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Tony Ondrusek is founder and publisher of Insurance & Financial Advisor and IFAwebnews.com.

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President Obama’s latest health care reform proposal addresses health insurance, according to an article on IFAwebnews.com, but ignores or dismisses major causes of rising health care costs.

It’s sort of like a doctor who diagnoses a patient with appendicitis, yet prescribes Pepto Bismol to deal with the problem. It completely misses a root cause.

According to the article, the president wants to focus on lowering insurance premiums for some, guaranteeing access to health insurance, creating health insurance exchanges, and fines for large employers that do not offer health insurance coverage.

But what about the actual care itself? Where are the mandates to lower the cost of the product itself? How does he propose to cap and control the cost of distribution of the product if he doesn’t first control the actual production costs?

When the cost of making an automobile increases, it makes no sense to put price restrictions on the retail dealers. Instead, it would be prudent to investigate the cost of the steel to make the car, the type of rubber used in the tires, where the computers and electronics are made, the payroll and size of the manufacturing workforce, the fraud and waste from vendors and inefficient companies, and how efficient the manufacturer is in its record keeping and testing procedures.

That is not what is happening here. In this case, the president is solely targeting the “retail dealers.”

Yes, some insurance companies are making a lot of money. About a 5.6% profit margin. The S&P 500 has an average profit margin of over 8%. So are they all next?

But getting back to some issues that deal directly with the actual costs of the care itself. What about:

1. Getting rid of the fraud and waste in Medicare/Medicaid (which will lower the costs of private/employer health insurance, since they subsidize the low payments the government plans make to health care providers) and not just making “provisions” to cut the fraud, as the president proposes?

2. Instituting tort reform? (If frivolous lawsuits were met with stiff fines, and if non-economic damages limits were in place, medmal insurance rates would drop dramatically, and so would physician rates, resulting in up to a 25% (TWENTY FIVE PERCENT!!) decrease in health insurance premiums)

3. Requiring the states to drop mandates? In some states, there are more than 40 mandates (why should a 65-year-old woman have to pay for birth-control care, or a 25-year-old woman be forced to pay for male hair transplants, or a retired couple be forced to pay for hearing aids for their children, when none of these people will ever use the covered services?!)

4. Make health records more electronic and more portable?

5. Allow employers to group themselves together to get group rates?

6. Require those who use the ER for ordinary care to see doctors on a regular basis for preventive care, perhaps even in regional clinics in areas frequented by those who use ER’s as their “doctor’s office?”

7. Investigate the feasibility of purchasing plans across state lines?

Insurers have spoken up as well, stating that the focus on health insurance premiums as the main thrust of health care reform is off base, according to an article on IFAwebnews.com.

While the president has made a number of proposals, most deal with the end-game in the health care continuum: insurance coverage. If we took insurance out of the mix, and considered the market for a moment as a direct consumer cost with everyone paying for his/her own care with no insurance market, the president’s proposals would do nothing to lower the cost of health care. Absolutely nothing.

The president’s proposal is a starting point. But just that, a starting point. For real health care “cost” reform, he needs to address the cost itself. His current proposal falls far short of that goal.

8 Responses

1. Dennis Jay Says:
   February 23rd, 2010 at 5:45 am

   As far as fraud, Obama’s plan unveiled yesterday includes some of most aggressive actions to date (see http://www.insurancefraud.org/blog/?p=1065), so your first point is pretty much off base.

   As far as your other points, read the bills, don’t just echo Republican talking points. Tort reform is the one area that’s lacking in the plans. The percentage savings you cite is not backed by any serious research, including the Congressional Budget Office, which concluded tort reform would save 0.5%, but a savings nonetheless that should be captured, in my opinion.

2. Tony Ondrusek Says:
   February 23rd, 2010 at 7:23 am

   Dennis, from what I researched of the fraud part of Mr. Obama’s plan, there is little in the way of “aggressive actions.” Certainly, he wants to enact a slew of laws that will expand databases and increase penalties and such for those who are convicted or found to have violated Medicare and Medicaid fraud laws.
   But what good are the laws without creating a force to actually find the perpetrators? An individual state can have the toughest anti-fraud laws on the books, but unless it has a competent and sizable investigative and enforcement force, all the laws on the books will mean absolutely nothing.
   When television shows such as 60 Minutes can find and interview criminals who make tens of millions off of Medicare fraud — and flaunt it — but the federal government can’t seem to get a handle on it, it says to me that we don’t need more laws, we need strict enforcement of current laws.
   Certainly, there are those who are serial offenders, and this will put a dent in some of their activities. But criminals are crafty, and they will find a way to bypass these new laws. What we need is a dedicated effort on our government’s part to find these people.
   Regarding tort reform, I have heard various figures, some as low as the 0.5% you cite, and others as high as 25%. And I agree with you, regardless of the savings, action must be taken.
   The point of my blog posting was to show that while the president has made a number of proposals, most deal with the end-game in the health care continuum: insurance coverage. If we took insurance out of the mix, and considered the market for a moment as a direct consumer cost with everyone paying for his/her own care with no insurance market, the president’s proposals would do nothing to lower the cost of health care. Absolutely nothing.

3. dentist frederick md Says:
   February 23rd, 2010 at 2:51 pm

   So this may be unrelated, but what’s your opinion on dental insurance, do you think it should be included in this big health care reform?

4. Employer Pam Werth Says:
   February 23rd, 2010 at 7:42 pm

   Certainly you make a valid point in that other areas must be addressed, and ideally it should be done. But from my side of the fence as an Employer who pays 100% of my employee’s health benefits (including all family members), plus deposit $2500 for a single member and $5000 per family member (per year) into an HSA to cover deductibles (which were increased in an attempt to lower our premium costs), it is outrageous that private insurers like Anthem then turn around and increased our premiums by 25% last year, and will do so again (maybe over 30%) this year. The fact is (and I did an unofficial survey among my employees), that most didn’t even use up their duductible, which means not a penny was paid by Anthem for their medical care! That, is legalized thievery by predetory insurers! Some type of regulation needs to be instituted or I will not be able to afford my employees the benefits I want to provide them with.

5. MarkusR Says:
   February 25th, 2010 at 10:24 am

   There is significant effort in increasing the number of doctors and nurses, which would bring down their cost while increasing the pool of talent to choose from, when going for care.

   I don’t think you’ve actually read the proposal.

6. Tony Ondrusek Says:
   February 25th, 2010 at 10:27 am

   Mark:
   Um, more workers and personnel will DECREASE the costs? Ok….

7. MarkusR Says:
   February 25th, 2010 at 5:03 pm

   The reason why doctors make $150k+ is because of the shortage of them. Same goes for nurses who make $80k+. By increasing the labor supply you bring down the price level. It’s simple economics.

8. Tony Ondrusek Says:
   February 26th, 2010 at 10:03 am

   I have no problem with doctors making $150,000+, if they are skilled and offer good service. Frankly, if doctors were told that their cap would be $100,000 or $150,000, as would the case be under a government-run insurance plan (sort of like with Medicare, where the government only pays the doctors about 70% of what their actual bills are, so they are telling doctors what their earnings will be), I am afraid we would have a lower-caliber individual entering law school. We have the best doctors, hospitals and health care on the entire planet. I don’t want to mess with that. Make it easier for doctors to practice with tort reform and increased electronic medical records? You bet! Lower their salaries? Not really…

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