Remember Georgia has peachcare for children whose parents cannot afford health insurance for their children which pays for their shots. Nice try Cynthia but you lose again.

Bubba Bob

September 9th, 2010
9:21 am

ctucker,

The question is….how do we fund all of this? We are broke, broke, broke. We can’t pay for what we are doing no. Adding more taxes isn’t going to help since we are already in so much debt.

Congrats! I didn’t know you had a toddler. Kids are great, huh?

Starring Kam Fong as Chin Ho

September 9th, 2010
9:21 am

Belinda, don’t speak of things you know nothing about. I own and operate several medical equipment and supply companies. Thanks to continued cuts in Medicare reimbursements, I have cut my staff by 40% (approx) over the last 3 years. I am doing 2.5 times the volume, yet my profit margins are down. Gov’t control over pricing only controls how much control they have over an industry. My industry accounts for less that 4% of the Medicare budget, yet has absorbed 90% of the Medicare cuts since 1985. We now receive around 35% of the amount to provide home oxygen (along with 24 hr service) than we received in 1985. Correct me if I’m wrong, but I pretty sure that is not “making a lot of money”. You must be one of those that thinks if I make any profit at all I’m making too much. Welcome to the real world, please buckle up.

ctucker

September 9th, 2010
9:22 am

Mike K@9:13, You’re wrong. That’s TOTAL SPENDING, not govt spending.

dbm

September 9th, 2010
9:23 am

We haven’t had a free market in health care for a long time.

WAR

September 9th, 2010
9:24 am

@ bubba
we didn’t think about being broke before the bush tax cuts and two wars.

CT–enjoy the toddler while you can. kids grow up fast… my little one is six going on sixteen :)

Bubba Bob

September 9th, 2010
9:25 am

Kam Fong,

Don’t use math and facts. It confuses people.

Bubba Bob

September 9th, 2010
9:26 am

WAR,

I talked about it everyday. I was ok with Afghan because of Osama. Totally against Iraq. Totally against all the wasteful spending.

I’ve been saying the same thing since Reagan.

Josh

September 9th, 2010
9:27 am

@ctucker

Its called the play or pay mandate in the laws of Obamacare. Businesses have to offer health insurance for all its employees or pay $7000 to $7600 per employee to the federal government for Obamacare. On top of that,the employee has to report this $7000 as income and will be taxed on that to the federal government. I know this because I am a manager for a very successful restaurant chain and corporate is preparing for this because it goes into effect in 2011 and it will put small businesses out of business and will cut jobs and slow hiring because businesses cannot afford to do this. Do your research Cynthia.

James

September 9th, 2010
9:27 am

As a nation we are “over prescribed”- cut out viagra and monitor such things a pain meds and anti- fill in the blank and you will reduce costs by 5-10%. Further, healthcare “reform” can only be done in conjuction with comprehensive immigration reform- see illegal drug dealer and 400k healthcare bill paid by us taxpayers- bet a diet coke he ain’t an isolated incident.

Too bad Obama went so far to the left- sad.

casual observer

September 9th, 2010
9:28 am

As always for Cynthia Tucker. The answer is help me government. To everyone out there without healthcare. The government is going to take care of you. Don’t worry. I know OBAMA will take money from “The Man” and give it to you. Have no fear.

Josh

September 9th, 2010
9:28 am

Mike K@9:13, You’re wrong. That’s TOTAL SPENDING, not govt spending.

Nope Mike is right and Cynthia is wrong. This does not include costs put on businesses and taxpayers.

Remmington

September 9th, 2010
9:31 am

I love the shotgun scattering of quotes and references you used in your Democrat essay on health care “reform”. The best one is from the administration predicting the expected rate increases this fall from the changes to the health care scheme at about 1% – 2%. These are the same people running the country who predicted unemployment to reach only 8%. Insurance companies are reacting in knee-jerk fashion to the implementation of the socialized medicine rammed down out throats. In order to cover the hapless lot of uninsured minority voters, the insurance companies are now forced into hedging their bottom lines with further rate increases. In a capitalist society there is no other way to staying in business and earning a profit when a government steps into your sphere of business and gives away your bottom line to those that don’t contribute to the system. The Party of No said, “hell no”, to this regulatory theft by the government of Democrats. The Party of No said we can fix things if you will allow reform of the tort system and allow cross-state competition of insurance rates. The Party of Vote Mining would not hear of it. Has anyone even brought up the fact that hospitals in general need to be investigated for their part in screwing the public? They are the ones who charge insurance companies $10 for a band-aid, $1,000 for an emergency room visit, or $10,000 for a birth delivery, Yeah, I know. Those who don’t have insurance will still be treated, bur look out if they know you do have insurance. Let’s start with all of these hospitals that charge an arm and a leg to heal us. Insurance companies have to make a profit too, but not as obnoxiously as hospitals do. This is a capitalist society we live in, or it used to be, and this is not socialist Europe yet, or is it?

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ctucker

September 9th, 2010
9:33 am

Remmington@9:31, Please explain how health insurance purchased from private companies by private individuals and private businesses is “socialized.” I don’t think you know what the word “socialized” means. (Hint: Medicare is the closest thing we have in this country to “socialized” medicine.)

Nothing Is Free

September 9th, 2010
9:37 am

ctucker

I can’t point to anything yet, but I know for a fact that this is happening. If you are honestly interested in learning how the private sector is improving health care, I can put you in touch with a private company that is offering this kind of price transparency and competition to large companies to be used by their clients. I know for a fact that you already know at least one of the people involved in this company. They are my client and their product is beginning to be observed by some of the largest companies in the country.

Their model works and they are fighting like crazy to get their product out because there are other companies trying desperately to be the first to come on line.

In the meanwhile, insurers are also seeing the advantages to price transparency. How many current National TV Spots are promoting some sort of research base for their clients, so they can make better and more informed decisions when selecting a doctor?

Whether or not the Heath Bill stands is in question. If just one sentence is declared unconstitutional, it all crashes and burns. So even the proponents are seeing that this horribly written bill that is designed to give the health insurance companies their largest margins in history, will probably go the way of the dodo.

But this bill has motivated the private sector to come up with real viable solutions that will not cost our country close to a trillion dollars just to make Health Insurance Companies richer than Midas.

Would you be in favor of a private solution that would really work instead of a government program that has no hope of ever being really effective?

paleo-neo-Carlinist

September 9th, 2010
9:39 am

WAR, “government assisted healthcare” is like “government assisted… war”. what is the real end game? who benefits most? who are the true players? do you think George Bush invaded and occupied Iraq to “protect” America? how is Obama’s “war to ensure all Americans have affordable healthcare different”? as I said, if healthcare is part of the function or role of government, so be it; but I just don’t see it in this plan. it’s just another government/special interest hybrid beast that is couched as “for the people”

Jimmy62

September 9th, 2010
9:40 am

Ctucker- Not an expert, but I’m pretty sure that Lasik costs have come down a lot. Or they did come down a lot till insurance began to cover it, leading Lasik doctors to raise prices because now the government and medicare are involved, leading to more money for everyone except those that need the care.

Obamacare
Before it was passed, we were told it would lower costs
Now we’re told it will raise costs, but by less than 1 percentage point
Based on seeing the government underestimate the costs of pretty much every program its ever been involved in (except, amazingly, Bush’s medicare part d, which has stuck close to projections), the reality will be much higher than one percentage point. You’re either naive, less than intelligent, or deliberately misleading if you really think it will only rise less than one percentage point. Weren’t we told Obama’s financial destruction packages would keep unemployment below 8%? Why do you believe any estimates coming from this administration? Can you name one time they were right? They were wrong about all the financial stuff, they were wrong about Cash for Clunkers. What have they been right about?

Of course we all know the real problem is that they didn’t flush enough money down the toilet. The only way to save the future is to waste much, much more money!

WAR

September 9th, 2010
9:41 am

@ bubba
i agree with you bout afghan and iraq. but we need healthcare for each American and we cant get it with all of this partisan, political stuff going on.

Tech man

September 9th, 2010
9:43 am

ctucker

September 9th, 2010
9:19 am

The answers are too numerous.

How about prescription drugs replacing surgeries for one.

James

September 9th, 2010
9:43 am

Jimmy62- don’t let the facts confuse you. Obama, Rahm and the gang will just need to run over to the CBOE and have them adjust the excel formulas- much like Bush et al did with the war. Us little working class folks just need to shut and go along for the ride.

Wow, that's Pulitzer material

September 9th, 2010
9:46 am

Well, I was going to comment on the ills of socialism; however, that has been done for me by the majority of bloggers already. Maybe we should let the states manage all social programs, because the federal gov’t can’t seem to make a change for the better.

Tommy Maddox

September 9th, 2010
9:47 am

Belinda, what do you think it is worth for someone remove the top of your child’s skull, move his brain over a little, then probe i to find and remove a malignant tumor?

It is worth what it costs? Anybody?

Tommy Maddox

September 9th, 2010
9:47 am

I can type…

Bob

September 9th, 2010
9:48 am

The Americas
Fidel Castro: Cuba’s Communism Not Working !
Even Fidel is siding with me on this one. But hey, Obo knows how to do it better right ?

WAR

September 9th, 2010
9:48 am

@ paleo

good points. problem is that we have to start somewhere with healthcare and this was the chance to do it. it almost completely bombed for too many reasons for me to mention here. it will be tweaked over the next few years of course has everything else in America except for Medicare and Medicaid. i just hope healthcare doesn’t become the fourth rail.

Pete

September 9th, 2010
9:48 am

Cynthia — How does your commentary relate to free market health care? I don’t think you connected the dots in your piece.

Rightwing Troll

September 9th, 2010
9:49 am

Tax cuts won’t cure stupid.

Ironic that the only remedy the hate baggers and conservitards can suggest won’t cure the ailment they have…

dbm

September 9th, 2010
9:49 am

ctucker

September 9th, 2010
9:33 am

Since health insurance purchased from private companies by private individuals and private businesses is legally defined as private, but the government intervenes heavily, I guess we could say that it is “fascized” rather than “socialized”. Either way, it’s definitely not free market.

mmm, mmm, mmm, Barack the LIAR Obama - BEND OVER, Here comes the CHANGE!

September 9th, 2010
9:50 am

Oh, you are SO blind. Check out this one…..Do you realize that 1 in 20 Americans have now been officially qualified as “disabled” by the Social Security Administration, meaning they can no longer work a full time job, and thus qualify for Federal disability benefits? If you’re at all skeptical that such a large number of Americans are truly eligible, you are right to question.

mmm, mmm, mmm – it’s only going to get worse with Obamamcare :(

Wow, that's Pulitzer material

September 9th, 2010
9:52 am

@ Rightwing troll, you are rude and an ignorant person. Name calling, really? Grow up and stop acting like a child. This is a blog not a place for you to show your IQ.

Van Jones

September 9th, 2010
9:53 am

ctucker @9:17, you are saying that these parents won’t make the necessary sacrifices for their children’s wellbeing? And that if the govt is not involved then woe be unto the child?
I’m not seeing it. There are some slacker parents who do dumb things where their kids are concerned and they will continue to do those things. As for most people, if they are “short of cash” they will find a way to still provide for basic care for their children… like not sending 1500 texts this month, etc.

Nothing Is Free

September 9th, 2010
9:54 am

ctucker

if you are actually interested in a real solution. (Something tells me that you are not) you have my email address.

This does not threaten the health bill but will work whether the bill passes or not, but if the bill fails, as most Americans are praying that it will, this WILL improve the quality of care and will start to weed out the horrible doctors that charge an arm and a leg because they have a fancy office in Dunwoody and the great doctors will be rated as such, giving everyone better care and saving money for everyone and greatly improving the best health care system in the world.

But unlike many on here, I have a lot of work to do today so I can’t set here and argue.

Have a good day.

JohnnyReb

September 9th, 2010
9:54 am

Ms Tucker, you are beating a dead horse. Obamacare will be defunded by the new Congress and then repealed/revised when the new POTUS goes into office 2013. Poll after poll shows the majority of Americans are against it and all the propoganda by the White House and its supporters such as yourself will not save it. It will be at least one Democrtic socialist policy that bites the dust.

Dr ooze

September 9th, 2010
9:55 am

At the time healthcare reform was being sold to us, it was gonna bring down costs. Now we are being told the cost increase will be minimal.LOL
Snake oil, anyone ?

paleo-neo-Carlinist

September 9th, 2010
9:55 am

James is right. we the People have no dog in this fight. policies are formulated and laws passed with NO concern for those who ultimately pick up the tab. The war in Iraq did not “protect” Americans or “defend” us against an attack. Overthrowing Saddam did not “uphold and defend the Consitution” or make us more secure. and yet, it was pitched, presented and prosecuted as just that. that’s not to say Saddam was not a problem, but a 7 year, trillion dollar war was not the solution. Ergo, I am not suggesting the current healthcare model is the last, best model, but Obamacare is not the solution. at the end of the day folks, there is a way to deal with lobbysists and the influence of special interest groups, it’s called “representation”. everyone keeps talking about “taking America back” – from whom? unions? the military-industrial complex? big pharm? big ag? whom do these soul-less beasts own? our representatives! as I said, we the People don’t have a dog in this fight

Joel

September 9th, 2010
9:55 am

Why does every American have to have health care?

Joel

September 9th, 2010
9:56 am

What about the people who abuse their bodies, do they too deserve health care?

Kamchak

September 9th, 2010
9:56 am

Kamchak,

Irony aside, I do worry when the government wants to force me to buy health insurance.

Me too, which is why I did not support this version of HC reform.

I would rather have socialized medicine than the evil insurance companies. What started out as a good idea, became layers of corporate greed.

WAR

September 9th, 2010
9:57 am

@ wow pulitzer

i don’t want the government running everything, trust me. i like my bible and my gun just fine. but i don’t want the states to have too much power either. i am afraid of the state’s power that will be used without outside oversight. social issues will rule the agenda and become huge problems i believe: immigration, voting rights, healthcare, gun rights, civil rights, abortion…. the list will

RG

September 9th, 2010
9:57 am

Economics 101: Health Care Spending is a “luxury good” as people get wealthier, they spend more of their money on health care. Just like as people get wealthier they spend more on fresh fish and plasma TVs. Has nothing to do with COSTS. Show me an individual medical procedure that is more expensive today than it was 20 years ago? You can’t. You might say that the procedures are more scientifically and medically advanced and so you can’t compare 2010 procedures to 1990 procedures, but then I can say that’s why they are more expensive (MRIs are a classic example).

You might complain that the state of the art of medical practice has evolved past the point of usefulness – so we should be using 1990 technologies instead of 2010 technologies in places where the increase in benefits is less than the increase in costs. But then you’re complaining about people making choices that seem incongrous with their financial situation. Of course, people buy pink flamingoes and put them on their lawns … in our society, even people with stupid preferences are free to spend their money how they like. And of course, in our “someone else pays for me” healthcare model, people are spending someone else’s money, so they’re even less likely to rational cost-benefit trade-offs.

Hence ObamaCare is a wonderful way to prevent people from spending their money how they like. We will have government technocrats making the decisions for us!