
Health insurance companies are useless - howard941
https://www.latimes.com/business/story/2019-08-05/health-insurance-useless
======
korethr
The problem with the "insurance" companies is that they're not really
insurance companies anymore. As the current top comment by raintrees points
out, our so called "insurance" is acting far less as insurance (coverage in
the case of a major but unlikely incident), but additionally standard payment
for regular healthcare services. And this creates all manner of perverse
incentives that messes with the pricing and makes it more expensive for
everyone.

Ironically, when I had a bout of un-/under-employment in the 2008-2009
downturn, my only option for medical care was to ration my healthcare services
to those actually needed, and pay cash when I actually received service. I
paid less per service individually by paying cash (doctors, imaging, and
testing clinics, etc, all really like cash, it makes their life much simpler).
And overall I paid less by paying only for the services I needed when I needed
it, instead of paying into some high monthly payment to have a battery of
services I may or may not ever need pre-selectedly available for me.

I think healthcare costs would come down for most if we could get back to
something approximating that: medical insurance being actually and only
medical insurance -- covering high cost emergencies to prevent such from
breaking one financially -- and covering only that. Paying for day-to-day
regular medical services can and should be handled differently. In all
fairness, I don't know how to get there, and I don't know what the options for
the latter would look like, or what they should be. But I do think it would be
helpful in the near and long term to put our energies in that direction.

~~~
oconnor663
I think the biggest complicating factor is that everything you just said is
true, but health insurance is also still sometimes insurance, as well as
redistribution. So it's doing three things at once:

\- Paying for routine care for people who could otherwise afford it.

\- Paying for unexpected and unaffordable care, like chemotherapy.

\- Paying for routine care for people who can't afford it.

Note that the third category doesn't refer only to poor people. Routine
childbirth costs thousands of dollars. Any reforms targeted at the first
category of spending, which hurt people in the second and third categories,
are politically unacceptable. Add to that another complication:

\- Unexpected/catastrophic medical expenses and routine care are closely
related, especially in the long tail of expensive patients.

For example, the number of emergency room visits a patient makes (especially
very expensive patients who make a lot of visits) is lower if the patient is
making regular doctor's appointments and following their doctor's orders. But
when regular care and monitoring come out of the patient's pocket, and
emergency room visits don't, the incentives are horrible.

So these are extremely difficult political and business issues that health
insurance has, which e.g. auto insurance doesn't. Most of the solutions to one
of these problems, will have negative side effects for the others.

------
raintrees
Isn't the whole point of insurance the basic bet that I will need an expensive
service so I will make small payments towards that possibility, against the
insurer's bet that I will not need that service and will instead be able to
keep those payments as a profit? If so, that arrangement has been abused by
using it for health care, instead of insuring against a low probability major
health incident...

It seems this would be the same as car insurance also paying for tolls, road
maintenance, car maintenance, etc. instead of just covering against
person/property injury from vehicle operation.

If health insurance instead is used for typical day-to-day payments for health
care coverage, then the costs of that insurance will logically exceed the cost
of that care because the insurance company exists to make a profit through
offering that service.

Similar to paying the government to do something that would be more
efficiently done privately - Maybe the same outcome (if one is fortunate) for
far greater cost.

Anecdotally, I used to have a health insurance plan that had a very high
deductible and fairly low monthly payments for my wife and myself. It's sole
purpose was to hedge the bet that one of us might need ambulance and major
medical treatment at an expensive facility (hospital) that might break us
financially without that hedge in place.

The Affordable HealthCare Act in the USA ended that arrangement, we now have
triple the payment size for a third of the coverage we used to have. To me,
that is a clear case of my government getting involved and the results being a
net loss.

Edit: Sorry, it did not end that arrangement, it made it far, far more
expensive.

~~~
thanatos519
The point of health insurance is that nobody should worry about the costs of
regular maintenance and emergency service to their meatbag. Ever. As you point
out, it costs much more if there is a for-profit organization in the middle.

Single-payer tax-funded health insurance means that each person contributes
based on their capacity, and nobody has to pay when they receive services.
Then the tax collector has an incentive to increase effectiveness of health
services by educating and encouraging the population to eat well and exercise
daily.

~~~
James_Henry
With the ACA, insurance companies have incentives to encourage the people they
cover to take as good of care of themselves as possible more than ever. I
think they are currently and in the future will do a better job of that than
the tax collector ever will.

Especially when it comes to preventable diseases, good health insurance
companies are doing some really interesting work on effective behavioral
change and early intervention. My insurance for instance pays me to walk every
day.

~~~
kevin_thibedeau
They are incentivized to boost their 20% cut. That doesn't work if everyone is
too healthy.

~~~
James_Henry
I'm not sure what you are referencing with the 20% cut remark, but there isn't
harm to health insurance companies (actually, providing care through medicare
advantage may be an issue...) if everyone is extremely healthy. Then the main
costs truly would be the unpreventable diseases, most of which come
unexpectedly. This is the exact market that works for risk pooling!

~~~
ceejayoz
> I'm not sure what you are referencing with the 20% cut remark

The ACA requires insurers to spend at least 80% of premiums on direct patient
care. To grow profits, they _must_ grow premiums.

------
martythemaniak
As an outside observer, sure, you don't strictly speaking need them in some
theoretical America, but in the America I see there's a large group of people
who do not believe government can or should do this work and will work very
actively to make it happen. The last bit is crucial.

Suppose that you are disappointed that Obamacare did not contain a public
option. Suppose that Obamacare did contain this provision in the law, it would
most likely be implemented the way the cfpb was. The cfpb is great, except how
good it is depends on how good the government in place is. If there's people
in government that want it to fail it will simply fail. Thus merely
incorporating the public option into law is not enough to have to have a
dedicated political body that wants to make it work. I don't think that's the
case in America.

I guess what I'm saying is, the specificity of the law doesn't seem to be as
important as peoples dedication to making things work

~~~
mywittyname
For better or worse, those same anti-government people do functionally support
social programs from which they directly benefit. They may pay lip service to
their ideological stance on the subject, but the money is green and they will
happily continue to take what they are "entitled" to.

Their major opposition is to social programs they don't benefit from.

~~~
Ididntdothis
My neighbor is a good example. He is on Medicare but he is violently opposed
to socialized health care and Medicare for All.

~~~
hestipod
This is extremely common in middle America where I live. People using social
services but opposing it for others. They believe they have earned and deserve
it, and the others are abusers who haven't.

------
beat
It's not just insurance companies that are a problem, and that's a common but
annoying oversimplification. Other countries (such as Japan, Germany, and
Switzerland) integrate private insurers without the massive cost overruns of
the American model. It looks to me like there's a systemic feedback loop
somewhere that leads to price inflation. And if private insurers aren't the
root cause of that feedback loop, then getting rid of them won't solve the
problem.

Example: I suffer from a rare chronic illness (respiratory papillomatosis, aka
warts on my vocal cords) that requires regular laser surgery treatments to
control - two to four times a year. Until recently, treatment consisted of
going to the specialist's office, where he had the laser and endoscopy camera.
He conducted the operation with two assistants - a laser tech and an ordinary
nurse. I was in and out in an hour.

But my most recent treatment was different. This time, I had to go to their
"surgical center", wear a gown, get wheeled to the room, and there were a
half-dozen assistants that were mostly not doing anything. I had to wear a
blood pressure cuff, which kept retriggering when I wiped away tears during
the treatment (it HURTS and tears of pain happen). I complained to the doctor
about this, and he didn't like it either, and said flat out he thinks they do
this to charge more money.

This isn't a dangerous surgery. It's as unpleasant as it sounds, but... it's
wart removal. I'm not under general anesthesia. I'm not going to stroke out.
He can't kill or even seriously injure me with that laser. The old, simple
office-based routine was better for patient and for doctor - and a lot less
expensive, I'm sure. And that's the point there, isn't it?

So there's your feedback loop, maybe. Insurance companies can be hit on to
cover even unnecessary work, so providers tack on unnecessary work, which
raises premiums, which means more money is available, so...

~~~
fatbob
Almost(?) every other developed country has price controls (all payer rate
setting) - that's a more general reason why prices are lower.

~~~
beat
I find it fascinating that price controls are pretty much the only difference
between the US and Japanese models (well, that and price controls eliminate
the concept of networks), and the Japanese model costs half what ours does for
better and universal care.

------
decoyworker
Rent seeking.

Literally getting paid to have a pile of money and sometimes pay part of
people's medical care while skimming fat profits.

~~~
lotsofpulp
Who will double check a doctor’s orders? Voters clearly don’t want the
government to do it. Do people have enough money to visit a second or third
doctor to get opinions regarding decisions that costs tens of thousands of
dollars?

~~~
dv_dt
Medicare is strongly supported by the seniors who receive it - surviving
against decades of attempted rollbacks. I don’t know how one ends up thinking
people are unhappy with government administered billing and payments in
healthcare.

~~~
merpnderp
Strongly supported because they love it, or strongly supported because they
have exactly zero other options?

~~~
astura
Can't they get health insurance through the Obamacare marketplace now?

~~~
dragonwriter
No, eligibility for marketplace plans ends when Medicare eligibility starts.

------
sidlls
This article is spot on. Unfortunately the Health Insurance industry is
extremely powerful--the NRA have nothing on them. Real change in our health
care system requires destroying these companies.

------
jvagner
Insurance companies actively work to not-deliver the thing they are paid to
deliver.

~~~
merpnderp
If your profit is limited to a max percentile by law, the only way you can
possibly increase profits is to increase expenditures. Insurance companies
have every incentive to increase costs so they can increase premiums, their
only path to increased profits.

~~~
irq-1
Salaries and shiny new buildings are expenses, and not constrained by profit
caps.

~~~
mrfredward
The minimum loss ratio in the ACA sets a minimum for how much is paid out as
claims. New buildings don't count toward meeting the requirement.

------
opportune
Regulating the hole-digging and hole-filling industries out of existence is a
politically difficult move considering how much money they’re shoveling into
the back-hoe business

~~~
jschwartzi
And anyway we'd prefer to have broken windows, because otherwise what work
will employ our glaziers?

------
jkingsbery
Many of the arguments in this article are great arguments against rent-
seeking, but many would apply to a public options. For example: consolidating
the market didn't create more efficiency because it reduced competition - yet
somehow consolidating the market into one single payer and eliminating
competition will create efficiency (even though there's no more competition).
The author is concerned about private insurers trying to keep their lucrative
position, but government organizations face similar incentives in trying to
keep theirs.

~~~
jjwhitaker
I agree, though I think a universal, single payer system under government
oversight without profit seeking drive would be better. Consolidation under
the current system is identical to McDonalds and Burger King consolidating the
fast food industry, they will still be driven to outperform the other to
consumers and to investors/owners.

Instead, a single system under the Us government shifts negotiation of drug
prices, care expenses, and more to one entity backed by the government, not
just a set of insured customers, which has excessive power to negotiate. Like
other nations that function this way, there is no skimming off the top for
shareholders or profits and as the only other party at the table
suppliers/hospitals can't play opponents against each other or take a kickback
to give better pricing to the larger insurer or something.

Ideally, it consolidates and simplifies negotiating pricing or allows the
government to step in and say, "No thanks, we'll pass a law or budget for that
on our own unless you lower prices or cut a better deal.

Also, a government system could cut out administrative and bureaucratic
paperwork like billing, coding, and more potentially removing a large % of
overhead costs that exist currently, by default lowering expenses for
healthcare similar to Canada.

the biggest issue I see is that about 1/6th of the US economy is built on
health care/insurance/etc companies. shifting that away from corporations into
private hands could cut tens of thousands of jobs (like billing and adjusters)
while shifting that cash flow under the US government as well. There would be
fallout as people would need social safety buffer for unemployment or
retraining or education. I don't think it could happen without pairing up with
reduced/free college and smart expansion of some needs based aid. That
requires some sort of tax, maybe like Warren has suggested, to cover
intermediate costs and friction.

The good news is it could save the average family over $5000 per year in
insurance costs alone while bringing millions out of medical debt and
providing a better standard of care and options for everyone. It's not
libertarian to shift something under the government but if it makes economic
and ethical sense to give such a monopoly to the feds (like with
infrastructure, the military, and more) while improving choice for citizens
(no longer tied to employer healthcare or entering debt to resolve acute or
handle chronic medical issues) it could be a huge boon for choice and freedom.
I'd be one of the first to start my own business if I didn't have to worry
about my chronic health issues being fully covered and paid for by my employer
plan.

~~~
jkingsbery
I definitely see where you're coming from, in terms of this being a worthy
goal. But I think there are a lot of challenges:

* While a government system could cut out administrative paperwork, that doesn't mean they always do. Many government agencies have a lot more paperwork than their private equivalents.

* Negotiations are tricky things. On the one hand, negotiating for a lower price is great, because it means you save money. On the other hand, it also means you are paying a lower price, and that can come with a different set of consequences. Yes, loss of jobs as you indicate, but also potentially less supply of health care. The fact that government is the negotiator doesn't mean that the effect of supply and demand gets suspended.

* I haven't read deeply in the area, but everything I have read indicates that this comes at the expense of wait times. I think, for example, I heard the stat recently that the average wait time for an orthopedist in Canada is 22 weeks.

* I get the moral argument that we should provide care, but I think the single payer raises other moral issues. If the goal is that if a doctor and patient agree on a particular treatment, it's evidently not the case that in socialist medicine that's enough for it to happen (see e.g., [https://www.independent.co.uk/news/health/nhs-rations-operat...](https://www.independent.co.uk/news/health/nhs-rations-operations-hip-patients-beg-treatment-cuts-funding-a8453531.html) ).

------
HillaryBriss
IDK. I'm not a fan of insurance companies. They can go away for all I care.
OTOH, it seems to me that a risk to Medicare-for-all is that the hospital
industry and doctor's groups will lobby and capture the very Medicare payment
agency that supposed to be saving all the money. Then we're right back to
spending 17% of GDP on healthcare.

~~~
checktheorder
Even if that scenario happens (which I would argue wouldn't happen) then
American citizens would STILL be far better off. They would retain that health
care coverage during periods of unemployment or while working for employers
who don't offer health insurance coverage, and they would never be kicked off
their insurance plan due to pre-existing conditions.

~~~
HillaryBriss
i think those conditions also hold true under the ACA plans right now (unless
Trump dismantled those conditions.)

anyway, a major selling point for Medicare-for-all I'm hearing is that
_overall_ it will result in a big _savings._ if that system-wide savings does
not materialize, if we still have to pay the same amount we're paying now
through higher taxes that amount to the same thing, then I would think
Medicare-for-all didn't actually deliver on the promises.

the other thing I wonder about is: look at prescription drug prices now: the
FDA has been captured by Big Pharma. drug prices are way higher than they need
to be. Medicare-for-all needs some real safeguards, something really strong,
to prevent that sort of price inflation. and since single payer would
eliminate competition, it has to be some other mechanism.

~~~
checktheorder
I think it's safe to say that the savings would definitely arise if (if...)
M4A is implemented in good faith. Decades of hard data from basically every
other developed nation with universal health care demonstrates this. All it
will take is the political willpower which is now starting to emerge on the
federal level. One also needs to carefully consider what constitutes a "tax"
when it comes to health care funding. Premium payments, co-pays, and
deductibles all need to be factored in to an apples-to-apples comparison of
individual taxpayers' contributions to any M4A system.

There's also a simple mechanism to fix drug pricing: repeal the laws passed in
2003 that ban most US federal agencies from negotiating for bulk medical
product pricing, and pass new laws requiring it of all agencies. Currently, I
believe that only the Department of Veterans Affairs is legally allowed to
negotiate bulk drug pricing. They take full advantage of that, and enable
active and retired service members to significantly cut their prescription
costs. They're a perfect example of the power of bulk pricing. And again,
revising the law in this way is a political-willpower problem, not an economic
one.

~~~
HillaryBriss
> a political-willpower problem

right. and, though it may be simple, it's non-trivial. politics and moneyed
interests will be the next battle to fight after M4A becomes law under
president Warren and Democratic majorities in House and Senate.

and i will venture to guess that the very next day a strange and unexpected
coalition of stakeholders will join forces to create exceptions to that new
single payer system. the political alliances will probably be fascinating. we
might even see a division so stark that one of the two political parties
emerges as a shill for hospitals and doctors, while the other party becomes
their enemy.

~~~
checktheorder
Quite likely. I think Americans in support of single-payer ought to look to
Canada, not just as a model of how to run a fair and cost-effective single-
payer system, but how to implement it against massive political opposition
from incumbent groups that financially benefit from a for-profit system.
Americans might not be familiar with the name Tommy Douglas, but to many in
Canada he's considered a hero.

------
DebtDeflation
I would propose a 3 tier system:

\- You pay the first thousand or so a year out of pocket with an HSA-like
vehicle to make sure people aren't overconsuming.

\- Government program pays 100% of everything over like $20k or so a year

\- Optional private insurance fills in the gap between the $1K out of pocket
and the $20K where the government starts picking up the tab, and would be very
affordable since their liability is capped at both ends.

They actually have something roughly similar to this in Singapore.

~~~
speby
[https://www.pacificprime.sg/blog/public-and-private-
hospital...](https://www.pacificprime.sg/blog/public-and-private-hospitals-
differences/)

Read up on Singapore's model. While it works well for them, I'd be interested
to see if it could work here (like hospital quality/comfort, wait times, etc.
based on tiers).

------
AdrianB1
What is the alternative for a private person? I understand that large
companies can deal directly with hospitals in their region, but if you are not
a large company what can you do? Even in Europe we have health insurers, some
are state owned (usually the worst), some are private. European model is
considered better, how is that?

~~~
qsymmachus
The alternative is universal single payer health care, paid for by taxation.

~~~
AdrianB1
And who is dealing with the hospital fees? You need some organization to do
this, this is how it works everywhere.

~~~
opportune
You are aware this currently already happens with Medicare and Medicaid
correct?

~~~
AdrianB1
No, I live in EU, not in US. This is why I ask questions, because I don't know
the answers.

------
rhacker
I can't remember it but there was a group of people in Oregon trying to start
their own health insurance company. They figured out how to do it like a
billion times cheaper than the big companies. Eventually they got blasted by a
government agency that didn't allow them to operate at those rates because it
would be untenable. Unfortunately I think the government doesn't realize it
but they have been bending over backwards for the insurance companies to
regulate that way.

If you take out the rent seeking apparently healthcare and health insurance
may actually be cheap. We just have a ton of laws preventing us from having
that. If anyone heard about this group on NPR/OPB let me know I can't seem to
find them.

~~~
javagram
Not sure if this is what you’re thinking of, but
[https://en.m.wikipedia.org/wiki/Health_care_sharing_ministry](https://en.m.wikipedia.org/wiki/Health_care_sharing_ministry)
is similar. They were grandfathered under Obamacare and are apparently legal
in most states.

Of course the thing is the reason the costs are cheaper than insurance is also
because they don’t cover as much. Some insurance plans are incredibly
expensive just because they have to spend multi-millions on a single person’s
care.

~~~
WkndTriathlete
Insurance plans are incredibly expensive because not only are you paying for
legitimate health-care expenses, you are also paying for:

* hospital administrators to interact with insurers * insurers employees/administration * ICD9/ICD10 coding overhead * and add 10% for the maximum legal profit health insurers are allowed to make

I have to think that removal of those four elements from health insurance
costs would result in significantly lower health care cost outlay in the US.

Routine care can be cheap. We really only need coverage for catastrophic care
- broken bones, herniated disc, acute injuries, etc., etc., and routine care
benefits for those so impoverished as to not be able to afford it. IMO, of
course.

~~~
SolaceQuantum
_" Routine care can be cheap. We really only need coverage for catastrophic
care - broken bones, herniated disc, acute injuries, etc., etc., and routine
care benefits for those so impoverished as to not be able to afford it. IMO,
of course."_

Where do chronic illnesses, hearing aids, HIV, diabetes, dialysis, mental
health intevention and outpatient therapy, etc. fall under that paradigm?

------
mattmcknight
The quickest fix is to just put in next year's Medicare contract that no
provider is allowed to charge any payer more than they charge Medicare. Much
of what insurers do to negotiate in-network and out-network pricing with the
various hospitals, pharma companies, and doctors becomes irrelevant, and they
just end up varying in the reimbursement schedules. Get all of the supposed
cost savings of single payer, without a single payer.

If things really do get cheaper, it gets a lot easier to figure out universal
coverage. If they don't get cheaper, we learned a lot without having to
implement single payer. [https://www.manhattan-institute.org/medicare-for-all-
marylan...](https://www.manhattan-institute.org/medicare-for-all-maryland-
hospital-healthcare-price-regulation)

------
malandrew
One thing I've been curious about is whether insurance companies are useful as
negotiators with healthcare providers.

At the end of the day, they are for profit enterprises. The cynic will
naturally state that they make money only by denying claims while taking
people's money. But were I in charge of such an enterprise, only doing that
would leave a lot of money on the table since there are still lots of claims
that an insurer is still paying out and there is a strong economic incentive
for insurers to bargain aggressively with healthcare providers to get access
to the pool of healthcare customers they represent.

With this in mind, does anyone familiar with the industry know the impact
insurers have on bringing down healthcare costs by putting the squeeze on
healthcare providers?

------
privateSFacct
For all the slams on insurance companies - folks should check out what your
local hospital or physician group charges if you don't have insurance.

I know everyone loves these medical groups - but I'm not impressed with their
billing.

~~~
linsomniac
I tried that once, I had a procedure that insurance wouldn't cover if done at
the hospital, but the hospital was the only place with the equipment to do it.
I had experience with paying cash for procedures being dramatically less
expensive, like half, so I called the hospital to find out the cash price.

"So you want the price you would pay if you didn't have insurance and directly
paid for it?" "Yes." "But you do have insurance, so you have to contact your
insurance company to find out what their contracted rate for that procedure
is." We went back and forth a few times, but she absolutely refused to give me
a number for how much someone without insurance would pay for that procedure.

------
not_a_cop75
You should probably also agree that hospital conglomerates are also useless,
since normally they force the market for an area to charge more, not less for
products.

------
29athrowaway
Entities that dispute claims can make the system more efficient. Insurance can
serve a useful role.

What went wrong in the American healthcare system is collusion and price
fixing.

~~~
AdrianB1
Mergers and acquisitions are also a problem, when companies grow large they
have too much power and do much wrong. You cannot have competition if you
allow mammoths to rule the market.

~~~
howard941
How do you butcher the mammoth? Lacking effective antitrust laws and a useful
FTC there's positive feedback loop of medical providers merging and
consolidating for the enhanced bargaining position vis-a-vis the merged and
consolidated insurance industry.

~~~
AdrianB1
The AT&T mammoth was butchered, it shows it can be done. In this market
anything higher than 5% should be forced to split.

~~~
howard941
It was, back when we had a pre-Bork standard for antitrust violations, and a
more effective FTC. Not much more but more than totally ineffective.
(Incidentally I like the cut of your 5% jib - 20 players may not be enough for
some markets)

------
musicale
I tend to agree that health insurance isn't really insurance - it's more like
a costly, inefficient payment intermediary that collects money from the young
and/or healthy to pay for care for the old and/or sick.

Which seems like an OK idea in principle, but it isn't working very well for
patients.

------
zubair_io
So what happens to our economy when 100s of thousands to people are out of a
work because the government shit down the insurance company they worked for? I
not saying things can't be better but a instant (or even a short roll out
time) would kill our economy. Why doesn't anyone mention that.

~~~
opportune
That’s barely a blip in the US workforce and I think they could find other
administrative jobs given enough time. Nobody objects to other jobs becoming
technologically obsolete (except coal mining for some reason) so not sure what
the issue is

~~~
mywittyname
Most of the people on the hospital side of this are medical professionals with
active licenses and degrees, so finding another hospital job would not be an
issue for them. I'm not sure about the insurance side, but I think it's the
same situation: they employ medical professionals to review claims to dispute
the care given.

The non-medical personnel should also not have any issues finding new jobs.
Executives, accountants, managers, and IT people have cross-industry
skillsets.

------
jjwhitaker
I am often disappointed in US healthcare discussions for similar reasons on
gun violence discussions. It can work a lot better, we have many examples of
this around the world that can scale and be even cheaper/better like the
Canadian system or German system.

But for some reason, we want to do it our own way with profit seeking
companies who can game the system or lobby the government for their benefit,
not citizens. Maybe that's BC/BS or the NRA, maybe it's libertarians or
conservatives that want smaller government (that time and time again fails
like in Kansas or with the federal deficit hawks and their lovely tax cut).

We have solutions in front of us. We just need to shift momentum and get there
instead of spinning our wheels and debating doing anything at all.

------
ptah
seems obvious to me

------
abfan1127
This article is interesting in the fact that it highlights several real
issues, but completely fails to understand the true root causes.

"they pay more for hospitals and doctors so they can just raise premiums..."

What kind of crap is that? They can raise premiums without paying more to
hospitals. In fact, that would raise their "fat cat" salaries even more.

~~~
tialaramex
It's about percentages.

The law says they can keep a _percentage_ of the premium. If they charge you
$1000 maybe they're allowed to keep $100 of that as profit. If they charge
$900 they only get $90. So, provide a "better" service and charge $1500 then
they get to keep $150.

The law used to let them keep whatever they could make, so you'd be right,
they could buy $400 of healthcare, charge $1000 for and they've made $600
profit. But the percentage rules mean they'd be told to give you $560 back,
they'd only be able to keep $40 in profit. So hence as the article says they
choose to spend more so they make more money.

~~~
zip1234
Amazing how good people are at finding loopholes in government regulations.

~~~
grepthisab
Not a loophole,it was specifically written into the ACA to ensure insurance
companies spend money on benefits rather than just pocketing everything. Of
course, it also has the effect of making the market hard to enter. See, e.g.,
Oscar

------
jefe_
Private Insurance pays healthcare providers higher rates than Medicare.
Private Insurance rates serve as a subsidy for healthcare providers, allowing
them to fund advanced services & facilities while also accepting the lower
Medicare rates.

I don't understand how removing this Private Insurance, and then moving
everything to Medicare rates, wouldn't instantly reduce the amount of money
flowing into the healthcare sector and cause massive slowdowns in all areas,
from research, to quality of facilities, to provider pay (nurses, doctors,
phlebotomist, hospital janitors), to real estate, and most other sectors of
the economy.

It would be great if industry rates were lowered, but many aspects of the
economy are relying on rates as they exist presently.

It seems the more optimal route would be to slow the increase of rates, but
this seems to be at odds with the process of untangling Private Insurance and
implementing a new Medicare for All System.

So my question is, how does Medicare for All cut costs without collapsing the
healthcare sector?

~~~
seanmcdirmid
> So my question is, how does Medicare for All cut costs without collapsing
> the healthcare sector?

Administrative and collections costs, which are a large part healthcare
industry already (probably more people work in billing than in actually doing
the healthcare work). Our current system is a huge mess, mainly related to all
the complexity of our insurance system, and just by getting rid of that
complexity huge savings can easily be had (though at the expense of a lot of
administrative healthcare jobs).

There is a good reason why the USA pays far more than most countries for
healthcare received.

