‘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

buck@gon

September 10th, 2010
12:28 pm

” (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:

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.”

Folks, we have it here first from C. Tucker, mediocritist extraordinaire in the editorial world. Now that we are implementing reform–the reform we still don’t know about because it isn’t all implemented yet, because we aren’t sure what was in it, and because we were going to learn about it AFTER we passed it –we need “more ambitious reform.” And all this time, the REPUBLICANS (not the DEMS who had a filibuster-proof majority) get the blame for this ambitious reform not happening.

Cynthia, you must be either an imbecile or believe that we, your readers are. Who in the hell are you kidding?!!!

Resign your job, do good things and start telling–or at least “acknowledging”– the truth, for once! If you can’t make a decent argument on point and on fact, you do not deserve any award, salary or respect that your job commands. Because you don’t, you continue to demean the “media” and make it all suspect.

I wish you well, and I hope you read things once in a while (like this) against which you know you can not argue. You need to write and behave like a logical adult.

Lil' Barry Bailout

September 10th, 2010
12:37 pm

Funny how everyone thinks health insurance is such a ripoff, yet they continue to clamor for it. Paid for by someone else, of course.

Pay your own bills, parasites.

Lil' Barry Bailout

September 10th, 2010
12:40 pm

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

I guess the Idiot Messiah’s health care scheme doesn’t work for health care, either, sinc we’re now learning that it is causing insurance rates to go up. Wasn’t all this government interference supposed to “bend the cost curve down”?

Heath care: Just another thing the Democrat party has funked up.

Adrian Donovan

September 10th, 2010
3:35 pm

Your column is a display of pure ignorance. Even though we have private insurance plans, they are not truly free market systems because of the massive government mandates. If the “free market” were allowed to work, it would solve the problem. Free market means that the industry or profession is free of government interference. That, unfortunately, will not happen.

Christopher Chance

September 10th, 2010
6:34 pm

Adrian Donovan…………….free from government interference would be a great temptation for greedy corporate types to engage in even more immoral business practices. You only have to study history to understand this. Absolute power corrupts absolutely…………just like an absolute free market corrupts absolutely the free market.

Let me ask you this: For those of you who believe in the bible, I’m sure that you’re aware of the story of the Ten Commandments and how Moses went up into the mountain and came down with the stone tablet that God gave him to take to his people.

Well, if man is so incapable of doing the right thing that God had to put it in writing that you should not commit murder…………….what makes you think that we as humans or Big Business should be free from government regulation? Without government regulation……….the so called free market becomes survival of the fittest (meaning that the powers that be will not have to worry about playing fair).

History has shown that the powerful (whether Big Business, military or political leaders) do not always play fair. Without the checks and balances that the government has to offer…………….monopolies will become even more the norm. You’ll see that the so called free market will truly be far from free.

TnGelding

September 11th, 2010
6:36 am

Free market rules don’t work, period. We all need to take responsibility for our own health care and stop relying so much on drug dealers (doctors). I made so many bad decisions during a recent hospitalization I should be charged for part of the bill. I feel guilty for abusing the system. And it was probably all due to something I foolishly ate.

Smiley

September 11th, 2010
7:37 am

Ever since third party payors such as the government and health insurance companies got involved, there has not been a true free market in the healthcare industry as they have a monopoly on dictating the price of healthcare. How could there be a free market when the end-consumer has no idea what actual money is being spent on their healthcare and they were not involved in any of the spending decisions? Make them accountable for their spending and we’ll see how many unnecessary antibiotics or x-rays get ordered. The closest thing to a free market we have right now is LASIK, cosmetic surgeries and HSA – they are free from third party payor involvement and seem to follow the rules of the free market just fine.

dan

September 11th, 2010
5:28 pm

the only problem with your assumption is that we do not have a free market in health care. there is massive government intervention. governments on state local and federal levels pay more than 50% of all health care dollars. if there are problems with health care it is obviously because of too much government intervention.

Chip

September 13th, 2010
12:58 pm

It is very hard to argue that the “free market” has not reduced healthcare costs when you consider the vast regulatory measures placed upon health care providers.

I’m not suggesting that the regulations aren’t necessary, I’m simply suggesting that the health care market is not able to operate under free market principles.

It is disingenuous to suggest that the behavior of a heavily-regulated market is somehow indicative of the fact that free (i.e., largely unregulated) markets do not work.