Wednesday, April 3, 2013

HHS Head Sebelius Doesn't Understand Insurance

To me it's not a surprise to find more government officials who know nothing about what they administering; especially in this administration.

Afterall, Jack Lew didn't know about budgeting issues and certainly didn't produce a budget the entire time that  he was White House Budget director, Obama continues to be the one man wrecking ball for the economy and undermines any remaining social cohesion in our country, now Kathleen Sebelius shows that she doesn't understand the basic concepts of insurance as the head of the Dept of Health and Human Services.  HHS (Health and Human Services) is the arm of this maladministration for the (now further delayed) implementation of "ObamaCare,"

From Meagan McArdle at Daily Beast, she discusses how Sebelius has her facts about insurance all upside down.  So when the Department Head for Health and Human Services has it wrong, then wrong-headed Obama and most other Democrats also have it dead wrong.

The key to controlling costs in a health care system anywhere is to make it as close to practical to a cash system.  This is the system in Thailand where I spend a good deal of time during the past 14 years.  There, most medical expenses are paid on a cash basis without an insurance or government intermediary. Because of this, and the low general cost of salaries, prices for medical care is, without exaggeration, some 10 times cheaper than in the US.  It is even cheaper in the smaller cities outside of Bangkok.  If the US went to, or had been on a cash basis with no government or private insurance, then prices would decline to what people can afford or manage and they would be MUCH lower than now.  Instead, there's nothing but intermediaries here in the US with no one spending their own money!

The next best thing to a cash system, and what is the true role of insurance, is to insure against large unexpected costs with high deductible catastrophic insurance policies covered ideally by medical savings plans. Premiums for high-deductible policies are MUCH lower since the buyer is "on the hook" for routine costs, routine prescriptions and less-than-catastrophic expenses.  In this way, the insured pays cash for nearly all of his or her medical expenses out-of-pocket (except for the big events).  Like I said, it's as close to a cash system as possible.

Catastrophic insurance was the only way that costs MIGHT have come down for medical costs in this country.  Those policies are now essentially "illegal" going forward due to the wrong-headedness of people like Sebelius and Obama and Democrats.

In the Daily Beast article by McArdle, exposes how Sebelius has it all wrong:
But Kathleen Sebelius, the Secretary of HHS, thinks that catastrophic insurance isn't really insurance at all.
At a White House briefing Tuesday, Health and Human Services Secretary Kathleen Sebelius said some of what passes for health insurance today is so skimpy it can't be compared to the comprehensive coverage available under the law. "Some of these folks have very high catastrophic plans that don't pay for anything unless you get hit by a bus," she said. "They're really mortgage protection, not health insurance."
She said this in response to a report from the American Society of Actuaries arguing that premiums are going to rise by 32% when Obamacare kicks in, as coverage gets more generous and more sick people join the insurance market. Sebelius' response is apparently that catastrophic insurance isn't really insurance at all--which is exactly backwards. Catastrophic coverage is "true insurance". Coverage of routine, predictable services is not insurance at all; it's a spectacularly inefficient prepayment plan.
What Sibelius and Dems don't understand is the cost trajectory of ObamaCare is UP not DOWN.  It's really the UNaffordable Health Care Act!  Why? Because now you'll have BOTH government AND insurance company bureaucracies, plus the admin costs of covering more people and nearly all of the routine medical payments plus more fraud.  Costs will only go up.  Also nothing has been done to address costs (malpractice reform, for eg.) or the "supply" of medical services for the additional enrollees.  Furthermore, the government will make everything even more complicated and bureaucratic and even more costly.  Finally, catastrophic policies will be essentially 'illegal' and, since the government is going to become a buyer with infinite resources (not cost sensitive) for a vast portion of the nation's medical services (taken together with Medicare/Medicaid),  true "cash" market discipline will never occur and costs will likely escalate at an even a higher rate along with our country's entitlement deficit.

It will end in an unsustainable mess.  In fact, it may never even get off the ground as it's flaws and costs become more widely known.  Worse, a financial crisis brought by such programs may bring an end to the entire liberal "experiment."

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