‘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

Logic 88

September 9th, 2010
10:00 am

Interesting how CT only response to certain post.
Respond to Bubba Bob posting at 8:29 and 8:31 … the first postings

James

September 9th, 2010
10:00 am

Really enjoy the silly “evil insurance companies” – like “big oil”

Anyways- tried to call evil insurance company last eve- a person answered and couldn’t forward me to the “evil company”. really perplexed.

Wow, that's Pulitzer material

September 9th, 2010
10:02 am

Simple fix to your worries, move to a state that is filled with people that think the way you do, this way you can be assured of keeping control of the issues. Let’s remember, this is a constitutional republic of states, all states have their own rights.

Libertarian

September 9th, 2010
10:03 am

If health insurance was a true “free market” I could get the same insurance plan in Tennessee as I can in Georgia…but that is not the case.

Wow, that's Pulitzer material

September 9th, 2010
10:03 am

Amen, libertarian

left wing

September 9th, 2010
10:06 am

The health care insurance companies have anti-trust exemptions, which mean that they can control the market (Blue Cross has 78% of Atlanta’s market, for example). This also allows them to ‘gouge’ consumers in terms of premium and services covered. Because consumers with health insurance only pay the co-pay instead of the full cost of seeing a doctor, there is no incentive to control costs. And doctors, hospitals and insurance companies have superior knowledge of both your condition and the marketplace for these services, which is a prerequisite to classify something as ‘perfect competition’.

Why would anyone think that we have ‘free market’ economics at work?

Now, please return to your ‘left field sucks’ ‘right field sucks’.

Gator Joe

September 9th, 2010
10:07 am

Cynthia,
How tragic some of our citizens, mistakenly, willingly approve spending billions, or more, in order to kill, maim, and wound people in immoral wars, and yet oppose spending to ease suffering, improve healthcare and well-being.

Libertarian

September 9th, 2010
10:07 am

Another thing Obamacare requires is that employers put the cost of employee health plans on their W2’s starting with 2012 W2’s. Why do you think they want to know what your employer pays for your healthcare?? Is it to avoid so-called “cadillac” plans? Or is it because they plan to one day tax you on that just as they do on income?

Also under Obamacare employers now have to send a 1099 to ANY company they do business with (if they spend more than $600). Why is this included in a HC bill?? That means if my company spends $1000 at Office Depot I have to send Office Depot a 1099. That is a paperwork/accounting nightmare. The IRS is already unsure of how to handle the influx of 1099’s as well.

left wing

September 9th, 2010
10:07 am

Libertarian @ 10:03 – An insurance plan in Tennessee may not have the same kinds of coverage that a plan (even by the same company) in Georgia. It’s comparing apples with bananas.

Dave from GT

September 9th, 2010
10:08 am

Oh crap, the insurance companies are acting like…….. insurance companies.

If the govt WANTED to fix the problem, they would flood the market with GP Drs and ensure competition for GP family services.

Same for the hospitals.

The insurance companies would be left with the specialists………..Their business would shrink so much and the competiton would go up so much……. that prices for these would surely come down.

allen981

September 9th, 2010
10:08 am

In the end, we’re all going to get sick and die (or injured and die).

How we live our lives is our choice; if health care is imoortant to an individual, find a way to have it. If it isn’t – and millions of Americans CHOOSE not to have it – then no one should be forced to pay for it.

We all take risks every day; some drive 80, some drive 60; some smoke (idiots), some don’t. Whatever each individual chooses to do carries with it responsibility for the result.

Let’s protect all children – which we do – and let everyone else make their own choices.

Libertarian

September 9th, 2010
10:09 am

Well said left wing. 78% does not a free market make in my opinion. BCBS basically forces doctors to lower their rates or they threaten to take them out of their network. Smells like a monopoly to me.

RH

September 9th, 2010
10:10 am

“For those Americans who have a religious faith in the free market, health care is a frustrating test of that faith.”

You do love controversary. Today’s topic is “religious faith” in the free market, when you could have very well labeled it a racist free market. I am glad to see your hate is so diverse.

Libertarian

September 9th, 2010
10:10 am

@left wing

HMO’s are banned in Tennesse (and Alabama, I believe) but not in Georgia. If you can’t cross state lines to sell then it is not a true free market.

Ragnar Danneskjöld

September 9th, 2010
10:10 am

False premise = false result. There has been no “free market” in health care since World War 2. The employer’s “healthcare deduction” – long denied to individual policy holders – was a way around the wage and price controls imposed by the US overlords during World War 2. That corruption of the free market led to a system where people got “free” healthcare. Not at all surprisingly, the absence of any constraint on demand (such as “personal obligation to pay”) leads to spiraling costs of service. Nothing abnormal about that economic analysis, and one would not anticipate any leftist to understand such things as simple free market economics.

The cure for two generations of price corruption is as obvious as it seems: require users to pay a larger share of the costs. Not gonna happen in a society of whiners, such as we find among democrat voters, but “healthcare” is not an illustration of failure of market economics, not by any stretch of the imagination. On the contrary, it is a proof of the effects of market interference by the government. Get ready for a lot more corruption.

Shawny

September 9th, 2010
10:13 am

“Competition doesn’t decrease costs.”
Really? How do you know that? Our choices are so limited, and we can’t buy into another policy across state lines. Therefore, it is not real competition, now is it?

Companies are running scared, and this administration and congress are to blame. They don’t know what their true costs of running their business will be, so they cover more than they need to.

There are many failures in this health care law, many of which have yet to be uncovered. You know Nancy said vote it in so that we can begin to figure out what is in it. It is terrifying.

Libertarian

September 9th, 2010
10:13 am

Well said Allen.

paleo-neo-Carlinist

September 9th, 2010
10:13 am

WAR, i’m just spit-balling here, but you want to here something really radical and subversive? if the end game is a healthier (more secure) nation, let’s turn it over to the ultimate socialist beast, the DoD? militart bases are closing faster than Blockbuster franchises, right? why not keep a couple open, and staff them with Army medics, Navy/Marine Corps corpsmen, and USAF flight surgeons? it would provide “training” (and jobs) for servicemen/women who could be repatriated from Korea, Japan, Europe, Iraq, Afghanistan, etc., and those who want to “consume” private sector health insurance and healthcare can do so. my guess is, Aetna, Blue Cross, Kaiser, the AMA, etc., more specifically, their lobbyists, would start yammering about “socialized medicine” etc. folks on the left and the right talk about the VA all the time (sometimes praising, other times critical of the quality of care, but hey, at least it is care). I think the real glitch in Obamacare is what I mentioned earlier; the “two headed beast”. if the Federal government wants to “heal” Americans, do it with federal employees via federally produced drugs, at federally owned and operated hospitals and clinics. as I said, I’m just kinda spit-balling, but if warfare/welfare are what drive policy in DC, why not kill two birds with one stone? heck, you want to address “unemployment” – hire the unemployed to perform the non-medical (administrative) tasks (and pay them the minumum wage). these offices will need secretaries, computer technicians, janitors, receptionists, etc.

Libertarian

September 9th, 2010
10:14 am

Ragnar:
On the contrary, it is a proof of the effects of market interference by the government.

Nail on Head.

Fang1944

September 9th, 2010
10:17 am

I see that Scout started the day by quoting Neal Boortz. That is about as intellectually impoverished as you can get. Boortz’s columns are like something a morose college freshman would write. This country has a government. Gasp! There are law. Horrors! You have to pay taxes. Unbelievable!

Ragnar Danneskjöld

September 9th, 2010
10:17 am

Dear Libertarian @ 10:14, thanks, but I just read through the other comments and Jon @ 9:17 said the same things I did, except better.

paleo-neo-Carlinist

September 9th, 2010
10:20 am

and as the child of a military officer, Boortz had access to “government healthcare” and “government housing” nd when it came time for college, he attended a “government school” (Texas A&M). Neal makes some valid points from time to time, but his “libertarian” schtick is just that.

left wing

September 9th, 2010
10:21 am

Libertarian @ 10:10 – That is true, but maybe that policy in Tennessee has more restrictions on the prescription drugs it covers, or the policy in Alabama doesn’t have coverage for psychiatric care (something I think several writers on this blog could use). How would you as a consumer know this?

Most consumer’s wouldn’t. If you buy a car or a tv in Tenn or Ala, you would expect it to be the same commodity. Even car insurance, for the most part, is standardized, meaning even between states, the parts you buy, comp, collision, towing, are not differentiated. That is not true with health insurance.

Ragnar my friend, nice to see you back. Although I’m not sure it’s really you, because I’m agreeing with what you wrote. Is this some doppelganger version of Ragnar? Anyway, you are correct about price corruption starting after WWII, which is when the insurance companies received their anti-trust exemption status.

paleo-neo-Carlinist

September 9th, 2010
10:22 am

and, I’m pretty sure Boortz’s dad’s (post-military) job at Lockheed – one of the largest “government (DoD) contractors” at the time, ensured further “mooching” and suckling at the taxpayer teat.

Realist

September 9th, 2010
10:23 am

Enter your comments here

Ragnar Danneskjöld

September 9th, 2010
10:23 am

Dear Left Wing @ 10:21, good morning, yes it is really me from the Wooten blog days, good to see you are still around. I’m shocked we are generally in agreement – I must be wrong? Have a great day.

paleo-neo-Carlinist

September 9th, 2010
10:26 am

Scout, politics aside, read earlier that a team of USMC “commandos” (Force Recon, I suspect, and hope they weren’t actually SEALs, and some journalist doesn’t know the difference between a grunt and a squid) liberated a German merchant ship of the coast of Somalia. HOO-RAH!

willie lynch

September 9th, 2010
10:26 am

There was a report about the number of millionaires in the House of Representatives some 2/3’s were millionaire with the average net worth being roughly 700K. This is not a Republican-Democrat issue we are merely dancing on the periphery.

Steve

September 9th, 2010
10:31 am

CT@9:10 – You are spinning, less than 1% sounds like a small sum. The average difference will be $265 per person. For a family of 4 that’s over $1000 per year. That’s real money families on limited budgets have to account for.
Obama promised everyone’s cost would be reduced when Healthcare was passed. I wonder how much support Obama would have garnered announcing the passage of Healthcare would result in your premiums going up less than 1% per year.

Lawrence

September 9th, 2010
10:31 am

CT:
With your attitude toward Medicare, I wish I could live long enough to see you opt out of Medicare when you are old enough to participate.

Nothing Is Free

September 9th, 2010
10:32 am

Left Wing

“Why would anyone think that we have ‘free market’ economics at work?”

Times are changing. Insurers and private companies are finding ways to get the real prices to the consumers.

it is capitalism at work again. If we can just the get the government out of the way, we can fix this without spending a trillion bucks that we don’t have.

Tech Man

September 9th, 2010
10:33 am

left wing

September 9th, 2010
10:06 am
The health care insurance companies have anti-trust exemptions, which mean that they can control the market (Blue Cross has 78% of Atlanta’s market, for example).
————————————————————–

Where does that figure come from.

The State Benefit Plan uses United Healthcare and Cigna.

BCBSGA has been losing market share for years.

Some People are stupid

September 9th, 2010
10:33 am

Josh-

On top of that,the employee has to report this $7000 as income and will be taxed on that to the federal government.

What…thats completely false. I’m a cpa and have studied the tax implications. The healthcare cost are not reported as taxable wages.

evonne goolagong

September 9th, 2010
10:34 am

crank up the death panels, let’s remove these old farts from the government teet….

Rafe Hollister

September 9th, 2010
10:34 am

Free market does work in healthcare, it used to work fine, and then we discovered health insurance. Back in the day when people paid their medical bills themselves, you got home visits from doctors and you paid for them with a dozen free range chicken eggs. The doctors were happy and the patients got good care.

When you have millions and millions of people demanding insurance so they do not pay ANY of their medical costs, the demand is met by the insurance companies by keeping the cost up. If insurance costs $1 a month and covered everything the insurance companies would go broke quickly. They lower their exposure and demand by increasing prices. Unfortunately, they have formed alliances with the hospitals and doctors and do not really care what the medical community charges. They make 3-4% profit and 3% of 10 Billion is much more than 3% of 1 Billion, so where is the restraint on prices on medical procedures. The insurance companies only benefit when hospitals charge $5 for an aspirin.

The secret is to outlaw insurance companies, let people accumulate money in Health Savings accounts, and let the doctors and hospitals compete for peoples business. You would see drive through mammogram clinics and free soft drinks for patients in hospitals. The free market always works, only government can kill the free market with regulations.

Some People are stupid

September 9th, 2010
10:37 am

Liberterian-

We have already discussed the reporting of the healthcare on the w2.
The 1099’s is actually to catch tax cheats. A lot of that is unreported income. Well if someone has to send a 1099, that income is trackable. You should actually be happy about that cause its forcing some people who would otherwise pay no taxes to pay taxes.

Ragnar Danneskjöld

September 9th, 2010
10:38 am

Dear Rafe @ 10:34, well-argued.

ATLshirt.com

September 9th, 2010
10:39 am

We are not a FREE MARKET, in a FREE MARKET, the GOVERNMENT can NOT mandate the people of that FREE MARKET to purchase ANYTHING…. You think the cost of health insurance is HIGH now, WAIT until OBAMACARE kicks in, and EVERYONE is REQUIRED to BUY that insurance… PRICES WILL BE DOUBLED THEN!!!

ATLshirt.com

September 9th, 2010
10:42 am

Oh yeah, and to add on to my last post, Cynthia, after the Prices have doubled, I am sure that you and Obama will still blame Bush!!!

James

September 9th, 2010
10:42 am

evonne- used to love watching you in those short tennis skirts- very hot

Halftrack

September 9th, 2010
10:44 am

CT, The market has not been free due to government regulations on the Health industry. They limited what Insurance companies could do as far as operating only in one state. You also forget about that now they are going to add 30 million to the roles with pre-existing conditions, including extending children to age 26. Obummer care is going to cost 2 ways, you will have to buy health insurance or pay a fine. Also, the employer part of the health care cost will become taxable income. Middle class folks can’t afford all these new taxes imbeded in Obummer care. Oldsters are having their Medicare cut or advantage plans diminished. Government is killing them slowly by legal means.

Hoghead

September 9th, 2010
10:44 am

Tucker: Well baby shots ought to be covered by health care insurance. Bull. That is exactly the kind of thing you can plan for and pay for. If you can’t afford to take care of the baby, then don’t have it. Insurance is for those ailments you can’t plan for–like scoliosis, cancer or the like. And another problem we have is all the healthcare money spent for fat people who have resultant high blood pressure, bad knees, bad hips, diabetes, strokes, heart attacks. If people were a little more responsible, and less whining we could save money. And if the illegals were barred from use of our medical facilities unless they showed cash or their insurance card we would be way ahead. Why is it I have to show my insurance card and they don’t??

gmaye

September 9th, 2010
10:47 am

Josh who do you have going to beat him in 2012? Sara Palin what a joke, Newt old white man of the estabishment do you think young people are going to vote for him? Nick R. another Joke.

Wait till someone in your family has pre existing sickness and can not pay for coverage.

Soon as America get attacked like 911 then you idiot Conservative start yelling we are all Americans.

As a Vet you I dispise you heartless idiots.

Cynthia's race card

September 9th, 2010
10:49 am

Must be racist right Cyn? That’s all you know and live for.

Scout

September 9th, 2010
10:49 am

This statement was never more true …………….

“The bigger the government, the smaller the citizen” Unknown

Conservatives SUX

September 9th, 2010
10:50 am

I’m sorry. I didn’t know a free market system was in the constitution. I was under the impressions that states had the right to regulate insurance based off the 10th amendment…I must be mistaken.

I would much rather have insurance than pay out of my pocket. A bone scan for a stress fracture cost 1300. My monthly premiums are 100…I saved 100 bucks…Why would I want to pay out of pocket. The beauty of this country is if you only want your insurance to cover really major things, you can get that policy(even under obamacare). I just hope you don’t break yor leg(not considered major) and get pneumonia(not considered major). The X-Rays alone will be 3 grand

David Granger

September 9th, 2010
10:50 am

You’re probably right, Cynthia. But the problem is, we’ve had very little “free market” in this country regarding health care.
Under “Obamacare”, for example, insurance companies now HAVE to cover pre-existing conditions. But there’s no restriction on how much they can raise premiums, so naturally…premiums have sky-rocketed. And to add further to the lack of “free market” conditions, if we don’t buy insurance now…we’re in violation of federal law. No WONDER the insurance companies are pouring so much money into the Democratic Party.

Call IT

September 9th, 2010
10:51 am

LOL!

That what most of us get for putting Barry in office. I can’t believe how STUPID some Americans can be. Most of the one’s that voted for the 1st time have never paid taxes or anything for that matter in their lives. Therefore, the takers in America continue to moan that they should be getting things for FREE, like their lunches, scholarships, and the like. Get off of your lazy butts and work for it for a change and stop expecting someone else to take care of you!

The Socialist will soon be out of office!

Enough Said!

John

September 9th, 2010
10:52 am

It’s ALL George Bush’s fault…. Everything that goes wrong from here on out.

Some People are stupid

September 9th, 2010
10:53 am

Hoghead-
Feel free to pay for your childs immunization out of pocket. I much rather have it covered under my insurance. And what if I have bad knees and I’m in perfect shape…should I not use my health insurance…