Washington Reforms Fragment Health Risk Pools, Driving Up Costs

Single Large Risk Pool - Most Sustainable Model

Republicans' "free-market" mantra implies that greater numbers of commercial health insurances will increase health care access while decreasing cost - nothing could be further from the truth. Breaking up health coverage into numerous small risk pools (including high-risk groups, reinsurance – even a "public option" amounts to one of many small insurances) is the most unsustainable model of health financing, inevitably bound to increase administrative inefficiencies and actuarially-unsound policies, where a few expensive illnesses will devastate any small insurance group's reserves, driving up premiums.

The most cost-efficient insurance consists of a single large risk pool that encompasses the entire population – rich, poor sick and healthy - to cover occurrences of illness/accidents that everyone faces eventually. The larger the risk pool, the greater diversification of risk, lowering premiums and overall costs.

Yet, most Washington health reform proposals (from Democrats and Republicans) result in fragmentation and multiplication of risk pools, in contrast with the cost efficiencies and sustainability of a single large risk pool offered by a Medicare-for-All model. Only single large-risk-pool insurance can eliminate the wasteful 30 percent inflated administrative/overhead costs of fragmented multi-payer insurances, while leveraging economies of scale to negotiate annual budgets and bulk-rate payments for drugs and medical equipment to reduce health costs.

Many governors and congresspersons begin redress of health costs by urging "stabilization" of the multi-payer health insurance market – usually by means of ballooning taxpayer subsidization to prop up that most inefficient financing model. Indeed, increased risk, reduced benefits and reduced provider choices are all means used by multi-payer insurances to shift cost and risk to the insured, while protecting insurers' bottom lines.

Graham-Cassidy Bill - Shrinking Risk Pools with State "Block Grants"

Another incarnation of fragmented costly reform, the Graham-Cassidy Bill would allocate federal health care monies as state "Block Grants." With no evidence, Sen. Lindsey Graham asserts that health coverage is best written at the state level, where ostensibly states can "repeal, repair or keep ObamaCare programs," while creating "subsidies, tax credits" or other purchasing mechanisms. State insurance coverage is an incredibly complex proposition, considering that individual states lack the population for a large risk pool, as well as overarching federal taxing and other authority to create health programs beneficial to all. More complexity and uncertainty is injected by the sheer mobility of population across state lines.

Graham implies that state block grants will be "more equitable" than an "individual entitlement" – a political jab at Medicare, in which all working people are invested, whose overhead costs are less than 3 percent (vs. 11-20 percent for multi-payer insurances). The Graham-Cassidy bill's allocation of $500 billion in block grants divided over 10 years and 50 states, does not hold a candle to estimated $500 billion annual administrative savings of an improved Medicare-for-All model of health financing. Estimates are an additional $100 billion+ could be saved negotiating bulk drug rates.

Health care financing to benefit businesses, employees, providers & families

Richard Master, CEO of MCS Industries, was invited by Bernie Sanders to speak at the introduction of his Medicare-for-All, SB 1804, on September 13. Master has made two documentary films investigating shortcomings of U.S. health care financing - Fix It: Healthcare at the Tipping Point and Big Pharma: Market Failure. U.S. health care spending is almost twice that of other developed countries; yet, he notes, the Organization for Economic Cooperation and Development (OECD) reports the U.S. has worse outcomes and shorter lifespans than those other countries.

Master cites problems faced by business: Health insurance and pharmaceutical costs make it prohibitive to hire more employees; his employees' health benefits decrease annually, even as their premiums increase by double digits. During his September 13 remarks, Master quoted Warren Buffet: "Medical costs are the tapeworm of American competitiveness."

U.S. skyrocketing drug costs are 2-6 times higher than in other countries, with U.S. pharmaceutical spending almost equal to the national defense budget. Lacking any regulation, medicine costs can easily surpass an employee's total annual salary. People cut back medications, or fail to take them at all.

Additionally, health costs are crowding out every other segment of the economy, including infrastructure and education, while effectively reducing wages and purchasing power. The primary problem Master cites is the multi-payer insurance model that siphons off 30 percent of U.S. health care dollars to administrative/overhead costs. With less than 3 percent administrative overhead costs, Medicare for All would improve the health of employees and the global competitiveness of business.

Single public payer financing, notes Master, would be a major stimulus for the economy, even as it provides true full choice of private providers - contrary to multi-payer insurances that shrink provider choices.

A 2006 econometric study, Single Payer/Medicare for All: An Economic Stimulus Plan for the Nation holds continued relevance as a model for "very substantial economic stimulus in the form of jobs, enhanced business and public revenues and increased wages for the population at large" - demonstrating a net jobs increase, and significant health care savings.