Comments to: Beginner’s Guide To Health Reform

The following is my reply to  David Wallechinsky at www.allgov.com

Mr. Wallechinsky, I appreciate the fact that you have taken the time to outline what you see as the current system. I would disagree that TriCare/Military care is socialized medicine. It is more a staff-model HMO, similar to Kaiser, where the employer happens to be the United States government. Socialized medicine would not involve insurance companies, in my opinion. Given your example, I would say that military care is not socialized medicine as TriCare is currently administered by Aetna, United Healthcare and TriWest Healthcare Alliance to the tune of about $50 billion.

Public Option is much like Rockefeller’s Standard Oil in that it will compete in the beginning with the ability to undercut pricing of competitors until it secures the entire market over time and becomes the only player in the marketplace, a defacto single-payer.

Separately, and what should be known as part of a beginner’s guide to health reform, is the role of the insurance company. Insurance is a product that transfers the risk of financial burden in the event of a catastrophic loss. It is also a legally binding contract. The terms of the contract are agreed to prior to purchase, and therefore, prior to any loss being incurred. Insurers and insureds alike, should be held accountable for meeting the terms of the agreement.

Also, to be included in a beginner’s guide should be composition of the cost of insurance and the cost of care. The cost of insurance is comprised of paid claims (i.e. charges from doctors, hospitals, pharma, other providers), reserves for incurred but not reported claims (i.e. charges incurred this year that won’t be paid until next year or after), taxes on premiums paid to each state, distribution (cost of brokers, mail, websites, other marketing), overhead (personnel, utilities, supplies, postage, other expenses necessary to run a business), profit. The cost of care – docs, hospitals, pharma and other providers make up 80% of the cost of insurance. Taxes, distribution, overhead and profit comprise 20%.

I look forward to reading the next in your series on health reform.