Wednesday, April 21, 2010

qotd: Will regulatory oversight of premium increases slow spending?

Los Angeles Times
April 21, 2010
Democrats seek greater control over health insurance rates
By Noam Levey

Congressional Democrats have begun pushing legislation giving government regulators greater authority to block big increases in health insurance premiums.

The move, which comes less than a month after President Obama signed the healthcare legislation, is aimed at giving all states the power to stop premium hikes deemed excessive and allowing the federal government to step in if the states don't act.

"There is no need for federal involvement in states with insurance commissioners who are protecting consumers," (Sen. Dianne) Feinstein said Tuesday.

"Health plan premiums are a symptom, not a cause of the problem," said Karen Ignagni, who heads America's Health Insurance Plans, the industry's Washington-based lobbying arm.

Comment:  The cause of high health insurance premiums is high health care costs. State insurance regulators have no control over that, nor over the administrative costs of the insurers. If insurance company profits are abusive, then regulators can pare back profits to a reasonable level. 

The problem is that insurance company profits are an almost undetectable portion of our $2.5 trillion national health expenditures (NHE). Dramatically reducing insurer profits will not even appear as a footnote in the report of our NHE. The terrible waste is not in insurer profits but in the profound administrative inefficiencies of a fragmented system based on a multitude of private and public plans.

Karen Ignagni of America's Health Insurance Plans is correct when she says that insurance premiums are a symptom and not a cause of the problem. High health care costs are. Unfortunately, her industry has been and will continue to be ineffective in controlling rising costs. Throughout the reform process she had stated repeatedly, in effect, that the government must provide the solutions to rising costs.

Under the reform model approved by Congress and the President, there are no effective solutions. Merely experimenting with meager health policy proposals holds little promise for effective cost containment at the level that we need. (Those who contend that the independent Medicare advisory board would be effective should keep in mind that it would ratchet down Medicare while allowing the private insurers free run. That could be a disaster for Medicare.)

Of course, the government solution that Karen Ignagni doesn't want, but one that would be truly effective, would be an improved Medicare that covers everyone. (Is there an echo in here?)

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