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Sunday, September 20, 2009

$133/Month Health Insurance Premiums?

The Truth-O-Meter found that Keith Olbermann had told a “half-truth.”

Olbermann said that for middle-class families, the Baucus plan would mean that "13 percent of what they make could be deducted directly from their paychecks and mainlined to insurance companies, the so-called 'Max Tax.'"

He's right that for people who are uninsured now, the upper limit would be 13 percent, and that money would go to insurance companies. But it's to pay for coverage they don't have now — not a tax — and some people would pay less. And all of the plans under consideration in Congress require people to pay something for coverage. So we rate Olbermann's statement Half True.

The last time I had health insurance, the premiums were 6.9% of my salary. According to Ezra Klein, I had a pretty good deal.
The average health-care coverage for the average family now costs $13,375, according to Kaiser.

In my community, the median income is $42,000. $13,375 out of $42,000 comes to nearly 32% making my 6.9% look wonderful.

And that sums up the problem with health insurance reform. For all the whining and moaning, most people are not feeling much pain. It is like college students complaining about the increase in tuition when what they (some of them, anyway) really mean is that they will not be able to afford as much beer.

Imagine if people who touched a hot stove felt only a small fraction of the pain from the burn. That is pretty much what is happening in our health-care system. It hurts enough that we would prefer it to stop, but without any sense of urgency.

Washington wonks trying to fix this mess face a dilemma: They look at the numbers and see health-care costs crushing our economy, overwhelming our government, swallowing our wages. But the public is not feeling the pain. Virtually no one writes a $13,375 check to pay for their own health care. Most pay 27 percent of it, or even less. The surest way to cut health-care spending would be to make people shoulder more of the burden directly, as opposed to hiding it in taxes and lost wages.

The surest way to cut health-care spending would be to make people shoulder more of the burden directly, as opposed to hiding it in taxes and lost wages.

So things were going okay for me. I thought my premiums were too expensive, sure, but I was managing. Then I got laid off. That is when the premiums became unaffordable, but not simply because I was laid off. After all, the unemployment check came every week like clockwork.

Getting laid off meant I qualified for COBRA. Going on COBRA meant I would have to start paying the both my half and the half the employer had been paying, thus doubling the out-of-pocket percentage to 13.8%. Worse, I would have to pay the premiums out of unemployment benefits, making the percentage a whopping 43.3%. Naturally I declined and joined the ranks of the uninsured. The purpose of COBRA is to help the recently unemployed avoid the sudden loss of health insurance, but unaffordable COBRA is no help at all. I wound up shouldering not just more of the burden, but all of the burden, and I could not do it.

Compared to the 32% I cited earlier, the 13% in the Baucus plan sounds like a good deal. Whether the 13% is taken out of my pay automatically or I write the check to the insurance company myself makes no real difference to my bottom line. If Keith Olbermann wants to call it a “tax,” whatever. But when I consider the Japanese health insurance tax/premium, 13% looks pretty awful.

The average consumer is not feeling enough pain, and powerful stakeholders do not want change.

Of course, providers don't much like the sound of (the public option) because they would see 20 to 30 percent less revenue. And insurers don't much like the sound of that because they could not compete with that sort of buying power. Republicans and centrist Democrats have banded together to weaken the public plan and maybe even remove it altogether. President Obama now promises that the public plan would be open only to the uninsured and wouldn't offer any advantages over private insurers. It won't, in other words, be allowed to save people money.

So if you take sweeping transformative change off the table, you are left with finding a multitude of little tweaks. All these little tweaks together require 1000 pages of legislation.

Added up, they equaled a startling $2 trillion over 10 years. That's a lot of money for policies that have received virtually no attention in the debate.
And yet, this is the quiet promise of health-care reform. The grand theories might fail. They often do. But making the system a bit better, a bit quicker and a bit more agile -- we can do that. And until the stove gets hot enough, it may be all we can do.

But let's get back to the Japanese health care system. I lived there for nearly twenty years. Japanese people have choices. They can self pay (as I did at first), get private insurance (the next thing I did), or participate in one of the two public options (which I did as soon as I qualified). My premiums were about 4% of my salary.

According to the Washington Post, premiums are still about 4% of wages.
Workers at major corporations pay about 4 percent of their salary to a company-based insurance provider. These premiums are limited to $6,000 a year, but the average salary worker pays $1,931, the government says. Job-based insurance in the United States costs the typical employee $3,354 a year, according to the U.S.-based National Coalition on Health Care.

In Japan, employers pay premiums that match each employee's contribution. In the United States, where health insurance is far more expensive, employers pay private insurers three or four times the amount contributed by each employee.

The self-employed and the unemployed in Japan must pay about $1,600 a year for insurance coverage.

Wouldn't you like to pay $133/month for health insurance? NPR reported on April 14, 2008 that average Japanese family paid $280 per month. The insurance covers 70% of the bill; the patient pays 30% out of pocket. Although a 30/70 sounds heavier than the 20/80 split common in American policies, patients happily pay 30% of a far smaller total bill. In the case of childbirth, the local city hall reimburses families that 30%.

The total rate for Japanese income tax is less than 20% (about 15% for the sum of national, prefectural, and municipal taxes plus the 4% for health insurance) which compares favorably to American tax rates. Think of it. For approximately the same tax burden Americans bear without health care premiums, the Japanese have their health care premiums included.

The government of Japan does not stand between the doctor and the patient in any way. In fact, there is no feeling of government presence at all. Patients go to the doctor, the doctor orders treatment, patients pay their 30%, and go home all done with it. The closest thing to government intrusion is the government's requirement that doctors and dentists participate in the government preventative health program by conducting free physical and dental screenings once a year in every elementary school, kindergarten and preschool. The government also sends new parents reminder notices for free well-baby clinics. That is the extent of government “interference.” The government never contradicts the doctor's order or refuses to pay its portion for services or prescriptions like so many American private insurers do.

Although most Japanese health care facilities are privately owned, there are some public facilities. Doctors usually do not work for the government. They may be sole proprietors of their own hospital which may be quite small, sometimes with as few as four beds. My maternity doctor had one of those little four-bed hospitals, several nurses and a cook. His patients gave birth in the same familiar environment where they received prenatal care.

While many of the large hospitals offer comprehensive care, some hospitals are specialized. For example, a patient with heart disease may go to cardiac hospital. I saw no dedicated out-patient facilities; every facility had the ability to take admissions (except optometrists and dentists). Wait times for service are about the same as in America. Doctors may also work for large hospitals. Patients may go to any doctor or specialist they choose anywhere in the country. A patient's own residence is of no consequence. There is no such thing as a preferred provider network. Thus there is far more consumer choice in Japan than with America's HMOs and PPOs.

Hospital are generally full service, at least from the patient's point of view. Patients do not go to a separate facility for labs or x-rays. If a doctor sent, for example, a biopsy sample to a pathology lab, the patient would never know it. There is no subcontracting of health services generating bills from all sorts of random providers. In the example of the pathology sample, the pathology lab bills the doctor directly who bills the patient. In the case of x-rays, there is no bill for taking the x-ray separate from a bill for reading the x-ray. If a hospital wants a second party to read an x-ray, the hospital pays for it, not the patient. It is crazy that an American hospital signs a contract with an outside radiologist committing a third party, the patient, to paying the contract. If a patient goes to a Japanese emergency room, the patient pays one bill, not multiple bills. Ditto for surgeries.

What is Japan's secret? According to Naoki Ikegami, probably Japan's top health economist, at least one secret is that Japan does not have a single payer system. It has a single payment system.

And the way the government controls the flow of money is that we have multiple payers and multiple providers, but there's a single-payment system -- not a single payer but a single-payment system -- so that all payers must abide by the payment system, and all providers must be paid by the system.

The rest of the interview is quite instructive.

For a pretty comprehensive set of viewpoints see this article and the several pages of comments.

It is strange that Americans are not as knowledgeable about the Japanese system as we think we are about the Canadian system. We should be seeing information about the Japanese health care system everywhere. We should be rejecting American exceptionalism and seriously considering how to incorporate the best features of the Japanese system while rejecting the worst aspects.

1 comment:

  1. “President Obama’s speech last week really moved me. Despite what my colleagues think of me. If what he says is what will EXACTLY happen, how can I not hope and work towards that cause”? Mike Oliphant runs a small Utah health insurance website and whom deals with hundreds of people on a day to day struggle to be approved for health insurance. “I get hopeful that I can finally tell people they can qualify for coverage REGARDLESS of their pre-existing medical condition”. Mike’s concern is that Obama’s people won’t deliver what he urges on areas within his speech. “I really have been moved by this guy and wish we could just talk so he could understand the frustration of a health insurance agent. I have been involved on a political level within the state of Utah and their struggle for health care reform. I have seen and regrettably been part of politics at work. I have learned lessons through baptism of fire with politics. For instance, I struggled against House Speaker Clark and H.B. 188 because that was what I was urged to do from our industry (that was all I knew). But after awhile and countless meetings with state and private carriers in Utah, I began asking myself if I was doing the right thing. I realized over time that House Speaker Clark really means what he says and is hard nose about getting reform done in Utah. I got that there wasn’t any behind the scene conspiracy scheme or personal objective of Mr. Clark. His bill makes allot of positive changes in the “health insurance reform” world of Utah. He claims that reform just doesn’t stop there, it must continue through “health care reform”. You see, there is a major difference between the two reforms. Clark “gets it” but I really worry that Obama’s administration doesn’t because if you have noticed the subtle language change of dropping “health care reform” and going to “health insurance reform”. See more about what Utah has accomplished here which utilizes private carrier involvement with true reform. If you can believe it, they reached it with an objective of $500,000. Perhaps the feds should take a look at Utah and House Speakers Clark’s bill 188. Now I find myself on the “other side” of the fence furthering Utah’s cause. Let’s hope we don’t all have a mental breakdown nationally and just take a honest look at the proposals.