Healthcare: Breakin' Down the Premiums in Consumerville

[don]

What I Could Buy Instead of Health Insurance

Last year I lost my job at HP and got a new job as a contract worker at Intel.

Working as a contract worker, I'm earning a sweet hourly wage, but I'm not getting any of the perks that a full-boat regular salaried employee would earn.

I'm not accumulating sick time, I get no vacation time and worst of all, I'm getting no health coverage.

Through a program called COBRA, workers in the US are able to stay on their old companies' health care plans, as long as they are able to keep paying whatever premium their old company was paying. This is what our family did. We stayed on the same Kaiser plan we had when I was working at HP. But we pay the whole insurance premium ourselves.

And man, oh man, is it expensive.

Our family's policy, two adults and two kids, for medical, dental and vision, costs $1,320.87 per month. That's the insurance premium. If we actually use the care, we have to pay a deductable too (called a co-pay), but honestly, after paying $1,320.87 per month, almost any co-pay seems like pocket change.

For me, facing this incredible payment every month, I considered what other things I could buy with that much month every month.

The first thing I thought of is that we could lease a couple of cars!

My first stop was to the Florin Road Hyundai dealership.

For $1320 a month, I could lease a top-of the line Hyundai Genesis, plus a second Genesis, plus a Santa Fe ($450/mo., $299/mo., $350/mo. respectively). Three new cars!

Man! I cannot wait until someone else starts paying my health insurance! How could providing health care to my healthy family possibly be worth more than three luxurious new cars? Amazing. Next, I visited the Folsom Toyota Dealership. At the Toyota dealership, $1320 goes quite far. The most expensive Toyota is the Sequoia Platinum SUV, a $60,000 car, which, of course I could lease for less than my families $1320 per month health care payment.

Some other options to spend $1320 at the Toyota dealership included a 4Runner, Highlander & Corolla combination. I could also lease FOUR Camrys for that amount, or perhaps I'd prefer to lease FIVE Corollas! ($225-$250/mo. each).

Finally, I went to the El Dorado Hills Mercedes Dealership. $1320/month was almost enough to lease a $100,000 car... for that amount of money I could lease anything except a Mercedes AMG. Within my price range were matching 2012 GLK 350 SUVs, or a pair of $50,000 E350 sedans.

I was looking at beautiful examples of magnificent German engineering, mine for the same price I was paying for basic peace of mind with my medical insurance payments.

Visiting car dealerships was fun when I had a potential $1320/month to spend, but maybe that money would be better spent elsewhere. No, not on health insurance, for every extraneous monthly expense I could dream of!

Like Netflix, streaming subscription with 8 DVDs out ($51.88/month), plus a World of Warcraft subscription ($15/month), plus a gym membership ($25/month), a home security monitoring system ($32/month), Gamefly service ($22.95/month), plus a membership to a tanning club ($9.95/month), plus Amazon Prime ($6.66/month), plus Hulu Plus ($7.99), Time Magazine ($2.50/month), Newsweek ($3.25/month), Playboy ($1.33/month), Wired ($1.25), Martha Stewart Living ($2.00/month), a lawn service ($50/month), Dana's Housekeeping service - four hours/week ($312/month).... uh, plus FullBelly Farms weekly vegetable & flower deliveries ($127.50/month), plus sponsoring a child in Haiti ($35/month), plus Disneyland deluxe annual passes for the whole family ($127.36/month total) plus a large supreme pizza from Pizza Hut delivered every night ($428.40/month). Those things total $1267.02 per month, leaving enough to give the pizza guy a $53 tip.

This was literally every additional monthly service I could think of. I could live like a king!

http://www.cockeyed.com/citizen/heal...alth_care.html

[c1ue]

Re: Healthcare: Breakin' Down the Premiums in Consumerville

Seen in the comments to the article above:

I pay ~700 / month for myself

i paid $720/month for the cobra coverage i had between my last 2 employers.

I live in Australia and hence pay nothing for healthcare, although I could pay around $70/month if I wanted great private cover, or $200/month for the best available (in which you're actually covered - no 'co-pay' system). I find it very hard to understand how you could all pay so much and still not be completely covered.

Indeed

[jk]

Re: Healthcare: Breakin' Down the Premiums in Consumerville

start with this:

One thing Americans do buy with this extra spending is an administrative overhead load that is huge by international standards. The McKinsey Global Institute estimated that excess spending on “health administration and insurance” accounted for as much as 21 percent of the estimated total excess spending ($477 billion in 2003). Brought forward, that 21 percent of excess spending on administration would amount to about $120 billion in 2006 and about $150 billion in 2008. It would have been more than enough to finance universal health insurance this year.

The McKinsey team estimated that about 85 percent of this excess administrative overhead can be attributed to the highly complex privatehealth insurance system in the United States. Product design, underwriting and marketing account for about two-thirds of that total. The remaining 15 percent was attributed to public payers that are not saddled with the high cost of product design, medical underwriting and marketing, and that therefore spend a far smaller fraction of their total spending on administration.

Two studies using more detailed bilateral comparisons of two countries illustrate even more sharply the magnitude of our administrative burden relative to that in other developed countries.One of these is an earlier McKinsey study explaining the difference in 1990 health spending in West Germany and in the United States. The researchers found that in 1990 Americans received $390 per capita less in actual health care but spent $360 more per capita on administration.

A second, more recent study of administrative costs in the American and Canadian health systems was published in 2003 by Steffie Woolhandler and David Himmelstein in The New England Journal of Medicine in 2003. The study used a measure of administrative costs that includes not only the insurer’s costs, but also the costs borne by employers, health-care providers and governments – but not the value of the time patients spent claiming reimbursement. These authors estimated that in 1999, Americans spent $1,059 per capita on administration compared with only $307 in purchasing power parity dollars (PPP $) spent in Canada.

http://economix.blogs.nytimes.com/20...trative-costs/

more broadly

Prominent among these ...factors are:

1. higher prices for the same health care goods and services than are paid in other countries for the same goods and services;
2. significantly higher administrative overhead costs than are incurred in other countries with simpler health-insurance systems;
3. more widespread use of high-cost, high-tech equipment and procedures than are used in other countries;
4. higher treatment costs triggered by our uniquely American tort laws, which in the context of medicine can lead to “defensive medicine” — that is, the application of tests and procedures mainly as a defense against possible malpractice litigation, rather than as a clinical imperative.

http://economix.blogs.nytimes.com/20...o-much-part-i/

both by uwe reinhart, health economist at princeton

[c1ue]

Re: Healthcare: Breakin' Down the Premiums in Consumerville

1. higher prices for the same health care goods and services than are paid in other countries for the same goods and services;
2. significantly higher administrative overhead costs than are incurred in other countries with simpler health-insurance systems;
3. more widespread use of high-cost, high-tech equipment and procedures than are used in other countries;
4. higher treatment costs triggered by our uniquely American tort laws, which in the context of medicine can lead to “defensive medicine” — that is, the application of tests and procedures mainly as a defense against possible malpractice litigation, rather than as a clinical imperative.

More importantly, how does Obamacare address any of these 4 issues?

[jk]

Re: Healthcare: Breakin' Down the Premiums in Consumerville

More importantly, how does Obamacare address any of these 4 issues?

there's some hand-waving in the direction of cost containment, but nothing really.
obamacare deals with the problem of inclusion by extending coverage to almost everybody. it thus also hastens the next crisis - of expense - which will have to be addressed down the road.

[dropthatcash]

Re: Healthcare: Breakin' Down the Premiums in Consumerville

there's some hand-waving in the direction of cost containment, but nothing really.
obamacare deals with the problem of inclusion by extending coverage to almost everybody. it thus also hastens the next crisis - of expense - which will have to be addressed down the road.

Exactly. I often hear those who have a poor understanding of supply/demand economics whine about the lower cost of drugs in other countries. What they don't comprehend is the U.S. is paying (through higher prices) for the research of the drugs others buy cheap. Canada, Europe and third world countries are getting a form of welfare that U.S. consumers are paying. Same goes for military protection of many of these nations. I don't know if their is a good solution to these issues.

[thriftyandboringinohio]

Re: Healthcare: Breakin' Down the Premiums in Consumerville

Exactly. ... the U.S. is paying (through higher prices) for the research of the drugs others buy cheap. ...Same goes for military protection ...

I don't like these policies.
Let's do something else instead.

[jk]

Re: Healthcare: Breakin' Down the Premiums in Consumerville

Exactly. I often hear those who have a poor understanding of supply/demand economics whine about the lower cost of drugs in other countries. What they don't comprehend is the U.S. is paying (through higher prices) for the research of the drugs others buy cheap. Canada, Europe and third world countries are getting a form of welfare that U.S. consumers are paying.

i used to believe this, too. turns out that:
1. they spend far more on marketing than research
2. worse, 85% of so-called "research" is in support of brand extensions - official indications for things that every doctor already knows - so that they can market on the "new" indications.

as for a solution, a start would be removing the law that prohibits medicare from negotiating drug prices.

[leegs]

Re: Healthcare: Breakin' Down the Premiums in Consumerville

Exactly. I often hear those who have a poor understanding of supply/demand economics whine about the lower cost of drugs in other countries. What they don't comprehend is the U.S. is paying (through higher prices) for the research of the drugs others buy cheap. Canada, Europe and third world countries are getting a form of welfare that U.S. consumers are paying. Same goes for military protection of many of these nations. I don't know if their is a good solution to these issues.

Further to JK's refutation of your comment re drugs, I'd say something similar re military. We aren't giving away military protection, we are maintaining an empire, which supports the IMS, which provides 'exhorbitant privilege' to the US, which allows us as Americans to maintain a standard of living far above what we 'deserve' based on what we actually produce.

Sorry for the run-on sentence.

[c1ue]

Re: Healthcare: Breakin' Down the Premiums in Consumerville

Exactly. I often hear those who have a poor understanding of supply/demand economics whine about the lower cost of drugs in other countries. What they don't comprehend is the U.S. is paying (through higher prices) for the research of the drugs others buy cheap. Canada, Europe and third world countries are getting a form of welfare that U.S. consumers are paying.

If you look closely at the origin of the above statement, it turns out to come from astroturf marketing by the drug companies.

From an economics standpoint, I'd like to see an explanation of the mechanics by which a drug company charges more in the US vs. other nations, especially when the drugs in question are patented.

There are some explanations, but they all fall short in major ways.

For example: some have said it is because of national health care systems bargaining for drugs - the scale of these deals leads to lower per unit profits.

But this is nonsense. The US isn't a collection of mom and pop pharmacies; the hospital groups, drugstore chains, and so forth in the US are individually larger than most nations in terms of buying power.

If Uruguay can buy its drugs at a lower price than Walgreens despite a lower purchase volume, clearly scale has nothing to do with it.

Another common argument is that Americans get better care/higher tech care.

The problem with this statement is that there is zero evidence for this. If in fact Americans live longer due to heart transplants or whatever, this should be detectable.

It is not.

Either the care being given is actuarially worthless - i.e. doesn't actually help - or else something else is very wrong.

I'd also note that technology is supposed to drop costs, not increase them. It is easy to say that there are operations which aren't even attempted elsewhere, but it is far from clear how much impact these high profile interventions affect the overall bottom line. However, technology works everywhere, not just in artificial hearts or what not.

I saw a pitch just the other day where the speaker did a really poor job of positioning his product. Almost all of his pitch was devoted to the lawsuit containment aspect of his IV insertion monitoring system, but later in the Q & A he noted that two things the system could do was to reduce the paperwork associated with documenting the process (video evidence rather than written) and that the camera could actually use frequencies of light which penetrate the skin and thus make it easier to find the vein - which I understand to be a big deal for a number of types of patients (obese, low blood pressure, etc).

I saw another presentation where the company was talking about 'large, dense breasts'. It was a bit surreal, but the gist was that this company had a system/technology which would yield far better breast cancer monitoring results for the (40%? 50%?) of women who have large and/or very dense breasts - because these structures make it very difficult for standard mammography to detect cancer.

Both of the advances above are notable not just because they improve results (if accurate), but also should be reducing costs.

[don]

Re: Healthcare: Breakin' Down the Premiums in Consumerville

from Jim Kunstler . . .

The diminishing returns of extreme bureaucratization and turbo-specialization in medicine has only made the doctors generally stupider and more inept. My own situation is a case in point. For two years I suffered an array of peculiar symptoms ranging from numb hands to supernatural fatigue. My ex-GP showed no interest in investigating the cause. Even my request for a toxicology workup was essentially shrugged off. I had to become my own doctor. For a while I suspected Lyme disease, which is raging in my corner of the country. I went to see a Lyme specialist who didn't accept insurance (because the insurance companies did not recognize his aggressive treatment protocols as falling within the current "standards of practice" - and this because the medical establishment doesn't know its ass from a hole in the ground about Lyme disease). Anyway, I asked the Lyme specialist to include a test for cobalt levels in my bloodwork because I thought there was an outside chance I had cobalt poisoning. The reason I thought this was because Google searches of my symptoms kept pointing to metal-on-metal hip replacement failure. I had gotten just such a metal-on-metal hip replacement in 2003. The hardware was developed because the orthopedists wanted to give younger patients a longer-lasting implant. That's when the diminishing returns of technology stepped in and kicked everybody's ass, including mine.

My cobalt blood test came back off-the-charts high. (My many Lyme tests all came back negative.) Wouldn't you know, though, that the Lyme specialist wanted to treat me for Lyme anyway. He ignored the cobalt numbers and wrote out a prescription for $400 worth of antibiotics. He was the proverbial guy with a hammer to whom everything looked like a nail. I declined that course of treatment and instead went to my new GP for a first appointment and asked for an additional cobalt test, along with one for chromium. (My hip implant is an alloy of titanium, cobalt, and chromium.) They both came back way over the toxic level. Apparently, the rotation of the metal joint has been shedding metal ions into my system for nine years.

Next I went to the orthopedic surgeon who put the implant in. He ordered an MRI and xrays and appeared rather concerned. Eventually I was routed to yet another orthopedic surgeon who specializes in "revising" hip implant failures - in particular ones of the type I have, which have been failing at such a staggering rate that the lawyers have assembled one of the greatest litigation feeding frenzies in history. They are going after the manufacturers of these devices.

I have health insurance but I am quite sure that I will be soaked for many thousands of dollars beyond the coverage to resolve this problem, which will involve at least the changing out of the terminal bearings of my implant - if I am lucky. In the meantime, I have to become exactly the kind of pain-in-the-ass patient who asks too many questions so I don't end up crippled, or dead, or taken for ride like a purloined human ATM machine. I suppose I am also lucky that this happened to me soon enough to even have this kind of remedial surgery. Another year or two and I would have just steadily turned purple and croaked like some poor 19th century foundry worker.

There's an excellent chance that I will be on the operating table at the same moment that another financial crisis erupts, one that will be orders of magnitude worse than the 2008 Lehman collapse. Won't that be something? I hope that the surgeon and the anesthesiologist, and whoever else happens to be on hand, don't all run out of the room at once to call their investment managers while I'm lying there inert, like a boned-out Thanksgiving turkey.

Pray for my ass. I'm a hostage in the system.

[DSpencer]

Re: Healthcare: Breakin' Down the Premiums in Consumerville

Another common argument is that Americans get better care/higher tech care.

The problem with this statement is that there is zero evidence for this. If in fact Americans live longer due to heart transplants or whatever, this should be detectable.

It is not.

Either the care being given is actuarially worthless - i.e. doesn't actually help - or else something else is very wrong.

This implies that the only metric by which you measure health care is length of life. So quantity of life matters, but quality of life is irrelevant.

I guess a person being treated for pain is receiving "actuarially worthless" treatment.

[c1ue]

Re: Healthcare: Breakin' Down the Premiums in Consumerville

This implies that the only metric by which you measure health care is length of life. So quantity of life matters, but quality of life is irrelevant.

I guess a person being treated for pain is receiving "actuarially worthless" treatment.

Unless you can somehow show that the 'technology' and the 'spending' are all towards quality of life, that above statement is completely meaningless.

Equally, pain shortens lifespan.

Try again.

[BK]

Re: Healthcare: Breakin' Down the Premiums in Consumerville

There is no lucrative insurance payment or insurance code for diagnosing a patients problem. Sadly, Doctoring has been turned into what bad automobile mechanics has always been about, swap out parts and make repairs until you solve the problem. The system isn't set up for a Doctor to actually spend time working a flow chart to diagnosis the problem. A family member was in the hospital recently for symptoms that were either a cardiac event or anxiety. As I watch every doctor did their best to foster the perception that a cardiac event might have happened or could happen soon. This lead to all sorts of expensive test including an electro cardio gram, a CAT scan, and a night stay in the hospital. After a nights rest in hospital the patient felt much better, but that didn't prevent the Cardiologist from attempting to sell a Stress test to the patient in order to rule out any possible cardiac problems. This patient is not over weight, no family history of heart attacks, and lots of signs indicating anxiety. But, a hospital can't pay the light bill treating anxiety in the ER -welcome to healthcare in 2012.

[jk]

Re: Healthcare: Breakin' Down the Premiums in Consumerville

if the doc doesn't DOCUMENT that he suggested a stress test, he is open to a lawsuit if the patient drops dead a month later.