OPEN LETTER TO U.S. CONGRESS December 11, 2009 

I am so frustrated and angry with my representatives in Congress not to mention my President’s complacency with fighting the real issues in the health care industry today.  I am 57, and my household income is pushing (withheld for privacy) annually, and I have run Fortune 200 company health plans for 25 years.  The duplicity and cognitive dissonance that is going on in Congress is astounding.  Consolidating the state markets into one national market a la the Federal government "exchange" will do nothing to control costs.  It will in fact only reduce administrative costs to the monopoly carriers which will then be converted into profit and not lower prices.  Respected organizations in Washington DC, one namely, The Alliance for Health System Change, a number of years ago following some research clearly stated that the health care system has such high barriers to entry that there is no effective competition in the industry.  The control over the industry from State to State among some 5 to 7 insurance firms is simply a matter of pushing back and forth among the gang of 5 a few percentage share in each market, with each player having anywhere from 25% to 40% and up to 80% of each respective state market.  Unless a real alternative market competitor with a different financial model is put in a place to compete significantly, there will be no downward pressure on health plan prices.

And, segmenting the market into small pieces that appear to be competing entities whether under a local or state coop or even in the case of a separate Medicare contract and not a part of the rest of Medicare will not represent a large enough pool of lives needed to compete against the insurance monopolies.  And, in the instance of Medicare age extension 55-64, that would simply take the most costly part of the population and force the government to cover that high cost population while the younger population is cherry picked for private insurance.  That even solves the problem the carriers faced in reform regarding evidence of insurability and rescission prohibitions, taking the population that the insurers often deny care to or terminate coverage on.  These are all just ruses to appear to reform the industry while you all know that it will leave price control and competition only within the hands of the monopoly carriers.  Unless an alternative model can offer non-profit coverage to the entire market and be able to enroll up to at least 20%-30% of that national market, there will not be enough risk pooling and economies for an alternate model to present real competition to the present industry players.  And, eliminating state boundaries will make it easier for the monopoly carriers who already have a monopoly to further consolidate their markets freezing out even more competitors forcing the smaller carriers to sell out.

Further attestation to your duplicity, is the fact that you have allowed religious views which are not to be part of our government to foul the free civil and human rights and laws of the country, regarding abortion.  The groups who have pushed this agenda, represent the height of hypocrisy.  While they scream that Americans must have free choice in their health care choice of private insurance products and not be influence one iota by options in reform, in the same breath they claim to limit the rights of women guaranteed by our laws to their right to choose abortion between themselves and their doctor.  Their arrogance and hypocrisy on these issues is disgusting.

If reform is perverted in the above mentioned ways, I will use my substantial resources as best I can to support primary competitors against incumbent democrats who have allowed this to occur including blue dogs and the like in favor of candidates who are more progressive. And if need be, I will vote for a moderate republican in the next election to show them how important this matter is to me and to show all representatives how vulnerable their duplicity and lack of support for democratic principles makes their continued seat in Congress.  This issue is that important to me and is at the heart of what America is about; Freedom from religious intrusion in the government and vice versa and the representation of individual interests by our government over commercial or corporate interests.

 PETE CERCHIARA

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December 18, 2009

'KILL BILL' RESPONSE

Yes this bill should be ‘killed’, taken back, and seriously reworked.  Reconciliation if practical could be considered if it can take us beyond simply expanding the current Medicare system.  Expanding Medicare as a separate group, or a combined with the current 65 and over population would be prohibitively expensive unless the under-55 population was also allowed to buy into Medicare.  The healthier, under age-55 population, needs to participate and share the cost of the older and more ill population over 55.  That is how insurance is designed to work.  If you, however, cut the population up into over and under age 55, and allow the insurance industry to keep the under 55, that will prohibitively handicap the funding of the over-55 population because the 80/20 rule will be fractured.  The insurers will take the most profitable under 55 population and the tax payers will have to foot the prohibitive expense of the older population.  Meanwhile, the insurers will continue to gouge the private insurance market and the tax payers as well.  This is funny because Lieberman let his politics destroy what would have been an ideal solution for the insurance industry had he not stopped the Medicare option. 

The reason this bill should be killed is multifaceted:

1.       Given the tremendous amount of time and resources spent to come this far for so little is not worth the effort of some many.  Furthermore, it is an insult to the process and hard work of good people in the process.

2.       This bill is so misguided that it does not offer much in the way of options to be further developed or amended after it is enacted.  It would mean full comprehensive additional legislation because there is so real little reform in this bill.  Therefore, if the bill is not real reform why waste any more resources on something that does not in any way achieve the reform objective.  Let’s not throw more good effort to bad.  Not to mention the tremendous amount of resources spent to enact and regulate the law. Please read on

3.       Not allowing this to move forward and scraping it now will cause major blow back in the face of all those who have stalled it, gutted it, and prevented it from being real reform.  If it is scrapped and reworked, it will put all those spoilers on the carpet for having destroyed it and will allow the honest and ethical democrats to take the high road and be leaders going forward to put back in elements of real reform.  It will place the conservatives who forced this to happen further out in the wilderness and extremes.  But, accepting it now diminishes the stature of those who have brought it forward in its true form and allows those who diminished it to win by putting something in place that useless.  That does not serve our party or our country.

Let’s look at why the bill is useless and does not provide essential reform in cost controls as it is now. 

DOES NOT CONTROL COST/PRICE

1.       Cost control is a major element of what reform was to do.  The current bill is not going to compress price to consumers of health care insurance.  For that reason alone, it does not do what President Obama has requested and he should veto it.  I will explain the absence of cost control and reason to believe this will significantly increase cost across American in details below.

2.       Benefit caps have been put back in. This means treatments will be cut off or denied which is what rescission does now and will be allowed by simply creating dollar caps for certain conditions.  And, who will determine when, for which conditions, at what dollar levels, that cutoff will occur?  That does not reform current systemic problems; it just attempts to make it look like reform and gives insurers another route to the same objectives and goals they operate from today.

3.       Rx pricing will not be reduced through international competition.  Another cost control not imposed in this bill.

4.       Non cancellation and insurability will be included but coverage will be priced based on those with preexisting conditions.  This is a common restriction in many states today but is circumvented currently in the following way.  The solution under the proposed bill that is already practiced today will be to price the product so high for those with preexisting conditions that the customer simply stops coverage because they cannot afford the cost.  (Or, become an indentured servant to his health care.  You see this is what Capitalism wants: a labor supply that must come back to work indefinitely with little chance of permanently ever being able to dig themselves out).  That strategy is widely used where non-rescission is the law today in both health and auto insurance.  You see, it’s not illegal if the customer stops paying; just if the carrier voluntarily terminates coverage.  This practice will continue under this proposed bill.  Once again no change to current circumstances, no real reform.  “30 million will be able to get coverage they can’t today”.   But will they be able to afford the cost of that coverage.  I am not talking about the people at or below 300% of poverty.  I am talking about middle class working Americans.

5.       Pricing under the new bill for those with preexisting conditions, as I have heard, will be allowed up to 5x the price for the same age and gender category as those without pre-existing conditions.  Will that be affordable?  Remember, those underwriting categories of age and sex that will be adjusted for pre-existing conditions are already loaded with the regular risk of those in that age and sex category which are already high.  In this, consider the current prices for people over age 50 now and then add on the cost for the pre-existing conditions at 5x the current rates.  Will that be affordable? 

Is Price or Cost Reduction remotely possible under this Bill?

Price control is essential to providing increased access.  Without price control or cost reduction for consumers, increased access will be a shame if individuals cannot afford to purchase a plan.  Let’s look at the premise that this bill will reform and reduce the price of coverage.  I am responding here to item # 1 in the category immediately above that I noted earlier.

First, during the current period of reform discussion, premiums have been increasing substantially.  As the stock market has done in the past, so too, have the insurers been ‘discounting’ the future effect of health care reform.  That is, insurers are increasing their premium rates now so that when reform does its supposed magic, the rates will have been already increased rendering any price compression of little effect on the true cost of the product resulting in no real discount or price reduction and maintaining profitability.  This means no real price reduction.

Secondly, our current national cost basis of health care is exorbitant, 16% or 17% of GNP/GDP.  Many other countries are at between 9% and 11%.  Look at that, in the context of the next point about adding a highly costly population to the mix of the current covered population and current cost basis. 

Third, the current national cost basis excludes a significant portion of high cost or adverse risk in the population who the industry has already kicked out of coverage because they are too expensive for them to cover.  The current uninsured 30 to 50 million are so situated because they have pre-existing conditions.  Secondly, it is well established that lower income citizens generally tend not to seek or use sufficient care when they should.  This means those uninsured who do not have pre-existing conditions are nonetheless more likely to have untreated disease and have greater treatment cost when they do show up for care.  So the ‘reform’ plan is going to add to an already exorbitantly costly program a population who is even more costly than the current covered population.  

CONCLUSION

If there are no real price or cost controls in the reform as noted above and the program is going to introduce a population that is already above the average cost basis of the current covered population, how is this bill going to offer a lower cost or price point to any part of our population, especially those in the lower middle and work class who cannot currently afford coverage at today’s prices before a more costly population is added to the plans. This bill is a formula to destroy the entire matrix of our economy sucking up so much individual resources that considering the current economic desert will grind to a halt any future economic development or consumer purchasing.

Pete Cerchiara