Oy veh: Strained by Katrina, a Hospital Faced Deadly Choices (NYT Magazine)

I just spent the morning reading a New York Times magazine article on Memorial Medical Center in New Orleans. When Hurricane Katrina hit, the hospital lost power. As we know, the rescue operation was botched. There was gunfire in the streets and limited supplies. Doctors at the hospital decided that they would triage patients.

In a military setting, casualties are expected to occur en masse and medical and evacuation resources may be limited. Military personnel have to do the greatest good for the greatest number with their limited resources. Casualties who can be saved with immediate care are given priority. Casualties with light wounds are given a lesser priority, as are casualties whose injuries are too severe to help on site. There is basically no choice but to ration care.

In a civilian disaster setting in a Western country, one would normally expect help to come relatively quickly. In Katrina's case, it didn't. The personnel on scene at Memorial also did not have military or disaster experience. They decided to give a lesser priority to patients in poor condition who had standing Do Not Resuscitate orders. Additionally, some doctors decided to administer lethal doses of sedatives to patients who were not expected to live.

There had been gunfire in the streets for days on end, and hospital personnel had had little to no sleep. The hospital was flooded and lost its power generators - this compromised the ICU equipment. Additionally, lines of communication were complicated by the fact that a for-profit hospital operated within Memorial; LifeCare leased some space to provide very intensive rescue care to patients so that they might survive until they could transfer to a nursing home of hospice. The presence of two chains of command and very sick patients was an additional complication.

Mistakes were inevitable, and there was initially enough for prosecutors to seek indictments for murder on several doctors. The criminal charges were dismissed, but there were subsequent civil suits.

Racial relations also complicated things. Most of the clinicians and administrators were White. One Black doctor noted and protested when several Black people attempted to seek medical care several days after the flood and were turned away. One of the patients who died, and whose death might have been averted even with the scarce resources on hand, was Black.

Whether or not mistakes were made, readers should realize that the hospital personnel were in an unimaginable situation for which they had not been adequately trained. They acted as best they could. To the extent that mistakes were made, the families of the victims deserve compensation as appropriate through the legal system. Of course, for the families of the victims who were Black, the situation may merely reinforce their often well-founded belief that the system isn't working.

Community rating and credit card laws

I have a rewards credit card that pays me back in cash. I pay the balance in full every month, which is the only way to profit from a rewards card.

In Singapore, rewards terms are far less generous than in the US. Singapore's banking sector isn't as competitive. However, Singapore also has far more restrictions on credit than the US. Some might say that's paternalistic, but the upside is that people don't get into as much trouble. And face it, Americans are in a lot of trouble with plastic.

I've previously talked about the concept of community rating in health insurance. In community rating, everyone is charged the same price. Modified community rating means you're allowed to vary the price by some demographic variables like age, but not by health status. Experience rating means you charge by health status, and this is one of the big things that causes harm to people. We should get rid of experience rating in health insurance. The flip side is that as a young healthy man, my costs in the private market will rise. I can deal, but I've heard some conservatives complain that this is wrong.

It turns out that the US is moving somewhat away from pure experience rating in credit cards. Morningstar has a good summary of the Credit Card Accountability, Responsibility and Disclosure (CARD) Act of 2009. "Supporters of the bill argue that the new law ... is an important step in protecting consumers from profiteering credit card companies. Critics, however, contend that the new regulations will punish responsible card users for others' shortcomings."

As of Aug. 21:

Issuers must provide 45 days' notice before changing fees or interest rates. Previously, only 15 days' notice was required.
Issuers must send the bill at least 21 days before the due date. Payment may not be due before 5 p.m. or when the business is closed. Previously, the bill only had to be sent 14 days before the due date.

Consumers have the right to opt out of interest rate and fee increases--they can cancel their accounts and pay off the balance at the original rate. Before, this option was only available at the issuer's discretion.

After Feb. 22, 2010:

Issuers cannot raise interest rates on existing balances, except under these conditions: 1) a promotional rate expired; 2) another rate to which the interest rate was indexed increases; 3) a payment is 60 days late. If the bank raised rates after a late payment, it must restore the lower rate after six months of on-time payments.

Issuers can raise rates on new balances at any time, provided there is 45 days' notice.

Issuers can no longer raise rates because a customer failed to pay an unrelated creditor.

Beyond the minimum payment, issuers must first apply payments to the balance with the highest interest rate--for example, to the cash advance rate before regular interest rate. Previously, issuers applied payments to the lowest interest balances first.
Customers can opt out of over-limit fees so that transactions over their credit limit will simply be declined. Creditors must notify customers of this option annually. Issuers may not charge more than one over-limit fee per billing cycle, and cannot charge for going over the limit due to a fee or interest charge.

"Double-cycle billing," in which card companies based finance fees on the previous cycle's balance in addition to the current balance, will end.

Marketing contact with college students will be limited, and students under 21 must prove they have sufficient income, have a parent co-sign, or take a certified financial education course to quality for credit.

As to the law's impact, this is what Morningstar thinks:

Ultimately, we think both supporters and detractors have valid points. The bill does address industry practices that run counter to consumers' interests. But in doing so, the new laws will reduce revenue for the banks--that shouldn't come as a surprise, as the bill is designed to protect consumers from practices that issuers use to make easy cash.

...

Will the new regulations help consumers navigate their credit agreements and avoid exorbitant and sometimes unexpected charges? We think so. Will it mean more annual fees across the board, even for people who have never run into problems with the credit industry? It's certainly possible.

They've produced fairly balanced analyses of several issues related to business, and their industry knowledge is considerable. I'd definitely trust this analysis. On balance, consumer advocates might not have got all they wanted, but perhaps that's politics. Additionally, the use of credit cards is extremely ingrained in the US. In any case, there's certainly no reason to worry that this will be onerous on banks and credit card companies.

Brief thoughts on biologic drugs

Biologics are molecules produced in living organisms, as opposed to chemically like regular drugs. They often target rare diseases, and they're often the only treatment available for that disease. From a cost perspective, it's obviously better to have multiple competing drugs, and preferably one or more of them are generics - it brings costs down.

Right now, there is no legal pathway to allow generic biologics in the US, whereas pharma drugs go off patent in a number of years. There are two bills in the House of Representatives that would reverse that. One would grant 7 years' exclusivity, the other would grant twelve. The latter bill seems to be in favor. However, Morningstar, a stock analyst firm, argues that even 8-10 years' exclusivity is far too long. One factor at play is that the companies can make minor adjustments to the formula, a process known as evergreening, and legally have a brand new drug every time they do this. This is not acceptable.

Generic Biologics Face Uphill Battle
Generic Biologics Face Uphill Battle -- Part 2

A Marketwatch article notes that Europe has biogenerics legislation. However, due to manufacturing difficulties, biogenerics are only about 20% cheaper on average than the originals, although they will get cheaper as manufacturing technology improves.

Pharma spending accounts for about 10% of US spending. However, biologics are a growing market. People who need them face high costs (insurers often make you pay a certain percentage of the price of a drug, as opposed to a dollar amount; this is coinsurance, as opposed to a copayment). Those who go broke end up on Medicaid, and then the government picks up the tab. Again, the current proposed solution was heavily influenced by the pharmaceutical lobby and is absolutely unacceptable.

Scottish Justice Secretary's comments on release of Abdel Basset Ali Megrahi

As many of you know, the Scots released Abdel Basset Ali Megrahi from prison recently. Megrahi was turned over by Libya and convicted of conducting the Lockerbie bombing, although there is now some doubt as to his actual guilt. In any case, the Los Angeles Times has a report on the subject, and a brief quote from the Scottish Justice Secretary, Kenny MacAskill:

"Our beliefs dictate that justice be served but mercy be shown," Scottish Justice Secretary Kenny MacAskill said. He added that Megrahi "now faces a sentence imposed by a higher power. . . . It is terminal, final and irrevocable. He is going to die."

Whether we agree or disagree with the decision, I hope we all recognize that the Scots are attempting to live up to a core principle of their system.

Soulforce: Daniel Gonzales promotes anti-heterosexism conference in response to NARTH meeting

RIP Senator Edward "Ted" Kennedy

Sen. Kennedy (D-MA; international readers: that means a Democrat from Massachusetts) has passed away. He had terminal brain cancer, and was given a prognosis of only a few months to live earlier in the year. Nonetheless, he worked tirelessly on health reform until he died.

The late Senator was very liberal and was a highly effective legislator. He wanted to enact a long-term care social insurance program in his committee's health reform bill. It isn't likely to survive, but long-term care is a huge social issue. I was estimating premiums for the program (i.e. what they would need to charge to keep the program solvent) and found out he was underestimating the costs. I mentioned this to a fellow intern, who remarked, "I'm not surprised." He also structured the program as automatic enrollment with opt out allowed; in contrast, Medicare and Social Security (the US social health insurance program for those over 65, and the US retirement social insurance supplement respectively) are mandatory for most people. Too many people would likely opt out of his long-term care program to make it viable.

He may have been overly optimistic, but he meant to provide meaningful insurance coverage for all Americans. His heart was in the right place. In politics, you start with idealism and work out the details - and try to make sure you don't trade away too much. I think the late Senator mostly managed to do this over his long career.

Robert Reich, previous adviser to President Clinton, has comments on the Huffington Post. HuffPost will have other comments. Readers should note that they're considered left-leaning and partisan.

The New York Times has a 7-page obituary.

Personal: Fleeing old apartment, searching for new one

Dear readers:

Posts may be spotty for a while. We have a security-related situation at our place and are breaking our lease. We are unharmed, but are searching for a new apartment. Do keep us in your thoughts and prayers.

Ezekiel Emmanuel clarifies some comments he made on health care

Sarah Palin, the ex-governor of Alaska who started the whole "death panel" nonsense, based her stance on some comments made by Ezekiel Emmanuel, health policy adviser at the Office of Management and the Budget. Emmanuel made some comments in a piece by the Hastings Center that at first glance seemed to call for rationing. However, Emmanuel clarified himself in an interview with ABC News:

One of the passages written by Emanuel and used as evidence by Palin and others that he would favor withholding medical care from those who aren’t productive members of society include a 1996 contribution to the Hastings Center Report, in which he said that under the “civic republican or deliberative democratic” construct, “services provided to individuals who are irreversibly prevented from being or becoming participating citizens are not basic and should not be guaranteed. An obvious example is not guaranteeing health services to patients with dementia. A less obvious example is guaranteeing neuropsychological services to ensure children with learning disabilities can read and learn to reason."

Is he saying, as Palin and others have suggested, that those who aren’t “participating citizens” should have no guarantee to health care?

“No,” Emanuel says, “and I think I made it pretty clear I wasn’t endorsing that view, I was analyzing that perspective and what it might mean in practical terms. The rest of the text around that quote made it made it pretty clear I was trying to analyze it and understand it, not endorse it.”

Emanuel acknowledges that philosophical treatises can be difficult to consume and might lend themselves to this kind of misinterpretation. People in the world of academia “tend to know your whole body of work, and when they make a response it tends to be to one line of argument in context.” But that said, “a lot of philosophy can sometimes seem extremely abstract to people and hard to follow -- even well-educated people.” He says sometimes he has trouble following a philosophical article. “They’re not necessarily the easiest thing to read.”

(See also our blog “When Academic Words Become Political Ammunition,” July 28.)

In another article used as grist for his critics, in Lancet in January 2009, Emanuel and two co-authors discussed rationing care. But Emanuel cautions the goal of the article was not to apply his views of rationing onto providing health care in general.

“We were examining a very particular situation,” he said.

The situation: “we don’t have enough organs for everybody who needs a transplant. You have one liver, you have three people who need the liver - who gets it? The solution isn’t ‘We get more livers.’ You can’t. It’s a tragic choice.” It’s a decision made in the story in the context of “absolute scarcity.”

“it doesn’t apply generally to health care services more broadly,” Emanuel underlines. “Only by ignoring what we say there could anyone come to a different conclusion. Only by taking two sentences out of their complete context.”

In that article Emanuel analyzed eight different views that have been advocated and, with his co-author, argued none are adequate. They combined five views to create the “Complete Life” theory. One of the arguments it that the younger patient should get the liver before the older patient -- though Complete Life theory makes exceptions to that rule.

As it turns out, I took a glance at the report mentioned in the article. I used to be interested in philosophy but quit because I found the writing confusing and impenetrable; that was the case with the article in question. I was initially taken aback based on the paragraph I read, but upon a re-read, Emmanuel is indeed describing a particular philosophical stance, not endorsing it.

We shouldn't blame Palin for making a mistake in interpreting a densely-worded article. However, public figures need to make sure their comments are accurate. If they turn out to be incorrect, they need to issue a retraction. If Palin wants to oppose increased government regulation of healthcare, that's her right, but she needs to retract her comment on Emmanuel's article.

Editor: An earlier version of this article said Emmanuel's paper was published by the Brookings Institution, a think tank. Brookings' health policy center is known as the Engelberg Center for Health Reform; I got confused here. The Hastings Center is an independent bioethics think tank.

End of life provision out of US Senate reform bill

A Wall Street Journal article reports that the end-of-life counseling provision in one of the US health reform bills has been dropped from consideration at the request of Sen Charles Grassley, a Republican from Iowa. Grassley is what's called a veto player in political science - the Senate requires 60 votes to stop debate on a bill and vote on it, and the Democrats will probably not be able to get 60 votes without some Republican support.

Additionally, the President has committed to passing a bill with bipartisan support. This is probably wise. Should the Democrats pass a bill along party lines but later lose control of Congress or the Presidency, the Republicans will likely gut whatever the Democrats do, no matter whether it was good policy or not.

The problem with this approach is that too many Republicans are frankly not basing their actions on good policy.

The Guardian: Gay-friendly congregations can provide a nurturing spiritual community

Rabbi Hillel Athias-Robles writes a very moving story in the Guardian, a UK newspaper. It references a recent decision by the US American Psychological Association to recommend to psychotherapists not to tell clients that they can change their sexual orientation. The APA did also recommend that for some clients, religion was more important than sexuality, and for these folks, celibacy is a valid option.


Last week the American Psychological Association adopted a resolution stating that mental health professionals should avoid telling clients that they can change their sexual orientation through therapy. It recognised that many of the clients wanting such a change were those whose religious beliefs conflicted with their sexual orientation. Among its suggestions, it proposed that therapists discuss with their religious gay and lesbian clients the possibility of joining gay-friendly congregations.

Reading this evoked memories of my journey from religious repression to religious liberation, from ultra-Orthodox Judaism, which condemns homosexuality, to its Liberal counterpart, which celebrates it.

As a young teen, I began practising – along with my family – ultra-Orthodox Judaism, which was teeming with laws. Cardinal among the prohibitions was one from Leviticus 18:22: "Thou shalt not lie with a man as with a woman, it is an abomination." This made my life untenable. As much as I tried to abide by every commandment, my efforts were insufficient. I knew that I was gay and that made me an abomination.

At 17 I moved to Jerusalem to study in a yeshiva, a seminary devoted to the study of the Torah. I naively hoped that by cloistering myself with sacred texts I would be miraculously purged of my deviation. Reality crushed my buoyancy – my attraction towards men intensified.

I tried to exhaust all possible means for my rehabilitation – crying, praying, fasting. When all this failed, I heard of a support group for Orthodox men struggling with homosexuality.

At the group, we were told that homosexuality was a pathology called SSA – Same-Sex Attraction. We were sick. In our meetings, and also during my private sessions with the therapist, it was said that we could only find fulfilment by marrying a woman. We needed to convert to heterosexuality, and could achieve this by adopting masculine traits and gender-appropriate attitudes, like engaging in team sports or hanging out with the "lads".

With time, I began to feel increasingly pressured to wed, to be fruitful and multiply. This way I would channel my sexual energies and be "cured". At 21, I went through an arranged marriage. I was engaged within less than a week of meeting my bride-to-be, and we moved to Amsterdam and then to London.

Naturally, all those promises were in vain – and at the expense of an innocent girl. Over the years, my secret began riving at me from my entrails. I was sick of deceiving my wife and myself. I told her the truth. Shortly thereafter she left me, taking our three daughters to Argentina. The pain I put all of them through is an albatross I will carry on my shoulders for ever.

After my ordeal, I burst out of the closet and considered renouncing my faith. I nonetheless came to realise I needed spirituality. Just as I couldn't repress my sexuality, I couldn't repress my spiritual self either. I needed an alternate source of meaning.

With trepidation I approached the headquarters of Liberal Judaism in London, a movement founded on the principles of egalitarianism and inclusivity, which conducts same-sex commitment ceremonies. The movement extended to me its unconditional support.Having been ordained as a rabbi, I joined Northwood and Pinner Liberal Synagogue and it felt like coming home. I now have a partner and have reached a level of happiness I never dreamed possible.

There are many other movements across the faith spectrum which fully embrace their LGBT members. Transitioning from a conservative religion to an inclusive one is not easy. Yet the bliss felt by being at peace with oneself and being welcomed into an accepting community outweighs the cost. If you take the leap, there will be many to catch you. Trust me, I was there.

Hillel Athias-Robles is assistant rabbi of the Northwood & Pinner Liberal Synagogue

Update on the alleged "death panels": Newt Gingrich endorses Palin's quackery, but he also endorsed end-of-life counseling

As an addendum to the previous post, Matt Taibbi of TrueSlant.com chronicles the fact that Newt Gingrich, who made statements supportive of Palin's erratic outburst against nonexistent "death panels", was in fact thinking of end-of-life counseling. Nonetheless, he has previously made statements supportive of such counseling in Medicare.

"More than 20 percent of all Medicare spending occurs in the last two months of life. Gundersen Lutheran Health System in La Crosse, Wisconsin has developed a successful end-of-life, best practice that combines: 1) community-wide advance care planning, where 90 percent of patients have advance directives; 2) hospice and palliative care; and 3) coordination of services through an electronic medical record. The Gundersen approach empowers patients and families to control and direct their care. The Dartmouth Health Atlas has documented that Gundersen delivers care at a 30 percent lower rate than the national average ($18,359 versus $25,860). If Gundersen’s approach was used to care for the approximately 4.5 million Medicare beneficiaries who die every year, Medicare could save more than $33 billion a year."

via Health Care Rx: Across the Country, Some Systems Are Getting It Right – Newt Gingrich.

That was Newt Gingrich just a few months ago praising the “Advance Directives” practiced by a hospital in Wisconsin. Advance Directives are another word for the end-of-life consultations that the teabggers have been flipping out over of late. Gingrich loved them a few months ago...

...

On This Week he argued with George Stephanopolous and Howard Dean about the programs. Check it out:



STEPHANOPOLOUS: The only thing that’s in the bill is that Medicare would pay for what they say is voluntary counseling on end-of-life issues.

GINGRICH: I think people are very concerned when you start talking about cost-controls… you’re asking us to trust the government. Now I’m not talking about the Obama administration, I’m talking about the government. You’re asking us to believe that the government is to be trusted. We know people who’ve said routinely, well, you’re going to have to make decisions. You’re going to have to decide. Communal stadards, historically, is a very dangerous concept.

STEPHANOPOLOUS: It’s not in the bill.

GINGRICH: (stammering) B-but, the bill’s… a thousand pages of setting up mechanisms. It sets up 45 different agencies. It has all sorts of panels. You’re asking us to trust the government when there clearly are people in the government who believe in establishing euthanasia, including selective standards.

In other words, there may not be a death panel in the bill, but there are other panels, and while no one has actually ever said such a thing and it is not relevant to this particular discussion, I nonetheless assert that in general it is true that “people in government” believe in euthanasia.

Amazing. I mean, talk about being full of shit. This is as clear a case as you will ever find of a politician just getting up on television and just flat-out dogging it, saying something without even the faintest shred of belief, just as a means to an end. What an asshole!

I know some politicians have kind of a wink-wink nudge-nudge attitude towards lying, and some of them in private will act almost like it’s funny, part of the job description. But there are limits to how much even a politician should be allowed to lie. That’s especially when he’s lying in order to scare a bunch of old people.

This might be a good time to call to attention one relevant facet of a code of conduct that Sojourners developed for health reform:

I believe that all people have a moral obligation to tell the truth. To serve the common good of our entire nation, all parties debating reform should tell the truth and refrain from distorting facts or using fear-based messaging (Leviticus 19:11; Ephesians 4:14-15, 25; Proverbs 6:16-19).

If you listen to some people, health reform in the US means that we'll shoot the elderly to save money

Sarah Palin, the retired governor of Alaska and Vice-Presidential candidate in the 2008 election, recently issued an extremely bizarre statement on health reform on her Facebook page:

As more Americans delve into the disturbing details of the nationalized health care plan that the current administration is rushing through Congress, our collective jaw is dropping, and we’re saying not just no, but hell no!

The Democrats promise that a government health care system will reduce the cost of health care, but as the economist Thomas Sowell has pointed out, government health care will not reduce the cost; it will simply refuse to pay the cost. And who will suffer the most when they ration care? The sick, the elderly, and the disabled, of course. The America I know and love is not one in which my parents or my baby with Down Syndrome will have to stand in front of Obama’s “death panel” so his bureaucrats can decide, based on a subjective judgment of their “level of productivity in society,” whether they are worthy of health care. Such a system is downright evil.

Health care by definition involves life and death decisions. Human rights and human dignity must be at the center of any health care discussion.

Rep. Michele Bachmann highlighted the Orwellian thinking of the president’s health care advisor, Dr. Ezekiel Emanuel, the brother of the White House chief of staff, in a floor speech to the House of Representatives. I commend her for being a voice for the most precious members of our society, our children and our seniors.

We must step up and engage in this most crucial debate. Nationalizing our health care system is a point of no return for government interference in the lives of its citizens. If we go down this path, there will be no turning back. Ronald Reagan once wrote, “Government programs, once launched, never disappear. Actually, a government bureau is the nearest thing to eternal life we’ll ever see on this earth.” Let’s stop and think and make our voices heard before it’s too late.

Incendiary lies about a critical subject are downright evil. There is no such legislation on the table. Palin is either mistaken or lying.

There is a passage that would allow reimbursement for end-of-life counseling in Medicare, the social insurance program for the elderly in the US. Doctors would be able to counsel patients on what, if any, lifesaving measures they want taken, and may ask them about living wills. In contrast, futile care is generally the default; such care extends life only with great discomfort, for a short time and at great cost. As the Huffington Post reports, there is extant legislation to allow Medicare to reimburse for end of life counseling; several Republicans have co-sponsored the legislation in question. If Palin is mistaken, she is almost certainly thinking of the end-of-life counseling provision. However, it is not excusable for a former public official to read legislation this carelessly.

As a side note, Palin has a child with Down's Syndrome. She asked that her children be off-limits during the Presidential campaign, which was a reasonable request. However, she then paraded her children around and made a big fuss over how she had not chosen to abort Trig's pregnancy. Now she brings Trig up again, making the wild accusation that there are those who would are thinking that children with Down's Syndrome should be euthanized. Some parents choose to terminate a pregnancy with Down's Syndrome as they feel they cannot support a child with the condition; this is not an easy choice for them. Palin's cavalier words are an insult to parents who feel they have had to do so. Additionally, the end-of-life counseling provisions are in Medicare, and Medicare beneficiaries do not generally get pregnant due to age (albeit some people with disabilities are in Medicare).

Sadly, other Republicans such as Senator Charles Grassley (R-IA) and Rush Limbaugh have jumped on this false bandwagon. This behavior is irresponsible. Palin's contentions, whether made on purpose or by accident, are demonstrably false, and it is not an excuse for US legislators, who have large legislative staffs, to be mistaken.

Edit: After further consideration, Palin's misconceptions (or outright lies) may be based on a general fear that comparative effectiveness research will lead to excessive rationing of care. In fact, it's more likely she was thinking of that that of the end-of-life counseling provisions. In any case, her statement is still demonstrably false. There are no 'death panels'.

Jibjab: He's Barack Obama

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US Senate Democrats from manufacturing states want tariffs on foreign goods in climate change bill

The Wall Street Journal reports that 10 Democratic Senators have signed a letter to the President saying that there must be tariffs on goods from countries that do not have carbon limits in a climate change bill. While I am not an economist, I understand that this is actually the best technical solution. While it might seem protectionist on its face, I would endorse a tariff system like this provided it was well designed - it would give China and India an incentive to strictly contain their carbon emissions. I am a fan of international engagement, but I'm under no illusions that China and India would otherwise enact a cap and trade mechanism.

That said, the first problem is that this may violate WTO regulations. The second is that the Chinese and Indians will choose to interpret this as protectionism (albeit they will probably be right).

It would be nice if the President used the threat of a tariff to get the Chinese and Indians to put explicit limits on their carbon emissions. I'll leave that bit to the State Department. However, I will say this: there is no excuse for any nation, whether in the West or the Global South, to not contain their carbon emissions. Trading short term economic prosperity for flooding, massive population displacement, massive shifts to weather patterns, disruption of water and the food supply and other similar problems is not a choice that a rational nation can make.

For-profit insurers: how big a problem are they?

Health insurance in the US is dominated by for-profit insurers (in contrast, the hospital sector is dominated by non-profits). Several people on the political left in the US have condemned the insurers for making billions of dollars in profits while denying care, retroactively cancelling policies (aka recission), and not doing anything to control costs.

However, a Wall Street Journal article notes that average profits at publicly traded US insurance companies average in the 4% range. That's very low. If you introduced a public option, the article says it would only be able to undercut premiums for the for profit insurers by 4% or so - assuming it can achieve the same scale as the largest ones.

You will hear that insurers spend only about 83% of every dollar they receive in premiums on medical care - that's known as the medical loss ratio. The medical loss ratio is a very, very rough gauge of an insurer's efficiency - in fact, it's such a rough gauge that we should consider ignoring it entirely. The medical loss ratio includes profits, but it also includes the expenses that insurers spend managing care, combating fraud, and other administrative expenses. Medicare and Medicaid perform very well on a loss ratio standard, but they need to do much more in managing care, and they need to do more in fraud prevention.

Of course, the nature of for-profit business has led the insurers to seek aggressive tactics to preserve their bottom lines. As said earlier, they've conducted recissions and denied necessary care. They've also sought to enroll healthier people at the expense of other plans. They've been too quick to offer skimpier benefit packages, excluding such services as cancer care, mental health treatments, inpatient care and others, instead of becoming more efficient.

While insurers have invested in wellness, disease management and other care management initiatives that produce a return, but these innovations are dwarfed by their antisocial behavior.

Regardless of whether a publicly sponsored insurance plan is enacted in the US, Congress must take care that the rules of the game are stringent. Delivering efficient care must be the only way that insurers can compete. The rules of the marketplace must prohibit them from discriminating against the sick and selectively marketing to healthier people. There must be an adequate minimum benefit standard. I think that the for-profit insurers have skills and infrastructure that could be used to the nation's benefit, but the market place must be set up so that the ONLY thing they can do is to be more efficient at delivering care.

Employer requirements and health reform

In the US, a lot of employers think it's their duty to offer health insurance to their employees. Indeed, this is the way the system has been set up. More than one small business owner testifying before Congress has done their utmost to maintain health insurance coverage even in the face of rising premium costs. Wal-Mart, in contrast, was castigated for not offering coverage - and its workers' wage levels meant that many of them had to seek coverage in Medicaid or other publicly subsidized insurance programs.

We want employer dollars on the table to pay for health reform. We want to be sure that employers won't simply dump their employees into the insurance exchange, where they may then need publicly subsidized insurance coverage or Medicaid. An economist might say that the employers would increase their employees' wages to reflect that they're now not providing health insurance. I'd say, that could happen in the long run, but there's no guarantee. Furthermore, we want money on the table specifically to pay for health reform.

As I mentioned in an earlier post, the Center on Budget and Policy Priorities had an excellent piece on how to structure an employer mandate. Briefly, employers would be assessed on their payroll (i.e. how much money in total they were spending on employee compensation). The requirement could be graduated. For example, a firm that didn't offer insurance might need to pay the government 1-3% of the first few hundred thousand dollars in payroll, going up to 8% for payroll amounts over a few million dollars.

CBPP has since revised that piece to update new legislation coming out of the Senate Finance Committee. Unfortunately, Finance is doing something a bit more drastic and ill-advised. In their legislation, employers not offering insurance would instead have to pay the cost of however much it costs the government to subsidize those people. This would only apply to people under 300% of the US federal poverty level, since these are the folks who would qualify for subsidies in the Finance bill (this amount, by the way, should ideally be raised to 350% or 400%).

This requirement could be dangerous. Judith Solomon, the author of the article, argues that employers would have a disincentive to hire low-income workers, particularly single mothers. Single mothers would be especially discriminated against since they are almost certainly the entire family's only earner, and it would be very difficult for them to exceed 300% of the poverty line in a low wage job. It's not really that hard for employers to determine or guess who the poor people or single mothers are, and it would be very difficult for those people to prove that they had been discriminated against.

The US corn lobby, Sen. Charles Grassley and protectionism

The Washington Post has an article on Sen Charles Grassley's hypocritical defense of a tariff on imported ethanol that primarily targets Brazil and defends the US corn industry. Most of Brazil's ethanol is derived from sugarcane. I'm not an environmental economist, but I understand that producing sugarcane ethanol produces net energy. Producing corn ethanol may actually be a net waste of energy.

If the article is true, it is unfortunate that Sen. Grassley would choose a path of protectionism that offers no environmental advantages.


PRESIDENT Obama's nominee as ambassador to Brazil, Thomas A. Shannon Jr., is a longtime diplomat trained to speak honestly without giving unnecessary offense. So when Sen. James Webb (D-Va.) asked Mr. Shannon during his July 8 confirmation hearing about lifting the 54-cents-per-gallon tariff on imported ethanol, most of which comes from Brazil, the State Department veteran responded carefully. "I personally believe that it would be beneficial, sir," Mr. Shannon remarked, "but I recognize that, especially in the U.S. Congress, there are different views at this point in time." In other words: It might be a good idea, but Congress sets policy, not ambassadors.

Innocuous as it was, this statement did not go down well with Sen. Charles E. Grassley, the Republican from Iowa -- and fierce defender of that corn-growing state's ethanol industry, a sector whose prosperity the tariff protects. Even a hint of opposition to the tariff was intolerable to Mr. Grassley, so he threatened to block the Shannon nomination unless the Obama administration "clarified" its stand. No doubt mindful of Mr. Grassley's leverage over the Senate Finance Committee's health-care reform effort, the White House gave him what he wanted: a letter last week from Secretary of State Hillary Rodham Clinton and U.S. Trade Representative Ron Kirk promising "no plans" to change the tariff. Mr. Shannon's confirmation is back on track.

But the price of enforcing Mr. Grassley's taboo is not trivial. The ethanol tariff is but one component of a lavish system of subsidies and protections for U.S. ethanol producers. Ethanol blended into U.S. gasoline gets a tax credit of 45 cents per gallon, regardless of its origins; hence the "need" for an offsetting tariff on ethanol from abroad. (Ethanol imports are also subject to a tax equal to 2.5 percent of its market value.) Mr. Grassley and other supporters say the ethanol tariff preserves U.S. self-sufficiency in renewable fuels. In reality, it artificially boosts the price of U.S.-grown corn, thus distorting the markets for food and energy. U.S. producers may not be able to meet Congress's ethanol consumption target of 36 billion gallons per year by 2022. What better place to get the rest than Brazil, a fast-growing democratic giant with which the United States enjoys a strong political and economic relationship?

The U.S. ethanol tariff irritates that relationship, and Mr. Shannon was absolutely right when he implied that both countries would benefit from free trade. The tariff expires next year; its bipartisan critics in the Senate will probably try again to kill it. To win, they would need help from President Obama, who unwisely backed the tariff as a senator from corn-growing Illinois and as a candidate for the White House -- but who could adjust his position now. Alas, the hope of that is fainter after Mr. Grassley's little power play.

Check cashing stores, the "neighborhood", and local legislative action in a Maryland County

Prince George's County in Maryland (which is an Eastern state in the US) is apparently considering "draconian" legislation that would severely restrict the operations of check cashing stores.

Briefly, there are a number of unbanked people in the US (not to mention in Latin America). A paper by the World Bank examines the demographics of the unbanked and why they might be unbanked. The authors conducted survey research. I haven't read the whole paper, but the unbanked are mainly poor and largely Hispanic (although there are a number of African-American unbanked). Major reasons cited for being unbanked are lack of trust in banks, or that bank fees are too high; for example, many banks in the US assess monthly fees for balances below a certain level. As an aside, no-fee and zero minimum balance accounts are often available if you look hard enough; credit unions, which are non-profits, often have these features.

A Washington Post article corroborates some of the findings. Fees are capped in PG County, but competition has driven the fees lower. Nonetheless, interviewees are paying something in the region of 1% per check. That money adds up, especially for low-income people.

My fiance and I live in Hyattsville, which is frankly not in the nicest part of the county. What can I say, it was cheap. In any case, I asked potential rental offices to describe the neighborhood. I had meant what grocery stores and restaurants were in walking distance, but in fact the word "neighborhood" is code in the US. If asked by someone White, it can basically be interpreted as how many people of color are living there.

In any case, check cashing stores are not commonly found in "nice" neighborhoods.

But a cluster of check-cashing stores leads other people to think: This is a bad part of town.

The County Council is considering restrictions that would make it more difficult to open check-cashing stores as part of a long-standing effort to improve Prince George's image by clamping down on certain types of businesses, including strip clubs, liquor stores, pawnshops and adult video stores.

The latest proposal highlights a persistent tension among residents of the economically stratified suburb, which includes both struggling, often blighted, urban areas and upscale, manicured subdivisions.

"People want to have quote-unquote 'nice things' in their neighborhoods, and a check-cashing place may very well be a nice entity," said council member William A. Campos (D-Hyattsville), who proposed the bill. "Unfortunately, though, the image that it carries is not so great. And that's something people think about when they're looking to move into a neighborhood. . . . You don't see check-cashing places in Bethesda."

...

Critics said check cashers prey on the less fortunate and attract crime because of the amount of cash going out the door.

The Prince George's bill would require new check cashers to acquire a special zoning exception from the county, involving a lengthy approval process with a public hearing. It would also limit the stores' hours, impose such security requirements as having a guard and bullet-resistant glass, and prohibit the stores from having ATMs or from sharing floor space with other businesses.

The last clause could be particularly onerous, business owners said, because many also offer money-wiring services or share space with liquor or grocery stores.

As an aside, Bethesda is a much richer and more expensive town. No way we could afford to live there.

If the restrictions put check cashing stores out of business, they will deprive county residents of a vital service. If you want to put these folks out of business - and this would frankly not be a bad thing - you need to ensure that more viable alternatives are in place first. I think this probably means access to credit unions (or banks) that offer no-fee accounts, and loans at a reasonable price. However, I'm not certain that the credit unions will be able to maintain a viable business model in a poorer area. I'm not sure if Campos realizes that.

Guernica: Food among the ruins

An article in Guernica, an online magazine, argues that it would be technically feasible to convert most of the land in Detroit to farming. The entire city of Detroit is close to being a food desert, whereas most food deserts in the US are only parts of inner cities. Converting most of the city to farmland would be of tremendous benefit to the residents. However, community leaders the author interviewed felt that the political and community will to do this does not yet exist.

The article is quite long, but here's an excerpt:

There are a few cities in the world that grow and provide about half their total food supply within their urban and peri-urban regions—Dar es Salaam, Tanzania; Havana, Cuba; Hanoi, Vietnam; Dakar, Senegal; Rosario, Argentina; Cagayan de Oro in the Philippines; and, my personal favorite, Cuenca, Equador—all of which have much longer growing seasons than Detroit. However, those cities evolved that way, almost unintentionally. They are, in fact, about where Detroit was agriculturally around one hundred and fifty years ago. Half of them will almost surely drop under 50 percent sufficiency within the next two decades as industry subsumes cultivated land to build factories (à la China). Because of its unique situation, Detroit could come close to being 100 percent self-sufficient.

First, the city lies on one hundred and forty square miles of former farmland. Manhattan, Boston, and San Francisco could be placed inside the borders of Detroit with room to spare, and the population is about the same as the smallest of those cities, San Francisco: eight hundred thousand. And that number is still declining from a high of two million in the mid-nineteen fifties. Demographers expect Detroit’s population to level off somewhere between five hundred thousand and six hundred thousand by 2025. Right now there is about forty square miles of unoccupied open land in the city, the area of San Francisco, and that landmass could be doubled by moving a few thousand people out of hazardous firetraps into affordable housing in the eight villages. As I drove around the city, I saw many full-sized blocks with one, two, or three houses on them, many already burned out and abandoned. The ones that weren’t would make splendid farmhouses.

As Detroit was built on rich agricultural land, the soil beneath the city is fertile and arable. Certainly some of it is contaminated with the wastes of heavy industry, but not so badly that it’s beyond remediation. In fact, phyto-remediation, using certain plants to remove toxic chemicals permanently from the soil, is already practiced in parts of the city. And some of the plants used for remediation can be readily converted to biofuels. Others can be safely fed to livestock.

Leading the way in Detroit’s soil remediation is Malik Yakini, owner of the Black Star Community Book Store and founder of the Detroit Black Community Food Security Network. Yakini and his colleagues begin the remediation process by removing abandoned house foundations and toxic debris from vacated industrial sites. Often that is all that need be done to begin farming. Throw a little compost on the ground, turn it in, sow some seeds, and water it. Water in Detroit is remarkably clean and plentiful.

Morningstar: Will Cash for Clunkers keep the auto industry rolling?

The US enacted a program informally known as Cash for Clunkers, where the government sponsors rebates of $3,500 to $4,500 for consumers to trade in old vehicles to new, more fuel efficient ones. The old vehicle must have had an EPA-rated fuel economy of less than 18 mpg, and the new one must have over 22 mpg. The standard, in other words is quite lax. Nonetheless, it seems that most people who are taking advantage of the program are trading in heavy vehicles for smaller ones. This is good.

I'm not sure that the bill is good from an environmental standpoint. The government requires that the traded in vehicles be disabled by destroying their engines. The remains would presumably be scrapped. This too incurs environmental costs.

Here, Morningstar argues that the auto industry has long-term issues that they will have to resolve independent of this program, although it is definitely a short-term boost and does provide some stimulus to the economy. To revive the industry, all players (even the Japanese manufacturers) have overcapacity that they need to reduce.

My view is that there are probably better places to put the US government's money. The House passed an extension, and the Senate is likely to vote yes - my inclination would be to vote no if I were a Senator, but there are (sadly) political factors here. In any case, the program would probably get only $1-2 billion more - there are bigger battles to fight.

Barbara Ehrenreich: the Destruction of the Black Middle Class

Barbara Ehrenriech is a journalist who wrote a book, Nickled and Dimed, after she went undercover, worked several minimum-wage jobs and basically failed to make ends meet. In an article on Huffington Post she coauthored with Dedrick Muhammad, a researcher at the progressive think tank Institute for Policy Studies, she argues that the African-American middle class is being severely affected by the recession:

Left out of the ensuing tangle of commentary on race and class has been the increasing impoverishment -- or, we should say, re-impoverishment -- of African Americans as a group. In fact, the most salient and lasting effect of the current recession may turn out to be the decimation of the black middle class. According to a study by Demos and the Institute for Assets and Social Policy, 33 percent of the black middle class was already in danger of falling out of the middle class at the start of the recession. Gates and Obama, along with Oprah and Cosby, will no doubt remain in place, but millions of the black equivalents of Officer Crowley -- from factory workers to bank tellers and white collar managers -- are sliding down toward destitution.


For African Americans -- and to a large extent, Latinos -- the recession is over. It occurred between 2000 and 2007, as black employment decreased by 2.4 percent and incomes declined by 2.9 percent. During the seven-year long black recession, one third of black children lived in poverty and black unemployment -- even among college graduates -- consistently ran at about twice the level of white unemployment. That was the black recession. What's happening now is a depression.


Black unemployment is now at 14.7 percent, compared to 8.7 for whites. In New York City, black unemployment has been rising four times as fast as that of whites. Lawrence Mishel, president of the Economic Policy Institute, estimates that 40 percent of African Americans will have experienced unemployment or underemployment by 2010, and this will increase child poverty from one-third of African American children to slightly over half. No one can entirely explain the extraordinary rate of job loss among African Americans, though factors may include the relative concentration of blacks in the hard-hit retail and manufacturing sectors, as well as the lesser seniority of blacks in better-paying, white collar, positions.


But one thing is certain: The longstanding racial "wealth gap" makes African Americans particularly vulnerable to poverty when job loss strikes. In 1998, the net worth of white households on average was $100,700 higher than that of African Americans. By 2007, this gap had increased to $142,600. The Survey of Consumer Finances, which is supported by the Federal Reserve Board, collects this data every three years -- and every time it has been collected, the racial wealth gap has widened. To put it another way: in 2004, for every dollar of wealth held by the typical white family, the African American family had only one 12 cents. In 2007, it had exactly a dime. So when an African American breadwinner loses a job, there are usually no savings to fall back on, no well-heeled parents to hit up, no retirement accounts to raid.


All this comes on top of the highly racially skewed subprime mortgage calamity. After decades of being denied mortgages on racial grounds, African Americans made a tempting market for bubble-crazed lenders like Countrywide, with the result that high income blacks were almost twice as likely as low income white to receive high interest subprime loans. According to the Center for Responsible Lending, Latinos will end up losing between $75 billion and $98 billion in home-value wealth from subprime loans, while blacks will lose between $71 billion and $92 billion. United for a Fair Economy has called this family net-worth catastrophe the "greatest loss of wealth for people of color in modern U.S. history."

I'd invite readers outside the US to think about wealth and income disparities in their own countries. How are various minority groups in your own country being affected by the recession? Is your government directing aid targeted at those most in need?

Center on Budget and Policy Priorities: insurance plans offered in an exchange should have limits on out of pocket spending

I mentioned earlier that, while searching for individual health insurance plans for myself, I noticed that a number of plans from Kaiser Permanente had limits on out of pocket costs. In insurance jargon, this can be called a stop-loss. In my current plan, I would pay no more than $10,000 a year (including my premiums) out of pocket. Services excluded from my plan would not count towards this limit, but unlike some other plans I've seen, my Kaiser plan has no illogical exclusions.

It is very likely that health reform will create a national exchange where Americans who can't get insurance through their employer can shop for it. Judith Solomon, a senior fellow at the Center on Budget and Policy Priorities, argues that insurance plans offered on the exchange should contain an out-of-pocket limit. In addition, the minimum benefit design should ensure that there are no illogical exclusions or limits on certain services; for example, some individual plans limit mental health treatments or limit inpatient (i.e. in the hospital) treatment. These limitations would be harmful if someone got hospitalized, or needed mental health counseling for any reason.

I would go so far as to say that Congress should mandate that all plans offered anywhere (i.e. including through large employers) should contain an explicit stop loss. It can be tiered by income, and I'm not saying that we should limit rich folks' out of pocket expenses to $1,000. However, one of the main purposes of insurance is to protect your assets. People who get really ill might otherwise spend a lot of money out of pocket, and we don't want people rationing their own care in an emergency situation. Judging from my own insurance plan, a high stop loss (i.e. high enough that it would only apply to people in major accidents) should be feasible without driving premiums up significantly.

In addition, Solomon cites some research on how much low-income people can afford to pay out of pocket. For example, one study conducted among 4 states showed that enrollment in public programs dropped by half if eligible people had to pay more than 3% of their family's income in premiums. When premiums exceeded 8% of income, enrollment dropped by 90%. In other words, the exchange's rules must protect the poor.

Dr. Abramah Verghese: The Practice Of Medicine and The Color of Money

Dr. Abraman Verghese, an internist, offers a perspective on American medicine.


So seriously, does anyone believe that we doctors can own a hospital (or sleep center if you are a sleep specialist, or imaging center, or outpatient surgery center, or chemo center) and be totally objective about referring patients there?
We doctors aren't coming out pretty in the health care debate. A few days ago in a Wall Street Journal online piece, I asked, Who Speaks for Medicine? With physician groups lobbying for their self interests, who, I asked, represents medicine, by which I mean the art of medicine, the ideals that we love to impart to our students at graduation and white coat ceremonies?

Well today's New York Times has two stories that show us at our conflicted best:

First, a report of a doctor-owned hospital in McAllen, called, appropriately, Doctors Hospital, which is flexing its muscles in Congress in the health care debate. The hospital (or rather its doctor-owners) has a big voice largely because of the substantial donations it or its proxy made to politicians. What does Doctors Hospital want? It wants to be sheltered from legislation that affects its income--and so far it has worked. (This is the same hospital that was written about beautifully in the New Yorker by Atul Gawande--a hospital that provides great care for patients but consistently does more tests and has more consultants involved per patient than comparable hospitals elsewhere.)

Another report also in today's New York Times describes dozens who were arrested in a health care fraud sweep. Alas, doctors were among those arrested in this scheme. It involved selling 'arthritis kits' to patients that were worthless; another scheme involved billing Medicare for Ensure and other liquid supplements that were never given to patients or billed to dead patients. The estimate is that BILLIONS of dollars are lost in this fashion, by bilking Medicare.
I am more and more convinced that the President does not need to look for new taxes to fund his health care plans. The savings in Medicare from eliminating fraud would be huge; add to that savings from restructuring payments and it would be even more substantial.

Speaking of payments, the AMA and other organizations are fighting the idea of an independent commission that would set fees and reimbursement schedules. God knows, such a commission might make it pay to be doing for a patient rather be doing to a patient. Alas, the money is in doing to; the AMA is against that changing.

As a confession, in those days when we all had close and cozy relationships with pharmaceutical companies, I took honoraria, spoke at conferences in beautiful resorts and had many free lunches. Of course I told myself, that all my professors and colleagues were doing it so it had to be OK; and I actually thought I could certainly separate the free lunch from any tendency on my part to prescribe a drug produced by that company. Looking back that was naive.

What brought about change was public scrutiny. Universities became hyper aware and now of course we all treat pharma contact with great caution. My point is, until public sentiment, embarrassment and finally our good conscience kick in to tell us something is wrong, we will keep dipping into that trough.

I think legislation needs to put an end to doctors profiting on businesses to which they can funnel patients--that is business not medicine. If you try to call it medicine then it is corruption. Without legislation, it will keep happening.

Washington Post: article on a small, African-American LGBT church

A recent article in the Washington Post offers a peek into the lives of Black LGBT folks who are also religious. The church has been a bedrock of African-American culture, but African-American Christians tend to have more negative views of homosexuality. Homophobia from the church, coupled with the very human need to find acceptance, can lead to LGBT people leaving the church and/or being careless in their sexual behaviors.

Then, to his surprise, about a dozen HIV-positive men and women answered Cheeks's call. Finally, Walker stood, too.

"I felt like I was in heaven," said Walker, who always heard homosexuality condemned from the pulpit of other churches he had attended. "The only place I feel safe is in my church."

He credits Cheeks with changing his life. The bishop told him to let God in and stop living in the shadows.

Walker was able to confess a deep secret for which he had long sought forgiveness. On the night of his honeymoon in 1973, he had slipped away from his wife to have sex with his best man. During his seven years of marriage, he betrayed her again and again.

The acceptance Walker found at Inner Light gave him the strength to stop abusing drugs and alcohol, he said. But it hasn't entirely erased the stigma of having HIV. Every morning, Walker opens a chest drawer filled with about 20 brown and white bottles of medicine for HIV, staph infection and failing kidneys. He doesn't keep the pills in the medicine cabinet of his Northwest Washington apartment for a reason, said his partner, Keith Short, who is also HIV-positive.

"You don't want visitors to come into the bathroom and say, 'Oh my God,' " Short said.

The desire to hide being HIV-positive -- not just from visitors but from prospective sexual partners -- is powerful and difficult to change. Some men are reluctant to reveal their health status to possible partners for fear of being rejected. Short said he might avoid the subject if he and Walker broke up and he were dating again.

"It would depend on how I feel," Short said, adding that he would probably use a condom but that in the heat of the moment, he couldn't guarantee it. "Sex is a very powerful thing."

That attitude, Cheeks said, is part of why gay black men in the District are disproportionately affected by HIV and AIDS. And why he has to keep preaching the message of safe sex.

Center for American Progress: LGBT Issues in Health Reform

CAP, a liberal US think tank, highlights some issues that same-sex couples face in health insurance.

One major issue: LGBT couples are usually not able to access insurance on the same terms as heterosexual couples. While insurance benefits offered to opposite-sex spouses and children are not taxed in the US, benefits to same-sex partners are, to the tune of about $1,069 in additional taxes per year per partner. Additionally, not all employers offer domestic partner benefits. It is an option for same-sex couples where both partners are employed at large firms to get two different policies. However, the small and individual markets are broken.

Another major issue that would likely be solved without any additional action is that pre-existing conditions are denied. LGBT folks have a higher prevalence of HIV and certain cancers.

The last major issue is that transgendered people have significant problems with insurance. Many companies have attempted to deny certain services, or coverage in general, to transgendered applicants. In some cases, insurers may have denied coverage for completely unrelated conditions (e.g. a broken arm) by claiming that these were related to gender transition. Additionally, gender transition services are generally uncovered. However, due to the small number of transgendered people in general, coverage is usually cost-neutral. Several large companies cover these services successfully.

A discussion of community rating versus experience rating in health insurance markets

I apologize for the technical title, but I thought readers should be made aware of an issue in US health insurance markets that needs to be fixed.

Community rating means that every enrollee in a health insurance market gets charged the same price based on the health status of the community. In other words, healthy people subsidize the sick. Some definitions of community rating allow insurers to charge based on demographic variables such as age bands, gender or tobacco use (this may be referred to as modified community rating in technical literature).

Experience rating means that individuals have their premiums set based on their own health status (i.e. the experience of the individual or group). For example, if I have diabetes, I would be charged a higher premium - assuming I'm even offered insurance.

In the US, the first health insurers generally offered community rating. When for-profit insurers came along, they used experience rating to offer cheaper premiums to younger and healthier people. This was good for the new entrants. However, the older, community-rated insurance pools had sicker people, and they had to raise prices. This set off a cycle, where sicker people tended to remain in the pool as prices rose and healthier people left. This is an example of adverse selection (link to Wikipedia article on the subject).

Briefly, experience rating basically prices sick people - and any of us could become sick - out of the market. In addition, you cannot have a market where some insurers are using community rating and some are using experience rating. The Democratic health reform proposals in the US Congress would all end experience rating. I am under the impression that many Republican Congresspeople supported an end to experience rating as well. To my knowledge, all the European countries with private insurance markets do not allow experience rating.

Rating bands are a related concept. Generally, a rating band of 2:1 means that the highest premiums in a market could be no more than twice the lowest premiums. This is after considering all factors on which you can rate people, so if a state did this, a (for example) 64 year old obese female smoker who had cancer, diabetes and heart failure would pay no more than twice a 20 year old healthy man.

The health reform proposals would generally impose tight rating bands in the individual and probably small group markets (companies in the large group market, over 200 or so enrollees, generally charge everyone in the group the same premium anyway). I don't think most states don't have rating bands, so if you're a sicker person, if you're even offered individual insurance you could probably pay more than 10 times that of a healthy person. If you impose a rating band where there wasn't one previously, though, younger folks would face significantly higher premiums than they previously did. They'll have to a) be subsidized and b) stop their damn griping.

Back to the concept of experience rating vs community rating. As I said, I thought this was a no-brainer concept that was settled long ago. However, to my dismay, I've recently seen two articles which condemn the move away from experience rating based on the flawed 'skin in the game' argument:

Government could also free up the private market to change the economic incentives to have better health. If people have skin in the game, preventable costs fall. Safeway and other companies have saved a lot of money with wellness programs, and increasing cost-sharing also has a huge effect. Yet Democrats are moving in the opposite direction, prohibiting insurers and employers from designing policies based on health status and limiting the financial involvement of patients in their own care.

Shawn Tumulty, of CNN Money, has an article where he directly condemns moving away from experience rating:

2. Freedom to be rewarded for healthy living, or pay your real costs

As with the previous example, the Obama plan enshrines into federal law one of the worst features of state legislation: community rating. Eleven states, ranging from New York to Oregon, have some form of community rating. In its purest form, community rating requires that all patients pay the same rates for their level of coverage regardless of their age or medical condition.

Americans with pre-existing conditions need subsidies under any plan, but community rating is a dubious way to bring fairness to health care. The reason is twofold: First, it forces young people, who typically have lower incomes than older workers, to pay far more than their actual cost, and gives older workers, who can afford to pay more, a big discount. The state laws gouging the young are a major reason so many of them have joined the ranks of uninsured.

Under the Senate plan, insurers would be barred from charging any more than twice as much for one patient vs. any other patient with the same coverage. So if a 20-year-old who costs just $800 a year to insure is forced to pay $2,500, a 62-year-old who costs $7,500 would pay no more than $5,000.

Second, the bills would ban insurers from charging differing premiums based on the health of their customers. Again, that's understandable for folks with diabetes or cancer. But the bills would bar rewarding people who pursue a healthy lifestyle of exercise or a cholesterol-conscious diet. That's hardly a formula for lower costs. It's as if car insurers had to charge the same rates to safe drivers as to chronic speeders with a history of accidents.

This is all part of their effort to pass “universal” coverage and gradually transition everyone into a single government program like Medicare, thus insulating people even more from the costs of their lifestyle decisions. Don’t expect to win the war on obesity by making the government fatter.

The basis of the skin in the game argument is that people make wiser decisions about their health when they're exposed to costs. If you have a copay for a doctor's visit (meaning that you have to cough up some sum of money, that it isn't covered fully by insurance), you'll be more careful about visiting the doctor for trivial reasons. Similarly, if you're exposed to some sort of financial penalty for being fat or sick, you'll be careful not to be fat or sick. I find the first half of the argument more compelling than the second. However, when insurers charge sick people the full price for their illness, the result is that sick people get priced out of the market.

As to the second, most people don't choose to become sick or obese. It sure sounds like the WSJ folks think obesity can be treated simply by charging obese people more in insurance - and if so, why do those idiots oppose taxing fatty foods? Obesity is not simply a matter of faulty choice. In addition, to my knowledge, you need quite a large financial penalty or bonus to get people to change behavior. Applied to obese folks, that could be viewed as discrimination.

Now, I'll deal with Tumulty's argument. In the first part of his argument, he argues that states which made their individual insurance markets community rated drove up costs for everyone, and drove the younger people out of the plan. He is actually correct. Community rating in isolation is not health reform, and healthy people will be unlikely to buy insurance as it will cost them more than they think it's worth. However, if you mandate insurance, you get everyone into the market, so that the healthy subsidize the sick. If you add marketing and other restrictions that prevent each insurer from attracting a healthier group of enrollees, so that healthy and sick people are evenly distributed among all insurers, you avoid situations where one insurer gets all the sick people. If you add subsidies, you make sure that no one is paying too much. Tumulty forgot to mention that.