NJ Business Matters: The Blog of the CIANJ

Senate Democrats' Health Plan Still Only an Insurance Plan

Senator Reid has unveiled the latest Senate Democrat version of a health care bill that the Majority Leader hopes to have considered by the full Senate within a week. CIANJ will publish its At Issue brief on Monday, but in the interim readers will have to make do with a Washington Post story and CBO estimate. Oh, the horror.

The legislation is largely as advertised - consisting of an individual mandate, smaller fines on companies that do not offer insurance to employees, and new rules for insurance companies which include a requirement to accept all applicants. The largest gulf between the House and Senate remains financing. The House favors a Medicare tax increase for high wage earners, while the Senate prefers a tax on so-called "Cadillac Plans" with individual premiums in excess of $8,500 and family premiums costing more than $23,000. Both the House and Senate plans include the so-called "public option", but prohibit individuals from excercising a private option to not purchase insurance.

Senator Reid proclaims his package can make health insurance affordable to more than 95% of legal US residents. For her part, Speaker Nancy Pelosi declared,

House Democrats look forward to a constructive debate in the Senate and to working together to achieve historic reforms that will make health care more affordable and strengthen our economy

We must, once again, point out the difference between making health insurance more affordable and health care more affordable. The subsidies, tax credits, penalties and mandates in both the House and Senate all surround Americans' access to health care. However, doing that while keeping us on a fee-for-service model will not lower the steady increase of health care costs. It is not insurance companies that make insurance expensive - it is the cost of the professionals, technology and administration set up to administer the care.

House Majority Leader Expects Tort Reform to be Considered

Tort reform will reduce health-care costs without negatively impacting (and most likely improving) the quality of care. Naturally, it has been opposed by the interests most deeply entrenched on Capitol Hill, but House Majority Leader Steny Hoyer (D-MD) says that may not matter.

From the Baltimore Sun,

WALDORF - House Majority Leader Steny H. Hoyer said Tuesday night that Congress is likely to consider caps on medical lawsuits as part of its health care overhaul deliberations, but stopped short of assuring his Southern Maryland constituents that he would push for changes in malpractice awards.

At a town hall meeting that in its often angry tone and hostile questioning echoed dozens around the country over the past month, the No. 2 Democrat in the House of Representatives was repeatedly pressed about tort reform.

"You kind of glossed over this before," Dr. Michael Magee, an orthopedist from Edgewater, said after Hoyer told another questioner that he "certainly" expected the issue to be considered.

Hoyer, a leading recipient of campaign contributions from lawyers and law firms, said he is concerned about excessive jury awards in malpractice suits. But he also said that if noneconomic damages are capped, some victims of medical malpractice "may not get anything of substantial value through the years."

"I intend to look at this very seriously and discuss it with my colleagues," Hoyer said. "We do want to prevent specious suits. I think we can all agree on that."

Caps on malpractice awards often leave people to cringe because they feel uncomfortable about putting a price on someone else's pain and suffering. While that emotion is understandable, the reality is that a jury must do that anyway. Setting a cap simply lets an insurance company know the upper limit of its liability, and allows them to set prices accordingly. The predictability has already translated to lower insurance costs in some states, and has to be considered by Congress in any serious "reform" debate.

The National Journal has the best piece on the political back-and-forth on the issue, here.

Family Health Insurance up 5% in '08

From our friends at the Kaiser Family Foundation:

Premiums for employer-sponsored health insurance rose to $12,680 annually for family coverage this year – with employees on average paying $3,354 out of their paychecks to cover their share of the cost – and the scope of that coverage has changed, with many more workers now enrolled in high-deductible plans, according to the 2008 Employer Health Benefits Survey released today by the Kaiser Family Foundation and the Health Research & Educational Trust (HRET).  Key findings from the benchmark annual survey of small and large employers were also published today as a Web Exclusive in the journal Health Affairs.

Premiums rose a modest 5 percent this year, but they have more than doubled since 1999 when total family premiums stood at $5,791 (of which workers paid $1,543).  During the same nine-year period, workers’ wages increased 34 percent and general inflation rose 29 percent.

This year many workers are also facing higher deductibles in their plans, including a growing number with general plan deductibles of at least $1,000 – 18 percent of all covered workers in 2008, up from 12 percent last year. This is partly, but not entirely, driven by growth in consumer-directed plans such as those that qualify for a tax-preferred Health Savings Account.

The shift has been most dramatic for workers in small businesses with three to 199 workers, where more than one in three (35 percent) covered workers must pay at least $1,000 out of pocket before their plan generally will start to pay a share of their health-care bills – rising from 21 percent last year.  For workers facing deductibles in Preferred Provider Organizations, the most common type of plan, the average deductible rose to $560 in 2008, up nearly $100 from 2007. 

Understanding the Problem

Universal health insurance is the rallying cry of so many politicians in Trenton and Washington that public opinion is now decidedly in the "something must be done" camp. We agree that something must be done, but that the "something" must come with market reforms. The ideal system is one whereby everyone who wishes to buy health insurance can afford it, and there are currently so many mandates here in New Jersey that insurance has become unaffordable for too many individuals and small businesses.

Against that backdrop, we note the latest US Census report to profile the uninsured. The profile, which was issued late last month, found that among America's 45.7 million uninsured,

• More than 9 million earn more than $75,000 per year with twice that amount earning more than $50,000.
• 5.4 million children are eligible for SCHIP or Medicaid, but not currently enrolled
• 6 million adults are eligible for Medicaid or other government programs, but do not take advantage of it.
• 10 million are not US citizens and would not be eligible for a new federal program under the current rules
• Millions refuse the health insurance offered by their employer.

Almost all of the above would benefit from market-based reforms in the insurance industry. Shouldn't that be a priority before creating a new entitlement program?

Bills Pile Up; Hospitals Close Down

Today's Washington Post has an extraordinary front page story on the crisis of New Jersey's uninsured and the often unbearable cost they create for hospitals.

The state has an estimated 1.3 million people without health insurance who cannot pay a doctor or a hospital bill. New Jersey law requires that hospitals treat anyone who walks through their doors, and then get reimbursed later by the state. But the state's looming budget shortfall has forced it to cut back on the reimbursements, leaving hospitals to pick up the tab. And hospitals, in turn, are going broke: Six have closed in the past 18 months, and half of those remaining are operating in the red.

As the economy falters, the number of uninsured is likely to grow, and so will the burden on hospitals. And with more hospitals expected to shut their doors, New Jersey faces a nasty culmination of health-care crises.

There are many, many systemic causes for the sheer number of uninsured in New Jersey. The expansion of Family Care that Governor Corzine will sign tomorrow addresses a small portion of that problem.

There are two points worth noting: First, universal insurance is not a goal in itself. Rather, it is a means to get people treated at the lowest responsible cost. If an individual has insurance, but still does not visit a doctor, their minor problem still evolves into a chronic one. Second, state policy should be directed so that anyone who wants insurance can afford it. Unfortunately, that is not the case in New Jersey. Numerous mandates, no matter how well-intentioned, drive costs higher and make bare bones coverage impossible - even if that is the most appropriate for certain individuals.

Without those changes, the goal of universal insurance becomes more costly (if at all possible) in the nation's most expensive state. That's a formula for failure.

Be sure to check out the entire WaPo feature.

First, Do No Harm

This week's NJBiz highlights the 9.4% jump in health insurance premiums paid by New Jersey companies last year, and the impact the escalating rates are having on employers and employees alike. For a family of four, the average national premium is about $12,000, but it is closer to $15,000 in New Jersey, adding to the costs of doing business we mentioned in today's first post.

The faster prices escalate, the more likely an employer is to be priced out of the market.

Despite the increases, 98 percent of companies with 51 or more employees said they still provide health coverage as an employee benefit.

But a growing number of smaller companies said they have dropped coverage because they can no longer afford it. Twenty-five percent of respondent companies with between two and 19 employees reported not providing health insurance, up from 8 percent four years ago.

There are many, many causes for high insurance premiums, but the legislature could act today to help slow the increases simply by doing nothing.

CIANJ's Legislative Agenda calls for a moratorium on all health insurance mandates. These mandates set requirements for what insurance companies must cover as part of a standard plan in the regulated market. No matter how well-intentioned the mandates are, they result in higher premiums and add to the problem of the uninsured. Presently, mandates already account for up to one-fifth the price of insurance.

Legislators should first, do no harm.

High Insurance Costs Are Bad Medicine

The state with the highest per capita income can do better than this.

United Health Foundation, the American Public Health Association and the Partnership for Prevention have released a joint study indicating New Jersey's healthcare system is slipping toward mediocrity with an increase in preventable illnesses and a decrease in prenatal care primary reasons for driving our national healthcare rating from the 14th best to 21st.

The number of New Jersey residents without health insurance has been steadily increasing -- a rate that has risen by 76 percent since 1990. At the same time, the percent of children in poverty in the state nearly doubled in just the past year.

Among the most troubling areas cited by the report was prenatal care. The percentage of pregnant woman receiving adequate prenatal care in New Jersey was just 63.4 percent -- worse than any state except New Mexico. The rate of infectious diseases dipped slightly, but the state still scored near the bottom in such cases nationwide.

None of this is surprising to our army of three regular blog readers. You already know that insurance in New Jersey is higher than anywhere else in America. You also know that New Jersey places enough mandates on insurance companies that it increases costs by up to 20% and has priced many of our poorest citizens out of the market.

Oh, and we can also partially thank the trial lawyers.

[NJ State Health Commissioner Fred] Jacobs attributed the state's low scores in prenatal care in part to the declining number of obstetricians -- some to retirement and others surrendering to the high malpractice premiums of the specialty -- calling it a major issue that needs to be addressed. (emphasis ours)

Not-So Breaking News: Higher Costs Lead to Fewer New Jerseyans with Health Insurance

Yesterday the Economic Policy Institute released a study demonstrating the percentage of New Jerseyans under 65 who hold employer-provided health insurance has slipped by 3% over a five year period. The chief reason cited was an increase in costs that made coverage unaffordable.

Of course, our friends at New Jersey Policy Perspective used the opportunity to call for a government-led charge for universal healthcare.

Here at CIANJ we wish to see an environment in which everyone who wants health insurance can afford it. Unfortunately, many of the proponents of government-led universal care are also the ones who work to make that impossible. Insurance costs are rising by up to 12% per year. At that rate, the government will not be able to afford it, meaning universal government coverage merely treats the symptoms and not the cause.

New Jersey has more than 30 mandates which health insurers must provide as part of basic coverage to their small business and individual policyholders. That leads to many New Jerseyans purchasing coverage for things they do not need or do not want. In total, that accounts for up to one-fifth of our premiums. Then, unlike car insurance whereby your rate is determined by your particular situation, NJ requires community coverage rates. So young healthy people now have a disincentive to get into the pool.

Reversing those trends are concrete ways to reduce the cost of insurance. To drive the cost up and then decry the fact fewer of our hard working men and women can afford it seems a little... 

Now That's Sicko

Yogi Berra gets credit for being the first to declare, "No one goes there anymore. It's too crowded."

When fiscal conservatives point out the flaws in socialized government-run medicine, the same axiom applies. For evidence, look no further than the British National Health Service, which is dealing with the fact 70,000 Britons will fly to a foreign country to get treatment for their illnesses. And the reason,

The first survey of Britons opting for treatment overseas shows that fears of hospital infections and frustration of often waiting months for operations are fuelling the increasing trend....

New research shows that growing NHS bureaucracy has left nurses with little time to see patients – most spending long periods dealing with paperwork.

Katherine Murphy, of the Patients' Association, said the health tourism figures reflected shrinking public faith in the Government's handling of the NHS. 

These "health tourists" will travel to 48 countries to seek treatment. Fewer than half of Britons were treated within 18 months of visiting a General Practitioner. Sometimes the mantra of "government inefficiency" loses its meaning - until you read this piece from the Daily Mail. This is why socialized care is bad medicine.

Coulda, Woulda, Shoulda...

Assemblyman Michael Carroll has increased the frequency of posts on his blog, bringing more truth to the New Jersey blogosphere. On Saturday, he blasted proponents of the State Children's Health Insurance Program (SCHIP), a government-run program which has led to much gnashing of teeth without serious discussion over the past few weeks.

During the debate, we totaled up the number of SCHIP press releases posted to PoliticsNJ (a bill NJ legislators do not vote on) versus those regarding the fact nearly half of Garden State residents would like to leave thanks to our high cost of living (a subject the NJ legislature can impact). Guess which side had the majority?

On the subject of health insurance, Asm. Carroll makes the same point we have at CIANJ - NJ has high health insurance rates in large part due to legislative actions. Every time the legislature requires something such as unlimited coverage for substance abuse to be part of the small market's basic coverage, premiums increase and New Jerseyans are priced out of the market. The legislature, in the interest of the children, could take steps to reduce the cost of health insurance in New Jersey. They haven't,

Health insurance is not difficult to come by; it’s just expensive. And while the blame for that can be laid at numerous feet, primary among these is government. NJ boast the highest health insurance costs in the country, but that could be ended with a single stoke of a gubernatorial pen, signing legislation which permits a state resident to purchase a policy approved in any other state. A policy of insurance in Kentucky costs one-sixth as much as does a policy in NJ, primarily because of "community rating" and the huge number of incredibly expensive coverage mandates placed upon policies by the Legislature.

Put another way, faced with the choice of making basic coverage available to everyone at a reasonable price – that is, letting people decide for themselves what coverage they need and want – and compelling everyone to purchase a hugely expensive policy, covering numerous services that most folks don’t want and will never need, the Legislature chose the latter.

Click here to read all of Assemblyman Carroll's recent posts.