Why Public Option Is A Trap, And Its Future Death Spiral- Documented

"Death Spiral" - Its a terrifying name. Its also the de-facto description of what the public option will undergo if it is "optional" because optional will mean not enough money will be devoted to it to avoid the "Death Spiral"

It starts with a nice, but misleading idea: "All other things being equal, public, nonprofit insurance can be cheaper than for-profit insurance"

Right? No - wrong. Because PUBLIC insurance HAS to be fairer and serve the public good and not the god of money.

The private insurance we all are hoping to replace is very profitable and expensive, because they deny care, right?

The catch is in that "if all other things are equal". The problem that eventually kills public option is that they wont, they can't be equal in profitability..

They will be extremely unequal. Any public option has to be fair to the sick. The for profit insurers don't. Not even Obama can EVER force a COMPANY to lose money.  They have to make money so they avoid insuring many. That willingness to insure the sick makes the public option the insurance of last resort for many, inherently a money loser. It will drive up its losses or it will have to raise its premiums
(This is one of several links documenting these so-called "Death Spirals")
If the risk pool gets sicker. And the higher the premiums go, the fewer people, healthy or sick can afford it.

Their only public option will become Medicaid loans for the indigent. (Which people are eligible for ONLY AFTER THEY OWN OR MAKE VIRTUALLY NOTHING.)

We need to admit that problem and accept subsidies will be needed, large ones. (Schumer knows that revenue neutrality will kill public option. He wants that money for Wall Street)

Of course, the insurance companies figured out long ago, that they need to apply reverse psychology to get what they want.

The trick in 2009 is to play Brer Rabbit and the Briar Patch..

They cant let on that they want public option, that its there to kill single payer... They can't let on that they know how and why it will die! - (see below) They have to say the opposite.

So they lie now saying the public option has an "unfair advantage" - They say they dont want the US to be thrown into the Briar Patch of adverse selection whose ways they know like their own territory. But of course, that is what they want, because there, they know they will win AS LONG AS PUBLIC OPTION IS AN OPTION, (as long as we preserve private insurance, and its extra administrative costs need to be borne by everybody, that ALSO helps doom affordability.)

Causing what is known as a Death Spiral - (follow the link)

Another paper documenting Death Spirals:
Death Spiral or Euthanasia? The Demise of Generous Group Health Insurance Coverage

The reasons why "public option" WILL inevitably become "Death Spiral":

1.Public Option is now supposed to be revenue neutral, which is an impossible condition to place on it given that.

2. Public Option's risk pool will be far sicker than that of private insurers, IT WONT BE PROFITABLE AT ALL. It cannot be revenue neutral.


Of course, there is actually a big difference that we NEED public option to have, its a "disadvantage" and it is caused by the public option doing the right thing. That "right thing" is community rating instead of pricing by risk.

By accepting the sick.. they accept that the plan will have higher costs than the private plans. The healthy will leave and their risk pool will become sicker. Without the needed subsidies their premiums will rise. And rise, and rise.

By 2020, the pundits will announce "We tried universal healthcare and we failed. The public option will be ended, and almost all of the millions left uninsured will not be able to find private insurance they can afford, with the additional problem of having been identified by their previous coverage as probably bad risks.

Our golden window of opportunity to enact healthcare reform will have passed and the US will be by then a Third World nation. Most skilled Americans who could emigrate elsewhere will have, leaving communities with no real tax base. Eventually, the government will become a dictatorship, and to remain in power, we will blame our problems on somebody else. We will enter a suicidal war which will result in the destruction of all humanity.

Tags: adverse selection, death spiral, optional affordability, Public Option (all tags)



Re: Death Spiral- Documented

So the solution must be single payer with equal coverage for everyone, no medical conditions excepted, no treatments unpaid for, no co-pays, no premiums, no private insurance options.

Sounds like a wonderful and workable plan.

Good work!

by QTG 2009-05-20 08:59AM | 0 recs
Re: Death Spiral- Documented

And don't forget no increase in taxes.

by jsfox 2009-05-20 09:06AM | 0 recs
We pay SO much now..

on premiums, the net cost would be FAR lower..

Premiums ARE a HUGE tax...

by architek 2009-05-20 09:23AM | 0 recs
Re: We pay SO much now..

 40 million Americans don't pay anything. They have no insurance, and hence, no tax.

by QTG 2009-05-21 06:15AM | 0 recs
Re: Future Death Spiral

Can we just fast forward to the dictatorship and endless war part?  I always wanted to live like Mad Max.

by Jess81 2009-05-20 09:25AM | 0 recs
Mad Max?

Only if I get to be the geeky guy with the airplane.

by TexasDarling 2009-05-20 12:08PM | 0 recs
public option=not affordable for middle.

A. People with no insurance pay no premiums, hence this implied HUGE tax is essentially ZERO for them.

B. You sig claims that the 'public option = not affordable for middle." Yet, apparently, neither is the private option. Your solution = no options, which is an odd piece of logic since whatever is done or is not done must in fact be an option!

You logic is all twisted up.

by QTG 2009-05-20 09:31AM | 0 recs
Assessment on Target, Maybe Not Later Scenario

While I agree that a single payer set-up is preferable, I don't think in the current proposal that the gov't option is necessarily headed for the 'death spiral' (good explanation and links, btw).

This is just my opinion, but I believe once it's put into practice, I think (and to some extent hope) they'll make adjustments toward this thing called reality.

For the current plan with a gov't option to work in a remotely effective manner to cover the masses of currently-uninsured folks (and current Medicaid recipients better) it's got to...

(A) accept all comers, regardless of health, "pre-existing" bullshit, or prior insurance status.

(B) for lower income folk, come up with a needs test that effectively and fairly reduces or eliminates whatever premiums or co-pays are established.

(C) Give up the revenue-neutral fantasy and subsidize it appropriately since this option will end up with the unemployed, the 'uninsurably' sick (by definition of the bastards running this industry), and lower-income folk who statistically need more care.

The last point will prove the most important from a sustainability standpoint.

So I agree with the assessment of the situation, but I must respectfully disagree with the idea that all these FAILS have been thought out and will inevitably occur by design. I think the system will be more flexible once established, though likely slow on the uptake and slow to perceive the needed changes.

Also, really, Medicaid is not a loan in most cases. Estate recovery practices vary by state but they MUST try to recoup any long-term care and related hospital and drug expenses for recipients over 55 (and presumably less than 65, since at that time Medicaid can simply pay Medicare premiums and uncovered co-pays). However, states have the option to go as far as attempting to recover all expenses paid for recipients over 55, and states are becoming more aggressive, but there are limits imposed by Federal law. Here's an overview: http://aspe.hhs.gov/daltcp/reports/estat erec.htm

ARCHITEK, I obviously know you support a single-payer option, but could you elaborate for our edification. Single payer can range from entirely free health care provided by a delivery system entirely under the government umbrella... to a system where those services are contracted out to a private company, with premiums and co-pays. Medicaid would be technically be an example of such a single-payer system (if no others existed), so let's hope if one comes around it's not that stupid!

Also, how would anyone feel if some sort of 'single payer plus' system were worked out where private insurance companies could offer some additional level of service on top of the required single payer set-up however it might exist?

by RecoveringRepublican 2009-05-20 09:44AM | 0 recs
Re: Architek only recently

Thanks for the info. I'm relatively new to this argument and so trying to give everyone the benefit of the doubt, but any information (in my opinion even sharp feedback, which yours is not btw) is better than no information IMHO, so thanks again.

by RecoveringRepublican 2009-05-20 09:54AM | 0 recs
I want a system

where I don't have to sit in a series of waiting rooms for up to a few hours just to see a doctor who is frantically rushing to catch up so he/she can average 11 minutes with each patient and still not get sued.

by QTG 2009-05-20 01:28PM | 0 recs
Re: Architek only recently

"Architek only recently decided to start supporting single-payer. Last year architek had no interest in single-payer. "

A fact that I've noticed too. If Obama were to unveil the Clinton plan in its entirety tomorrow, Architek would be the first to eviscerate it.  Although at least now he's arguing for something good - last year he was passionately for universal private insurance, a position I never understood in the slightest.

by Jess81 2009-05-20 06:56PM | 0 recs
Re: SIngle Payer now, Universal Private then....

 Seems that Achie has no problem at all with OPTIONS, at least as far as HIS options are concerned.

by QTG 2009-05-21 06:17AM | 0 recs


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