‘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

Nothing Is Free

September 9th, 2010
5:12 pm

Looks like the Mosque is going to be built elsewhere.

Scout

September 9th, 2010
5:18 pm

…………. and looks like the burning has been called off.

ck hall

September 9th, 2010
5:18 pm

Recieved my new Oabamacare bill today..It is going up….again!

barking frog

September 9th, 2010
5:19 pm

The troops are safe.

Kitty Conrad

September 9th, 2010
5:22 pm

If CT understood economics 101, she’d have a real job.

Scout

September 9th, 2010
5:22 pm

barking frog:

Oh yes, now that the Korans are not being burned they will be best buds with our troops.

Film at 11.

Scout

September 9th, 2010
5:24 pm

Now that Rev. Jones has called off the torching of the Korans, I guess it’s too much to hope that N.O.W. would start burning burkas

Scout

September 9th, 2010
5:35 pm

Time for chow. Back later.

Real Athens

September 9th, 2010
5:36 pm

Mystified:

” … you have an entity that does not have to show a profit and can run at a loss competing with for profit companies. It creates unfair competition that would most likely lead to running private insurance companies out of business.”

What do you think Microsoft, Wal-Mart, Big Oil, Agribusiness and many other giant, multi-national, corporations do on a daily basis to stifle competition, research and development and free-markets?

Hell, that’s called capitalism. What, are you some kind of socialist?

Michael

September 9th, 2010
5:37 pm

I stopped read after the first paragraph when I saw this:

“Competition doesn’t decrease costs.”

Really? How much does laser eye surgery cost today? How much did it cost 10 years ago? It’s a perfect example of competition lowering costs. Because consumers have to pay for it directly and prices are transparent the providers have to compete on cost and quality, just like every other industry.

Nothing Is Free

September 9th, 2010
5:37 pm

Hey. Just for fun, anyone want to meet at Piedmont Park on Saturday and burn a Koran?

Nothing Is Free

September 9th, 2010
5:38 pm

Just kidding.

Bad Karma, man. Bad Karma.

MarketPrice

September 9th, 2010
5:40 pm

“Nothing for Free”:”But the insurance companies DO NOT set the prices. The doctors set the prices. ”

What insurance company do you know who pays “the price set by the doctor”?

In fact, the insurance companies do set the price THEY will pay! If the doctor set the price (or control it), why is it that the same procedure can cost you more or less depending on your insurance company?

Mike K

September 9th, 2010
5:58 pm

@Kamchak
I hear you knockin’ but you can’t come in, Mikey-poo
————————————————————–
Please show exactly when and where I was “knockin’”. Also, explain why you have engaged in name calling.

Mike K

September 9th, 2010
6:02 pm

@Real Athens
“What do you think Microsoft, Wal-Mart, Big Oil, Agribusiness and many other giant, multi-national, corporations do on a daily basis to stifle competition, research and development and free-markets?”
—————————————————————-
What a great point! You’re sooooo right – over the last 20 years Microsoft has driven up the price of operating systems, agribusinesses have driven up the price of food, and Wal-mart has driven up the price of clothing, groceries, and all sorts of goods. Oh, wait, that’s the opposite of what happened. Well, in any case, the price of oil rose. Of course, oil exists in limited supply and demand has skyrocketed, but that can’t have anything to do with the increase in price.

Ragnar Danneskjöld

September 9th, 2010
6:12 pm

I am totally opposed to the burning of Koreans! What it the world did the Koreans do that someone would want to burn them. I knew a Korean – he cleaned our offices. A prince of a guy. He was a little hard to understand, but what crime is that! What has the world come to!!!

Nothing Is Free

September 9th, 2010
6:13 pm

MarketPrice

“In fact, the insurance companies do set the price THEY will pay! If the doctor set the price (or control it), why is it that the same procedure can cost you more or less depending on your insurance company?”

There’s a lot of valuables, but how much you pay is determined by your deductible and since most are HMOs, the consumer has a smaller choice of doctors that they can choose from, all determined to be in that price range. But like I said, that is all changing and it has nothing to do with Obama Care.

The newer system will give you a lot more options.

Say you need a procedure . . . a kidney infection. Your company belongs to this Data service.

You go on line. You look up the procedure and it lists all the doctors in your area that perform that procedure or treatment. lots of different prices and ratings. You will be able to see the background, fines, problems, awards, etc of each doctor.

If you choose doctors in a specific price range (price rarely means its a better doctor. It’s usually based on operating cost such as building rent, overhead, etc. ) If you choose some doctors, you won’t need to pitch in with a deductible. In the next group of prices you will need to pay your deductible and the last group of prices, you will need to be paying out your nose, along with the deductible, plus what the insurer pays.

So you are right. The insurance companies set what they will pay, but it is the doctors that will decide how much they will need to get to do the procedure or treatment.

you will begin to hear about this a lot in the media by Christmas.

Nothing Is Free

September 9th, 2010
6:16 pm

Ragnar Danneskjöld

I feel that way, but only about South Koreans.

North Koreans: Light em up.

hobby

September 9th, 2010
6:28 pm

I’m sad—– I really thought CT WAS into me!!??

hobby

September 9th, 2010
6:34 pm

FACT–There is not a free market in health care. Supply of hospitals is controlled by the “certificate of need”. If not for that, we would have at least twice as many hospitals, clinics, etc competing for patients. If patients had to pay out of pocket, then be reimbursed by their insurance company, there would be more ’shopping’ for price and quality.
CT is right (hard to say that!) — Free market rules DON’T work for health care with the system that is in place. Oh, it will be worse with Obamacare. The real fix is to return to a free market system and watch the prices fall and quality go up!!

John Galt

September 9th, 2010
6:42 pm

Bubba Bob-

The speech of CT and her lemmings sounds EXACTLY like the “progressives” in Atlas Shrugged.

Scout

September 9th, 2010
6:56 pm

Headline: “Fidel Castro: Cuba’s Communism Not Working”

Well, well, well ……………. maybe he could talk with “Che” Obama?

StJ

September 9th, 2010
7:15 pm

If Castro has decided that Communism bites for the people at the top, it must really bite for the people at the bottom.

But hey, it will work here because the “right people” are implementing it here. Never mind those history books…

Mike

September 9th, 2010
7:17 pm

Neil Boortz is a butthole.

Tommy Maddox

September 9th, 2010
7:24 pm

Smooveb @ 3:31:

Very interesting and telling.

Real Athens

September 9th, 2010
7:45 pm

MIke K:

” What a great point! You’re sooooo right – over the last 20 years Microsoft has driven up the price of operating systems, agribusinesses have driven up the price of food, and Wal-mart has driven up the price of clothing, groceries, and all sorts of goods. Oh, wait, that’s the opposite of what happened.”
You’re right that’s exactly what has happened. They were able to operate their businesses at a loss for extended periods of time, driving competition, research and development out of business to give us second rate operating systems built in Vietnam; food that has less health benefits (and taste) of locally grown farms (who went out of business); meat that poisons citizens daily and clothes manufactured in Asia that destroyed the Textile Mills of the Southeast.

Capitalism ROCKS!

Chris Sanchez

September 9th, 2010
8:22 pm

Real Athens,

There is nothing wrong with the way capitalism works. When the government puts in place a tax system that makes manufacturing overseas less expensive than to make them domestically, then capitalism reacts accordingly and moves those operations overseas and improves their profit margins. By the way, businesses don’t pay taxes. The customers of those businesses do in the way of higher prices. Reduce taxes on businesses in a meaningful way and see what happens. If the nominal cost of manufacturing something domestically is the same as doing so overseas then the jobs will stay here and likely return.

The problem isn’t capitalism. The problem is government trying to manipulate capitalism.

Some People are stupid

September 9th, 2010
8:30 pm

Chris Sanchez-

Wait…hold…on…you just said businesses dont pay taxes..and then said to reduce taxes on business….

You cant make this stuff up

Divide and Conquer

September 9th, 2010
8:35 pm

Thanks Carlinist. No need for me fell the need to post once again since you said it all at 9:08AM :)

Real Athens

September 9th, 2010
8:36 pm

Yeah Chris, you’re right. Americans are too fat and soft. Hell, why can’t they work 12 hour shifts for $.70 a day? If they shop at Wal-mart, they can get by!

Hey, just like the good ‘ol days of the company store, Standard Oil and the Stockyards of St. Louis.

I’m in!

Divide and Conquer

September 9th, 2010
8:37 pm

Wait, that was CT at 9:08. I meant 8:40.

Lil' Barry Bailout

September 9th, 2010
8:42 pm

FBI agents visit Florida church over Quran burn
By ANTONIO GONZALEZ and MITCH STACY (AP)
—————–

When did the FBI start “visiting” folks who simply plan on exercising their free speech rights?

When the Idiot Messiah took office, apparently.

Idiot Messiah: Fascist.

Lil' Barry Bailout

September 9th, 2010
8:44 pm

Free market rules worked just fine until the government got involved in health care.

Just one more think Democrats have funked up.

bravesfansince66

September 9th, 2010
8:51 pm

The real problem is the cost of litigation. Doctors are ordering tests to cover their butts. I am sure you believe the costs and quality will improve with Obamacare. As many have said before how can we expect the government to manage anything as complex as the health care bill when it can’t even manage the stimulus spending. And oh the irony of what to call the results, first created then saved and now lives touched. And the unemployment numbers reported today were incomplete by 9 states so we will just give an estimate. Never mind the other 41 that reported were trending in a negative manner. So you have all the uncertainty surrounding, health care, taxes and all the new regulations weighing on the entities with the capital to create jobs. This whole group at the White House is strong on what needs to be done academically but have no clue how it is in the real world. And our illustrious president is the most clueless of the bunch!

AlatSea

September 9th, 2010
9:36 pm

Anybody seen that Keep up the fight?

Tell him AlatSea is looking for him.

Kamchak

September 9th, 2010
9:58 pm

AlAtSeA

Have you finished swabbing the deck.

Perhaps TuEsDaY vANdY gIrL can help.

Nothing Is Free

September 9th, 2010
10:26 pm

I’m not sure if liberals get this:

Say the fed raises taxes on the oil companies. Is there anyone who believes that the oil company ecexs get all the stock holders together and say “Ok guys, they caught us. We are going to need everybody to man up and give us x amount of money to pay these taxes.”

Is there anybody really that dumb?

Is there anyone that is just dumb enough to believe when the financial reform bill caused the banks to hire more paper pushers to make sure the banks conform to the new regs, that the banks go to the stock holders and say “Ok guys. We need some money to hire these new people that the government is requiring”. And then among some pretty vocal profanity, we see a room full of fat cats setting and writing checks to take are of those costs.

Is there ANYONE that is dumb enough to believe that ANY company is NOT going to pass their increased cost brought about by extra taxes or extra costs they encounter because of more regulations to their customers?

So it doesn’t matter if you make less than 20 bucks a year. Not 20 thousand, but ANY amount of money, you are going to pay those taxes for the companies that the government is talking about leveling toward “rich people” i.e. small businesses and large businesses that have been under attack by this administration since 2007?

If anyone does believe that they won’t be paying those taxes for those “rich people” you’re an imbecile.

Kamchak

September 9th, 2010
11:12 pm

…i.e. small businesses and large businesses that have been under attack by this administration since 2007?

HAHAHAHAHAHAHAHAHAHAHAHAHAHA!

AlatSea

September 9th, 2010
11:22 pm

Kamchak

Tell us all again how you have been in the construction business since the 70’s. It’ such a great and inspiring story.

Leon from Redding CA

September 10th, 2010
12:10 am

Traditional employer funded health insurance is not a free market. For a free market the consumer must be making the financial decisions. A new company has found an amazing way for employers to control healthcare costs, or who couldn’t afford employee health insurance, to now do so. LyfeBank, collects employer contributed funds and directs them to employee-owned LyfeVault accounts (via existing tax law) where employees can use their accumulated account funds to purchase (at lower cost) an individual or family insurance policy of their choice, and pay for other qualified medical expenses with their LyfeVault Visa debit cards. All with pretax dollars. This is a free market business model which could easily replace our outdated employer/insurer model. A brief visit to LyfeBank.com will explain this amazing process better than I.

Scout

September 10th, 2010
12:19 am

Hummmm ……….. I wonder if this will grow legs ?

ALLAMA OBAMA

“A Pakistani newspaper is quoting one of the country’s ministers as stating he wants President Obama to offer Muslim prayers at Ground Zero and become the “Caliph,” or ruler, of the Islamic nation.

“The coming Eid would expectedly be observed on 9/11; this a golden opportunity for President Obama to offer Eid prayers at Ground Zero and become Amir-ul-Momineen or Caliph of Muslims. In this way, all the problems of Muslim World would be solved,” stated Minister of State for Industries and Productions Ayatullah Durrani, according to Pakistan’s The Nation newspaper.

The newspaper reported Durrani called its offices and argued the Muslim world was in “dire need” of a supreme leader and that the position would earn Obama the exemplary titles of what Durrani termed “Mullah Barrack Hussain (sic) Obama,” or “Allama Obama.”

Christopher Chance

September 10th, 2010
2:45 am

I see no problem with forcing Americans to buy health insurance. It’s no different than making Americans buy car insurance when driving a car. The level of coverage you want is up to you..as long as you have basic care. If you want fancy care (just like if you want all kinds of coverage for your car), then you pay more.

As far as the hubbub about the wacko preacher in Florida who wants to burn the Quoran….I say, let the mofo burn it. Personally I have better things to do (although I would totally support a bonfire that burns the bible, Torah, and Quran).

However, I feel that the bigger issue here is that this is a freedom of speech issue. Just like Americans have a right to burn the American flag or the bible…..he has a right to burn the Quran. Why should Muslims be any different than a Christian or Patriotic American who hears that someone is burning a bible or the American flag?

If Muslims ever want to be taken seriously….if they want to ever be viewed as anything but fanatics…..then they need to wake up and join the 21st century. In the free world, people have the right to free speech. As long as they get riled up over someone burning a Quran or a cartoon depicting Mohamed……….they will continue to be viewed as extremist religious wackos.

For President Obama and the military to get their panties in a twist over some wacko preacher with a congregation of 50 people…..just shows how they really view Muslims. If I was President and wanted to give the Muslims an out when it comes to showing that they are reasonable people……then I would hold a press conference and say something along the following lines: “I’m confident that most reasonable Muslims are strong enough in their faith to not let some wacko preacher affect their judgment”.

Saying that would give Muslims an opportunity to show that they arent extremists. Instead, the powers punted by catering to the sensitives of Muslim extremists. Instead of having the vision to make a situation like this work to their advantage…….Obama just delayed the inevitable. I guarantee you that another situation like this will come up in the future. When someone tells you that you cant do something…it kind of makes attention seekers want to do it. Bank on it.

ODDOWL

September 10th, 2010
3:46 am

I’ve noticed that of the 342 comments posted in this blog site, not a single one of them mentioned anything about salary increases. American workers are some of the lowest paid workers in the industrialized world. The average salary in the US is about $14.00 an hour or $31.000 a year. The average wage in the US has decreased every year since 2000. When inflation is taken into account, the average worker today earn about the same wage as a worker did in 1980. President Obama explained it perfectly; “Many Americans have been hoodwinked and bamboozled.” Lets contrast the salaries of Americans with the salaries of workers in Western European Countries. The average salary in German is about $37.00 ah hour, in France about $37.00 an hour, in Britian about $30.00 and hour, the Scandinavian Countries about $35.00 and hour. All the Western European Countries have national health insurance, along with all other cradle to grave services. When a recession occur in Europe, a strong middle class keep the economy relatively stable. We Americans have a weak middle class, huge lower class, mass layoffs and overvalued houses in foreclosure, all hell has broken loose. Milton Friedman’s Deregulated, free market, supply-side trickle down, cutthroat capitalism has proven to be a miserable failure. Cutthroat capitalism has produced a vicious class warfare with the richest 10% of the population hording 90% of all the wealth. You know, that European style of so-called Democratic Socialism is beginning to look more and more attractive.

Lil' Barry Bailout

September 10th, 2010
6:34 am

ODDOWL: Cutthroat capitalism has produced a vicious class warfare
—————————–

Hmm, sounds like somebody can’t cut it in a competitive market. Loser.

If you think those Europeans have it so great, you haven’t seen how they live. Their high tax rates undo every bit of those grand salaries, and they have a living standard similar to our lower middle class.

Lil' Barry Bailout

September 10th, 2010
6:36 am

$37 doesn’t go too far in a country where a beer is $7 either.

Educate yourself before spouting off…then you won’t sound so dumb.

Caveman

September 10th, 2010
7:02 am

The “free market” doesn’t work for anything. Look at how deregulation brought our economy to it’s knees.

paleo-neo-Carlinist

September 10th, 2010
7:29 am

Li’l Barry, I conced the $7 beer post. but most are found at ballparks, concert venues and high end drinking establishments. I think the problem with Obama’s plan is, it removes “choice” from the equation – do I want to attend a Braves game where I know beers are $7? do I want to take the Mrs. to some trendy club or Buckhead eatery where I will pay $10 for a fancy-pants microbrew? as far as “not cutting it in a competitve market” – I call “idiot”. the healthcare market is not “competitive” because the regulations in place favor insurance companies and providers. that said, I concur the Obama solution does not change this at all. the “reform” or new regulations are cosmetic and political at best.

jt

September 10th, 2010
7:35 am

Four sentences in, CT devestates her own argument.

“For the better part of two decades, health care costs have been rising at more than the rate of inflation — straining the federal budget,”

The “free market” has absolutely nothing to do with the federal budget. The government killed the “free market” over fifty years ago.

Reagan was right.

Andrea

September 10th, 2010
8:47 am

Has anyone ever shared the cost of the benefits received for the premiums paid? The missing discussion is what the cost of care is without insurance. Most Americans don’t understand or have forgotten what insurance is…simply a group of people who come together to pool their dollars against current and future costs of that care needed. We need to discuss the cost of the care for us as a nation to understand why the premiums issues by the insurance companies are either too high or too low to cover those costs. I am for a solutions to the raising cost of care and for that care to be the best that we can afford both individually and as a nation.

southla

September 10th, 2010
9:22 am

There has not been a free market in Healthcare since 1965 when Medicare was passed. Graph the cost of medical costs from 1940 to now along with the variouls goverment programs, and the fact is inescapable that the involvement of the Government in Healthcare is responsible for the high costs. It is clasic economics, goverment money creating ever more demand. When demand chases supply, costs have to rise. Add to that insane regulation, and here we are.