This area elected a smart but clueless, experienced right wing career politician, Congressman Tom McClintock. While visiting my town recently, he sounded off on “we need less regulation…let’s sell insurance across state lines to reduce costs.” Here’s the long version of my response. I sent a shorter version to the Grass Valley Union so it would run as a letter to the editor.
I’m glad that our Congressman, Tom McClintock, brought up the subject of cost control in health care when he was here (reported in the Feb. 4 Union), but I am surprised that he proposes looser regulation.
He wants to add insurance companies based and licensed in other states to companies OKd by the state of California. That would give you more choices, but it wouldn’t guarantee your bills get paid. In the mid-1980s, when I was first working as an insurance agent, Great Republic Insurance, from Texas, became available here. It was easy to sell Great Republic—the cost was low, yet it covered office visits and prescriptions more generously than California companies like either Blue Cross or Blue Shield.
Great Republic lasted about a year. Texas never checked Great Republic’s finances. Actually it was just a “Ponzi” scheme that could pay small claims as long as new clients were joining, but failed when big claims arrived.
There is another problem with having lots of little competing insurance companies rather than a few large ones. A company with thousands of customers in our county has the leverage to force doctors and hospitals to cut prices. Even if the customer has to pay part of the bill, his share is based on that lower amount. Some minor insurance company from Iowa or Rhode Island with just 5 or 10 customers here would get stuck paying full price, and so would its customers. Then, as soon as any big claims happen, their rates shoot way up.
Anthem-Blue Cross uses this kind of cost control. Many of us have read an “explanation of benefits” showing that the insurance company paid a medical provider half or two-thirds of what was billed, while also adjusting the patient’s share of costs.
Regulation by 50 states has been great for the companies, but lousy for consumers. The surgeon and medical cost researcher Atul Gawande points out (New Yorker magazine, April 3, 2010) that, “in 1965, health care consumed just six per cent of U.S. economic output; today, the figure is eighteen per cent. Nearly all the gains that wage earners made over the past three decades have gone to paying for health care.”
Meanwhile, though other countries see people’s health improving, the USA has dropped to 37th among 191 countries in objective measurements like the death rate for men between 15 and 60, and the death rate during childbirth, although we spend the most (New England Journal of Medicine, Jan. 6, 2010).
Dr. Gawande agrees that the national health care reform bill isn’t perfect, and finds that it’s not just a big-government approach. Rather, “In large part, it entrusts the task of devising cost-saving health-care innovation to communities like Boise and Boston and Buffalo, rather than to the drug and device companies and the public and private insurers that have failed to do so.”
The new law also makes insurance companies pay out medical benefits totaling 80% of what they take in (maybe 85% eventually). To achieve this, all the companies have cut payments to me and other local agents by half. I realize steps like this are needed, while McClintock opposes them as being too much regulation.
Back in 2008, he blamed the banking crisis on too much regulation, which surprised me. “Free the financial institutions from burdensome regulation”, is what I remember him saying at the Veterans Building. Just let bankers and investment companies do whatever they want? Doesn’t sound smart to me.
Mr. McClintock often speaks about protecting entrepreneurs from burdensome regulation, as if he is an ally of the small business owner. But entrepreneurs like SPD Market and DeMartini’s Pharmacy are worlds different from huge stock corporations like Chase Bank, Aetna, and Wellpoint which employ armies of lawyers and financial wizards. Lumping them all together confuses matters. If our Congressman were really are on the side of everyday Nevada County folks trying to pay our bills, he would use government to help us steer those big outfits, rather than sending us out into an unregulated Wild West.