‘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

Mike K

September 9th, 2010
10:54 am

@Mike K
@9:13, You’re wrong. That’s TOTAL SPENDING, not govt spending.
—————————————————————
You’re right – I googled the quote you gave and just read the title of the AP piece from which you took it without reading the article. However, you’re wrong about the 2/10 of 1 percent. That’s per annum. The total change is about 2%.

My guess is that number is suspect as well.

Really

September 9th, 2010
10:54 am

Call It-

Having heard the request for free scholarships….isn’t a scholarship free anyway

gatorman770

September 9th, 2010
10:56 am

Conservatives and Republicans wanted to include tort reform in the healthcare legislation which would have reduced doctors fees by at least 10%, but the Democratic party controlled by the ABA and ACLU would have nothing to do with common sense reform that would really be effective in reducing healthcare cost.

gmaye

September 9th, 2010
10:59 am

Call it, who do have to beat him? You dumb conservatives do not even know what socialist mean? George Bush was a socialist”””

Really

September 9th, 2010
10:59 am

gatorman770-

CBO projected tort reform would reduce cost by less than 1%. It’s actually included in the legislation by the way…just thought I’d put that out there

Call IT

September 9th, 2010
11:02 am

Hey gmaye

I know that MORON in office has done NOTHING but blame BUSH and AMERICA for everything and he will not take accountability for his own failures and the like. His spending in two years is more than Bush’s in eight!

You need to wake up and stop following the community organizer, racist, and yes I know what Socialism means and he is right from the playbook.

Enough Said!

Libertarian

September 9th, 2010
11:03 am

@SPAS

I guess I don’t remember the W2 discussion.

I’m fine with sending 1099’s to LLCs, sole proprietors, etc. But, like in my example, office depot? I hardly think they are hiding income.

I’m sure you love it since you are an accountant. I guess more people will need to hire you to help them with the work load of sending all these 1099’s??

Kamchak

September 9th, 2010
11:04 am

Enough Said!

If only. :roll:

Libertarian

September 9th, 2010
11:05 am

Also SPAS…

Ultimately I don’t get why this 1099 rule was attached to a “healthcare” bill. Politics as usual, I suppose. 1200 pages+ of random crap.

Some People are stupid

September 9th, 2010
11:05 am

Liberterian-

You would be surprised how many major companies short their income for tax purposes.

Call It-

How is he a socialist??

Hil

September 9th, 2010
11:06 am

Each DAY you discuss something from the Radical Left wing:
Anythig will do. You know Obama’s Health Care Bill will cut a Trillion Dollars from Health Care for Seniors “Medicare” What about Seniors…I dare you to discuss Seniors.

Cardinal Sin

September 9th, 2010
11:06 am

Call it is correct!

This so called President has bowed at people, reduced military spending, and somehow thinks that anyone that makes less than $250k is the only way to gin up the economy! What a loser! We all need tax breaks to make the economy work and BTW, the rich already shoulder most of the tax burden and do pay their share. Call it hits the nail on the head when he mentions Socialist! What else to you call it?

Get this loser out of office in 2012!

James

September 9th, 2010
11:08 am

some people are not smart- folks providing 1099s to home depot, sears, etc will not catch “tax cheats” but was simply done to provide that little illogical boost from the CBOE. The private market cost to facilitate the silliness will out weigh any “catching of tax cheats”

Kamchak

September 9th, 2010
11:08 am

…I dare you to discuss Seniors.

And I dare you to go to blogspot and start your own blog if this issue is soooooo important to you.

willie lynch

September 9th, 2010
11:08 am

Businesses are finding out they can do with less in the way of people. They are finding the costs of employees and the attendant issues (vacations, sick pay, insurance, etc)are not necessary. Why hire 3 people when I can get it done with 2? They are able to post profits, pay large bonuses and appeal to shareholders. This is the free enterprise system it requires one who has and one who needs.

The lost jobs are not coming back (comensurate to those lost) because there is no profit in that. Businesses admit they are sitting on capital and report they are seeing strong profits but they use the “we are waiting to see what the government is going to do” line and run a fake reverse on those who can’t quite see the nuance. This is like the insurance companies who dupe their clients with these “holding” accounts instead of paying out death benefits.

The profit motive is not wrong (intrinsically) but in order to fairly assess the enviornment you must include that all to human factor (greed) in this equation.

Lobbyist don’t care who pays.

Boner sez

September 9th, 2010
11:09 am

You don’t need none of that damn health insurance! Just die!

Scout

September 9th, 2010
11:11 am

Dr. Kildare, please report to surgery … Dr. Kildare, please report to surgery.

left wing

September 9th, 2010
11:15 am

Tech Man @ 10:33 – The figure I quoted may be old. The current figure for the Atlanta market is 59%. Wellpoint is Blue Cross.

ama-assn.org/amednews/2010/03/08/bil20308.htm

Nothing Is Free @ 10:32 Times are changing. Insurers and private companies are finding ways to get the real prices to the consumers.

You’re living in a dream world. You think the insurance company is going to work to lower premiums for you??? We need regulation of the industry to prevent them from gouging us.

It's all magic

September 9th, 2010
11:19 am

One cause of rising premiums is health care costs related to older population, more fat people, more people demanding latest/greatest pill to cure everything they do to themselves (along with actual vast improvements in the ability of drugs to cure problems/sickness, etc.). The cost of these drugs (cancer cures, for example), can be enormous (hundreds of millions to billions of dollars). One way to keep premiums down is to just not authorize payment for any new drugs…is this one of your recommendations?

Jimmy62

September 9th, 2010
11:20 am

If Obama and the left are so intent on giving away other peoples’ money, why are they skipping the one area where it might really help things? The most potentially productive citizens are 20-somethings with college degrees and tons of student loan debt. If you absolutely must give away other peoples’ money no matter what, then forgive a percentage of those student loans, giving young people a leg up, rather than continuing to throw money at people who have failed.

But they will never do that. Why? Because student loans are controlled by the government and don’t even go away in bankruptcy, which means the government has a lot of control over the lives of those kids, and they are unlikely to give up that sort of power, even if it would help the country and economy.

On the other hand, they love, love, love to forgive debts they don’t hold. Sign a mortgage you can’t afford? Don’t worry, the government will force the bank to forgive it. Sign a loan the government holds? Unless you’re a “protected” minority with political access or media coverage, you’re screwed forever. Not that I think people who sign loans they can’t afford to pay back deserve help, but student loans have become a big lie. most kids will not make enough to pay them back before their own kids are ready for school.

ButtHead

September 9th, 2010
11:21 am

Of course free market rules don’t work for healthcare, because healthcare is NOT open to free market. If we could buy healthcare across state lines, and have the posting of prices on common procedures, then maybe we could see if the free market healthcare works. But instead our government made the rules so that you can’t have healthcare free market. But once again the idiot liberals create a situation then claim that things don’t work and the GOP did it. When will you people wake up this?

Rafe Hollister

September 9th, 2010
11:21 am

I just love you who want Health Insurance to pay for everything, nothing out of your pocket. What you are saying is I want someone else to pay for my health care. Folks, there is no free lunch. The taxpayers ulitimately wind up paying for your free health care whether we have Obamacare, socialized medicine, or the current mismatch of insurance/hospitals/gov controll.

Well, I do not want to pay for your health care, I’m already paying for your food stamps, housing, and childrens schooling and other things you should be responsible for.

Some People are stupid

September 9th, 2010
11:22 am

James-
The private market cost of sending out a 1099…how much is a stamp now….0.45 or something like that. Most companines use a few major vendors…the ones that use a lot of vendors rarely have many over 600 dollars…

Kamchak

September 9th, 2010
11:23 am

But once again the idiot liberals create a situation then claim that things don’t work and the GOP did it.

The smoking gun is the mushroom cloud.

JB

September 9th, 2010
11:24 am

Imagine in 10 years ( of Obama care) finding out your spouse has cancer, you’re told to call a 1-800 Government run medical clearing house to start the process. you are on hold for 17 minutes ( feels like hours) and finally greeted on the other end by a Government employee with the compassion of a postal worker at Christmas time. After answering 74 questions, put on hold 6 or 7 times, and then told to go a ‘clinic’ in say Griffin, Ga in 11/2 months to start the evaluation period. This just begins the nightmare. Wake up America. This is the single payer option they WANTED…..and still may get if the Mean ole greedy Republicans don’t repeal this. Yes, we need reform, not Government run Health care !

Some People are stupid

September 9th, 2010
11:25 am

Rafe Hollister-
I just love you who want Health Insurance to pay for everything, nothing out of your pocket

You are joking right. I pay a premium (out of my pocket) every month to my insurance..so technically they are using the money I gave them, plus the interest accumulated on said money(thats how insurance companies work), to cover the cost of my medical procedures. Who has free healthcare, even medicaid, you have to pay a little..medicare is suppose to be self sustaining…did someone have a little too much coffee this morning.

Libertarian

September 9th, 2010
11:26 am

@SPAS

You are forgetting the cost of my time. I (unlike most people) print my own W2’s and 1099’s. Its also going to cost my software company to upgrade their software to include health insurance costs on W2’s, which they will ultimately pass that cost onto me.

Some People are stupid

September 9th, 2010
11:27 am

Jimmy62-

They actually propsed legislation to forgive student loan debt…they were gonna cap repayments to I believe 10years( may have been 15) and forgive the rest. Was suppose to be part of the student loan bill attached to healthcare…

Libertarian

September 9th, 2010
11:29 am

@JB

17 minutes? Haha. Last time I called a gov’t agency (GA dept of revenue) I held for 22 minutes, got cut off, then called back and held for 38 minutes before anyone picked up.

Some People are stupid

September 9th, 2010
11:30 am

Liberterian-

It’s a box 15 item.( i believe thats the correct box). They don’t have to upgrade, they just have to put the number in. It’s just like when you pay a someone independent a bonus. I can’t think of the term, i want to say its noncommission pay. You can print that stuff out on quikbooks in less than a minute

Some People are stupid

September 9th, 2010
11:30 am

Box 14…my bad

Some People are stupid

September 9th, 2010
11:32 am

It’s not a single payer system…where are yall getting your information from…..wth???

paleo-neo-Carlinist

September 9th, 2010
11:38 am

how does the FDA fit into the “free market” healthcare model? seems to me if some lobbyist or politico can get Uncle Sam to endorse one drug, or ban another, it’s not a free market. I think we need look no further than marijuana to understand that “freedom isn’r free”. see how this works? we the People are taxed, which provides the resources for the government to operate the FDA. the FDA has the ultimate “say so” when it comes to thumbs up or thumbs down on a drug (or food additive). ergo, Big Pharm or Big Ag doesn’t have produce quality, it just has to “buy off” a congressman or FDA type. and you can transfer this model to ANY government agency (Defense, Education, Energy, etc.). again, look at who really benefits from policy. look at who (lobbyists) truly define agenda at the federal level.

Jimmy62

September 9th, 2010
11:39 am

Some people are stupid: We shouldn’t be attaching riders to unrelated bills. If a part of a bill has nothing to do with the title of the bill, then it should be a separate bill. This crap is just playing politics, like when the Dems put out a horrendous anti-free market bill with a rider about protecting children from child molestors, and when the GOP rejects it, the press shouts that they are supporting child molestors.

That sort of thing has to end if we want any real transparency in government.

Joseph Pinto

September 9th, 2010
11:42 am

Tort reform, competition, and insurance not regulated by the government–

FIRE CYNTHIA TUCKER

StJ

September 9th, 2010
11:43 am

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

The insurers are going to make as much money as they can before being run out of the health insurance business. The people who voted Obama into office need to look into a mirror to find who’s responsible for this mess.

This is just the light at the end of the tunnel…the train isn’t here just yet.

Kamchak

September 9th, 2010
11:43 am

Will Obamacare pay to remove this hamster from my rectum?

Granny Godzilla

September 9th, 2010
11:45 am

paleo-neo-Carlinist

September 9th, 2010
11:46 am

JB, imagine the current healthcare model in place. your wife is probably going to die in either scenario. I have had two family members (young adult and elderly) diagnosed with cancer in the past 18 months. the child endured every procedure known to man; surgery, chemo, radition, etc. he is blind in one eye, and after 3 months of being declared “cancer free” it has been determined the cancer is back and he will die in “3-10 months”. the elderly relative, after second and third opinions, was advised “do nothing – old age will kill you before lymphoma.” all this “death panel” and “denied treatment” stuff is just good old fashioned fear-based political threats. as I said in my first post; who “owns” life? who benefits from life and who suffers from death?

StJ

September 9th, 2010
12:03 pm

no….and probably won’t pay to remove the squirrel either.

Blaylock

September 9th, 2010
12:08 pm

Don’t trust the market…trust Charlie Rengel and Chris Dodd and Nancy Pelosi. Trust these yahoos, they are smart enough to know how to price all product and control all goods and services. Just look at how well they have done so far. Let the bureaucrats decide everything. It will all be fair because no one will have anything.

We have tried this foolishness before and it does not work.

What are these people smoking?

hobby

September 9th, 2010
12:15 pm

ok, Cynthia, at 9:19 you asked where increased competition has decreased costs in any area of medicine.

Pharmaceuticals have increased in price from lack of competition.

Drug prices used to be controlled by ‘free market’ forces but no longer. Consumers used to pay for their medicine and file a claim with their insurance company for reimbursement. Starting in the early 70’s, drug stores began billing the insurance companies directly. This was a small percentage of precriptions at first, but over the years, more and more precriptions were billed this way. Now over 90% of all prescriptions are paid directly by the insurance company to the pharmacy. The consumer never really knows (or cares) what the real price is. The buying decision is no longer based on price vs benefit. The free market no longer exist for 90% of prescriptions. Because of this ‘third party payor’ system, drug prices have continued to rise unabated. There is no downward pressure from the marketplace to hold prices in line. The last section of the population that paid for their prescriptions out of pocket were the seniors. These people were retired, with little or no drug coverage. Medicare part D put them in the ‘third party payor’ program, so now just about everyone has their meds paid by somebody else. And prices keep rising—–

If the system went back to ‘pay as you go’ (as suggested by Jon @ 9:13) you would start to see prices respond to competition and come down.
Of course, there still needs to be medicaid, peachcare, county health departments, etc for the TRULY needy.

So– Cynthia, if you are still monitoring this site, this is one example where decreased competition has increased prices.

Rafe Hollister

September 9th, 2010
12:20 pm

Some people are Stupid

I understand that you pay a premium for a policy that covers 80% of hospital costs, that means you are responsible for the other 20%. So, some of the cost is YOURS, don’t complain you got what you paid for. If the insurance companies have to pay for everything you would never be able to afford the premium. If you have no iiability for the cost then you abuse the system by going to the doctor for every little sniffle. The insurance companies are trying to give you some incentive to man up and take care of your own health care and its costs.

JKL2

September 9th, 2010
12:22 pm

Why would any decent business pay for health insurance for their employees when the government has said they are going to pick up the tab for everybody?
Not sure what the solution is when this mass influx of people into the blue cross system get cut off because eliminating blue cross was the way the Demwits explained how obamacare was going to cost less than $1T.

Drill, baby, drill. Amaizing how Glenn Beck was able to fill the mall without having unions bus in people paid to be there.

Timothy

September 9th, 2010
12:24 pm

Cynthia, you are so so far off the mark on so many issues I cannot see how you could have won a Pulitzer Prize, especially saying we are a country of racists now that people are unhappy with Obama… Let me tell you something directly, Obama does NOT run this country, “WE THE PEOPLE” do!!!

Me!!

September 9th, 2010
12:26 pm

“Medicare is the closest thing we have to socialized health care? Wrong. Prison health care is the closest thing we have to socialized health care. Have you seen the inside of a prison health clinic?

Logic 88

September 9th, 2010
12:32 pm

Still waiting CT…

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

Perhaps granny could respond for you.

Tommy Maddox

September 9th, 2010
12:32 pm

Sorry folks – tort reform will not fix anything.

James 34

September 9th, 2010
12:34 pm

Please help.
Granny Godzilla has escape from the home…if you see her please don’t bring her back.

Grumpy

September 9th, 2010
12:35 pm

There hasn’t been a truly free market in health care for 40 years.