Public option and competition, where is the connection?

[Rightarrow]

I keep hearing about the public option helping create more competition for the big bad money grubbing insurance companies. Will someone please explain to me how the government can ever fairly compete in any endeavor with the private sector?

When I am forced to pay into the public option through my taxes, how does that fairly compete with the private option which does not force me to pay?

When the public option provides subsidies with my tax dollar, how are the private sector companies supposed to compete with that?

How about we drop the competition word, since we can see that competition is not what advocates of the public option are after, it is annihilation of the private insurance companies.

 

[jackalope]

I keep hearing about the public option helping create more competition for the big bad money grubbing insurance companies. Will someone please explain to me how the government can ever fairly compete in any endeavor with the private sector?

When I am forced to pay into the public option through my taxes, how does that fairly compete with the private option which does not force me to pay?

When the public option provides subsidies with my tax dollar, how are the private sector companies supposed to compete with that?

How about we drop the competition word, since we can see that competition is not what advocates of the public option are after, it is annihilation of the private insurance companies.

You will not be forced to pay into the public option through your taxes; your taxes will fund subsidies for low-income individuals who don't have insurance. However, whether a public option makes it into the final bill or not, doesn't determine what your taxes will pay for. If there is no public option, your taxes will still fund the subsidies. Difference is, it will cost more. Public option = lower cost, according to CBO.

 

[Rightarrow]

I am researching the CBO's findings right now, but meanwhile... How exactly would the public option lower costs? And I still haven't seen how it will be competitive with private "options".

 

[jackalope]

I am researching the CBO's findings right now, but meanwhile... How exactly would the public option lower costs? And I still haven't seen how it will be competitive with private "options".

The plans with a public option came in at lower cost to the taxpayers than plans without one on the cost estimates. We will still be funding the subsidies, we will just be paying more.

 

[Rightarrow]

The plans with a public option came in at lower cost to the taxpayers than plans without one on the cost estimates. We will still be funding the subsidies, we will just be paying more.

I see. So costs will go down for the individual, since I, the taxpayer, will bear more of the burden. Am I right?

 

[lizzie]

Will someone please explain to me how the government can ever fairly compete in any endeavor with the private sector?

They can't. It's just snake oil in a pretty bottle.

 

[jackalope]

I see. So costs will go down for the individual, since I, the taxpayer, will bear more of the burden. Am I right?

No, costs for the taxpayer will be lower b/c premiums will be lower, thus percentage for subsidy costs less.

Only lower income people qualify for subsidies. Those subsidies will be higher if the only choices are the current private options. With a public option, the subsidy will be less b/c the premiums will be less.

A public option plan won't be the 'entitlement', the subsidy will. We can pay less money with a public option, or more money with no public option, the taxes are going to be paid regardless. Seems like a no-brainer to go the lower cost method.

 

[Rightarrow]

So... lower premiums mean less money going into the system. Since doctors already take a cut for treating Medicaid patients, do we expect them to take more cuts treating the public option patients?

One more thing. The idea of the health care reform is to provide more services to more people, right? This means more demand for services from doctors while not increasing the supply. Basic economics tell us that when demand increases and supply does not, prices go up. I don't see why people ignore this issue.

 

[prometeus]

Will someone please explain to me how the government can ever fairly compete in any endeavor with the private sector?

Why does the government HAVE to compete and fairly with the private sector in this matter? Why does health care have to be a VERY profitable business for a party that does nothing to make people well?

When I am forced to pay into the public option through my taxes, how does that fairly compete with the private option which does not force me to pay?

When I have to pay more in taxes so you can have the same police protection as I do, how is that fair?

When the public option provides subsidies with my tax dollar, how are the private sector companies supposed to compete with that?

Why are they supposed to compete at all in a matter of national importance? We do not bid out our defense to competitive armies.

 

[prometeus]

Basic economics tell us that when demand increases and supply does not, prices go up. I don't see why people ignore this issue.

So more money will go to actual health care providers instead of the pockets of insurance companies. It's rather simple actually.

 

[lizzie]

So more money will go to actual health care providers instead of the pockets of insurance companies. It's rather simple actually.

Insurance companies don't have huge profit margins. Health care providers, as a general rule, are not making huge profits either. What it amounts to is that health care is expensive to provide for a wide variety of reasons. The things that government could do to help control costs are the very things they will not do.

 

[Ethereal]

When I have to pay more in taxes so you can have the same police protection as I do, how is that fair?

It’s not fair. A flat tax would rectify that.

Also, the police are funded locally, not nationally, so your comparison is nothing more than a poorly disguised strawman.

 

[The silenced majority]

You will not be forced to pay into the public option through your taxes; your taxes will fund subsidies for low-income individuals who don't have insurance.

So there won't be a public option, just publicly-paid insurance for low-earners?

Isn't that the same thing at the end of the day?

 

[Solidus]

Be careful when talking about "the public option", there are at least three versions being floated around.

"Weakest" - No access to general tax revenue (outside of initial capital outlay), must negotiate rates with health care providers, must operate solely on premium revenue. Basically what the President has been outlining in various speeches. There is still the question of an "implicit subsidy" (see Fannie and Freddie), if a few years down the road the public option isn't sustaining itself with premium revenue will Congress decide to dissolve it? Prop it up with cash? Take it over completely? To my knowledge there is no language in any of the proposed bills that spells out what will happen if the public option is not financially viable. Further, this raises the question highlight by Mankiw and others ... if the public option has to operate exactly like a non-profit insurer how is it any different from the many other non-profit insurers?

"Average" - No access to general tax revenue (outside of initial capital outlay), sets (not negotiates) reimbursement rates at 10-15% above Medicare rates, must operate solely on premium revenue. I think this is in the House version of the bill (or it might have been what was eventually dropped form the Senate Finance committee I've lost track). This undercuts private plans by setting rates not negotiating them. Arguably this is a good thing in regions where market power is tilted too far in favor of insurers or providers (strong insurers extract near monopoly rents from customers, strong providers extract near monopoly rents from insurers which are then passed on to customers). The argument on the other side is that with set rates the strong providers will cost shift to the private plans, as sometimes seen with Medicare. The magnitude of this effect is under much debate. This is where the CBO estimates the cost savings from. Of course if we wanted the really cheap version of this benefit we'd just open up inter-state health insurance purchases. Thereby skipping over the establishment and administration of exchanges, public option administration, and the various other departments added to HHS.

"Strong" - Possibly subsidized, sets reimbursement rates at Medicare levels, may not need to be self-sufficient on premium revenue. The originator of the concept for a public option started with a non-subsidized "strong" version, most "next best thing to single payer" advocates push for this version. Will drastically undercut private insurers (seen as feature not a bug). This is one of two options "scored" by the Lewin Group that found massive shifting from private insurance to the public option. This version has not made it into any of the bills to my knowledge.

So when people say "the public option" they might mean the President's "just like a non-profit" version, or the bogeyman of the right "Medicare for all".

As you can probably guess from my other postings I oppose a public option. Mainly because I don't see a "weak" version staying "weak" for very long ("hmm ... it's not saving enough money ... let's allow it to set rates instead of negotiating"; etc.), the benefit can all be duplicated via different means (actual national markets with inter-state purchase, instead of artificial exchange markets), supporters of a public option pooling their personal resources to start it themselves, and the ineffectiveness of state public options.

That said I'm much more worried about all the other mandates and regulations that are in the major reform bills. I don't mind at all subsidizing low income households (carefully, marginal tax rates are tricky), although I'd much prefer a voucher (see food stamps) to subsidizing insurers or hospitals on their behalf.

J

 

[Rightarrow]

Why does the government HAVE to compete and fairly with the private sector in this matter? Why does health care have to be a VERY profitable business for a party that does nothing to make people well?

When I have to pay more in taxes so you can have the same police protection as I do, how is that fair?

Why are they supposed to compete at all in a matter of national importance? We do not bid out our defense to competitive armies.

So you are making the case that the public option is not supposed to be competitive. Thank you! Please tell your liberals to stop saying that it is.

 

[Rightarrow]

So more money will go to actual health care providers instead of the pockets of insurance companies. It's rather simple actually.

We are not talking about demand to insurance companies, we are talking about demand to DOCTORS and what they charge for their services. If too many people come to see them to the point they can't take care of all of them, they raise their prices to reduce the demand. What is there not to understand about this?

 

[lizzie]

If too many people come to see them [doctors] to the point they can't take care of all of them, they raise their prices to reduce the demand. What is there not to understand about this?

That's not exactly the way it is working in our current system. A good number of doctors have closed the doors to their private practices because insurance and Medicare reimbursement is poor. I have about 10 friends (doctors) who have closed their private practices. Insurance and Medicare reimbursements have reached the point that doctors are having to take on more and more patients just to make ends meet. Granted, these are usually family and general practitioners, where income is not that great anyway, but I know three general surgeons who also closed their office practice to contract with hospitals as "hospitalists". Many doctors are really stretched thin these days having to see a heavy load in their offices, and still making hospital rounds, and they are having to sacrifice their home and family life. Add to that, the rising costs of malpractice insurance, and it's a no-brainer for some doctors.

If people had to pay for their own doctor's office visits, the costs would come down, and if people had to pay for their own prescriptions, the costs would come down as well. HMO's have been one of the primary reasons for the soaring insurance rates- not because the insurance companies are making more profits, but because it has taken the responsibility off the consumer, and we have created a society that expects to pay nothing out of pocket, thus are inclined to over-utilize the system.

 

[prometeus]

Insurance companies don't have huge profit margins.

Really? I guess then UH must have robbed banks to give the CEO over a billion.

Health care providers, as a general rule, are not making huge profits either.

Then pray tell where does all that money, as we spend more on health care than any other nation, go.

 

[prometeus]

It’s not fair. A flat tax would rectify that.

Would not as 10% of a million is still more than 10% of 100K

Also, the police are funded locally, not nationally, so your comparison is nothing more than a poorly disguised strawman.

BS. So what if they are locally funded? Does that come out of donations? How about FBI and all the other federal law enforcement agencies? Think before you post.

 

[prometeus]

So you are making the case that the public option is not supposed to be competitive. Thank you! Please tell your liberals to stop saying that it is.

Not exactly. The way the public option is or will be set up it maybe I am not sure what the outcome will be, but it should NOT be, that is we should have a single payer system not based on competition but on competency.

 

[lizzie]

Really? I guess then UH must have robbed banks to give the CEO over a billion.

The profit margin of insurance companies ranges generally from 3-6%, which is considerably less than many other industries, but the insurance industry is such a large one that making 3% seems obscene when compared to smaller industries. Percentage-wise, they are not huge profiteers.

Then pray tell where does all that money, as we spend more on health care than any other nation, go.

Services, pharmaceuticals, diagnostics, medical equipment, employees, and administration costs, just to name a few.

Edited to add:
One of the reasons health care around the world is improving is because of innovations and R&D in the US. Research and development and innovation are driven by profit. Take away the profit component and you will see a decline in innovation. Personally I can live with that because I accept the fact of mortality. Many people never want to face the fact that they will eventually die of something, and they enjoy living under the false impression that medicine can save them. (The doctor has become the new God, in a manner of speaking).

 

[prometeus]

The profit margin of insurance companies ranges generally from 3-6%, which is considerably less than many other industries, but the insurance industry is such a large one that making 3% seems obscene when compared to smaller industries. Percentage-wise, they are not huge profiteers.

Can you please provide a source for that figure?
I like you comment about "it seems obscene." I prefer to call it obscene when a CEO is compensate over a billion dollars over a few years while doing nothing to make anyone better.

Bottom line is that we spend MORE money on health care than any other developed nation, yet we are not healthier, do not live longer and have a higher infant mortality rate. Put it differently, even at a nil profit margin we are not nearly getting our money's worth, yet some are getting rich. Perhaps you are OK with that, I am not, not because some are getting rich, but because they offer nothing in return.

 

[lizzie]

Can you please provide a source for that figure?
I like you comment about "it seems obscene." I prefer to call it obscene when a CEO is compensate over a billion dollars over a few years while doing nothing to make anyone better.

Is an AP story enough, or do you need me to find you the actual statistics on a formal study site?

Health insurers posted a 2.2 percent profit margin last year, placing them 35th on the Fortune 500 list of top industries. As is typical, other health sectors did much better — drugs and medical products and services were both in the top 10.
The railroads brought in a 12.6 percent profit margin. Leading the list: network and other communications equipment, at 20.4 percent.
HealthSpring, the best performer in the health insurance industry, posted 5.4 percent. That's a less profitable margin than was achieved by the makers of Tupperware, Clorox bleach and Molson and Coors beers.
The star among the health insurance companies did, however, nose out Jack in the Box restaurants, which only achieved a 4 percent margin.
UnitedHealth Group, reporting third quarter results last week, saw fortunes improve. It managed a 5 percent profit margin on an 8 percent growth in revenue.
Van Hollen is right that premiums have more than doubled in a decade, according to a Kaiser Family Foundation study that found a 131 percent increase.
But were the Bush years golden ones for health insurers?
Not judging by profit margins, profit growth or returns to shareholders. The industry's overall profits grew only 8.8 percent from 2003 to 2008, and its margins year to year, from 2005 forward, never cracked 8 percent.
The latest annual profit margins of a selection of products, services and industries: Tupperware Brands, 7.5 percent; Yahoo, 5.9 percent; Hershey, 6.1 percent; Clorox, 8.7 percent; Molson Coors Brewing, 8.1 percent; construction and farm machinery, 5 percent; Yum Brands (think KFC, Pizza Hut, Taco Bell), 8.5 percent.
___
Associated Press writer Tom Murphy in Indianapolis contributed to this report.
By CALVIN WOODWARD, Associated Press Writer Calvin Woodward, Associated Press Writer – Sun Oct 25, 2:34 pm ET

FACT CHECK: Health insurer profits not so fat - Yahoo! News

Bottom line is that we spend MORE money on health care than any other developed nation, yet we are not healthier, do not live longer and have a higher infant mortality rate. Put it differently, even at a nil profit margin we are not nearly getting our money's worth, yet some are getting rich. Perhaps you are OK with that, I am not, not because some are getting rich, but because they offer nothing in return.

In this country, we have more of many things, including poor health habits. We also have access to lots of food, lots of drugs, lots of everything that can make you sick, and we have lots of people who want to live a high-risk lifestyle, then want the medical community to put them back together again. In a relatively free society, with access to lots of stuff that is bad for you, rates of illness at relatively young ages is going to happen, and all the access to health care in the world can't save you from a high-mileage life. And no, it doesn't bother me a bit that some people are rich. I'm not one of them, but I don't live in a state of class envy, and I don't think that the rich owe me anything.

 

[Ethereal]

Would not as 10% of a million is still more than 10% of 100K

What's more fair than paying a flat percentage?

BS. So what if they are locally funded?

What's the matter? You don't understand the difference between locally and nationally funded initiatives?

Does that come out of donations?

No, it comes from tax dollars; local tax dollars. Which means the people who pay the taxes incur a direct benefit from the expenditure, and exercise a greater measure of control over the dispensation of those tax dollars, as opposed to nationally funded programs which often disproportionately benefit certain demographics and powerful political blocs.

You see, I don't want or need a public option. I would derive absolutely no benefit from it and would have absolutely no control over its composition or management. My local police force, on the other hand, is something I want and can benefit from directly and exercise an appreciable measure of control over.

Locally funded programs, generally speaking, benefit the people who pay for them, while nationally funded programs are often beneficial to select demographics and political movements. See the difference, genius?

How about FBI and all the other federal law enforcement agencies? Think before you post.

What about them?

 

[prometeus]

What's more fair than paying a flat percentage?

excise or VAT. Pay as much as you use.

You see, I don't want or need a public option. I would derive absolutely no benefit from it and would have absolutely no control over its composition or management. My local police force, on the other hand, is something I want and can benefit from directly and exercise an appreciable measure of control over.

It is not about individual needs but societal good.

Locally funded programs, generally speaking, benefit the people who pay for them, while nationally funded programs are often beneficial to select demographics and political movements. See the difference, genius?

So you are all about 'damn the neighbor, I am doing well' and ytou call me genius?

What about them?

You have to ask? clearly you are understanding the posts...