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SPEAKOUT: A very costly health-care solution

By Linda Gorman and Ari Armstrong

Published January 30, 2008 at 12:05 a.m.

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As the health-care debate unfolds, we hear a lot about cost-shifting, the idea that some people are charged more for health care to make up for the fact that others do not pay. Various legislators, journalists and activists tell us that the state should adopt the Blue Ribbon Commission on Health Care Reform's recommendation to impose an individual mandate and force everyone to buy health insurance in order to end the unfairness of cost-shifting.

In fact, the commission's recommendations likely will shift more costs onto those who already have insurance. Along with the individual mandate, the commission recommends large subsidies for those whom the commission considers too poor to purchase the insurance it says they should have.

Under the commission's plan, people with health insurance would be taxed to subsidize health insurance for single people making as much as $40,000 a year, and families of four making as much as $82,600 a year. Many of these people pay for their own health care now, or have the assets to do so in an emergency.

The commission would also increase cost-shifting by forcing many more people into Medicaid.

Because Medicaid pays so little to providers, Medicaid as a whole generates far more uncompensated care and cost- shifting than the uninsured.

Those who advocate an individual mandate throw up all kinds of numbers to support the wild claims that the proposal would save everyone money. A Jan. 8 article from The Denver Post claims that "Coloradans who have insurance spend an extra $950 each year to cover the costs of those who show up at the hospital without insurance."

The article attributes the number to state Rep. Anne McGihon, who said that the figure comes from Partnership for a Healthy Colorado. Partnership for a Healthy Colorado, in turn, says it got the figure from Families USA, which published a paper in 2005. That paper's estimates were unable to accurately predict the percentage of uninsured residents in Colorado. The paper also grossly overestimated at least some costs of uncompensated care.

The Lewin Group, the modeling firm hired by the commission to collect information about Colorado, reported total Colorado expenses for the uninsured of about $1.4 billion. Of that amount, around 45 percent, or $627 million, was paid out-of-pocket by the uninsured themselves.

Private philanthropy covered $197 million. Another $341 million was paid by the Veterans Administration, workers compensation and various public programs.

The leftover uncompensated costs, the ones that are not paid by any identifiable source, total $239 million. Divide $239 million by Colorado's 2.8 million insured residents, and the result is a maximum likely cost-shift of about $85 per insured individual per year.

To "fix" the problem of $239 million in cost-shifting, the commission proposes to increase health spending in Colorado by more than $3 billion, funded with an income tax increase of $800 million to $1.8 billion, new taxes on various politically incorrect types of food and drink, and an increase in the cigarette tax.

The sensible way to solve cost-shifting is to reduce health-care costs so that people fund their own health care, not to force people to buy insurance created by special-interest groups or to expand Medicaid. Professor Christopher Conover of Duke University estimates that 10 percent of annual health costs are caused by inefficient regulation. Results from experiments in consumer-directed health-care plans suggest that freeing consumers, providers and insurers can reduce costs by up to 30 percent.

The hostility of the commission to any plans like this was summed up in two votes that took place one after another on the same day. First the commission voted to recommend that the state legislature study single-payer health reform plans. Then it voted not to recommend that the legislature study consumer-directed reforms. While single-payer plans have failed around the world, consumer-directed reforms are succeeding wherever they're given the chance.

Linda Gorman, a senior fellow with the Independence Institute, serves on the Blue Ribbon Commission for Health Care Reform. Ari Armstrong writes for FreeColorado.com.

Comments

  • January 30, 2008

    5:37 a.m.

    Suggest removal

    HolierThanThou writes:

    Canada, most of Europe, and Japan have single-payer systems that work. Here's a business comparison. The average health costs built into a Japanese car assembled in 2005 was about $210 per car. In the same year, American auto makers paid private insurance over $2800 per car to provide health benefits to their employees.

    American private health insurance is designed to kill patients as quickly as possible with shoddy service and convoluted procedures that make the Byzantines looks like models of simplicity. Americans pay more every year and get less every year. We pay for administrative complexity, advertising, and propaganda from the likes of Gorman and Armstrong.

    The real travesty of these proposals is to force people to buy private health insurance. The rest of the industrialized world has abandoned this dysfunctional model for systems that work far better than ours. We should hire them as consultants when we come to our senses, abolish private health insurance, and go to a single-payer system.

    Linda Gorman and Ari Armstrong are straight-faced liars whose numbers do nothing but obfuscate the real issue. The American health industry is run by savage profiteers who couldn't care less about alleviating suffering. The only thing they care about are how many billions of dollars they can rob from sick and injured people every year.

    The time is long past due to shut'em down and go with a single-payer system.

  • January 30, 2008

    7:16 a.m.

    Suggest removal

    RS writes:

    The true dishonesty is in any system which classifies disabled veterans as "uninsured" when the fact is these people paid for lifetime medical care through the injuries received during their voluntary military service. Taking care of injured veterans is NOT charity, it is an obligation created by our society to those protecting that society!

  • January 30, 2008

    10:49 a.m.

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    Art writes:

    Holier Than Thou wrote "Linda Gorman and Ari Armstrong are straight-faced liars whose numbers do nothing but obfuscate the real issue." In fact the numbers they quoted, all from very reliable sources, are what we need to focus on. If we do not pay attention to the numbers we will never get any improvement. While you may disagree with their analysis it is very unfair to call them liars. They did not make up these numbers and they cited where they got them. We need more reasonable discussions of these issues. Name calling will get us nowhere. I am glad we have people like Gorman and Armstrong who have done the research and presented it in a concise manner. Disagree with their assumption based on the numbers and show why you disagree but don't devolve into name calling.

  • January 30, 2008

    12:03 p.m.

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    kathyM writes:

    Administration takes up 30% of the healthcare dollar. Just how will adding another bureaucracy decrease that cost?

  • January 30, 2008

    12:50 p.m.

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    Jack_Bauer writes:

    Holier,
    have you ever looked in depth at Canada's, Brittains and most importantly France's "single payer" systems? Doubtful or you wouldn't have spouted so confidently "The time is long past due to shut'em down and go with a single-payer system."
    Here is a link for you to peruse;
    http://findarticles.com/p/articles/mi...
    Actually just google single payer healthcare and you'll find copious amounts of articles on the major downfalls and side effects of socialized medicine.
    I'm sure nothing will change your mind though, at least until after 10 or 20 years of "socialized medicine" and after we are taxed into oblivion and health care is rationed and quality is poor.
    Additionally there will not be any progress in medical research because there will be no incentive in the government run market place to do so.

  • January 31, 2008

    7:10 p.m.

    Suggest removal

    gary writes:

    Ok, I will say this again, over and over. The problem with health care in America. IS.....insurance companies and the government!
    Americans lived for hundreds of years without health insurance and got along just fine. We do not need insurance companies and thier HMOs. etc, nor a "efficently run" government single payer program. It is time to let doctors be doctors and work for themselves...like the past. Instead of being controlled by the government or insurance companies!!

    Nuff Said..

  • February 8, 2009

    1:21 p.m.

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    tateman writes:

    To believe that we pay more because others don't pay is foolish. Insurance companies don't pay for the loses of medical facilicies , unlike what the government want to do with our money. The health insurance companies figure rates based on the charges from the high priced medical industry and the amount of claims they pay from clients that pay premiums.

    As for Japan I lived there and will tell you , everyone does pay a premium and it is about $225 per person average , but the results is the medical service is horrible, the lines for major care is a long wait and if you go in the hospital you will be in a ward with about thirty to fifty other paitents, NO exceptions.I assure you the care is scary, I know first hand.

    Plus as the populations declines so does the already bad quality of a social medical system. Plus the mandated government rates will increase.

    America is just not ready for or would accept this, even the left wing socialist want to best health care. We must stop lieing to the American people and vote out the lawyers that control our government.
    Yes, VOTE NO to any Lawyer running for office in the future elections.

    Keep in mind the problem is really not as the Liberal would like us to believe. The largest percentage of people without medical coverage are people that are quite wealthy and have elected to not carry any coverage. After that there is a small percentage that don't have coverage but have never been denied health coverage in this country and they know it and would never take coverage of any type.

    This is a political game with the democrats and they are killing the lower economic class of people in this country and driving them further down the food chain so they can better control them..We must wake up here and stop these socialist activist and give America back to the people , not the people to the government.