Public Option Has No Cost

(Revised 12/3/09) Retired insurance CFO Andy Kurz (short bio) is always looking for new ways to put health care numbers and proposed reforms in perspective. The chart below is his latest creation. Click the image to view the chart; there is also a pdf with a second page explaining calculations.

Executive Summary:

Americans can be divided into three health groups. About 3 in 10 people are on government run Medicare/Medicaid. Four in 10 work in big business and 3 in 10 work in small business or are uninsured. Much health insurance for big business is run just like Medicare where insurers administer claims but incur no claims risk. The middle group, small business and individuals incur the brunt of “at risk” insurance that is higher cost. Those higher costs put this group at a cost disadvantage to big business.

The Public Option has no effect on big business. But most new jobs come from small business, where higher health costs create a disincentive to hire. That in turn, hinders economic growth. A non profit Public Option eliminates high profit margins from insurance and puts small business on a more level playing field with big business. Since Public Option must play by the same rules, it is unlikely to put private insurers out of business. Only a strong Public Option with a broad enrollment base will compel insurers to compete.

Comments by the author:

This whole public option is not the boogeyman that some make it out to be. The diagram puts people of the U.S. into three main groups:Medicare and Medicaid recipients, insured by large employer, and eligible for proposed Insurance Exchange. For the largest, big business, it's business as usual, for several years at least.

I added a small table to show how health care costs are extremely skewed. If you are among the 90% of population, no worries, and why care at all about reform. You should care because if you become the 1 in 10, or 1 in 100, the consequences could be absolutely devastating health care costs. Kind of an eye opener, thanks to Kaiser Foundation for the stats.

Links for page 2:

Kaiser Foundation: Trends in Health Care Costs and Spending, March 2009

Centers for Medicare and Medicaid Services: Total Personal Health Care Expenditures by Type of Service, Region, and State of Residence: Calendar Year 2004

U.S. Census Bureau: Population, Population change and estimated components of population change: April 1, 2000 to July 1, 2008 (NST-EST2008-alldata)

U.S. Census Bureau: Statistics about Business Size (including Small Business)