Insurance Fraud: 2011

From the moment conservatives failed in their attempt to block passage of health care reform outright, they started the process of undermining the new law. The signing of the Affordable Care Act by President Obama a year ago started the clock on a plethora of legal filings and state level legislative initiatives designed to make the law irrelevant. While some of the maneuvering focuses on one of the least-desirable aspects of the measure  (The Rational Middle has repeatedly stated its economic objections to the individual mandate), most of the ventures amount to silly political shenanigans.

As the anniversary approaches however, the time has come for a whole new set of unsubstantiated garbage to be heaped on the plate of U.S. consumers. The Insurance Fraud of 2011 will be composed of wrong numbers, made up numbers, numbers out of context, and anecdotal creations. This column is a simple statement of costs, lest we forget the structure and history of the medical marketplace.

First, we have to remember where we have been before deciding where we are going. From 1999 until 2010, overall inflation ranged between 1.59% in 2002 to 3.85% in 2008 (inflation in 2009 was -3.4%, an outlier we should all understand). In contrast, the medical marketplace was generating increases in insurance premiums far in excess of base inflation, as evidenced by the chart below.

Bear this in mind when you begin to hear the cries of massive cost increases as generated by health care reform. Insurance companies have been raising rates and limiting coverage for years, and for good reason. Per person medical costs have seen explosive growth during the last thirty years, growth that hasn’t been mirrored by positive changes in average standard of care.

But conservatives haven’t seemed interested, on the whole, in addressing the very real problems associated with explosive health care costs. Despite the facts that these costs define the long-term budget issues at both the state and federal level, and despite the fact that medical coverage is a defining constraint for businesses both small and large, conservatives have responded with their tried, true, and tiring mantra of “cut taxes and kill social programs”.

As to the Affordable Care Act, conservatives have focused largely on make believe. The battle over the bill was joined initially as a fight of non-existent granny-killing death panels. The engagement was continued through the make believe of a “$2 trillion government takeover”. Shortly after the surprising persistence and inexplicable backbone of Congressional Democrats and the President made the bill a law, conservatives rejoined the battle via a silly quest to prove the law’s “effect” well before any provisions were joined.

Conservative commentators were pontificating on the terrible side effects of the legislation 100 days after its passage, well before the bulk of the rules enforcing the law were published. This, my friends, is a law whose principle elements won’t take effect until 2014, and we are already hearing of its supposed negative consequences. But let us be fair, and grant conservatives their hypothesis that Affordable Care is having an effect on the nation.

We can already see, from the premium numbers, that Affordable Care hasn’t driven anything like unprecedented cost growth in that segment. Premium inflation has exceeded base inflation in every year this century, topping 10% three times and 9% three more in the family market. So what has changed?

Well, one early provision in the law is a tax credit for small businesses who provide coverage for their employees. Insurance companies reported what can fairly be described as massive increases in the number of small employers buying policies for their employees. While the insurance industry may have fought the Act through the process, its managers aren’t stupid. The tax credit was designed and is serving as a marketing lever, and the insurance industry has used that lever to the benefit of itself and consumers.

The article that supports the above contention is nice, but the discerning reader should ask for corroborating evidence. The chart below demonstrates the expansion in coverage, and the tremendous contribution to that expansion coming from small employers.

Another critical element of the law which took effect was the ban on preeexting condition exclusions for children. That change, in concert with funds in the law set aside for state expansions in the coverage of children under Medicaid and CHIP, added more than 2 million kids to the roles of the insured. For those of you who are counting, that makes 42 million kids covered under these two programs. These kids wouldn’t get preventative care without the programs, and emergency rooms and clinics wouldn’t be paid for acute and critical care services either.

The funds are stop-gap, in the measure only until full implementation expands private coverage beyond its paltry current totals. But these investments have real returns on investment over the long term, for both patients and providers.

Interestingly, conservatives are making an important move within the medical marketplace. It isn’t immediately apparent, however, that the move is positive. Any search of the state or federal budgets will demonstrate the destructive effect of medical costs on solvency. Yet conservatives are on the front foot in the war to eliminate pensions and retiree medical coverage. If you need a description beyond the cost charts for our budget problems with Medicare, the chart below should help.

Our medical marketplace is broken, and the Affordable Care Act provides a plethora of line items that have the capacity to repair the damage. More needs to be done, but it seems strange that conservatives would be so eager to attack a market-based solution to the fundamental budget problem of our times, that they engage in make believe.

But I suppose the conservatives have already picked out their idea of the fundamental budget problem of our times, haven’t they? Firefighters, police officers, auto workers who earn more than $30,000 per year and, of course, Big Bird. The evil of Sesame Street will be the focus of my next column…stay tuned.

The Rational Middle is listening…

One thought on “Insurance Fraud: 2011

  1. As you know, Michael, defined benefit plans have also been reduced

    “We’ve gone from about 80 percent of these companies offering defined benefit pensions to about 20 percent now. And the companies that do have them are going to have cash-balance plans, rather than traditional defined benefit plans. We’re moving to an account-based, do-it-yourself employee plan.”

    First it was the pension plans.
    Then it was the health care plans employers provided.
    Then it was health care reform.
    Now they are attacking a woman’s rights, the unions.
    Next it is Social Security, Medicare, Medicaid.
    Slowly they are returning the country to the early 1900’s and they will continue to do so until all of us follow Wisconsin’s lead and stand up. Stand up and stop this madness or we will soon be returned to nothing more than servants to the masters.

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