The Obama Administration's Genius New Plan For Keeping Health Insurance Premiums Down

The Wall Street Journal reports on the Obama administration's latest policy innovation:

On Monday, insurers that sell Medicare Advantage plans must submit their 2011 bids to the government. In a letter to four insurance-industry executives, Health and Human Services Secretary Kathleen Sebelius warned the companies not to increase premiums and co-payments for seniors.

"Focus on price and quality rather than asking seniors who need health care the most to pay more for it," Ms. Sebelius wrote in a letter sent Friday and reviewed by The Wall Street Journal. The letters went to WellPoint Inc., Cigna Corp., BlueCross BlueShield Association and Health Care Service Corp., according to a person familiar with the situation. Those executives met with Ms. Sebelius last month.

Many insurance companies are planning to increase costs for a range of services for seniors next year, according to consultants who have helped prepare their bids. Dozens of Medicare Advantage providers plan to cut back vision, dental and prescription benefits. Some plans are eliminating free teeth cleanings and gym memberships, and raising fees for hearing aides, eye glasses and emergency-room visits.

Consultants cite two reasons for the cuts. The rate the government will pay private insurers to run the plans is frozen for 2011 at 2010 levels, while medical costs are expected to increase an average of at least 6%. Such price increases and benefit cuts will help them recoup that difference, the consultants say.

Meanwhile, the health overhaul will impose drastic payment cuts to insurers that run the plans, and consultants say insurance companies need to begin adapting now. Starting in 2012, the law calls for a gradual reduction in government payments to insurers, totaling $136 billion before the end of the decade.

The Obama administration and Senate Democrats say that passing those costs on as early as next year is unfair. In her letter, Ms. Sebelius warned insurers that she will deny insurers bids if they include excessive price increases, using new powers under the health law.

Now why would Sebelius need to send a letter like this? Wasn't the Affordable Care Act supposed to, you know, make care more affordable? And didn't President Obama himself indicate that seniors needn't fear Medicare cuts? Or is this an admission that that, despite the administration's steady promises to the contrary, health insurance premiums are likely to go up in the wake of the new health care law?

Or maybe this letter is just a way of following through on those promises. The way the Obama administration will keep prices down and quality up is by...writing threatening letters to the health insurance industry warning them to keep service levels high and prices low.

If this is such a great idea, though, I wonder why we can try it for other industries? I propose we start with the video game console market: Let's make sure Microsoft puts out a next-generation Xbox pronto, and a stack of nifty new games to go with it. Obviously, though, I don't want to pay any more for it than a current console. Maybe the FTC and the FCC can take of this one with a joint-letter. And how about the wedding industry? Costs have gone up steadily over the years, and American families, already burdened by the effects of a sluggish economy, are suffering. If all it takes is a stern letter and a flash of some agency's regulatory weaponry to get more reasonable pricing and service out of the wedding planners and DJs and venue managers of the world, then surely this is a problem we can solve.

It's absurd, obviously, but hardly more so than what the Obama administration is doing here. Price controls on health insurance have already provoked a massive legal battle in Massachusetts, and the state's four biggest insurers are now all reporting operating losses—in large part, they claim, because of rate-hike rejections. Even Bill Clinton's economic advisers warned during the HillaryCare debates that imposing price controls would be difficult to implement and were likely to produce adverse effects. But those lessons appear not to have been passed on to the current administration, which seems determined to turn health insurance into an all-but government-run quasi-public utility.

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  • ||

    Or maybe this letter is just a way of following through on those promises.

    Bingo. Feature, not a bug.

    Just wait for the letters that will come after the companies start offering coverage that matches the price.

  • Ezra Klein||

    As an expert on everything, I disagree with your premise that price controls cause shortages.

  • x,y||

    lol @ at the handle link, almost spit soda out of my nose

  • guy in the back row||

    This will be similar to the New York Medicaid market. Between the state's premium and the local hospital contracts many upstate counties are running out of providers willing to take Medicaid members.

  • ||

    I've asked this elsewhere and received to answer, so I'll toss it out to Reasonoids -

    By what metric will the Obama adminstration judge the success or failure of Obamacare?

    a) Insurance costs?
    b) Number of people on the health insurance dole?
    c) Medical costs?
    d) Deficit reduction?
    e) Life expectancy?
    f) Who cares? We passed it.

  • P B||

    g) 100% ownership of the medical field

  • ||

    They will trumpet b to the exclusion of everything else. They might throw in some specious bullshit about health outcomes and aggregate health metrics, but they'll clam up about anything else by referring to f.

  • ||

    Agreed.

  • ||

    Agreed as well, but they'll also engage in serious chicanery to trumpet how much they've reduced c & d, despite a reality to the exact opposite. Just another day in gummint bookkeepingcooking.

  • ||

    True.

  • ||

    By what metric will the Obama adminstration judge the success or failure of Obamacare?

    a) Insurance costs?
    b) Number of people on the health insurance dole?
    c) Medical costs?
    d) Deficit reduction?
    e) Life expectancy?
    f) Who cares? We passed it.

    And

    g) 100% ownership of the medical field

    a) I predict something along the lines of a per capita rating very similar to how many people have car insurance. Enforced by the IRS and HHS. Any physician that accepts CMS will be (is) a de facto agent of the state, as will be any hospital. Freestanding surgicenters, private urgent cares, and clinics, AFAIK are exempt (for now, as these are not required to be accessible 24 hrs or maintain an ER).

    b) Also tracked by the aformentioned agencies and states. Bolstering state Medicaid payments from the Fed (Unspent stimulus anyone? Remember that?) will aid in "enrollment" and enforcement as well and will be made easier as all medical records will go electronic eventually. Again, when this system implodes, entitlement will be even worse now and the public will be screaming bloody murder for true single payer. Investment in torch and pitchfork companies would be wise. Dmitiri Molotov will demand residuals from the grave. Metric will be scored against a).

    c) Nanny statism as its finest. There is truth to the maxim "you get out of your body what you put into it." This is where state Depts. of Health, state medical boards and medical schools will be apparatchiks to this. "Encouragement" for healthier lifestyles as individuals and states have not implemented this at a fast enough rate to decrease demand related to this cause of disease. Expect to hate the phrase, "In the interest public health..." with every bit of passion as "It's for the children," as a justification of mandatory preventative care. Risk, via this legislation has been collectivized. Metric here will be mortality and morbidity scored against actuaries. See also: Dr. Ezekiel Emmanuel, rationing.

    d) Won't happen till the bank breaks or rationing has taken place, something Dr. Ezekiel Emmanuel fully endorses (and a loathsome man. I would take a shit the size of Vermithrax Pejorative on his grave or in his mouth if I could, whichever happens first). Attrition of the most expensive patients will be encouraged here and to supplement c) as a metric.

    e) Draw your own conclusion from the above. Lack of TORT reform anywhere in this bill will make it very difficult to sue your provider (governments, like insurance companies hate to lose money). Since recission will be verboten, costs will have to be balanced somewhere. Metric will be decreased suits, but not in the positive way (better care). See: NHS.

    f) See profane rant.

    g) Nothing is 100%, but owning the means of practicing medicine (surgical equipment, diganostic equipment, syringes, ambu bags, J tubes, etc., and other means of delivering care) via even higher taxes on this biomedical stuff will ensure de facto ownership. Metric will be government oversight and amount of procedures done. Expect more procedures to be deemed "elective" to lower costs as well. We will see John Edwards' "Two Americas": one that will pay cash for private providers and shitty care for the rest.

    Was this trip really necessary?

  • Contrarian P||

    Well it's not like we didn't see this coming, Groovus. It's a pity the AMA, who at this point is so irrelevant to the issues really facing medicine, was too busy being Barack Obama's PR department to be bothered with all this negative stuff.

  • ||

    Fuck the AMA with red hot iron ball mace. They mean nothing, sans influence on public health policy and medical education. They are a dinosaur that should have died a long time ago. What people don't realize is state medical boards and insurance agencies have more influence over physician care restriction than the AMA.

  • ||

    As always, nicely done, Dr. One quibble:

    Lack of TORT reform anywhere in this bill will make it very difficult to sue your provider (governments, like insurance companies hate to lose money).

    Au contraire. Lack of tort reform will mean that extortionate judgements (and liability premiums) will force more and more doctors out of practice. The government is immune from tort liability. Expect the end game for truly socialized, NHS-style medicine to include the ultimate "tort reform" - sovereign immunity, as one of its cost-saving measures. I plan to laugh and laugh as the trial lawyers realize too late that they, too, are less important to the Democrats than the Holy Grail of Totalitarian Health Care.

  • ||

    I defer to your expertise RC. And you are right. What you typed is what I meant to imply. However, dropping CMS will mitigate my premiums some.

    Which is why you are the eminent lawyer you are ;-)

  • ed||

    "Focus on price and quality rather than asking seniors who need health care the most to pay more for it"

    That appeal to altruism (with the implicit threat of force if they don't) never loses its appeal amongst big-government drones.

  • ||

    Question to Sebilius: If seniors need and want health care the most and are in the best position to pay for it (e.g. the most affluent segment of society) then why the fuck shouldn't they pay for it?

  • Corduroy||

    Well, they did leave out the third variable in business services.

    Typically, there are only 3 things you can adjust when running a business: price, quality, and delivery. Optimizing for two variables means the third is going to suffer in most cases.

    Therefore, I will await my six month review for Stage IV cancer treatment with great expectations of excellent treatment at low cost.

  • ||

    I took a health law class in law school and that is basically what the professor told us--look at price, quality, and availability of health care--pick 2 out of 3.

  • ||

    look at price, quality, and availability of health care--pick 2 out of 3.

    If you're lucky. I doubt the Brits are too thrilled about either availability or quality.

  • André||

    And if they're paying taxes, they can't be too thrilled about the price...

  • Tim||

    Fortunately the medical priorities of influential special interests will be readily available.

  • ||

    Remember Napoleon and Squealer from Animal Farm.

    Have any of the dictators and despots in history ever looked as feeble as their citizenry, overall?

    Also, I seem to remember a certain Canadian PM coming south of the Canadian border for a cardiac procedure bypassing his system's queue line....

  • ||

    Corduroy is right - everywhere that governments already run medicine, it's always the third option they choose. Politically, it is too difficult to allow costs to patients to rise, or to eliminate services patients need. So they choose to underfund these services and let waiting lists develop - in other words, they allow an informal, unofficial system of rationing to develop. In Canada, it's not uncommon for there to be waits of a year or two for elective procedures or for non-critical ones, like hip replacement surgery. That's how costs actually get controlled in practice.

  • P B||

    Dear Former Policy Holder,
    Due to government restrictions placed on us we will no longer offer Medicare Advantage plans...

    Too bad this will never happen.

  • kinnath||

    It happens in slow motion. Five or six consecutive years of cuts in coverage result in "we no longer offer Medicar Advantage plans. . . . "

  • ||

    Medicare Advantage Plans have been exiting the market for years. Most have gotten to be pretty marginal. I expect the exodus to accelerate now.

  • André||

    State Farm no longer sells auto insurance in Massachusetts because of the burdens that accompany compliance. Never say never.

  • André||

    State Farm no longer sells auto insurance in Massachusetts because of the burdens that accompany compliance. Never say never.

  • André||

    State Farm no longer sells auto insurance in Massachusetts because of the burdens that accompany compliance. Never say never.

  • ||

    And how about the wedding industry? Costs have gone up steadily over the years, and American families, already burdened by the effects of a sluggish economy, are suffering.

    Peter, you're more subtle than Megan is at reminding all of us of your upcoming nuptials. Congratulations.

  • Peter Suderman||

    I'm not going to lie. It's on my mind this week.

  • PR||

    I saw it as a cry that the wedding prep was cutting into his Xbox time.

  • cynical||

    Figures that he's a console gamer.

  • ||

    Sebelius forgot to threaten Advantage plan sponsors with destruction if they dare to lay off thousands of employees in response to her other directives, and move all their administrative offices and support centers to India.

    I mean, if you're going to basically stomp out an entire sector of commerce, at least do it right. Sheesh.

  • Old Mexican||

    On Monday, insurers that sell Medicare Advantage plans must submit their 2011 bids to the government. In a letter to four insurance-industry executives, Health and Human Services Secretary Kathleen Sebelius warned the companies not to increase premiums and co-payments for seniors.

    Let me play Devil's advocate here and argue that it is not unusual that a buyer asks her suppliers not to raise their prices.

    Unfortunately, Sebelius is not a normal buyer but a fascist bureaucrat with too much power in her hands, but regardless of that very fact, it is not an unusual thing to ask suppliers not to raise their prices . . .

  • T||

    True, but if my suppliers raise their prices I can't stick a gun in their face and take the steel at the old price. Nor can I pass a law that says they have to sell to me at cost. Or any one of a dozen other silly things Sibelius can do.

  • Brett L||

    Why stop at cost?

  • Almanian||

    OM, you devil...

  • Joshua||

    I used to think all those conspiracy theorists were crazy, but the only way this is good news is if you are the gov't and your long-term plan is to take over the entire health care industry.

  • cynical||

    Wait, secretly planning to do exactly what their side passionately and openly wanted them to is a "conspiracy"? It was pretty obvious which way this was headed.

  • ||

    It's called a "command and control economy" for a reason, Peter.

  • Tim||

    Dear Lars and Beru Owen:
    Thanks to reform of the Empire's new Galacticare program our outreach workers will soon arrive at your farm to deliver quality preventative and screening services.

  • ||

    according to consultants who have helped prepare their bids.

    Someone forgot to get their nondisclosure agreements signed...

  • ||

    In her letter, Ms. Sebelius warned insurers that she will deny insurers bids if they include excessive price increases, using new powers under the health law.

    If I'm an insurer who's been thinking about ditching my MA offering, this is more of a golden opportunity than a deal I can't refuse.

  • ||

    Horse heads in the CEOs' beds would probably be more subtle.

  • ||

    Patient choice should be at the base of ANY health care policy. Americans should be allowed to make a cost-benefit analysis of the value of healthcare on their own. We need leaders who respect individual rights and free markets. There is a candidate in NY-14 who has smart ideas to reform healthcare. I suggest you check out Ryan Brumberg at www.Brumberg2010.com as a fresh alternative to the tax-and-spend politicians we currently have working for us

  • Jack||

    Or is this an admission that that, despite the administration's steady promises to the contrary, health insurance premiums are likely to go up in the wake of the new health care law?

    That's a poorly written sentence.

  • Medic_001||

    Good time not to be old...or sick.

  • Sick OId Man||

    Shit, now you tell me.

  • ||

    "Some plans are eliminating free teeth cleanings and gym memberships, and raising fees for hearing aides, eye glasses "

    Free teeth cleaning, gym memberships and eye glasses? I'm think Obamacare is designed to break the current system and force us all into single payer, but, wtf?! I mean, really, none of that should be under "insurance" anyway. If it was just the pigs being slaughtered, I'd be laughing at this shit.

  • Xmas||

    Metzger,

    All of those things are small things that help prevent big things. Surely you've heard of the studies that link good dental health to lower heart disease rates.

  • ||

    They could make the database and statistics "classified/top secret" and would not have to disclose what they were doing to us, through manipulation of the system!.......;P

    Doctors, patients and government are all to blame. When will anyone learn that there is not an endless pit of money supply to pay for the ever increasing costs of medical care?

    And, if the government follows the lead of HMO's, they can get rid of the doctors who spend too much, on "caring" for the patients, and are classified as "outliers"! What will the doctor supply look like, in ten years?

  • replica watches||

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  • Air jordan fusion||

    Free teeth cleaning, gym memberships and eye glasses? I'm think Obamacare is designed to break the current system and force us all into single payer, but, wtf?! I mean, really, none of that should be under "insurance" anyway. If it was just the pigs being slaughtered, I'd be laughing at this shit.

  • أبل||

    anyway. If it was just the pigs being slaughtered, I'd be laughing at this shit.

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