The American dream is dead.
Not for everyone. If you’re reading this now, not for you. For some of us, it’s still possible to get ahead, have the perfect family and the house with the white picket fence — the whole shebang.
But for more and more people, the American dream is a pipe dream. Read on...
It may be one of the biggest modern health trends, as thousands of men jump on the bandwagon
Are certain foods causing your joint pain? Here’s an easy way to find out.
The TPP, if made into law, could affect nearly every aspect of your day-to-day life. This includes a huge hit on your freedom of speech, and your ability to receive cost-effective healthcare. Read on…
How my mother inspires me to be healthier, and what she’s doing to feel 20 years younger without traditional exercise
How lifting weights can go wrong, and cause your body more damage than health.
If springtime allergies have you trapped indoors, try one of these 7 natural ways to get some relief.
One simple strategy to “reverse aging” in the powerhouses of your cells…
Suffer from heartburn, indigestion, or acid reflux? You may actually need more stomach acid, not less.
The mystery is solved: Nate reveals what was causing his horrible gut pain, and how he eliminated it naturally
What happens when Living Well Daily editor Nate Rifkin starts feeling horrible abdominal pain, and he can’t figure out why…
Where are people spending their money today, even if they’re strapped for cash? Not where big chain grocery stores would like…
One in three people have fatty liver. How do you know if you have it and what can you do to prevent it? Find out here.
What’s causing so many livers to choke on their own fat? Living Well Daily begins unravelling the mystery…and the answer’s not what you think.
Could there actually be a sugar replacement that’s natural and good for you? Read on to learn the truth about stevia.
Could there actually be a sugar replacement that’s natural and good for you? Read on to learn the truth about stevia.
We examine studies measuring alcohol and its effect on recovery from exercise…and whether or not you should partake.
The New York attorney general supplement saga continues, and this time a famous martial artist has entered the fray.
Is this synthetic vitamin bad for your health? Knowing the difference between folate and folic acid could help protect you from cancer, cognitive decline, and more.
Living Well publishes details on a high fructose corn syrup study which has been ignored by the mainstream media
Living Well reveals the neat trick to make virtually any vegetable taste good, using two “forbidden” ingredients and a lesson from Seinfeld
Have a cold or flu? Get sick with food poisoning? Before you resort to antibiotics, You MUST read this.
Living Well tackles the controversial issue of EMF wave safety, and whether our increasing levels of exposure are causing us more harm
Living Well publishes reader feedback on the proposed GMO labeling law. One opinion wins by a landslide…
We hit a rich vein when we wrote about magnesium last week. Readers weighed in and demanded answers... so we’re back to make this whole magnesium thing a little less murky.
You never really notice how oddly shaped trunks are unttil you’re in one with handcuffs on. At least, that’s what Chris Campbell says after being shoved into a trunk in Las Vegas. He had three minutes to escape. What happened? Read on…
Living Well covers the latest update in GMO labelling laws, and how a newly proposed law called the Safe and Accurate Food Labeling Act might not be as great as it sounds.
Living Well gets the inside scoop on a new product for instant energy, calmness, and focus. In fact, one of our editors takes it for a personal test-drive.
“This only works if young people show up,” said Bill Clinton the other day. He was explaining Obamacare.
On the surface, that’s an odd thing to say. Medicare seems to work just fine without a lot of young people. It needs taxes from young people, of course. But nobody has ever said young people need to buy into Medicare or it won’t work. What’s so special about Obamacare?
To understand that, we need to go back to square one.
One of the strange things about the market for health insurance is that almost none of us ever sees a real price. More than 90% of people with private coverage get it through an employer. Employers, on the average, pay about three-fourths of the cost, and the remaining share tends to be the same for every employee — irrespective of expected health care costs.
In most states, the only people who face real premiums are in the “individual market,” where individuals and families pay for insurance out of their own pockets. Yet the Affordable Care Act (Obamacare) will outlaw the pricing of individual risk (medical underwriting) by the year’s end. Health insurance, therefore, is very different from just about every other form of insurance.
In other insurance markets, a person newly entering an insurance pool will be charged a premium that reflects the expected cost and risk the individual brings to the pool. With respect to life insurance, disability insurance, homeowner’s insurance, and (for the most part) even auto casualty insurance, you pay for what you get.
That practice, by the way, works quite well.
When premiums reflect expected costs, people are essentially paying their own way. When that happens, it really doesn’t matter very much who chooses to buy insurance and who chooses to self-insure and bear the risk themselves. With life insurance, for example, you can have pools with a lot of old people or pools with a lot of young people. You can have pools with a lot of people at high risk of dying or pools with a lot of low-risk enrollees. Or you can have combinations of all of these.
When was the last time you heard anyone say that life insurance won’t work unless we mandate its purchase? Or that the life insurance market will fall apart unless we convince a lot of young, healthy people to buy it? Have you ever heard of a life insurance company spending millions of dollars on rock stars and sports icons and librarians and local civic associations to beg youngsters to buy the product?
Why are things so different in the market for health insurance? Because in this market, premiums are regulated, and that regulation is completely dominated by the idea that it’s unfair to charge real premiums. In fact, the most common belief is that everybody should pay the same premium for health insurance, even if everyone’s expected health cost is different.
It’s not easy to say where this idea came from, or why it is so widely believed. The health policy community often exudes a herd mentality. Once an idea is accepted, it tends to be repeated again and again — until a point is reached at which no one can exactly remember why the idea was ever proposed in the first place.
One reason why this issue has suddenly become a topic of discussion in the blogosphere and in the public policy community is that Obamacare was sold to the public on deceptive terms. When he was campaigning for the presidency in 2008, Barack Obama made it sound as though his health reform was designed only to help people who couldn’t afford health insurance afford it. Everyone else was going to be left alone. (“If you like the health plan you have, you can keep it.”)
Then, on the eve of passage of the legislation, the focus changed to those few people (very few, it turns out) who are denied coverage because of a pre-existing condition. At last count, there are about 107,000 enrolled in newly created risk pools because of this problem.
But it has been only very recently that New York Times columnist Paul Krugman and others have been in print explaining that Obamacare won’t work unless the government controls the premiums paid by everybody in the entire country! No one ever said that during the presidential campaign or during the congressional debate. As far as the general public is concerned, this is a brand-new idea.
There is one other way in which government regulation has caused health insurance to be different. Traditional indemnity insurance basically doesn’t exist anymore. What we call health insurance is really a health plan. It is an entity that controls what care you are entitled to and who can deliver it. When you choose a health plan, you are not just choosing an entity that will pay your medical bills. You are also choosing a network of doctors and hospitals and a set of protocols that determine how medicine will be practiced.
Here’s why that matters. When premiums are regulated so that they cannot reflect expected costs, four things will happen:
1. On the buyer side, people who are undercharged will overinsure, and people who are overcharged will underinsure. This is basic economics. If the price you are asked to pay is artificially low, you will buy more than you otherwise would; if the price is artificially high, you will buy less. If you are sick and require a lot of medical care but can pay the premium ordinarily charged to a healthy enrollee, for example, you will likely choose the richest plan you can find.
2. In order to avoid attracting high-cost enrollees, health plans will respond by scaling back their benefits and their provider networks until the richest plans look pretty much like every other plan. In the individual market today, in most states, you can buy a Blue Cross plan that covers almost all doctors in your area and practically every hospital, including all the best hospitals. I predict those plans will never see the light of day inside the (Obamacare) health insurance exchanges. See this health alert on the race to the bottom with respect to access to care.
3. At the same time, health plans will seek to attract the healthy. Of course, to a certain extent, they are doing that today. But with an electronic exchange in which healthy people tend to buy on price and sick people tend to buy on benefits and software that makes it easy to do those things, the insurers will be even more pressured to reconfigure their offerings to make them more attractive to the healthy and less attractive to people who need medical care.
4. Finally, the perverse incentives do not end at the point of enrollment. They continue. Health plans will have perverse incentives to overprovide to the healthy (to keep the ones they have and attract more of them) and to underprovide to the sick (to avoid attracting more of them and encourage those they have to go elsewhere).
[By the way, risk adjustment in the Obamacare exchanges may actually overpay for certain types of chronic illnesses — making them more attractive to the health plans than healthy people. But anytime there is nonmarket fixing of premiums and artificial risk adjustment, the total revenue for any particular enrollee is almost certain to be wrong — in one direction or another.]
There is something else that tends to happen in an insurance market where no one is paying a real premium. If you have problems and need help, you are likely to discover that the insurance company is about as accommodating as the Department of Motor Vehicles.
Dealing with a vendor who doesn’t want your business can be unpleasant. When you call, you are put on hold. Or you never get to talk to a real person in the first place. You are shuttled from one office to another, buried in a complex web of bureaucracy and paperwork that seems intentionally designed not to meet your needs. (See a previous post on paying for medical care at my blog.)
I know what you’re thinking. This is the way insurance companies already treat everybody! Yes, but there is a reason for that. In a world in which market forces have been completely suppressed, anyone who makes frequent calls to a health insurance company is probably someone with lot of health problems, paying a premium well below the cost of her care, who is prima facie a customer the insurer wishes it didn’t have to deal with.
So how should the market for health insurance work? It should incorporate two features:
1. Whenever you enroll in a health plan, you want the premium paid to the plan to reflect the expected cost of your care — especially if you have medical problems. Otherwise, your new plan will have perverse incentives to skimp on what you need.
2. To be able to afford that premium in case you become ill, you should be able to purchase “change of health status insurance” in addition to garden-variety insurance. Such insurance pays the extra premium caused by a change in your health status.
In such a world, health plans would compete for the patronage of the sick just as vigorously as they compete for the healthy. Most likely, health plans would specialize — with plans carving out such markets as cancer care or diabetic care. Instead of running from problems, the insurers would see common, expensive illnesses as entrepreneurial opportunities — just like we observe in other markets.
“Change of health status” insurance doesn’t exist today and isn’t envisioned under Obamacare. But we need it. If the providers of medical care are to have good incentives, we need to allow such insurance and encourage it.
— John C. Goodman
Article originally appeared here.