Health Policy Election 2016 Post-Mortem

America dodged a bullet on health care — but still has a lot of work ahead. The high cost of Obamacare is arguably one of the many issues that drove Americans to the polls to vote for Trump or against Clinton. If it did nothing else, Trump’s victory is important because it blocked the plethora of bad health policy ideas championed by Clinton. The leading presidential candidates’ positions on health reform could not be farther apart. Whereas Hillary Clinton wanted to double down on Obamacare and expand it, Donald Trump plans to repeal Obamacare in its entirety. Clinton wanted to expand Obamacare subsidies, she wanted to expand Medicaid eligibility in the remaining states that have not done so and she even wanted to expand eligibility for Medicare. She also wanted to enact a Soviet-style system of price controls on drugs and make drug makers justify their prices — whatever that means.

Obamacare was rammed down America’s throat nearly seven years ago without a single Republican vote. The program is now failing; individual premiums are skyrocketing while insurers are abandoning entire state markets. Many conspiracy theory proponents believe Obamacare’s failure was preordained to usher in single payer health care. Yet, a ballet initiative in Colorado to create a single-payer health insurer, Prop 69 “ColoradoCare,” was also voted down.

Donald Trump has the opportunity to replace Obamacare with something better — and far better than HillaryCare 2.0 (Obamacare on steroids). For one thing, your health savings account (HSAs) are now safe. Clinton’s proposed three free physician visits prior to the deductible being met would have made most health plans noncompliant with HSAs. Donald Trump supports expanding HSAs and allowing them to be used for more purposes. A great idea would be to allow families to use them to replace income lost to sick days and for family leave/care needs.

The Affordable Care Act (ACA) changed the way individual health insurance is regulated. The goal was to expand coverage, make coverage more comprehensive and remove the restrictions on applicants that insurers placed on them to avoid losses. With those restrictions gone, losses have mounted. The non-profit Blue Cross Blue Shield Association found that Obamacare enrollees are about 22 percent costlier than people covered through employer plans. Indeed, the consulting firm McKinsey & Company found insurers lost money on individual insurance in more than 80 percent of the state marketplaces in 2014 — the first year Obamacare exchanges were open. In the years since insurers have lost billions on exchange plans.

But at least Medicaid expansion was cheap. Right? No, not really. As recently as fiscal year 2011, Medicaid-covered adults cost $3,247 per individual, while children cost only $2,463. However, a new report from the U.S. Department of Health and Human Services found Medicaid expansion enrollees are 50 percent more expensive than originally projected. New Medicaid expansion enrollees’ costs were $6,366 in 2015.

With problems like these in mind, the first thing a Trump Administration should look at is dismantling the current system for financing Medicaid and allow state control and let states innovate. Federal funds should be allocated to states in the form of a block grant. Federal matching funds should be a function of the state population living in poverty. The federal government should let the states decide how best to spend the money. The marginal cost of losses from fraud, graft and inefficiency should be borne entirely by states.

The most pressing goal of health reformers in Congress should be to replace all the costly provisions in Obamacare with the consumer-friendly health plans Americans prefer. Congress should start by repealing the Obamacare mandates on employers, individuals and health insurers. Insurers should be granted the flexibility to design plans consumers can afford and are willing to buy. To help those in need of coverage, Congress should provide a refundable tax credit which families would be free to use towards premiums or on direct care.

In place of ACA regulations guaranteeing coverage for pre-existing conditions, Congress should restore the right to renew coverage if an applicant has maintained insurance with no gaps of more than 63 days (COBRA) and allow insurers to sell multiyear coverage. This would ensure nobody games the system by enrolling only after becoming sick. Creating a national market would also allow insurers to sell policies across state lines, resulting in competition among states to reform overly-restrictive state mandates.

Another goal of any reform agenda should be to expand Americans’ access to primary care. The supply of physicians is relatively inelastic; it takes time to train a doctor. The shortage of primary care providers is expected to get much worse over the next 20 years. Expanding the number of primary care residencies would help. In addition, there are many foreign medical graduates who would like to immigrate but find insurmountable barriers to licensure in the United States.

Reforming the practice of medicine would also better serve patients and boost access to primary care. Medical practice has hardly changed in the past century. Many states have regulations that inhibit talking to a doctor over the phone, and prevent so-called physician extenders, such as physician’s assistants and nurse practitioners, from practicing to the limits of their training. Reformers should focus on removing barriers to competition in the hospital sector and expand price transparency.

Donald Trump and Member of Congress have a big job ahead of them. After seven years of Obamacare, the task should not be taken lightly.

Comments (117)

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  1. Ron Greiner says:

    Obamacare is circling the drain. President Trump had Rep. Tom Price (R-GA) with him last week and Price said, “We have a plan to replace Obamacare.”

    This is YUGE! President Trump said he wants to replace Obamacare with Health Savings Accounts or tax-free HSAs. I enrolled the 1st tax-free HSA in October of 1996 which is the same month that FOX News was started. After all of this TIME I have never seen a show on FOX News devoted to tax-free HSAs. So, they are not fair and balanced.

    The repeal of Obamacare will also be the end of employer-based health insurance in the United States which will be a big reason that America will become great again.

    The 1st thing we have to do is de-link tax-free HSAs and health insurance so people with high deductibles, like $10,000 or $20,000, can go tax free.

    Can you smell that? It smells like FREEDOM! (But not for Hillary who deserves a special prosecutor exactly like President Trump has promised)

  2. John Fembup says:

    “a ballot initiative in Colorado, Prop 69 “ColoradoCare,” to require a single-payer program was also voted down. A similar initiative in Vermont imploded a couple years ago.”

    And a few years before that, Connecticut looked at the same idea. It met the same fate, but was rather more publicly embarrassing From from the Hartford Courant:

    “In a year when legislators pledged to cure the state’s health care ills, the most ambitious plan of all would have the state fund coverage for everyone in Connecticut under age 65 . . . The cost is slightly more than the entire state budget proposed by the governor.”

    That’s all? Slightly more than the entire state budget? So what’s yer point?

    The Courant article goes on to state:

    “Without a cost affixed to it, the so-called single-payer plan was approved 12-7 by the legislature’s insurance committee last month.”

    Without a cost affixed – they liked it? Only one month before submitting the plan to the full Legislature for review? And no one ever asked how those 12 Humpty-Dumpties who voted to approve got on the insurance committee in the first place – – – in the “Insurance City”.

  3. Lee Benham says:

    so you’re saying there’s a chance!

  4. Bob Hertz says:

    In the conservative National Review this morning, Chris Jacobs pointed out that Republicans in Congress have had a lot of ‘free votes’ on Obamacare for the last few years.
    He meant that many of them have been able to vote for repeal, without having to come up with a replacement and cost it out.
    Between the subsidies and expanded Medicaid, there are about 20 million persons who have insurance that did not have it before the ACA. It will be interesting to see how the reform plans look when someone has to figure out what to do with these folks.

  5. Barry Carol says:

    What I think gets lost in the debate over whether to repeal and replace the ACA and with what is the notion of whether or not the society has a moral obligation to provide health insurance and healthcare to low income people who cannot afford the premium and / or cannot pass medical underwriting if we abolish guaranteed issue. Personally, I do think the society has such an obligation beyond ad hoc and uncertain charity care or showing up at the emergency room and expecting to be treated regardless of ability to pay under the rules of the EMTALA. It’s also important to note that guaranteed issue cannot stand without a mandate to purchase insurance yet the idea of guaranteed issue is enormously popular among people who are unhealthy or already sick. Guaranteed issue if you had previous coverage with no more than a 63 day gap between coverage is fine but waiting until you get sick to buy coverage without having prior coverage just doesn’t work.

    So, if we were to go back to a world of medical underwriting coupled with some sort of subsidy that would cap the out-of-pocket premium at a reasonable percentage of income, the trickiest question is what do we do about the unhealthy and already sick and at what cost? High risk pools that actually work for the people who need them would be expensive.

    With respect to the idea of providing health insurance for low income people, including those currently eligible for Medicaid, the University of Chicago’s John Cochrane had an interesting take. He suggests that health insurance for this group should be good enough to discharge society’s obligation to help them but bad enough so that nobody in a position to make a choice would want or choose it. Liberals wouldn’t like that approach but I happen to think it’s reasonable.

    • Jimbino says:

      “good enough to discharge society’s obligation to help them but bad enough so that nobody in a position to make a choice would want or choose it.”

      Kind of the way we do public education!

  6. Barry Carol says:

    The concept of tax credits to buy health insurance whether coupled with an HSA or not may be adequate to buy health insurance in some places but grossly inadequate in others because medical costs differ quite a lot regionally for different reasons. Medicare pays providers at different rates for the same care in different regions to reflect differences in the cost of providing care. National employers, including the federal government, pay employees doing the same job and with the same GS grade higher wages in some regions than others to reflect differences in the cost of living. A flat dollar credit that applied nationally would be seriously flawed for this reason.

    That’s why I prefer capping the premium at a reasonable percentage of income like 10% for those with income at or above 300% of the FPL but the income verification process needs to be far more robust than it is under the current ACA. The colleges and universities seem to do a pretty good job of ascertaining income and assets to calculate need based financial aid. There is no reason we couldn’t do the same thing to determine ACA subsidies. While that approach would come with an administrative cost, it would be worth it, in my opinion, to maintain the integrity and credibility of the system in the eyes of taxpayers.

  7. Bob Hertz says:

    The consensus I am seeing among thoughtful Republicans is that the ACA subsidies will have to remain in force for 2017 and probably 2018 as well, even with a new federal approach.
    Guaranteed issue would remain in force for that period too.

    That raises a key point. Will the insurance companies stay around for two more years? Will the insurance companies be interested in a post ACA world?

    Most large insurers have never liked the individual market very much. A few carriers like Time and Golden Rule made money through tough underwriting. They are gone now.

    I have said this before and will say it again. If Republicans are in power, they may find that they have to subsidize insurers or allow a public option. Reality will trump ideology.

    • Barry Carol says:

      If Republicans think the 3R’s are nothing more than an unwarranted giveaway to or bailout for health insurance companies, their best alternative is probably to provide block grants to the states to offer heavily subsidized high risk pools for the unhealthy and already sick.

      That probably won’t save any money and may well cost even more than the 3R’s would have but it might make them feel better and it would definitely make young and healthy people who can pass underwriting as well as their insurance agents feel better. At the end of the day, though, the unhealthy and already sick need to be provided with coverage at a subsidized premium they can afford somehow.

    • John Fembup says:

      Bob, you are still stuck on trying to cure our medical delivery cost problems with an insurance (“subsidy”) band-aid. Of course you are not alone in that.

      I do agree that if there is gonna be a move away from ACA, there must be a transition period, which will include at least a continuation of subsidies.

      But even the optimal insurance plan that every last person in the country would enthusiastically embrace, won’t solve the problems of high and rising medical delivery costs.

      We won’t begin to cure those problems until our leaders come to grips with the correct diagnosis – instead of tryIng to cure some other problem because it looks easier.

      As evidence, I offer the last 55 years.

      • Barry Carol says:

        John — We agree on that medical costs are the biggest issue here but, in the meantime, people need health insurance at a premium they can afford which means subsidies need to be in the mix. There is no reason why both issues can’t be addressed at the same time. Policy making isn’t, or at least shouldn’t be, one issue at a time sequential processing. Both can proceed on parallel tracks where the different areas of expertise that each requires can be brought to bear.

        • John Fembup says:

          Yes, we’ve both known this from the beginning.

          I do not mean to suggest people won’t always need some form of medical insurance. Even if the growth in medical delivery cost is somehow constrained, everyone will still need some form of medical insurance.

          I also agree the problems are related so both issues can be addressed at the same time. What worries me is that our so-called health policy leadership seems to spend nearly all its time on the insurance band-aid and almost no time on the medical cost cure. I hope I’m wrong.(*)

          Such a strategy means that additional taxes will be necessary every year for the government to increase insurance subsidies by enough to keep pace with the growth in medical costs. Otherwise, at some point, insurance costs will resume growing as in the past. Arguably we’ve reached that point now.

          (*) “I hope it, but I doubt it” – Mark Twain

    • Allan says:

      “Most large insurers have never liked the individual market very much.”

      The power of selection has made many of the greatest risks end up in the individual market. What has to end is third party payment and along with the end to this selection problem we see an end to many other problems as well. This does not mean that the employer cannot offer insurance, rather that both employer and personal insurance are on an equal footing with regard to the tax benefits along with individual choice.

  8. Lee Benham says:

    “Most large insurers have never liked the individual market very much.”

    Yes Insurance companies prefer the group insurance market. they like the fact that HR people sign up the employees without the need of an agent. the individual market is very labor intensive compared to the group market. Also group insurance comes with eligibility clause and removes the sickest individuals out of the groups because they can no longer maintain eligibility.

    Group insurance was on a decline since the mid 1990’s the ACA postponed the migration from group to individual plans. repealing the ACA will cause the small employer groups to go back to offering premium only HRA plans. Employees will purchase individual policies on their own. The Age based tax credits that the republicans have offered as a replacement to the ACA will expedite this trend and bring large employers into the individual markets.
    Employers will stop offering plans allowing employees to receive the tax credit and purchase individual plans in the open market. The Employer will subsidize individual premiums with a Fixed $ amount in a premium only HRA and also contribute to employees HSA accounts.

    Employers will receive the same tax advantages they enjoy today just in a different accounting Colum. Employees will then take their funds and buy insurance based off of there individual needs that are portable.

    This would have already happen if HHS had not made premium only HRA plans non ACA compliant.

    The bottom line any attempt to fix the ACA or repeal will be the end of employer based health insurance plans.

    • Allan says:

      Lee, how nice of the government to provide the insurers with such an easy pathway to earning money at the expense of the people. We should make Broccoli a tax deduction and support that vegetable. To the hell with carrots.

      Thanks for added insight as to what may or may not happen. The best thing that could happen would be a change in the tax system that eliminated the tax deduction entirely.

  9. Ron Greiner says:

    Lee, you write, “attempt to fix the ACA or repeal will be the end of employer based health insurance plans.”

    I wrote in the 1st post, “The repeal of Obamacare will also be the end of employer-based health insurance.”

    You and I think exactly alike but we are the only ones. Everybody else is so brainwashed that they cannot imagine how stopping employer-based insurance will help the American people. They can’t even imagine…hahaha

  10. Lee Benham says:

    Exactly is a stretch 😱. I do agree with Fembup that controlling the cost of care is the problem. Because we live in a subsidiesd marke costs will never be controlled. However age based tax credits and the demise of employer based health insurance might slow the inflation of health care. Alowing people to control more of their $ by choosing plans that fit their needs and depositing funds into HSA’s will make consumers more price conscious.

    At least it will be a step in the right direction

  11. Lee Benham says:

    Bob posted this paper in another posting and I finally got around to reading it. I feel the most important part of the paper should be posted again under this topic. I’m shocked that somebody from Chicago would understand the problem so well.

    “I and others have written a lot about how to fix health insurance, so I won’t repeat that all here.
    To summarize briefly, health insurance should be individual, portable, life-long, guaranteed-renewable, transferrable, competitive, and lightly regulated, mostly to ensure that companies keep their contractual promises. “Guaranteed renewable” means that your premiums do not increase and you can’t be dropped if you get sick. “Transferable” gives you the right to change insurance companies, increasing competition.
    Insurance should be insurance, not a negotiator and payment plan for routine expenses. It should protect overall wealth from large shocks, leaving as many marginal decisions unaltered as possible. “Access” should mean a checkbook and a willing supplier, not a Federally-regulated payment plan. Such insurance would, of course, be a lot cheaper. And insurance can be all these things, in a free or lightly-regulated market.
    Preexisting conditions, lack of insurance by the young and healthy, and spiraling insurance costs– the main problems motivating the ACA — are neatly addressed by this alternative, as I and others have explained at length elsewhere.
    Why do we not have a system? First, because law and regulation prevent it from emerging. Before the ACA, the tax deduction and regulatory pressure for employer-based group plans was the elephant in the room. This distortion killed the long-term individual insurance market, and thus directly caused the pre-existing conditions mess. Anyone who might get a job in the future will not buy long-term individual insurance. Mandated coverage, tax deductibility of regular expenses if cloaked as “insurance,” prohibition of full rating, barriers to insurance across state lines – why buy long-term insurance if you might move and are forbidden to take it with you? – and a string of other regulations did the rest. Now, the ACA is the whale in the room: The kind of private health insurance I described is simply and explicitly illegal.
    The second reason we do not have a system is that functional “insurance” requires a functioning underlying market, which law and regulation have also prevented from emerging. We can’t reasonably write contracts about who pays the bill when the bill itself is so meaningless.
    If there were functional cash markets, health savings accounts could also substitute for much of the necessarily cumbersome functions of insurance. Health borrowing accounts, i.e. HSAs with a preapproved line of credit, which you can tap for unexpected expenses but are not insurance in the
    sense of transferring overall wealth, would help even more. But without functional (competitive) cash markets, HSAs are not that helpful either.
    Unfortunately, individual long-term policies were one of the first casualties of Obamacare. In the Fall of 2013, a large number of insurers canceled individual policies, most of which were guaranteed-renewable, under ACA requirements. Many customers faced large premium increases, and more restrictive new policies under the exchanges, and may choose to go without insurance instead. Here was a population who did the right thing, and bought insurance, even if badly over-priced, precisely for the right to keep it if they should get sick in later years. And the first act of the ACA, just before the disastrous rollout, was to cancel that insurance. The only silver lining is the number of voters who began to find out what is really in is really in the system, epitomized by a young woman writing a letter to Pam Kehaly, president of Anthem Blue Cross in California, on receiving a 50% rate hike26. “I was all for Obamacare until I found out I was paying for it.”

  12. Bob Hertz says:

    I am glad you enjoyed the John Cochrane article. He has a blog called The Grumpy Economist.

    No big deal, but do you have a gripe against the University of Chicago or the city itself? I went to the U of C for 2 years, great school, though I did not like the city at all.

    Now a more serious question.

    You suggest that in the future, employers will enable their employees to choose their own plans. That does sound good in a lot of ways.

    However — if the individual market stays with guaranteed issue, then individual premiums will often be higher than group premiums, and with much higher deductibles and co-pays in many instances.
    At my insurance agency there is a rush by small businesses to get group insurance, because rates are lower and vastly more stable than the individual market.Taxes are a secondary consideration.

    Are you assuming some changes to the individual market?
    Can you detail them?

    • Lee Benham says:

      Why would individual premiums be higher? Before the ACA individual plans were 1/3 to 1/2 the price cheaper than group. Also remember how insurance companies price there product. Most insurance companies tie an association to the individual policy then issue a group policy to the state and then individual certificates as part of the group.

      However for argument sakes let’s assume you are correct and individual plans are about the same price as group. Why would an employer that is paying $5000 a year for an individual policy not cancel the group policy allowing the employee to claim a tax credit and then place funds into an HRA ? Employers would be financially irresponsible for not taking advantage of individual tax credits.

  13. Bob Hertz says:

    Note to John F:

    You often refer to the medical cost problem as the elephant in the room. It is a vastly complex subject, but here is an observation you may find of interest:

    Once in a while I get to look at actual insurance company fee schedules. I have spent time at the library reading the Medicare fee schedules also.

    In a lot of cases the fees are surprisingly low.
    Blood tests paid at $25, CAT scans at $279, MRI’s at
    $950, treadmill EKG’s at $1200, etc.

    My first reaction was:

    “Hey, these guys have solved the cost problem!”

    But insurance premiums keep going up, why is that?

    Here are some of my ideas on this:

    a. There is little control of utilization. Medicare has virtually no control of it.

    b. There is no control over specialty drug prices.

    c. Insurance premiums can keep going up even if medical costs are flat — due to the aging of the risk pool, and due to crummy investment results on insurance company cash.

    These thoughts of mine have kept me from completely agreeing with you that medical costs are the main villain.

  14. John Fembup says:

    “Little control on utilization” – private insurers have a lot more influence – I would not call it “control” – over utilization than Medicare which has effectively none. Rising utilization can drive overall costs up even if unit prices don’t budge. When overall costs are expected to go up, so will insurance premiums. It doesn’t matter if the cost increase is due to prices, to utilization, or to a combination of prices and utilization.

    “No control over specialty drug prices” – same comment as above.

    “Insurance premiums can keep going up even if medical costs are flat — due to the aging of the risk pool, and due to crummy investment results on insurance company cash.”

    Lost me on this one. As a population ages, its overall costs grow for several reasons. Frinstance older people tend to accumulate chronic illnesses and frinstance, our bodies just gradually wear out and require more medical attention. This means members of the population gradually use both higher-cost services and generally more services, including primary & specialty care & hosp. As for any population, premiums will increase because expected medical costs increase. I don’t understand why you suppose that medical costs would ever be flat as a risk pool ages.

    Remember Overall Cost = (svc unit price) x (number of svc units) summed over all svcs

    Investment results are a minor component of insurance premiums. Reserves typically amount to roughly 2 months of premiums and assuming the insurer can make 5% the gross return is (.05) x (.17) = .0085 that is, less than 1% of premiums. And that is before FIT. Also don’t forget that insurerance regulation generally limits insurers to lesser-risk investments – which of course have a lower gross return.

    • Barry Carol says:

      If medical prices, including drug prices, increased no faster than general inflation as measured by the Consumer Price Index (CPI), it would be a meaningful improvement over the long prevailing status quo. For a given age cohort, utilization of services would be pushed higher on a per capita basis by improvements in technology such as new surgical techniques, new medical devices and better drugs as they save people, often at high cost, who would have died before. At the same time, they would be pushed lower if we find ways to keep people healthier for longer and out of the hospital. Better personal behavior around smoking, drinking, drugs, diet, exercise, etc. would be most helpful here while taxes on cigarettes and, more recently, soda can push people in that direction.

      Other strategies that could help to mitigate cost growth include price and quality transparency tools to help both patients and doctors identify the most cost-effective high quality providers in real time, sensible tort reform that could reduce defensive medicine and a less futile and marginally useful care at the end of life that many patients don’t even want but can no longer express their preferences and family members don’t know what they would have wanted if they could express their preferences. Living wills, advance directives, and even informal letters or memos to family members could go a long way to fix this problem. Hospitals these days, at least in NJ, will generally do what the family wants at the end of life. If they actually know the patient’s preferences, it’s an enormous gift for everyone involved as nobody has to guess. Finally, for Medicare and Medicaid, better data analytics to combat fraud and an ability to wait longer before paying provider bills if there is a basis to suspect something improper would be helpful as well. As I often say, there is no silver bullet to resolve this issue but lots of silver pebbles or pellets if you want to stay with the gun and rifle analogy.

      • Allan says:

        I will reiterate what I have said before. Smokers die young so they lose years of benefits from Medicare and social security. That saves the nation money without even considering the taxes they pay on cigarettes. Everyone dies and therefore everyone pays for death. One calculates the cost of the disease. Heart disease I believe is a lot more expensive than COPD or lung cancer..

  15. Bart I says:

    Congress should restore the right to renew coverage if an applicant has maintained insurance with no gaps of more than 63 days (COBRA)…

    Restore? I didn’t know COBRA was repealed.

  16. Bob Hertz says:

    Lee, the only way to drive individual premiums lower than group premiums is to go back to full underwriting on the individual side.

    Before the ACA, individual premiums were lower because people could be declined, plus maternity could be excluded (that is a huge source of claims in group insurance.)

    Full underwriting is not evil, but it creates a problem for any company trying to just give money to employees for their individual policies.

    What if two of your ten employees cannot find any individual coverage?

    A fellow named Paul Pilzer used to advocate for your kind of HRA designs, but he never solved this problem.

    • Barry Carol says:

      He could never solve the problem because there weren’t adequately funded heavily subsidized high risk pools that actually work for the people who need them standing ready to cover the two employees of the ten that were declined underwriting. The high risk pools weren’t there because they were too expensive for state politicians to support. Politicians weren’t going to fund a very expensive program that benefitted only a relatively tiny slice of the population some of whom were too sick to even vote.

      The freedom loving free market types want their healthy customers to be able to buy low cost health insurance coverage, stick women with paying the full cost of maternity benefits and tell the unhealthy and already sick, sorry, you’re on your own. Oh, they say they support high risk pools but they don’t tell us what they would really cost to actually work. If, for example, a 2% income tax on all modified adjusted gross income above the FPL of income would cover all the people under age 65 not eligible for Medicare or Medicaid who couldn’t pass underwriting would adequately fund the high risk pools in all states, would they support that? Yes or no?

      • John Fembup says:

        Wait for it . . . Strident political message from Senator Foghorn Leghorn to follow.

      • Allan says:

        “The freedom loving free market types want…”

        The collectivists want to tell everyone what to do and infer that free market types are horrible people. We saw that in this election year. What they forget is that the free market types for the most part want to protect the healthcare marketplace. That is why they offer things like subsidies.

        The collectivists also get into a panic if they hear that should they have an expensive illness they might be required to pay for it up to their ability to afford payment. They don’t want to do that because they might not have enough disposable income left for their country club communities. They don’t bother to look at what happens to lower class people because they had no problem placing them on Medicaid. Hurrah for the collectivist that is really an elitist pretending to be protective of those with chronic illnesses. Obama and Obama collectivism failed because the American people aren’t so stupid.

  17. Lee benham says:


    Sorry I disagree. there are several ways to get individual policies less expensive than group.

    I am very familiar with Mr. Pilzers ideas. over the last 20 years I have had the pleasure of speaking with him on the phone several times.

    Let me ask you a questions.

    Would you agree that Employee Benefits are part of an employees compensation package so what ever the cost of the benefits are the employee is actually paying 100% of the cost while the employer enjoys the tax advantages?

  18. Bob Hertz says:

    I cannot agree with your last paragraph.

    If an employer just gives me $500 a month to help me buy health insurance, under current law I believe that the $500 is fully taxable to me.

    Whereas if the employer buys a group plan and pays $500 toward my premium, I get the $500 tax free.

    The $500 was deductible to the employer either way.

    So it appears that the employee gets a big break with group insurance. The employer gets no special advantage from group insurance that I can see.

    • Ron Greiner says:

      Bob, just ask yourself – does the employer pay Payroll Tax on the employee’s earning? Now, does the employer pay Payroll Tax on employer-based health insurance premiums?

      How about unemployment tax

      How about Workers’ Comp

      You wrote, “The employer gets no special advantage from group insurance that I can see.” — WRONG

      training you schnitzels could take all day

  19. Bob Hertz says:

    Barry you remind me of an interesting point.
    Right now, the vast majority of high risk individuals
    who can still work are on employer plans. That is why the high risk pools that did exist pre-2010 had relatively few participants.

    That is also why group insurance rates are still quite high, especially for companies with a big block of older employees.

    But if employer insurance was blown apart as some advocate, and if insurers were allowed to underwrite again, then we would need well over $100 billion a year to fund high risk pools.

    • Barry Carol says:

      Bob — I not only agree with you but I think you may even be understating the cost. About 150 million people, including family members, currently get their health insurance through an employer. If employer insurance were blown apart and each employee received a defined contribution to buy an underwritten insurance plan instead, Ron Greiner said previously that probably 10% of those lives would be declined by underwriters. That’s 15 million people. If it cost $15-$20K each to cover them, that’s $225-$300 billion per year plus the currently uninsured people who can’t pass underwriting and those with ACO coverage with pre-existing conditions who couldn’t pass underwriting either.

      If commercial health insurance for the population not eligible for Medicare or Medicaid is currently generating roundly $1 trillion per year in premiums, it could cost half that amount to cover the 10% who can’t pass underwriting while the other 90% could buy relatively low cost coverage. $500 billion per year is equal to about 2.8% of U.S. GDP. It would probably take a 7% Value Added Tax (VAT) to raise that much money or a 5% income tax on all income from both wages and investments above the FPL income level. Would the 90% of the population who can pass underwriting at the moment be prepared to pay that in exchange for a much lower health insurance premium than is charged today? I doubt it.

      • Ron Greiner says:

        Barry, the uninsured who cannot pass medical under-writing will personally pay higher premiums so make sure you deduct that cost from the rest of us in your calculations.

        • Barry Carol says:

          Ron, I tried to take that into account. I assumed anyone with income above 300% of the FPL would pay 10% of MAGI toward their premium with a sliding scale below that down to the Medicaid eligibility level.

          I also assumed that those who can pass underwriting would also be subsidized if their premium exceeds 10% of MAGI also with a sliding scale between 300% of the FPL income and the Medicaid eligibility level.

          I read recently that one insurance executive was quoted saying that within his company’s ACA exchange plans, the sickest 5% of members accounted for 75% of claims this year which is most likely an outlier case. 50% of claims would be more typical for the sickest 5%.

      • Allan says:

        “That’s 15 million people. If it cost $15-$20K each to cover them”

        I was declined individual insurance for 2 years. During that period of time including including the years afterwards, 5-10 until I went on Medicare I didn’t spend $500 per year. Most of that was spent on check ups for other things. That cost included my so call uninsurable diseases. I had more than one. To date my uninsurable diseases in total haven’t cost me, my insurers or Medicare $1,000 despite the long time frame. Most of that money was spent in conjunction with other complaints. In fact I don’t think I ever collected a dime from any of my health insurers in my entire life.

        I believe you are vastly overestimating the cost of those denied insurance. In many cases the insurer is trying to make sure no illnesses suddenly came up that haven’t been treated or they are overly cautious. I had to be careful what I wrote in my notes because the insurers took any hint of potential illness as an uninsurable disease at least for a year or two. Then when the person reapplied they were provided insurance.

  20. Lee Benham says:

    Bob ,

    I asked a simple question . Are employee benefits compensation? A simple yes or no.

    • Barry Carol says:

      Lee, for me, all benefits are part of each employee’s total compensation though some of those benefits, including employer provided health insurance, the employer’s share of FICA taxes, defined benefit plan or defined contribution plan pension benefits, disability benefits, if any, etc. come with more favorable tax treatment to the employees than would be the case if the employer cost of those benefits were all paid out to employees as straight wages instead.

      To the employer, it makes no difference from an accounting standpoint in calculating taxable profit on which C Corp or owner pass-through taxes are determined.

  21. Lee Benham says:

    Still can’t answer a simple question?
    If benefits are part of an employees compinsation is the employee paying for the benefit?

    • Devon Herrick says:

      Economists say “Yes”

    • Bart I says:

      The full question was more interesting:

      Would you agree that Employee Benefits are part of an employees compensation package so what ever the cost of the benefits are the employee is actually paying 100% of the cost while the employer enjoys the tax advantages?

      I wouldn’t agree, at least not to a blanket statement. It’s highly unlikely that a high-cost employee would be paying 100% of his or her costs. It’s also highly unlikely that healthy employees are paying the shortfall. That means at least some of the tax advantage is being used to pay the costs of the expensive employee.

  22. Bob Hertz says:

    Technically I understand the argument that health benefits are compensation. However I see so many real world examples in my insurance practice that would appear to contradict this.

    Example 1

    The standard package in a firm is a $40,000 salary and a health policy that costs $10,000.
    A new employee shows up and says he does not need the company health insurance.
    Is he then given a salary of $50,000?
    Almost never, in my experience.

    Example 2

    The firm has been paying the above package of $40,000 plus health insurance for many years.
    But times are tough and the company health insurance is cancelled.
    Are salaries raised to compensate at least in part?
    Almost never.

    Example 3

    A unionized firm pays $40,000 plus a $10,000 health policy.
    A non union firm opens up and does not offer health insurance. Do they pay a $50,000 salary? Almost never.
    They recruit workers who can get by without health insurance and are grateful for the job.

  23. L:ee Benham says:

    Obviously this is where the disconnection is happening.
    Employees need to realize they are paying 100% of their benefit package.

    Let’s use Bob’s group of 10 employees averaging $40,000 a year in salary.

    $20 an hour times 2000 hours of work a year would be $40,000.

    The Average Employee only health insurance premium today is about $4,500 a year or about $2.25 an hour worked.

    The employee’s total compensation per hour would be $22.25

    The Employer pays $20 an hour to the employee and takes $2.25 an hour and sends it to the insurance company for premiums.

    Bob’s argument for group insurance is that it makes more since to have all 10 employees pay the $2.25 an hour because 2 of the 10 probably won’t qualify for individual premiums and it will be cheaper.

    My argument would be to have the Employer still pay the $20 an hour to the employee but instead of paying $2.25 to an insurance company. They place the $2.25 into an HRA.

    The employee then uses the funds to go buy an insurance plan designed to cover their personal needs.

    If the majority of employees could find an insurance plan that worked for them for around $1.50 an hour and take the .75 difference and fund their HSA I think all 8 employees would choose to do so.

    Bob argues that the 8 employees that will be able to get cheaper insurance is not fair to the Two who will be unable to find a cheaper plan.

    Bob, I hope you don’t feel I’m picking on you. We just have different opinions about group insurance and I’m just using your post as an example.

    The arguments that need to be addressed are:
    Should the 8 pay more to help the 2 pay less?
    If the 8 knew the cost difference in their compensation would they agree to pay more?
    How can the 2 find and affordable plan?

    The ACA is not a workable model and it is going to be repealed or drastically changed.
    If we end up with individual tax credits I feel we will see a paradigm shift from employer benefits to individual. By lifting the burden of health insurance off the backs of employers will lead to economic expansion not seen since the industrial revolution.

    • Ron Greiner says:

      Exactly Lee, President Trump lifting the cost of health insurance off the backs of American employers will make the economy soar.

      We should have done this in 1996 when we passed HIPPA but instead we postponed making America great again for a bunch of special interests groups.

      President Trump will target wealth to the poor and go down in history as the greatest American President of all TIME.

  24. Bob Hertz says:

    Well put, Lee.

    Actually I agree with you. The 8 healthy employees are taking a big hit if they have to pay group rates to cover the 2 unhealthy employees.

    Ron has done a good job highlighting how wildly unfair this gets in government employee plans.

    So the issue may be, how will the costs of the 2 unhealthy employees be absorbed?

    If we had a high risk pool funded by a 1% or 2$ increase in federal income taxes, then the highly paid federal or corporate manager would be helping to pay for the unhealthy employee.

    And this is fine with me.

    (the ACA forces healthy self-employeds to absorb all the costs of high risk persons, which is why the ACA is despised.)

    But the Grover Norquist sheep legislators will veto any such tax increase, so far.

    Show me the tax increase and I will sign up with you.

  25. Barry Carol says:

    Conceptually, I have no problem with free market medical underwriting coupled with high risk pools to carve out and cover the unhealthy and already sick in a separate pool. The rub, of course, is cost and how to pay for it. What percentage of income should the high risk pool members pay? I’ve suggested 10% of MAGI for those with income above 300% of the FPL with no income ceiling for subsidy eligibility. I would create a sliding scale percentage obligation from 300% of MAGI down to the Medicaid eligibility level at which point it becomes fully funded by taxpayers.

    If the employer system went away, there is a huge amount of uncertainty around how many of the 150 million lives, including family members, currently covered under employer plans would need to look to the high risk pools for coverage. Will it be up to each state to create their own solution or choose to do nothing at all or should it be a federal responsibility to finance them? What happens to people in states that choose to not create a high risk pool as 15 states failed to do when we had them in the other 35 even though most of those weren’t very good either?

    Since most insurance models show that the sickest 5% of members account for 50% of claims in any one year, and the sickest 10% account for 60%-65% of claims, it’s conceivable that even if only 10% of the non-Medicare and non-Medicaid population flunks underwriting, their aggregate claims could equal or exceed those of the 90% who can pass. Remember that even within Medicare, where the Part B and Part D deductibles are both very low and Part A isn’t especially high either, the healthiest 5% of members only account for about 4% of claims costs in any given year.

    The 200 million or so people who are not eligible for Medicare or Medicaid and are not illegal immigrants probably generate roundly $1 trillion in annual medical claims today including what they pay out of pocket. If we got rid of the third party payer approach and everyone bought an individual policy either through traditional underwriting or through a high risk pool, I’m pretty darn skeptical that the prior $1 trillion number would shrink very much even if somewhat more of it is paid out of pocket in the form of higher deductibles. Based on the experience of the relatively healthy Medicare beneficiaries who enjoy low deductibles today, I don’t see a lot of care being used SOLELY BECAUSE insurance will pay for it. The biggest claims that break the bank will still break the bank under any system. The only issue is how we pay for them and how we allocate the cost across the income distribution of the population.

    • Allan says:

      #1 “Conceptually, I have no problem with free market medical underwriting…”

      That is a long awaited step in the right direction, but then you step over the line overly involving yourself as to how a family should allocate their money and which expenditure is of greater importance.

      We can have one family blessed with health, but spending a lot of money on multiple children with one disabled child and parents that need to be cared for. They may earn the same amount as a single individual who inherited a lot of money with no one to support but has to pay a higher rate for insurance. In essence you are transferring funds from one group to the next saying that his high risk is more important than funding ones parents needs, or funding of a disabled child, or funding many children. If you are trying to make things fair you should be equally accommodating to all the important variables, but you aren’t for you have picked your pet project and then you want your opinion mandated and backed up with guns.

      #2 The employer system need not disappear or disappear all at once. All others are asking is for parity with regard to the tax deduction something you don’t want to see for that you feel would destroy the employer system something you favor today.

      #3 The sickest members change from year to year.

      #4 The market place brings down costs tremendously. You prefer a more collectivist model and higher prices.

      • Barry Carol says:

        In a big, diverse country, there will always be many thousands of permutations and combinations of individual and family circumstances making perfect equity impossible to achieve. Whatever system we have needs to be understandable and it has to be able to be administered with minimal confusion. Within Medicare, a beneficiary with an annual income of $20K pays the same Part B premium, which only covers 25% of the actuarial value of the benefit, as a beneficiary with $84K of income. You could argue unfairness there too but what’s the alternative? I think 10% of income is reasonable to expect even middle class people to pay for health insurance especially since, in Lee’s example, that’s what the guy making $40K is paying now — $2.25 per hour on a $22.50 per hour income from wages plus the value of his employer provided health insurance benefit.

        I only argued against extending a tax benefit to people who buy their health insurance in the individual market because it would further erode the tax base which is already riddled with deductions and credits for all sorts of things. I would go along with it if that’s what the congress wants to do but I would rather get rid of the preference for employer coverage and have everyone buy health insurance with after tax dollars like they do for car and homeowner or renter insurance. Moreover, the biggest perceived value from employer coverage is that the employer is nominally paying 75% of the premium on average. Yes, we know that the employee is really paying it in an economic sense but as Bob Hertz points out, employees don’t have a choice of declining the insurance and taking it as extra pay instead. At my old employer, if you declined family coverage which at the time was worth about $15K per year in cost to the company, you would get an extra $80 per month or $960 for year for not taking it. That was the employee’s contribution from his or her wages at the time. Employers are not going to offer that choice either. If they did they would stop providing health insurance for everyone and replace it with a voucher of stated value which might be adequate for many or even most employees to buy the coverage they want and need but would also likely be grossly inadequate for the 10%-20% of employees who can’t pass underwriting and may not be able to buy coverage at any price in the absence of a heavily subsidized high risk pool.

        I haven’t seen much evidence of the marketplace bringing down the cost of health insurance because it’s derived from the cost of health care which, in turn, come through as medical claims that the insurer must pay under the terms of the policy. Those costs have increased faster than overall inflation for many years now.

        • Allan says:

          #1 “making perfect equity impossible to achieve”

          The only problem that separates us is I am willing to subsidize one who requires the subsidy to have any chance of being insured. I am willing to provide that chance, but I am not willing to tax others so that one can maintain their country club lifestyle. You feel that lifestyle has to be propped up at the expense of needs that are equal to or more important than the person being insured.

          #2 You demonstrate a lack of concern with rising debt yet you want to tell me you are worried about eroding the tax base when one party is unfairly supporting another. Next thing you will say is that whatever is thought of to rid this unfairness is impossible. But, on the other hand you will say that you offer that fairness if the tax deduction is totally removed which is impossible. In other words rather than try to equalize the deduction you suggest something you know in advance will never be done.

          I’m not getting into the back and forth argument of who actually pays for the insurance because the studies demonstrate the employee pays and there aren’t good studies to show the opposite nor is there empirical reasoning to demonstrate that the studies are wrong. The employer is trying to sell a product at the lowest possible price. When all is said and done and everything but employee salary and benefits are equal the buyer will buy based upon the lowest price. That means to me that as a general rule employee costs must be equal no matter how the check is divided between salary and benefits.

          Your last point takes us back to #1.

          #3 Pray tell, when have we had a truly free marketplace? Its been collectivized almost from day 1. The employer tax preference which leads to third party payer, probably one of the worst parts of our healthcare system, has existed since WW2 and modern healthcare didn’t exist much before that.

          • Barry Carol says:

            Allan – You say under #1 that you want to provide a subsidy to anyone who would otherwise have no chance of acquiring insurance but you don’t say how you would do that. It sounds like you want every person who thinks he might be eligible for or need a subsidy to put together a packet of income and asset information plus any extenuating circumstances that apply to their particular individual or family situation and present it to the equivalent of a university’s financial aid board for review. That would be time consuming and expensive and it would have to be done every year as income, assets and family circumstances can change. Moreover, I think you would be hard pressed to find anyone today who is a member of a private country club with golf who has no health insurance by choice and would be eligible for a subsidy if required to contribute up to 10% of MAGI toward the premium.

            Regarding #2, removing, phasing out or at least shrinking the current employer provided health insurance tax preference is not impossible, in my opinion. On the evening of November 8th, the Trump campaign’s own internal data showed him losing. The Cubs won the World Series for the first time in 108 years in an incredible seventh game. This year, anything is possible! On a more serious note, I’m told that there was an effort to remove the health insurance tax preference in Congress during the Truman administration but the then very powerful labor unions killed it. I wouldn’t lose any sleep if a bill was passed to allow people who buy health insurance in the individual market to pay their premium with pretax dollars. The erosion of the tax base from that issue alone is pocket change in the scheme of things. Dealing with the long term debt issue will require a far more comprehensive effort that reforms social security and Medicare along with broad based tax reform.

            The reason large self-funded employers will never let employees selectively choose to take a voucher to buy health insurance away from the employer’s plan or plans is because if all the healthy people took that option, the employer might only escape half of its prior health insurance claims but will have given away 90% of its previous healthcare spend through vouchers thereby raising its total cost to provide health insurance to its workforce by 40%. It’s a non-starter.

            • Allan says:

              #1 Barry, we are able to manage this type of problem when determining Medicaid eligibility, student loans, how much taxes people pay etc. This is not that difficult especially since many of the so called uninsurable have adequate funds to pay the premiums on their own. You desire a large group of people with assets to be assisted in paying their premiums by those with lesser assets. I only want to help those relatively few that require a safety net. I am not willing to support their life styles. Failing that I am willing to place them on Medicaid even letting those that are somewhat better off pay a premium.

              You complain about expenses, but have no problem racking up public expenses to pay for the premiums people could have paid with their private funds.

              #2 Up till now your default answer when pressed was it is impossible so I am glad to see that you have entered the world of possibilities. I too would prefer to end the tax deduction for healthcare, but I would not limit the solution to that singular solution. I would rather compromise with a step by step process than leave some Americans with the tax deduction and others without. It is your adherence to the all or none philosophy where the non looks very unlikely that I object to. Congratulations for recognizing that not everything unpalatable to you is impossible. I always said your tax erosion response for doing nothing was as you say now “Pocket change in the scheme of things”.

              It seems your position has shifted regarding the erosion of the tax base and even the massive debt. That is great for that movement permits change for the better. It seems the magnitude of your shift today is around 8.3. That is a pretty big change for earthquakes and this list. 🙂

              #3 I’m not concerned with what self-funded employers will do. I am only concerned that the individual has access to the same tax deduction that employers have.

              • Barry Carol says:

                I’ll give you the last word on this but I hope some others will weigh in as well.

                • Ron Greiner says:

                  Barry, Allen is right. The Democrats rode the Obamacare dead horse right into the ground and the Democratic Socialist Party is almost destroyed. Democrats may never come back and that’s a good thing.

                  Barry, you and yours lost bigly. Like Obama says, “Now you have to go to the rear of the bus.”

                  This is the way it’s going down. We have to pass Obamacare repeal and replacement to find out what’s in the new bill. That’s the way it’s done Barry, sorry.

                • Allan says:

                  Barry it is not a matter of the last word rather what one’s principles are. I don’t believe government should be in the business of picking winners and losers.

  26. Barry Carol says:

    Correction: I meant to say in paragraph three that the healthiest 50% of Medicare members only account for 4% of claims cost in any given year. Sorry about that.

  27. Bart I says:

    L:ee Benham says:

    Let’s use Bob’s group of 10 employees averaging $40,000 a year in salary.

    $20 an hour times 2000 hours of work a year would be $40,000.

    The Average Employee only health insurance premium today is about $4,500 a year or about $2.25 an hour worked.

    The employee’s total compensation per hour would be $22.25

    Lee, I think you’re confusing the employer’s average cost per employee with actual value to the employee.

    Since you postulated that 8 of the 10 employees are able to find equivalent coverage for $3000 per year, the after-tax value of the employer policy can be no more than $3000 per year. It makes no difference what the employer pays, what the tax break is worth, or even whether the employees know the employer’s cost.

    If you assume the employees have a marginal tax rate of 40%, then the pretax value to each of the eight employees is [$3000 / (1 – .40)], or $5000. They would presumably demand a salary of $45,000 from a competitive employer who didn’t offer coverage. The $5000 is would it would cost to replace the coverage on the open market.

    For the remaining two employees, we don’t have a comparative means to value their coverage, but we can deduce a few things:

    1. Total cost of the employer’s premium is $45000.

    2. Cost to the insurer to cover 10 healthy employees is presumably $30,000, since that is what the insurer would charge in the individual market.

    3. The remaining $15,000 presumably represents the excess cost of insuring the remaining two employees, at $7,500 each. In other words $10,500 total per person versus $3000.

    4. The two high-cost employees would each require a salary increase of [$10,500 / (1 – .40)] or $17,500 to make up for loss of employer coverage, assuming replacement coverage exists.

    • Bart I says:

      Should the 8 pay more to help the 2 pay less? If the 8 knew the cost difference in their compensation would they agree to pay more?

      For the eight low-cost employees, the pre-tax value of $5,000 is higher than the employer’s average cost of $4,500, so it’s hard to claim that they are paying more to help the remaining two.

    • Bart I says:

      Calculating the actual value of the tax subsidy is tricky, since it’s based on lost revenue and not on the actual cost of the benefit. The ten employees would collectively need $75,000 more pretax income to replace the employer benefit, so lost tax revenue is 40% of $75,000, or $30,000 total.

      I’m not sure how to allocate this $30,000 effective tax subsidy among the 10 employees. But the eight low-cost employees receive a $5,000 pre-tax benefit which is $500 above the employer’s average premium cost. The remaining two employees’ benefit is valued at $17,500 pretax, or $13,500 above the employer’s average premium.

      Note that (8 x $500) + (2 x $13,500) = $30,000.

  28. Lee Benham says:


    All I was doing iwas using the crayon version example to show employees pay 100% of their benefits because it’s part of their compinsation package. Thank you for your hard work in showing employees are paying the premiums. I’m sure we can will discuss tax advantages in another blog post shortly.

    • Bart I says:

      Actually what you said was that the employees pay an equal share of the employer’s premium, which would not be the case even if there were no tax advantage. They don’t pay the premium. They pay the value of the coverage, which varies per individual.

      • Lee Benham says:


        See we can disagree and still be friends.

        What I am saying is employees pay for their benefits. Yes The employer pays the premium to the insurance company but does so on behalf of the employee as part of the employees compensation. The employee is giving up direct compinsation from the employer to lease benefits from the employers while they work for that employer.

        I feel if we end up with age based tax credits. (Let’s for argument sake say $2500 a year ). The employer will drop group health benefits and allow the employee to claim the tax credit. The employer will supplement the tax credit with a fixed $ amount into an HRA of HSA or both.

    • Bart I says:

      With no tax advantage and all else the same, the first 8 employees’ annual compensation is $40,000 + $3000. For the remaining two, compensation can be inferred to be $40,000 + $10,500/yr.

  29. Bart I says:

    Sorry to keep hammering my point, but this is the most important question that has been raised here in a long time. If we can’t establish what the current system really does, then I don’t see how it’s possible to intelligently discuss changing it.

    • John Fembup says:

      “If we can’t establish what the current system really does”

      Bart, I think you’re correct, but then again . . .

      That’s the same mistake most of our politicians and so-called “thought leadership” have been making for the last 50+ years. They have failed to diagnose the problem. They think we have is an insurance cost problem when all along our problem is the cost of medical delivery..

      No insurance scheme directly addresses the medical cost problem. In fact insurance can produce worse results by subsidizing favored types of medical care (improving supply, and even higher cost), while choosing not to subsidize other services, (leading to restricted supply). Exhibit A = Obamacare.

  30. Bob Hertz says:

    Is any employer in the real world going to give one person $3,000 to buy their own coverage and give another person $10,000? This kind of thing gets out and destroys morale. A tiny family firm would get away with it but no employer over about 5 persons would attempt it.

    Also, premiums in the individual market are age based, even for the healthy persons. If two guys work next to each other, but one is 25 and the other is 60,
    what do you give them for insurance?

    Another problem I think with the Paul Pilzer cash-em-out scenario.

    • Ronald Greiner says:

      Bob, you are correct that employer-based health insurance discriminates against young healthy people by paying more for the old 60-year-old and so much less for the 25-year-old.

      This discrimination has got to stop. We used to think it was OK to discriminate against women and black people but now we know better. Now it is time to stop this awful, awful wicked discrimination against poor young Americans by evil employer-based health insurance.

    • John Fembup says:

      The fundamental principle of insurance is sharing risk.

      Sharing requires transfers of risk – i.e., of the costs of those risks – among the insured population.

      We depart from insurance principles when we exclude “intergenerational transfer” of risk between young and old. Further, that is neither necessary, nor fair, nor ethical.

      So I refuse to accept a health policy culture in which the old are intentionally and significantly disadvantaged, even excluded, because of their age.

      Besides – and this is so obvious no one should need reminding – most of us wiil one day be old. Bearing some of this cost while we are young will one day be repaid.

  31. Ronald Greiner says:

    John, you write, “So I refuse to accept a health policy culture in which the old are intentionally and significantly disadvantaged, even excluded, because of their age.”

    I agree. We need to let people 65-years-old opt out of creepy Socialistic Medicare and set them free with tax-free HSAs and a private option. Everyone can now agree that another option or choice never hurt anybody.

    Let’s have a private OPTION for Social Security too with tax-free PSAs (Personal Savings Accounts) just so we can end the ugly discrimination of Socialism once and for all.

    Welcome to the Ownership Society! (OZ)

  32. L:ee Benham says:


    Although I agree with you most of the time I have to disagree with your opinion this time.

    ” We depart from insurance principles when we exclude “intergenerational transfer” of risk between young and old. Further, that is neither necessary, nor fair, nor ethical. So I refuse to accept a health policy culture in which the old are intentionally and significantly disadvantaged, even excluded, because of their age.

    The Transference of risk is individual not collective. Group insurance transfers the risk as a collective of the group.

    Yes everyone gets older and someday everyone will Die. That’s why Life insurance costs more the older someone gets.

    If we are going to subsidize health insurance because some of the population will run up unaffordable medical expenses why don’t we subsidies life insurance knowing everyone will one day die?

    why does a 2017 escalade cost more to insure than a 2017 chevy cruz?

    Because the Risk is larger just like the risk of medical claims is larger the older one gets.

    Its not discrimination it evaluation and transference of risk.

    • Ronald Greiner says:

      Lee, Hillary said the same thing with, “Younger people don’t mind paying more because presumable someday they will be older too.”

      Maybe John was saying, “So I refuse to accept a Life Insurance policy culture in which the old are intentionally and significantly disadvantaged, even excluded, because of their age.”

      Life Insurance also has that pre-existing stuff too. Yet, everybody knows the best time to purchase Life Insurance is when you get diagnosed with internal cancer. Why O why would we let Life Insurance continue to discriminate against people with cancer?

      You might change John’s mind but Hillary is stuck in her Socialist ways.

  33. John Fembup says:

    “why don’t we subsidies life insurance knowing everyone will one day die?”

    Lee, perhaps one day, when there is a growing popular demand for single-payer life insurance, we’ll have exactly that. 😎

    But seriously let’s all keep in mind life insurance primarily insures against the risk that one will die too soon. It’s therefore largely a younger person’s purchase. As one ages, the adequacy of ones savings/pensions becomes much more important than having life insurance (aside from estate tax planning which is financial, not risk protection).

    Medical insurance also becomes much more important as one ages.

    America is collectively aging.

    I think all this helps explain why talking about medical insurance leads immediately to the question of intergenerational risk-sharing – but life insurance does not.

  34. Allan says:

    John F.,

    “ life insurance primarily insures against the risk that one will die too soon.”

    Unless one is gambling life insurance insures the recipient that he will have funds of a specific amount after the insured’s death. Age doesn’t determine the need. It only determines the price one has to pay.

    “Medical insurance also becomes much more important as one ages.”

    Medical insurance becomes more important when one gets sick. That age correlates with sickness does not mean that age causes the need for insurance.

    One pays an insurer to get rid of risks no matter what age, sex, race etc. The insurer buys that risk. The intergenerational transfer of money from the young to the old has little to do with classical insurance. Of course we can define anything anyway we want, but that makes it difficult to communicate. The type of intergenerational transfer that I think you want can and should not be tied up in the premium. Doing so causes the young to flee from insurance instead of towards insurance which you find desireable.

  35. Bart I says:

    Note that the simple example is not sufficient to say risks are being transferred. All we know is that eight employees are earning $43,000 and two are earning $50,500 in total compensation (or $45,000 and $57,500 with the more realistic tax assumption).

    We don’t know why the employees are being paid different amounts. The two higher earners may be older and more experienced, and could even be the supervisors of the other eight.

    If all employees were of equal productivity, one might expect the two with higher costs to have a lower cash wage to compensate. I guess it depends on the amount of information available to employer and employees when negotiating salaries.

  36. John Fembup says:

    “Age doesn’t determine the need. It only determines the price one has to pay”

    Well, yeah Allan. But I stop short of saying age determines the need, What I say is that life insurance is largely a younger person’s purchase. As one ages, the adequacy of ones savings/pensions becomes much more important. Age does not “determine” the need for life insurance, but a positive correlation certainly exists.

    “Medical insurance becomes more important when one gets sick.”

    Of course that’s true. And less important when one does not get sick. Younger people – e.g., the so-called “young immortals” – behave as though they believe they will always be healthy. Medical care is not continually on one’s mind when one young and healthy, which helps explain why some younger people are willing to go without medical insurance. But older people are terrified to do so. Wouldn’t you agree? And, as you well know, older people actually do get sick more frequently and generally suffer from more chronic diseases than younger people.

    I think all this helps explain why talking about medical insurance leads immediately to the question of intergenerational risk-sharing – but life insurance does not. That was the question I was addressing.

    “The type of intergenerational transfer that I think you want can and should not be tied up in the premium.

    I did not specify “premium”. Anyway, I am not suggesting any particular way to finance an intergenerational transfer. I am mainly expressing my hope that America not drift toward a health policy culture in which the old are intentionally and significantly disadvantaged, even excluded, because of their age.

    • Allan says:

      John, say these things any way you wish, but the way you are presently saying it is better. I was setting the issues based upon cause and effect rather than correlation. Cause and effect is more scientifically based and leads to less confusion.

      Intergenerational risk sharing in the context I think being used is nothing more than a way of transferring ones cost to another. Attach a fancy name to it and make it into a law and one has descended to the level of legalized theft of the young.

      I am glad you aren’t trying to combine legalized theft with premiums. It screws up the marketplace.

      We are now left with the last statement, “my hope that America not drift toward a health policy culture in which the old are intentionally and significantly disadvantaged, even excluded, because of their age.” I don’t think this is intentional on anyone’s part, but that, like other needs, requires planning in advance.

      Planning is an art some aren’t very good at. I guess that is one reason we have safety nets.

      • John Fembup says:

        Well, Allan, my response to you was mostly copied from my earlier comment. I really have not changed anything.

        Glad to see we mostly agree.

        • Allan says:

          I think we do mostly agree. I find your postings to be a breath of fresh air.

          We need to be so careful when we touch on intergenerational transfers. We all have good hearts and want to see the older folk cared for so sometimes that gets in the way of our rhetoric causing a bit of confusion.

  37. Barry Carol says:

    Suppose I’m a health insurance company and I can use underwriting to price my health insurance policies. My extensive research shows that the older people use, on average, five times more healthcare than people in their 20’s so I want to price my policies to reflect that fact. For a given age group, my underwriting department will determine that some are very healthy and will be quoted our best preferred rate. Others are somewhat less healthy and will be quoted the preferred rate plus 25%. Still others are even less healthy and will be quoted the preferred rate plus 50%. Then there are those that we determine are either too unhealthy for us to cover or already sick. We decline to sell them a policy at any price.

    There will be some people who don’t make a lot of money because they work in a low paying field which doesn’t pay very much even after you’ve been in it for 30 years or more. Others may be unable to work very much or at all for any number of reasons. Many of them can’t afford the premium even if they qualify for the preferred rate especially if they’re older.

    That leaves us with two issues to solve. The first is how do we cover people that the insurers don’t want to cover at any price because they’re unhealthy or already sick? The best answer is probably high risk pools. Since those would be expensive, the next question is how to fund them. Maybe you could charge a surcharge on all of the underwritten policies, maybe we could use state funded high risk pools or maybe there could be a federally financed pool.

    Then there are those who are healthy enough to pass underwriting but still can’t afford coverage. They need to be subsidized too one way or another. What percentage of income should they be expected to contribute toward their premium and how do we finance the subsidy?

    In Switzerland, there is no such thing as our equivalent of Medicare or Medicaid. Everyone over age 25 pays the same premium for the same coverage in a given canton and 45% of the population qualifies for a subsidy. If we used underwriting to price policies to charge a premium that reflects actuarial risk at the individual level, even healthy older people are going to be charged comparatively high rates. Most of those are likely to need a subsidy especially once they are retired and no longer working.

    So, if there were no such thing as employer provided insurance and no special tax preferences for favored groups, more people than not would probably need to be subsidized even if the whole health insurance market were structured the way the free market types would prefer it to be. If we want everyone to have at least high deductible coverage for catastrophic events, there needs to be a big role for subsidies. It’s an expensive proposition with little or no consensus around how to structure or pay for them.

    • Allan says:

      Barry, this newest entry of yours appears to be a rehash of what was said above and was responded to by me earlier and now by Lee below.

      You keep worrying about that individual who without a subsidy paid by someone else might have to reduce his standard of living just like we all do when a new child is born or parents come to live with us. I don’t know why you are fixated soley upon that individual and not the rest, but I will leave that up to another to figure out.

      Lee has some good points below, but I would like to correct one thing and add a comment.

      If the rules and regulations don’t exclude unconventional insurance then the statement of insurers “We decline to sell them a policy at any price.” is untrue. It is only a matter of price and value.

      You supported the ACA and you even argued how it increased the number of insured. It did so by using Medicaid. Since Medicaid is so ingrained in the ACA and in your arguments defending the ACA you should have no problem placing all of these patients that can’t afford insurance due to high risks onto Medicaid. That was sanctioned by the ACA (along with your support) for people that had good insurance before the passage of the ACA.

      Problem solved.

      • Lee Benham says:


        thanks for the wonderful idea!

        I could recommend the couple i talk to today spend %1500 on a quick divorce. That would allow the wife and child to qualify for Medicaid expansion as a single pregnant parent.
        Medicaid picks up 100% of the cost of the new born and when the baby is born in July they get re married and buy another short term plan.

        Desperate people will do desperate things when forced into an unwinnable situation.

        New headline Obamacare makes divorce the best financial option!

      • Barry Carol says:

        “Since Medicaid is so ingrained in the ACA and in your arguments defending the ACA you should have no problem placing all of these patients that can’t afford insurance due to high risks onto Medicaid.”

        In case you need to be reminded, 19 states exercised their right not to expand Medicaid under the ACA after the Supreme Court said they could opt out of the expansion if they wanted to. Now you suggest that all these uninsurable people, who would be expensive to cover, could just be put on Medicaid. Who do you think is going to pay for that? It won’t be the states which are already straining under the cost of the current Medicaid program coupled with unfunded retiree pension and health insurance obligations.

        If all people had to do to afford health insurance is pull in their belt and reduce their standard of living a bit, that would be one thing but that’s not the reality. Underwritten insurance would be unaffordable and often completely unavailable to tens of millions of people that are older and / or have health conditions and diseases that the insurers don’t want any part of covering.

        • Allan says:

          “In case you need to be reminded, 19 states exercised their right not to expand Medicaid under the ACA”

          They were right, had the legal right as states (something you seem to abhor) and have protected their budgets now and in the future, but what does that have to do with your satisfaction that Medicaid exists to increase enrollment and that you had no qualms when people with good insurance suddenly found themselves on Medicaid because of a program you favored, the ACA.

          You keep drawing conclusions without evidence. High risk patients come from all walks of life. I’m not for denying them treatment rather I am asking them to pay a portion for their treatments so they don’t have to take from others that are less well off. If their situation is more desperate I am for subsidizing them. You are afraid these high risk patients that are from poor to rich might have to lower their standard of living like many do to pay for their parents or children. That is the only issue at hand.

      • Barry Carol says:

        “It is only a matter of price and value.”

        The problem is that the price to cover someone with high medical costs would be unaffordable for everyone accept the mega-wealthy. If someone needs to take, say, a $100K specialty drug indefinitely and needs expensive monitoring or in-home support, nobody would offer such a policy unless taxpayers were paying for it and nobody but the super rich could afford to buy such a policy with their own funds if it existed.

        So, as a practical matter, there are people who could not be covered by conventional insurance without a huge subsidy from taxpayers. They may not comprise a very high percentage of the population but they account for a disproportionate share of medical claims. If those people are to be covered and have access to the care they need, their healthcare costs have to be paid for somehow. I don’t think most of the states would go along with just adding them to the Medicaid rolls either.

        • Allan says:

          $100K specialty drug consumption is limited now. But with your policies the number of people on that type of drug is due to expand considerably until we reach a point where society can’t afford the payment. You have chosen an outlier rather than the typical patient because you have no debating points regarding the typical patient. This $100K outlier can be discussed in another thread.

          In essence no matter what the bill (if acceptable to society) the high risk patient should be paying as much as possible from his own pocket rather than forcing the one taking care of his parents and children to lower his standard of living while he sees the one he is supporting living at a higher life style.

  38. Lee Benham says:

    As many have pointed out Insurance is a transference of risk.

    Exactly what risk does the “young immortals” or the poor need to transfer?

    People buy insurance to protect assets. IF they get sick they don’t want to lose everything they ever worked for.

    If a 20 something single individual making $35,000 a year doesn’t have a wife/husband or kids or a home what risk do they have for not having health insurance?

    Will they spend 10% of their income to transfer a risk to an insurance company or will they say to heck with it they can file BK for $1500.

    How about a 40 something year old couple with two kids living pay check to pay check. What risk are they transferring and what would they be giving up to spend 10% of their income on insurance.

    I had a client in the office today. 31 year old Husband gets insurance through his employer but its $800 a month to add his wife and daughter on the group policy.

    I have had the wife and child under a temp policy for the last year.

    The policy is a $2500 deductible 80/20 that costs $198 a month. Wife just became pregnant. Because the wife is pregnant they cannot buy another short term policy.

    The only option if they want insurance is to go on the husband’s group policy for $800 a month or to buy an ACA qualified plan from Aetna.

    The cost of the Aetna Bronze policy is $475 a month with a $7050 deductible. They have an option of buying the Aetna Silver policy for $541 a month with a $6000 deductible.

    Maternity is covered on both policies after the deductible is met.

    Husband looked at me and said why I would buy insurance if I’m paying for the whole thing anyway.

    I answered yep this is a xxxx sandwich and which corner do you want to take a bite out of.

    He responded “hell if I pay $7,000 for the insurance and still have to pay $7000 for the berth I’m better off just paying the bill”.

    What is the risk he needs to transfer? Cancer, heart attack, pre mature birth or other complications? Any major health issues will drive them into BK and if the baby is born with a problem or condition, that would be a SIP and they could buy an ACA plan for just the child.
    Again what is the risk this couple needs to transfer?

    • Barry Carol says:

      “if the baby is born with a problem or condition, that would be a SIP and they could buy an ACA plan for just the child.”

      They couldn’t buy an ACA plan if the ACA plan has been repealed which is what you want to do. What then?

    • Barry Carol says:

      “Will they spend 10% of their income to transfer a risk to an insurance company or will they say to heck with it they can file BK for $1500.”

      Lee, You seem to imply that filing for bankruptcy has no adverse intermediate or longer term consequences. Suppose the young person or couple wants to, say, buy a house in a few years. If they wrecked their credit with a bankruptcy filing, either they won’t qualify for a mortgage or they will pay a much higher interest rate than they would have with clean credit.

      • Ronald Greiner says:

        Correct Barry. We know that the death rate increases without health insurance too.

        I’m sure Lee used to say that getting diagnosed and paying a lifetime of higher health insurance premiums was not worth the gamble. After Obamacare was passed simple logic has been lost.

        Sir, you are so strapped you have nothing to lose if you don’t have health insurance, except your wife’s life.

      • Allan says:

        It’s a gamble. A lot of people gamble when they start a new business and a lot of people that would like to start a new business have to risk being uninsured because of the high costs created by the collectivists.

      • Lee Benham says:

        I never implied that BK did not have consequences. I’m saying having sat at thousands of kitchen tables and talked with individual clients about their personal needs I probably have a different perspective than you. Having been a single father with a two year old and 4 year old to take care of and worried about how I was going to pay rent or make sure the kids were fed. Believe me faced with these choices health insurance or insurance of any kind was the last thing I would worry about.

        Again we go back to, insurance is transference of risk and if you have nothing to lose what risk are you transferring?

        Look at Bob’s example of the 62 year old making $47,000.
        Do you really think someone making $47,000 a year would spend $1300 a month on health insurance that has a $6800 out of pocket? The 62 year old would be spending $15,600 a year to limit his risk to $6800. So if he gets sick and uses his insurance he’s out $22,400 for the year.
        Exactly what risk is this individual transferring?

  39. Bob Hertz says:

    Lee is absolutely right about the crappiness of the ACA policies. A 62 year old in Omaha must pay $1,300 a month for a policy with a $6800 deductible, 60% coinsurance after the deductible, and no coverage for brand name drugs until the deductible is met. If his income is over $47,000, there is no subsidy either.
    (he does get free contraceptives, and a few free screening exam.)

    And this is AFTER the ACA imposed a 3:1 limit on the spread between old and young persons’ premiums.

    Where I scratch my head is why are the premiums so high?
    A high deductible plan before the ACA would cost $200 a month at most ages.

    This is all the consequence of guaranteed issue. The insurers have a huge block of expensive claims to pay for the formerly uninsurable, and so they raise everyone’s rates to bring in the money they need just to break even.
    (and many insurers have not been breaking even.)

    The Republican alternatives do not deal with this very well. The concept of ‘guaranteed issue with continuous coverage’ will still leave the insurers with a lot of expensive customers.

    The ACA architects like Jon Gruber understood that premiums would soar, but either did not care or assumed that the mandates would bring in millions of low risk young people.

    Now we must recalibrate. All I ask is that we do so with a little bit of actuarial realism.

    • John Fembup says:

      “Where I scratch my head is why are the premiums so high?”

      Keep scratching, Bob. “Cost of medical care” will eventually occur to you.

      • Allan says:

        John, of course the cost of medical care causes high premiums, but does the cost have to be that high? No.

        I saw the costs firsthand and was in part responsible for all of them when I sent my patients to the hospital, to consultants and for testing. I so happen to have been able to do more things in my office, but patients say I want a person specifically trained in that area to do it. That is fine with me, but it frequently jacked up the price 10 fold. Did that patient really need the MRI for back pain before a short wait? Probably not, but the patient was insured so they would go through the gambit coming back to my office with a problem that cured itself or remained untreated. Should society pay $100K for a specialty drug needed because a person is a drug addict? Should society pay for an illegal alien that could be flown back to his home country for followup long term treatment? The bill for one hospital reached $1Million. If I remember correctly. The hospital was prevented from paying for the patient’s flight back to his home country. Should we be paying for illegal aliens healthcare just to keep the price of a head of lettuce a few cents lower? Should we be paying for babies to be born by illegals while encouraging legal mothers to have babies that cost society in more ways than just healthcare. Should we have a bureaucracy in charge that made my costs increase by at least 25%? Should doctors be spending 15% extra of their time on EMR’s?

        I can go on and on how the price of healthcare has climbed without benefit to the consumer, but in conference yesterday, studying the costs of ACO’s owned by hospital, I found out some alarming information at some of the top medical institutions. If it continues this is going to put a huge dent in our wallets and significantly affect patient care in a negative way.

        I’ll provide one item. The bonus’s, salaries etc. are all geared to a complete medical record that has little to do with the patient at the bedside or should I say computer screen. It appears that the progress notes (which deal with the reason the patient is seeing the doctor) count for almost nothing. Thus the physician is spending his time dealing with things that can be handled by a highschool graduate and spending almost no time on real patient care. What was described to me was absolutely shocking and I don’t shock easily.

        • Lee Benham says:

          well Damn now I’m scratching my head.

        • John Fembup says:

          “John, of course the cost of medical care causes high premiums, but does the cost have to be that high? No.”

          Allan, I agree. I hope we’re right.

          The threshold issue, it seems to me, is persuading our politicians and health policy gurus that they should spend less time on insurance solutions, and more time on medical cost solutions (including, by the way, how to reduce demand if America had a healthier population to begin with).

          I fear too many incomes are dependent on doing things just the way they are now.

  40. Bob Hertz says:

    Disagree John. The cost of medical care has not gone up 400% since 2009 the way that some insurance premiums have gone up.

    Insurance premiums are driven by the risk pool being covered by the insurer, not overall medical care costs.

    • John Fembup says:

      Bob, you asked “Where I scratch my head is why are the premiums so high?”

      Then you said “Insurance premiums are driven by the risk pool being covered by the insurer, not overall medical care costs.”

      It appears you understand why premiums have risen so fast. But the “so high” part is where you are scratching your head. I answered before, but you didn’t like the answer. Here it is again.

      First of all, premiums are always based on expected overall medical costs. What drives expected overall medical costs? Two factors: price per unit, and number of units.

      Overall Cost = (svc unit price) x (number of svc units) summed over all svcs.

      The price factor is driven by the cost of medical care and the providers’ pricing practices. The number of services factor is driven by the health of the population. Both factors are present and they interact as the formula shows. It makes no sense to accept one and deny the other.

      I think you are saying that the biggest reason premiums have risen so fast, at least in the immediate post-ACA period, is that insurers were obliged to cover new populations of less-healthy people, many of whom were previously uninsured because of ill health. As a result of covering these new populations, the insurers’ risk pools generated much more cost, which drove much higher premiums. If that’s what you’re saying, I agree. We’d need to see the insurers’ rate filings to know all the details. I’d add that many insurers’ post-ACA premiums were not high enough at the start, and they’ve been trying to catch up – or have decided to drop out. In 2014 only a third of insurers managed to make money and some big insurers lost big money

      Now, why are premiums “so high” in the first place? Because the cost of medical services is “so high” in the first place. With lower medical costs, the change to risk pool demographics would still have had about the same relative impact. But starting from a lesser medical cost base, the resulting premiums would have been lower – ACA or no ACA. Remember before ACA, what was the universal complaint about medical insurance premiums? They were “so high”. The reason insurance premiums are so high today is that medical costs are so high today. In short, if the medical costs were lower, the premiums would be lower – regardless whether the pool demographics were pre-ACA or post-ACA.

      Finally, don’t overlook the role of state insurance regulation. Insurers must periodically justify their premiums in order to sell policies. This means insurers cannot simply increase their premiums willy-nilly. However some regulators have granted 2017 increases that are higher than requested by the insurer, in order to keep the insurer solvent.

      Insurers facing insolvency is evidence that premiums are not yet high enough.

      Which of course is yet more evidence that ACA has failed to “bend the cost curve” as the president promised it would when he sold it to us.

      Keep scratching your head. It’ll come to you.

      • Barry Carol says:

        It will be interesting to see what impact, if any, new taxes in several cities on sugary soft drinks will have on obesity rates over time, and, eventually, demand for healthcare services. Prior to 1980, U.S. obesity rates were about half of what they are today.

        Obesity rates didn’t double because of some genetic mutation that appeared in the last 30-40 years. They doubled because portion sizes increased substantially, especially in restaurants. I remember in the 1950’s when a standard bottle of coke was 6.5 ounces. Maybe we should go back to that.

        • Ronald Greiner says:

          Barry, this will cheer you up:

          –Rep. Tom Price, R-Ga., a major critic of Obamacare, is being floated as the next secretary of Health and Human Services.

          Price was an early supporter of President-elect Trump and has been a vocal critic of Obamacare. He has also put out a replacement plan that mirrors several provisions in Trump’s healthcare plan and a plan issued by House GOP leadership earlier this year.–

          Price is an MD. Obamacare BEWARE!

          Drain that HHS swamp and get a new chief.

          • Barry Carol says:

            Ron, believe it or not, the fact that Tom Price is an MD does cheer me up. Putting a medical guy in charge of HHS makes sense just as putting a financial guy in charge of Treasury does or an energy guy in charge of the DOE.

            I don’t care about the ACA per se. I care about creating a healthcare and health insurance system that works for everybody including the unhealthy and already sick. There are several potential ways to skin that cat. I wish Price well should he get the HHS job.

      • Allan says:

        John, as I said above the cost goes up among other things because medical services are being misused and an expensive bureaucracy has grown into the healthcare sector. A major cause of this misuse so happens to be government involvement.

        • John Fembup says:

          Allan, I don’t disagree.

          When it comes to the overall cost of medical care, there’s an unbelievable number of things to be among. Different people group those things in different ways. It gets confusing when people call different groupings by the same name.

          For example to a physician, the cost of complying with government regulation / involvement may be one of the costs of deliverying medical care, but is certainly not medical; it’s administrative.

          Physicians’ fees must cover both.

          Then insurance companies call the physician’s charges “medical cost” – not administrative cost. And they use these medical costs to build their premiums, justify them to insurance regulators and to their customers and even to stockholders.

          And insured people think their copay is the physician’s’ fee.

          It’s almost like the seven blind swamis arguing over what an elephant looks like.