Why private insurers will back reform
$150 billion.
That's how much revenue that's up for grabs if/when mandated universal coverage becomes law.
Here's how the math works. 47 million people did not have health insurance during 2006 . The average family premium in 2007 is $12,106. Figuring that all of these uninsured are in families with 4 people (I know that's not the case but I'm being conservative), the total premiums come to just under $150 billion.
All of the leading Democratic candidates' health care platforms include some form of universal coverage, ranging from immediate (Edwards and Clinton) to phased in over time to implied (Obama).
The health plan marketplace has all the markings of a mature industry - it is consolidating rapidly - the biggest are getting bigger through acquisition, snapping up smaller carriers and ancillary vendors. If the big plans are going to grow (after they've bought all of the smaller plans) they have to expand their market - and with 18% of Americans under 65 without health insurance, that's just what they need.
What does this mean for you?
Go long on the better large health plans.
Comments
Thanks, Joe, for observing the KISS rule (Keep It Simple, Stupid). Doing the math like this is so obvious, I'm amazed no one else has done it.
It's a great starting point since this number you've come up with is that it assumes zero effort on cost-containment. Your math assumes we take our current system, with all its built-in waste, fraud, abuse, inefficiencies, misplaced incentives and dysfunctions, and does not even account for the expenses that would automatically go away under a universal coverage arrangement. For example, Disproportionate Share Hospital funding, which is money given by Medicaid to hospitals that see a disproportionate share of the uninsured to cover uncompensated care, would be zeroed out, since there would be no uninsured, and near-zero uncompensated care (save for maybe a few unpaid copays). The last figure I can find, 2002, says this total is $20 billion. Instant savings, so automatically, universal coverage only costs us $130 billion net, before we even start doing any hard thinking.
And think of all the economic activity (taxable, private-sector, economic activity) that would take place that is currently going on in the public sector, and therefore untaxable, under this scheme. Budget surplus, here we come!
What you've highlighted, Joe, is the wost-case scenario. Could we really not handle it when the President wants to spend another $200 billion this year on Iraq.
Posted by: Rick | November 1, 2007 9:36 AM
"expenses that would automatically go away "
Eh? But don't forget, expenses are someone else's revenue.
Such expenses won't go away automatically. No expenses ever go away "automatically".
Posted by: Mike Feehan | November 1, 2007 8:05 PM
No need to split hairs, Mike. When I say go away, I meant they get melded into the expenses of universal coverage. The DSH line item certainly would go from $20 billion to zero. But how enticing to think that money now spent through the Medicaid budget on DSH funds could become taxable, private-sector business activity.
Posted by: Rick | November 2, 2007 11:42 AM
"When I say go away, I meant they get melded into the expenses of universal coverage. "
Oh. I see now. Thanks.
Posted by: Mike Feehan | November 4, 2007 8:00 AM