Funny/Scary

Regular readers know that I'm the proverbial life/health guy in the P&C agency. That is, I insure people while my colleagues insure their things.

This afternoon, I noticed my colleague looked rather dejected about something, and I asked him what was up. He told me that he was not looking forward to meeting a particular client in the morning because he had to deliver a rather pricey renewal.

I told him, jokingly, "hey, just do what I do and blame ObamaCare."

He looked up and said "I don't think that'll work," to which I replied (still joking), "why not? It's not as if anyone really knows what's in there."

And then it hit me: if they can find coverage for birth control and abortions, why not a free roof, too?

After all, a roof's as much healthcare as birth control, isn't it?

Sweden ups the ante

Last we looked, the Swedish national health care system was busy cutting the legs out from under one of its citizens (literally, as it turns out).

Now, though, they're upping their game:

"A hospital in Stockholm has published a job advertisement trying to attract nurses who are both qualified and "TV-series hot" in what has been explained as an "attempt to catch people’s attention"

Of course, the hospital's spokescritter is quick to point out that they're also hoping to attract "competent nurses," as well.

Eye of the beholder, and all that.

A Fisking of a Rebuttal to a Fisking

Our post Friday on Maggie Mahar's recent Time article on the impact of the birth control/abortifacient mandate seems to have struck a nerve. Ms Mahar responded in the comments section (Thanks, Maggie!) and was none too pleased. I would absolutely recommend that our readers check it out to get the full measure of Nate's rebuttal [ed: And while you're at it, Mike's take is also highly recommended].

Take it away, Nate:

Thank you for responding Maggie. As a side note, much of the material in my post was in a response I left at your Time article which was (for some mysterious reason) never approved.

"First, Henry claims that the average out-of-pocket cost for childbirth and pregnancy is around $2,000."

I don't see where Henry or I ever claimed this. As the sentence clearly states, that number came directly off the Federal Government's sample SBC, Summary Benefit Communication.

In regards to the issue being insurer cost, that is not what your article said:

"But in terms of the costs to give birth to the child, she is not much better off, because if she does become pregnant, her insurer, like many, would pay the bills above and beyond the co-pay."

As I showed, members paying $9 per month themselves would take 13 years to equal the out-of-pocket cost of a delivery. If you want to argue insurers should pay for birth control because it is in their financial interest, you must also accept that it is in the member's interest as well. If $9 per month for birth control is unaffordable, then 20% for cancer treatment must surely be unaffordable; why aren't we helping them with “free” chemo?

In the US, there are roughly 61 million women of child bearing age, which means $6.5 to $30.5 billion per year (calculations available on request). Divide that by $7,600/pregnancy and we would need to see a reduction in unintended births of up to 4 million. Seeing as we only have about 4 million births per year now, those numbers aren't possible to achieve. And that’s assuming no increase in the cost of birth control.

"As I note in my piece, when pregnancies are unplanned, and contraception is not used, the rate of complicated pregnancies is much higher."

What about when contraception is used and they still have an unplanned pregnancy? I have seen studies that say 5% of women on the pill get pregnant; it only takes 1 missed pill, a not uncommon occurrence. With over 11 million women on the pill, that is a lot of abortions and unintended pregnancies. Further destroying your claim insurers will save money.

"This is why insurers would not need to hike premiums if they offered free contraception. If all if their customers used contraception, and fewer of them had babies, they would save more than they spent waiving the co-pays."

This is really the crux: you have no experience in this field, have never worked with the real data, and don't cite a study to back this up. I have worked 20 years in this business and see the data in real time and know it will increase cost. Who’s more credible?

"Also, Nate ignores the fact that what Federal Employee's insurers were required to cover contraception, they Did Not Raise Premiums. (Again for the source, see my piece.)"

Since there’s no link to support this, one supposes this is another issue of credibility. On the other hand, it is a great argument for more "skin in the game" on the part of those Federal employees.

"Nate also assumes that if there were no co-pay, women would switch from generic Pills to prescription pills. Why? Presumably he assumes that women are too stupid to realize that the generics are just as good. In fact, experience shows that once patients switch to generics, they don't go back. "

I assume that based on 20 years of actual experience in the field, and thus 20 years of data on how people use brand name and generic drugs. But don’t take just my word for it:

"Aren’t generic drugs just the same as their brand name counter-parts? As it turns out, not necessarily."

Based on my experience, the owner of the brand will often outsource manufacturing to the generic makers, or the brand will supply the generic with just a different implant. In these cases, why would anyone take the brand name? Yet millions of people do: I see the claims. And then we have movement from generic to new patent-protected drugs with little to no increase in effectiveness. Often, these changes come with new patent protection and huge advertising budgets.

Which leads to this unsettling news:

"The government is considering setting higher standards for birth control drugs used by millions, saying that newer pills appear to be less effective at preventing pregnancy than those approved decades ago."

So I wouldn't say that women are "stupid" for falling for the advertising, yet it is clear that millions of them do. Something someone with any actual experience in the field would know. Billions have been spent on these new forms of birth control, and it could be argued it was all a waste. Now insureds and other taxpayers must pay 100% of this cost.

From the same MSNBC article:

"The original birth control pills approved in the 1960s allowed less than one pregnancy when taken by 100 women for at least a year, the FDA said. But in the last decade, the government has approved pills allowing more than two pregnancies for every 100 woman-years of use."

Let’s use a little common sense: millions of women paid a co-pay 2-3 times higher then the generic for a drug that was less effective. If the whole purpose of this is to prevent unintended pregnancies, why are we covering pills that fail twice as often?

"He also assumes that insurers would be able to raise premiums as much as they want, whenever they want ("why not raise it to $1,000?")"

I clearly was talking about pharmaceutical manufacturers raising the price to $1000. Follow the paragraph: the maker of Mirena increased the cost, what is to prevent them from raising it to $1000?

"or long-lasting birth control that is much, much cheaper (Source in my piece)"

Okay, let's do that math: Mirena cost $742 for the IUD, plus perhaps another $58 to insert (erring on the low side). Now we're at $800, which is $160 per year or $13 per month. That’s almost 50% more than the $9 generic Pill. Wouldn't you agree that's a pretty big hole in your "it's cheaper" argument?

'A' Case for Annuities

Interesting article at Forbes making a case for the concept of "dying broke." Briefly, the idea is that one should shuffle off this mortal coil the way one came into it: by accident with no assets:

"You can cleverly arrange your financial affairs, so goes the theory, such that your spending stays level. You suffer neither a collapse in living standards when you retire nor an embarrassment of riches on your deathbed."

Essentially, it's looking at one's life as a zero-sum game. While no one relishes the idea of leaving one's heirs with crushing debt, neither is there a moral or legal obligation to leave them well endowed financially. But how does one walk this thin line?

Forbes' William Baldwin posits that a very effective way to do so is through the use of annuities. As we explained late last year, "[One takes] a lump sum of money (say, from an under-performing CD) and put it in one of these newfangled "longevity annuities." After a while, it begins to pay out a lifetime stream of income via annuitization.

Properly structured, one cannot outlive the income stream, but neither is there anything left at the end. It's a challenging game of "chicken," of course, but for some folks, it may be an appropriate strategy.

First things first, please

I think Maggie Mahar (her comment to a post on February 17) is correct that there are cost benefits from the use of contraceptives and abortifacients. There are certainly religious-based differences of opinion about their use but it seems to me the cost benefits are clear.

Accordingly a public policy to promote the voluntary use of contraceptives and abortifacients seems to me beneficial at least from a cost perspective. And cost is clearly important.

However, the first and primary issue in the present controversy appears to be whether the administration has chosen a correct, legal, and constitutional method to implement its policy. Credible critics object to the administration’s policy on technical, legal and constitutional grounds. I think these objections must be dealt with first.

So far, the administration has responded largely by deflection- that is, by attempting to turn the public discussion into one of access to contraceptives and abortifacients. This is not helpful and at best it’s a diversion from the basic issue.

This tactic of deflection may explain why, so far, the administration has not satisfactorily responded to the numerous sincere objections to its policy from many churches and related organizations. In fact after seeming to offer an "accommodation” that turned out not to alter anything meaningful in the originally-proposed regulation, the administration has now:

(1) proceeded to implement the originally-proposed regulation without any change,

(2) responded on February 16 to a federal lawsuit filed by the Becket Fund for Religious Liberty by essentially asking the court to defer any action on the suit. Why? The administration said it might "propose and finalize changes to the regulations" at some undefined point in the future.

This response is interesting for several reasons. First, the administration chose not to defend the legality or constitutionality of its regulation. Second, it appears the administration does not wish to defend the regulation as originally written - even though the administration has now finalized the regulation as originally written. Third, having finalized the regulation, there is no assurance that the administration intends to follow thru with its expressed willingness to work with religious groups to reach a satisfactory resolution of this problem - a problem created by the administration in the first place.

So despite the public good that may be available from promoting the voluntary use of contraceptives and abortifacients, and despite the theoretical value in having insurance plans facilitate such use, it seems to me this threshold question is reached first and is much more significant: is the government proceeding in a legal and constitutional manner?

Whether the administration’s regulation may promote the public good is not the constitutional or legal test. The National Recovery Act of 1933 contained measures designed to benefit the public, but the Supreme Court ruled it unconstitutional.

I think the controversy here, as with NRA, similarly involves a more fundamental conflict, in this case church and state. Given the administration's actions to date, I have doubts whether it will make a bona-fide effort to resolve the problem. So - I expect this will be settled in the courts.

Trends, Premiums and Disconnects

So yesterday I attended a CE (Continuing Education) class on Underwriting Principles; more specifically for large group (100+ lives) health insurance plans. I was not aware of that particular specification when I signed up (I studiously avoid that market), but am glad I went.

First, because if the carrier which presented the class could find a way to bottle the first hour and fifty minutes, they would have a superb homeopathic alternative for folks who need surgery but have issues with medical sedatives.

The last 10 minutes were actually fairly exciting: the presenter was discussing "trend," which is roughly analogous to medical inflation and which makes up a part of the overall rating process. In that context, he proceeded to "prove" that high deductible, consumer-centric plans are actually more expensive than lower deductible plans, and in fact a $0 deductible plan would have the lowest trend of all:

What that chart purports to show is that (all other things being equal) a lower deductible will result in a lower "trend."

This was too much for one person in the class, who raised his hand and said "I can see what you're doing, it's dishonest and I call bullcrap." Here's why:

When questioned, the presenter confirmed that a zero deductible plan would have the lowest trend of all. I then asked "well, then, why isn't healthcare free?" The presenter laughed that off, calling it absurd.

I smirked.

Because according to the logic of this home office critter, if a $500 deductible produced a lower trend than a $2500 one, and a $0 deductible was preferable to $500, then it only stands to reason that giving away care would then result in negative trend.

Now who's absurd?

The Preventive Care Lie

Offering "free" preventive care, or as DC wants to do during this election year, free everything, does not save money over the long haul. This tidbit comes from none other than Doug Elmendorf, former head of the CBO.

"The evidence suggests that for most preventive services, expanded utilization leads to higher, not lower, medical spending overall," CBO director Douglas Elmendorf wrote in an Aug. 7, 2009, letter to Rep. Nathan Deal, the top Republican on a congressional subcommittee involved in the debate.

Elmendorf explained that while the cost of a simple test might be cheap for each individual, the cumulative cost of many tests adds up:

"But when analyzing the effects of preventive care on total spending for health care, it is important to recognize that doctors do not know beforehand which patients are going to develop costly illnesses. To avert one case of acute illness, it is usually necessary to provide preventive care to many patients, most of whom would not have suffered that illness anyway. ... Preventive care can have the largest benefits relative to costs when it is targeted at people who are most likely to suffer from a particular medical problem; however, such targeting can be difficult because preventive services are generally provided to patients who have the potential to contract a given disease but have not yet shown symptoms of having it."

Reading further we find this comment which has been totally ignored by the White House and HHS.

In fact, a government policy to encourage prevention could end up paying for services that people are already receiving, including breast and colon cancer screenings and vaccines, Elmendorf said.

Other studies backed up the CBO's analysis, including a Feb. 14, 2008, article in the New England Journal of Medicine that was written in response to campaign promises for more preventive care.

"Sweeping statements about the cost-saving potential of prevention ... are overreaching," according to the paper. "Studies have concluded that preventing illness can in some cases save money but in other cases can add to health care costs." They write that "the vast majority" of preventive health measures that were "reviewed in the health economics literature do not" save money.

So why the push for free preventive care?

And if they really BELIEVE requiring health insurance carriers to offer preventive care without patient copay's or deductibles is such a good idea, then why do they want to PENALIZE SENIORS ON MEDICARE with a tax on "first dollar" Medigap policies?