Florida’s Governor Charlie Crist (R) has proposed a stripped-down health plan with coverage for the basics – physician visits, emergency care, hospitalizations, and drugs, for $150 a month. He’s not setting the benefits, but rather proposing that commercial insurers develop their own plans.
There’s a lot to like about hizzoner’s proposal.
First, Crist wants guaranteed issue – insurers won’t be able to turn someone down for pre-existing conditions.
Second, families will be able to include their kids on their plans up till age 30. This does a couple things – many ‘free riders’ are the young newly-employed who would rather use their cash for stuff besides health insurance (and who wouldn’t?). This eliminates many of the free riders, makes sure they are covered, and thereby reduces the need for hospitals and other providers to deliver care for free when these kids run their motorcycles into walls.
Third, the state would increase its efforts to locate and cover children eligible for insurance under Florida’s KidCare program.
Nothing’s perfect, and the Governor’s plan does have one rather big problem. He wants to eliminate the Certificate of Need program which requires providers to jump thru regulatory hoops before they can open certain kinds of facilities. Unfortunately, in health care supply creates demand, and the end of the CoN process in Florida will increase costs.
Thanks to Florida HealthNews for the tip.

This is a two-part answer. Both have essentially identical cost containment mechanisms. But will these mechanisms have a material impact on costs?
Here’s my take.
Pools – both look to reduce administrative expenses by providing insurance thru and ‘managing’ insurers by centralized insurance buying pools. Both would set up national mechanisms – Clinton thru the existing FEHBP and Obama via a new Health Insurance Exchance. My take – this will help cut admin costs by a few points.
Disease prevention – relatively minor policy differences – both will require coverage of preventive care and increase funding for some public health initiatives. My take – this should help reduce costs – but over the long term – by spotting disease early, thereby reducing cost of treatment. It will also improve GDP as the early detection will prolong lives of workers. Costs may well increase somewhat over the near term as the previously uninsured get lots of care for all their newly-discovered conditions.
High cost cases – Obama will reimburse employers for a portion of an individual’s over a per-person threshold if the payer uses the funds to reduce premiums. Clinton’s plan is silent on these. My take – no impact on costs. I don’t like risk transfers, as there is no incentive for the primary risk taker to manage cases which they think will become high-cost, and no incentive once these cases have pierced the threshold.

Continue reading Which health plan controls costs, Obama’s or Clinton’s?

I’m not a big fan of risk adjustment. The case for risk adjustment is pretty simple; insurance carriers should not be penalized if the folks who sign up for their plan are sicker, and therefore require more care, than average.
To make the market ‘fair’, risk adjustment advocates believe that the plans with lower costs (presumably due to their ‘healthier’ population) should send money to the plans with higher costs. There are several risk adjustment models in place, each with its own features. Germany’s system is an oft-cited example where adjustments for age, sex, disability, and level of sick pay benefits are calculated. The Dutch also look at age, sex, and disability status, and add employment status and region to their formula. The Israelis, Swiss, and Belgians also employ risk adjustment techniques; and each methodology has significant problems. To be sure, these countries are working on improving their techniques and formulae, but they all have been doing this for years and still find challenges.
But say these countries find the right algorithm, and figure out how to make the risk adjusment system ‘fair’. What then?
A massive deviation towards the mean – all insurers will become ‘average’. The logical problem is obvious – a risk adjustment eliminates any reason for an insurer to invest in keeping their insureds healthy, to effectively manage care, to seek out the best providers and help them deliver the best, most cost-effective care. Instead, it de-motivates insurers – there is no reason to work hard to improve health status and outcomes and minimize cost if there is no financial reward for success.
If insurers have no motivation to control medical costs, they won’t. Instead, health plans will slash costs, eliminate programs and jobs, and ignore results.
Risk adjustment assumes that regulators will not prevent insurers from exercising their well-honed risk selection skills; the transfer mechanism is a kind of backstop to ensure that even if those wiley insurance execs do fool the regulators, their trickery will not pay off.
I’ll grant that some insurers will try whatever they can wherever then can whenever they can to get ahead, and (pause, cross fingers) if some day we have universal coverage and ban medical underwriting and target marketing that will not change . There are always going to be cheaters – that’s why we have whistleblower laws, and Federal agents, and prosecutors, and jails. No, we’re not going to catch all of them.
But I don’t think they will cause nearly enough pain to offset the gains we will enjoy when insurance companies finally start turning their brains from risk selection to keeping us healthy.
And the only way to motivate that behavior is to reward those insurers that do it well.

Encourage people to eat and smoke more.
Because they die sooner, and, believe it or not, end up incurring lower health care costs than their healthier brethren.
That’s the rather uncomfortable conclusion of a Dutch study reported by our colleague Bob Laszewski on Health Care Policy and Marketplace Review. According to an article on the report, “from age 20 to 56, obese people racked up the most expensive health costs. But because both the smokers and the obese people died sooner than the healthy group, it cost less to treat them in the long run.”
The net cost differential in favor of the unhealthy folks was 12%, or $45,000.
The study was an academic extrapolation of data, and was not based on actual claims information. And there’s one significant problem with the conclusion -given how fat we Americans are getting, our costs should be heading down, and fast.