Sep 152010
Heath care for America Now! @barackobama rally...
Image by Steve Rhodes via Flickr

Article first published as Affordable Healthcare in America — Fighting Fiction and Facing Facts on Technorati.

Healthcare insurers are at it again, only this time they’re blaming their rate increases on the Affordable Care Act passed earlier this year. Late last week, Aetna Inc., certain BlueCross BlueShield plans and other smaller carriers asked for rate increases from 1% to 9%, allegedly to cover costs stemming from the new law.

Republicans were quick to jump on the news and leverage it for political gain by posting the news on the Republican Senate’s website. But this is nothing new. The Republicans have railed against the legislation since day-one, most often with gross distortions, like Sarah Palin’s “Death Panels.” Most recently, during his August 24 speech at the City Club of Cleveland, House Minority Leader, John Boehner attacked the law, illegitimately labeling it “a government takeover of healthcare.” Of course it’s actually nothing of the sort, as it continues to rely upon the existing system of private insurers and providers, but Boehner would never let the truth get in the way of a good talking point.

Not to miss an opportunity to ding the Democrats, Rand Paul released a new campaign ad attacking what he calls, “the Obama-Pelosi healthcare scheme,” claiming that it “puts Washington bureaucrats in charge, destroying the doctor-patient relationship.” And according to Sen. Charles Grassley (R-IA), the top Republican on the Senate Finance Committee, “People are finding out what’s in [the law], they don’t like it, and I think it’s going to play a big factor in this election.” Such serious assertions make a person wonder what changes within the new law could possibly be responsible.

The issues cited by the insurers looking for rate hikes were: allowing children to stay on their parents’ insurance policies until age 26, eliminating co-payments for preventive care, barring insurers from denying coverage for children with pre-existing conditions, and changes to annual and lifetime coverage caps. Just how these regulations will “destroy doctor-patient relationships” or why Grassley’s “people” would raise an objection to them is hard to fathom. But fact-free Republican spin is a constant in 21st Century America, so Democrats are left with a vigilant effort to combat fiction with actual facts.

The fact is that the Obama administration was expecting small premium increases in the short term, between 1% and 2%, stemming from the new regulations. But they are also counting on the state managed insurance exchanges to provide much needed competition and rate reductions as time moves forward. Another fact is that rate increases vary amongst carriers. The high mark is currently Celtic Insurance Co., in Wisconsin and North Carolina, who claim that half of their 18% increase is the result of the new federal regulations. BlueCross BlueShield of Oregon sets their hit at 3.4% of an overall 17.1% increase, and HMO Colorado actually filed for a 1.8% rate reduction associated with the new laws.

Regardless of what the costs resulting from new regulations are in reality, they are but a small part of the overall thrust toward ever escalating healthcare costs. Few can forget the 39% increase requested by Anthem BlueCross earlier this year, a request that turned out to be based on erroneous calculations. But erroneous or not, costs are on a steep upward trajectory and so are insurance company profits.

Real costs continue to rise for multiple reasons. With Baby Boomers aging, there is a steady increase of elderly patients, and at the same time, the population is increasing and people are living longer. New and expensive medical technology is another contributor of rising costs, as is increasing obesity, currently estimated to affect 34% of American adults. Inadequate medical records and a lack of preventative care also contribute, both of which are now being addressed through Obama administration initiatives — preventative medicine through the healthcare bill and medical records through $20 billion in Stimulus funding.

But none of these issues should be viewed as the main culprit, though each one does have more impact than the Republican’s favorite diversion — malpractice insurance, which only accounts for around 2% of overall costs. Fortunately, the main culprit is completely controllable, but it will require structural change: that factor is our reliance upon a fee-for-service based insurance system. Inherent in the design of fee-for-service systems are incentives that promote the consumption of unneeded and marginally effective services, and disincentives for leveraging preventative care. This dynamic is the driving force behind the fact that, while we trail most other Organization for Economic Cooperation and Development (OECD) nations in almost all healthcare metrics, we also spend twice as much on healthcare — currently 17% of GDP.

Ironically, the main people really benefitting from continuously escalating healthcare costs are the very same people now asking for rate increases — the medical insurers. While the nation is struggling under the weight of average insurance rates that have climbed 131% since 1999, the insurers have enjoyed a ridiculous 250% increase in profits. Even in the current economic times, the nation’s five biggest for-profit health insurance companies posted record profits, booking $3.2 billion in the first three months of this year, a 31% increase over the same period in 2009. They’re doing so well that the top 10 firms have been able to raise CEO pay to an average $23 million each, a 167% increase in 2009 alone.

Unfortunately, the Affordable Care Act didn’t address most of the issues responsible for driving up healthcare costs, and at present, there is no movement in Washington to do so. Until these issues are given the focus they need and fee-for-service is replaced with some sort of managed care system, more emphasis is placed on preventative medicine, and a system is created to provide real competition amongst both insurers and providers, costs will continue to skyrocket and insurers will keep smiling all the way to the bank.

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