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Finally, Mike McFadden offers details on his health-care views

This is one in an occasional series of articles about the policy positions of U.S. Senate candidates Mike McFadden and Al Franken.

McFadden unifies GOP with convention win
MinnPost file photo by Brian Halliday
McFadden speaking at the 2014 GOP

Until now, I’ve been portraying Mike McFadden as a U.S. Senate candidate who either couldn’t or wouldn’t level with Minnesotans about where he stood on a wide range policy questions. He also hadn’t agreed to my several requests for an interview.

Now he has. After a reasonably long interview last week, which I appreciate, McFadden has definitely gone beyond the almost cartoonish non-positions he had taken previously in the “issues” section of his website, but also during debates and in many of the interviews that he had granted.

Possibly his willingness to talk more about policy reflects a new stage of the campaign, now that he is the Republican endorsee, has the nomination almost locked up and is perhaps less concerned about alienating the Tea Party/Liberty wings of the Repub coalition. That’s just a guess.

It’s harder and harder to convince oneself that a political campaign, such as this one for the U.S. Senate, is a contest between competing visions of the best public policies. But we still gotta try, don’t we?

So, based on the interview, here’s a deeper (but not totally satisfying) treatment of McFadden’s thinking on a major issue, health care:

In his general rhetoric and on his website, McFadden has railed against Obamacare (what Republican hasn’t). He calls it the “Unaffordable Care Act”  and says he wants to “repeal and replace” it with something that would be better for everyone, more “patient-centered” and “market-based,” cost less and still extend coverage at a reasonable price to those with pre-existing conditions.

I fear there may be some magical thinking in there, but who knows? At least in our interview I asked him to define “patient-centered” and “market-based” and got him to specify which of the provisions of Obamacare he would keep and which he would ditch.

The answers:

‘Patient centered’ and ‘market-based’

“Patient centered,” according to McFadden, means “I want patients to be able to make decisions and have optionality.”

The U.S. health-care system was already “broken” before Obamacare, McFadden says, but “Obamacare is a step in the wrong direction…When you have a 140,000 Minnesotans who lost their insurance  — that takes away patient centeredness.”

That figure refers to the number of Minnesotans who reportedly had to change from one insurance policy to another as a result of the Affordable Care Act. Republicans emphasize this group in part because of President Obama’s false promise that those who liked their insurance could keep their insurance. But most of those who had to change health plans nonetheless ended up insured. Millions of Americans  who were uninsured before the Obamacare law took effect, now have insurance because of various provisions of the law. The overall number of Minnesotans who actually lack insurance has fallen by roughly half, according to the most recent numbers.

“Market-based” means treating health insurance more like other products and services that consumers buy. McFadden wants more transparency. “Markets can’t work unless you have price discovery,” he said, which means consumers have to be able to compare prices. If you are going for a knee replacement or buying prescription drugs, the current system makes it functionally impossible for a consumer to find out what different providers are charging.

This sounds good, but would make little difference for many of us, if we have good insurance, because our insurer is probably paying for our knee replacement and has an incentive to get the best price. McFadden’s team emphasized that patients could benefit from price comparison on their co-pays and deductible and other out-of-pocket expenses. Under Obamacare, McFadden’s spokester said, the average deductible for a bronze plan is 42 percent higher this year than a comparable plan last year.

Another element of market-based, McFadden said, is that he “would like individuals to be able to buy insurance across state lines.”

Currently, health insurers have to be licensed by the state of Minnesota to sell to Minnesotans. United Health Care, a very profitable Minnesota-headquartered giant in the national health-insurance market, isn’t licensed to insure Minnesotans. McFadden thinks that’s ridiculous.

I asked him whether someone needs to set standards so that unscrupulous insurers can’t sell bad policies to Minnesotans. He said he assumed the federal government would set some standards (which is interesting, because, in general, McFadden seems to favor state autonomy where possible).

Another big idea

McFadden has one more really big idea about the health-insurance market. He would like to extend to individuals who buy their own health insurance the tax deduction that is currently enjoyed only by employers when buying health insurance for their employees.

The United States health-insurance picture is quite odd, compared to most of the world because of its heavy reliance on employer-subsidized group policies. That is by far the most common source of health insurance for Americans, a tradition that traces strangely back to wage-and-price controls imposed during World War II, but now provides what McFadden called “a strong incentive for someone to get their insurance through their place of employment,” even though some people might come out ahead buying an individual insurance policy, especially with the extra benefit of deductibility for the premiums.

This would be big. It would be a big plus for those whose current employer doesn’t offer health insurance, and maybe even for younger, healthier workers who do have access to a group plan through their employment — especially if the employer was offering extra pay in exchange for the savings to the employer of not having to insure them, (McFadden didn’t say, in our interview, whether he envisions that such a raise in pay should be required.)

But it raises many issues, most of which McFadden didn’t cover in our interview nor anywhere else that I can find. When you subsidize anything through a straightforward tax deduction, it is worth more to the rich than the middle-class or poor. So that’s an equity issue. If younger, healthier workers dropped out of the employee pool because they have lower health concerns and would pay lower premiums in an individual plan, what would that do to the cost of insuring the older, sicker worker pool left behind? How many employers would seize the opportunity to get out of the insurance-middleman role altogether?

Maybe these changes would eventually net out favorably for many people, maybe not, but there’s a lot more in play than just a broadening of a tax deduction. I asked McFadden whether his idea could undermine the whole employment-based part of the system (which might turn out fine, but would be a very big deal and would need to be thought and argued all the way through.) He didn’t like that word “undermine,” and he didn’t think it would, but he didn’t say much about why.

McFadden doesn’t believe that providing a tax deduction for those who buy their own insurance would have much impact on those who already get their insurance through their employees. In a follow-up exchange through his spokester, Tom Erickson, McFadden said:

“Expanding the tax exclusion to individuals does not change any incentives for employers to offer insurance. It changes the incentives for those on the individual market because it makes health insurance relatively cheaper for those who did not have employer-provided insurance.”

To summarize…

Yikes, forgive me, this is getting pretty long. Allow me, if you would, to quickly summarize the provisions of Obamacare that McFadden would keep and those he would drop, if he was in charge of writing the law that would “repeal and replace” Obamacare:

The two that he would keep are the one that would require insurers to insure those with pre-existing conditions (at a rate that would not take into account those conditions) and the one that would allow kids younger than 26 to stay on their parents’ insurance policies.

The first one, the pre-existing conditions one, is something McFadden has been saying for a while. He acknowledges that if the government is to mandate this provision, it will require a subsidy to the insurers and “we should look at what’s the most cost-effective way to subsidize this high-risk pool, and there might be a federal role in that in terms of providing some of that subsidy.”

Where to find that money, when he is also emphasizing the need to restrain federal spending? “I don’t have the perfect solution,” he acknowledged, it would require “sitting down at the table” with all of the stakeholders, but he would not be opposed to “some transference of dollars from the federal government.”

The second one — the letting the 20-somethings stay on their parents’ policies — is new, at least to me, in McFadden’s post-Obamacare position. He said he’s been hearing from quite a few parents about how much they like that idea. Unlike the pre-existing condition one, he said, it shouldn’t necessarily require any subsidy.

The four or five provisions above constitute what could be called McFadden positive proposals on health care, meaning changes he would like to make (or keep, from the otherwise-repealed Obamacare). I asked him about several of the major aspects of the Affordable Care Act. The ones below are those he would repeal and not replace:

Repeal and not replace

The Medicaid expansion: Of all the Obamacare provisions, this one — which basically raises the level of income a family can have, up to 133 percent of the federal poverty level, and still qualify for Medicaid — is probably the one that moves the largest chunk of the population from uninsured to insured, even though most Republican-dominated states have declined to accept the expanded benefit.

“I don’t know if that’s the most effective way to provide insurance,” McFadden said of the Medicaid expansion. He would prefer to leave it up to the states — and to the states’ taxpayers — to decide what they wanted to do along these lines, and to keep the feds out of it. If some states did nothing, that would just be federalism at work, McFadden said, “I just don’t think that’s the federal government’s role… I believe the states are laboratories for experimentation.” [An earlier version of this post said that McFadden would repeal the Medicaid expansion. He never explicitly said he favored repealing it, although his comments about the provision, reflected above, were negative or skeptical.]

The employer mandate: Obamacare requires large employers — those with 50 or more employees when the provision is fully phased in — to provide them with a health insurance program or pay a penalty. McFadden would repeal that one. “I don’t think the federal government should be mandating that,” he said.

The individual mandate: Unsurprisingly, McFadden is against that. He also predicts that supporters of Obamacare will be in for a disappointment when they find out how many young, healthy people are rejecting the mandate and declining to sign up.

“The actuarial costs are not adding up,” he said. He added that Obama (and McFadden’s Democratic opponent, Sen. Al Franken) are guilty of “hiding the ball,” because they are aware of the bad numbers. When the bad numbers become clear to everyone, “either premiums are going to go up, and I think they’re going to go up significantly, or you’re going to see bailouts of insurance companies,” he said.

The state-level health exchanges that have been created under Obamacare is another feature that McFadden would not keep, at least to the extent that they are mandatory. (States are free to set up their own exchanges if they choose, but if they do not, the feds operate an exchange to provide the same features within that state.)

McFadden would preserve the Obamacare feature that bars insurers from including a “lifetime limit” on the amount that a person can collect in health benefits over his or her lifetime.

Because he is running against Franken, I asked him about the Obamacare provision widely credited to Franken, the so-called “medical loss ratio,” which requires health insurers to spend at least 80-85 percent of what they collect in premiums on actual health services for their customers, as opposed to administrative costs, profits, marketing or CEO salaries. Companies that violate the provision are required to send rebates to their customers. McFadden said that provision, which he considers “price controls,” would not be left standing if he has his way.

McFadden also said he would definitely repeal the tax on medical-device manufacturers that is part of Obamacare, in part because it hits Minnesota-based companies.

Friday: McFadden on the federal debt and economic growth.

Comments (58)

  1. Submitted by Hiram Foster on 06/26/2014 - 08:38 am.

    Something to understand about Obamacare is that it is an exquisitely balanced policy, that is the result of a multitude of political, economic, financial and other policy tradeoffs, One of the consequences is that whenever one focuses on one aspect of the policy, it’s important to understand why it is in place and what the tradeoffs were that got it there. We, as a nation, made the decision to go for a premium support system. Republicans wanted this because they felt that competition among private health insurers would make for better insurance in various ways Democrats were skeptical about that for reasons that have since been borne out as the policy has been implemented, but in any event, that was the only policy we could get done at least at some time before our sun goes super nova. The problem with this system is the difficulty in getting universal participation the goal of national health care policy, which would also help rationalize costs. Single payer, you will note, doesn’t have these problems, although it may have a different set of problems, see the Veterans’ Administration.

    So, because of less than optimal participation, premiums are more than optimally low. What’s the solution? There are two which can be put together in one combination or other. We can increase participation or we can lower the amount and/or quality of care, You might note that while Republicans complain about the problem of higher premiums, they aren’t in favor of either of the solutions that are consistent with their overall views, nor are they in favor of the alternative liberal solution, single payer, which would avoid the issue they are raising altogether. In other words, they have no policy at all. They are simply engaged in partisan kvetching, in a way that provides neither a liberal nor conservative answer to America’s health care needs, does nothing at all. Kvetching that has everything to do with obtaining political advantage and nothing to do with the health care problems of Americans.

    • Submitted by Peder DeFor on 06/26/2014 - 12:41 pm.

      Exquisitley Balanced

      Um, where has the criticism been when the administration has unilaterally delayed and waived parts of this exquisitely crafted law? Where is the concern about delaying employer mandates? Or repealing various taxes? What about extended deadlines that make it harder to set prices for upcoming years? What have those things done to the balance?

      “We, as a nation, made the decision to go for a premium support system.” There is very little national consensus on how to go about any kind of support system. There is general agreement on things like ‘people shouldn’t go broke because they get sick’ and ‘health care should be better than it is now’. We’re still very much at odds as to what a system should look like, what should be offered and who should pay what amount.
      The Obamacare approach creates a long list of mandates that every insurance plan must offer. It also controls what can be charged. This creates very little room for various insurance plans to compete. The idea of out of state plans (like McFadden suggests) would give that room. Which makes sense. Different people, at different stages of life, need different options. The heavy mandate approach disregards this.
      I’ll take overall criticism of the Republican approach seriously, only once I’ve heard some kind of critique for why the favored Dem approach has raised premiums after repeated promises that it would drop them. It seems that they thought that smart enough policy would enable them to dictate to the overall market and boy howdy has that failed. Complaining about the lack of Republican plan (which isn’t remotely true) is simply ‘partisan kvetching’.

      • Submitted by Hiram Foster on 06/26/2014 - 03:17 pm.


        where has the criticism been when the administration has unilaterally delayed and waived parts of this exquisitely crafted law?

        It’s come from Republicans and others who have objected to among other things delays in putting certain elements into effect. When I wrote that, I was thinking mainly of the employer mandate, which I discussed later on.

        “Where is the concern about delaying employer mandates?”

        I don’t have much for reasons I have discussed.

        “Or repealing various taxes?”

        I am not sure what you are referring to here.

        “‘ What about extended deadlines that make it harder to set prices for upcoming years?”

        A lot of improvising has been needed.

        ” What have those things done to the balance?”

        Not much. Lots of that stuff involved political tradeoffs for political political reasons. They were needed to get the deal done but are of little substantive impact over the long run.

        ” It also controls what can be charged.”

        It does not. What it does do is provide that insurance companies must spend 80 percent of premiums on health costs.

      • Submitted by Hiram Foster on 06/26/2014 - 03:24 pm.

        Out of state insurance

        “The idea of out of state plans (like McFadden suggests) would give that room. Which makes sense.”

        Out of state insurance is a Republican shibboleth, something they say but don’t think about. For one thing the notion that we don’t have out of state insurers operating in Minnesota right now is based on a set of legal fictions. National insurer operate locally incorporated subsidiaries. As others have pointed out, allowing out of state insurance would turn Minnesota health policy over to out of state legislators, people none of us voted for. It’s also the case, that what out of state insurers would offer is Minnesota, not say Florida health insurance. They would tailor their products for the local market, which is in fact what they already do.

        “Different people, at different stages of life, need different options.”

        This is one policy option, but what it does is leave the profitable insurance business to private insurers while sticking the taxpayers with the unprofitable insurance business. Obamacare evens out the generational divide to the benefit of all parties. If you don’t like being on one side of the deal, don’t worry, soon enough you will be on the other side of the deal.

  2. Submitted by Gerald Abrahamson on 06/26/2014 - 08:49 am.

    Many holes in his ideas. Too few nets to catch who falls threw.

    Wouldn’t trust this guy to run anything. SP/UHC is what it takes–but *that* would destroy his conservative political career.

  3. Submitted by Jon Kingstad on 06/26/2014 - 08:56 am.

    A good idea

    Good work on getting Mr. McFadden to share his views with us, Eric.I must say he does have one good idea in making premiums for individual policy buyers tax deductible.

    The rest are incoherent and unconstructive. So much kvetching, as Mr. Foster puts it. Why allow insurers to impose things like “lifetime limits”? I hadn’t heard that before but that sure sounds like “rationing” to me. Just don’t call the insurance company which imposes such a limit a “death panel.”

    Or why repeal the “medical loss ratio”? Is Mr. McFadden aware that the insurance industry has been “regulated” since the 19th century and since 1944 enjoyed special antitrust protection to allow price fixing under the shield of such “regulation”? Probably not because who could ever tell that “regulation” that exists across the country by these captive state insurance commissioners has not been anything that consumers might recognize as “regulation.” If the “regulation” which has existed under this antitrust immunity really was meaningful regulation, the “medical loss ratio” wold have been imposed long ago as a “price control” just as prices of electric and gas companies are controlled. Is Mr. McFadden against that too?

    • Submitted by Todd Hintz on 06/26/2014 - 11:50 am.

      Not So Much

      I have to disagree and say that even the tax deduction is not a good idea. Here’s why: Because the poor and middle class generally take the standard deduction as they don’t have enough deductions to do the itemized schedule. The rich, who already have a long list of deductions, will add this as and get more of a tax break.

      The end result is the people who need the tax break the most–the poor and middle class–don’t get the benefit. And the people who need it the least–the wealthy–get yet more money back.

      Personally, I agree with an earlier poster who said the only way to go is through single payer (SP), universal health care (UHC). Everybody pays, everybody benefits. The government provides a basic level of health insurance from cradle to grave. If people want additional supplemental insurance, then that’s what the insurance companies are for.

      To be sure, the above is not enough. We also need to couple it with compensation reform to get away from procedural-based payments to a results-based system. That will help limit costs and get us down to levels seen by other industrialized nations. As a point of reference, they pay roughly HALF what Americans pay and get better results.

      • Submitted by Jon Kingstad on 06/26/2014 - 09:46 pm.

        Got that

        I’ve been behind the single payer idea ever since it got that name. So you don’t have to sell me on that idea.

        But Obamacare is at least some improvement. And if it makes Obamacare more palatable and popular for those who can afford the premiums by also having them be tax deductible, I’m in favor of that.

  4. Submitted by Dennis Tester on 06/26/2014 - 09:06 am.

    The employer mandate

    Since Obama kicked the employer mandate down the road to help his fellow democrats in an election year, we won’t see the real public outrage to Obamacare until after the election when about 90% of the country, those who currently receive their health insurance from their employer, will suddenly be affected by this law.

    It’s too bad that McFadden didn’t talk more about this because it ties into his best idea for health insurance reform and that is allowing individuals to deduct their health insurance premiums from their income taxes.

    When the employer mandate hits the fan, thousands of employers will opt out of insurance coverage for their employees and simply pay the fine (I have clients who are already hinting they’ll probably do that). This will throw millions of panicked people into the individual plan market who will need some sort of cushion if the politicians want to avoid torches and pitchforks in Washington D.C.

    One effective cushion would be the deductibility of your health insurance premiums. To compromise with the democrats who would demand some “equity” or “progressivity” to the plan, the republicans could agree to some sliding scale of deductibility as a compromise … 100% for working class people to 10% for democrat politicians and other rich folk.

    McFadden should take that idea and rationale and put a TV ad together to sell it as the focus of his campaign.

  5. Submitted by Ray Schoch on 06/26/2014 - 09:40 am.

    My thanks

    …to Hiram Foster. I would only add to his first paragraph that “Republicans wanted this…” because of a visceral dislke of government versus the private sector. I’d guess that efficiency was less important than ideology.

    Having corporatized health care itself, transforming it from a public service to a profit-oriented industry, was apparently not enough. It’s not at all surprising that McFadden would carp about a medical device tax in Minnesota, while the extremely profitable chief beneficiary of that tax’s repeal is busily transferring its headquarters overseas specifically to avoid income taxes. The polite phrase for this is “pandering to the wealthy.”

  6. Submitted by Hiram Foster on 06/26/2014 - 09:41 am.

    Health insurance policy

    The problem Mr. McFadden and Republicans in general are having isn’t that they don’t understand the problems of American health care policy, rather it’s that they don’t they don’t understand their centrality, and their intractability. Mr. McFadden tells us that the efficiency of markets would be improved if transparency were increased. But the problem with health care isn’t the lack of information, As any visitor to the MnSure website could tell you, we are overwhelmed by information. The problem is that we don’t have the information we need, to make the correct choices because we simply don’t know what the future will bring.

    It’s an issue of asymmetry of information. Think of health care as a game of roulette. We, the individuals are the players and the insurers are the house. The problem we as bettors have isn’t with lack of transparency, we know the odds, the problem is that the laws of statistics don’t tell us what we need to know, the outcome of the spin, but they do tell the house it needs to know, the outcome of ten thousand spins. The problems of transparency for the individual are there, as Mr. McFadden understands, what he doesn’t understand is that for the individual, they are incapable of being solved for the simple reason that none of us know, individually, what the future will bring.

    • Submitted by Dennis Tester on 06/26/2014 - 11:04 am.

      Ok, Hiram

      Tell me where in this town a person can have cataract surgery for the lowest cost per eye? If that information is readily available, the consumer could make an informed choice about where they might have the procedure done.

      How about a knee replacement? Any ideas what a person can expect to pay for that and who offers the better deal?

      That’s what republicans mean by transparency. People who rely on government or another third party to pay their medical bills wouldn’t know or even care to know that information. And that’s why democrats in general “don’t understand the problems of American health care policy” and the people who actually pay for their own health care, do.

      • Submitted by Paul Brandon on 06/26/2014 - 12:13 pm.

        To get these answers

        You need a single payer system (you can get these answers in Germany, for instance). That has to be either the government or a single government mandated insurance company. IS that what you’re advocating?
        Here, there ARE no answers, since each payer (insurance company) negotiates its own price (often after the operation) with each provider. Try calling an ophthalmologist and asking what the cost of cataract surgery is. No such thing.
        You really ought to find out how our system (if you can call it a system) works (such as it does).

        • Submitted by Dennis Tester on 06/26/2014 - 02:08 pm.

          To get those answers

          all we need if for the health care providers to publish their price lists.

          • Submitted by Paul Brandon on 06/26/2014 - 02:49 pm.


            Please read my comment.
            In this country there ARE no such price lists.
            First you would have to require health care providers to HAVE standard price lists.

          • Submitted by RB Holbrook on 06/26/2014 - 03:28 pm.

            Absurd on its face

            What reputable doctor is going to have a “price list?” You seem to think medical services are like any other commodity: “We’re running a special on knee replacements–2 for 1!” You might get a price range, but an up-front estimate for a service that is, by its nature individualized and somewhat unpredictable is not going to happen.

            I can just imagine someone who has been in an accident phoning emergency rooms, looking for the best deal.

          • Submitted by Karen Sandness on 06/27/2014 - 12:28 am.

            The reason there is no “list price”

            is that the insurance companies do not pay what the doctors bill. Say a doctor needs to charge $1000 for a given procedure in order to break even on supplies, pay for assistants, etc.. However, this doctor is on the preferred provider list of three different insurance companies, each of which pays no more than a certain percentage of “customary charges”–and they’re all different.

            In order to get that $1000 from an insurance company that pays “35% of customary charges,” the doctor has to list the procedure at nearly $3000, more than that in order to make a profit instead of just breaking even.

            Even if Minnesota’s insurance companies are required to be non-profit, there’s still plenty of room to price gouge in order to spend money on executive compensation and fancy buildings.

      • Submitted by Neal Rovick on 06/26/2014 - 01:23 pm.

        If this is a passion for the Republicans, where is the bill to require transparency?

        And how would it be enforced?

        (Not another gubmint big-brother mandate on private business??)

      • Submitted by Matt Haas on 06/26/2014 - 01:57 pm.


        Its your body you’re talking about, not some widget. Do you truly, honestly, want to farm out your health to the lowest bidder? Hence the problem with commoditizing health care, cost should be the last thing considered. Quality, as in will your problem actually be solved correctly, is the doctor a hack, does the procedure use the most up to date methodology and equipment, should all rank far higher on the list.

        • Submitted by Dennis Tester on 06/26/2014 - 02:11 pm.

          I do it all the time

          I shopped around to find the best price for surgery and went with the lowest bidder. These are doctors who have to pass an exam to demonstrate their competency. I wasn’t too worried.

          I bet you have no idea how much common procedures cost, do you. But why should you care? Someone else is paying for it, right? I paid for mine.

          • Submitted by Paul Brandon on 06/26/2014 - 02:52 pm.

            Did you compare

            the surgical success rates for all of the surgeons that you bid?
            Had they all passed the medical board exams in all the relevant areas of specialization? Were any of them diplomates?

          • Submitted by Jonathan Ecklund on 06/26/2014 - 02:52 pm.

            Bargain basement ophthalmology pricing

            Perhaps this is why you are so myopic?

        • Submitted by jason myron on 06/26/2014 - 07:21 pm.

          Let’s not be hasty…

          I like the idea of regressives farming out their medical care to the lowest bidder. You get what you pay for…

          • Submitted by Todd Hintz on 06/27/2014 - 07:23 am.

            Lowest Bidder

            There are several problems with taking your business to the lowest bidder.

            -When it comes to your health, people general want the best results, not the cheapest.
            -When you’re in an emergency situation, you generally don’t have the luxury of shopping around.
            -Health care should be something everyone has access to. Creating transparency on prices does not solve that issue.
            -Looking for the lowest bidder is irrelevant when even the minimum price of the procedure and hospital stay is more than you can afford.

            It would be much more effective to have people pay a little bit of money each month into a large pool we all contribute to. If someone is ill, then they can draw on the fund to get healthy again. Not everyone will be sick at once, so the healthy people contribute to the ill ones until such time as they become ill themselves. Because the pool is so large, it would drive down the premiums for everyone. All in; all benefit.

            Perhaps we could call this program “assurance” as it assures that everyone has coverage.

      • Submitted by Hiram Foster on 06/26/2014 - 03:08 pm.

        “That’s what republicans mean by transparency.”

        Since I have health insurance, I don’t need to know the answers to those questions. Republicans do like to pay lip service to buzz words, but what they say about health care doesn’t seem to have any relationship to the way health care is actually provided in this country.

        ” People who rely on government or another third party to pay their medical bills wouldn’t know or even care to know that information.”

        The benefit of that is, however, that there is a third party to pay the bills. As I say, there is always a tradeoff. I would rather not know the costs of stuff I don’t pay for than to know the cost of stuff I can’t afford to pay for.

        And this is really the hole Republicans have gotten themselves into. When Obamacare was enacted, an essentially Republican view of health care, the reflexive needs of politics forced Republicans to oppose their own program. That left them in a quandary. They could do what Obama did, steal the Democrat’s idea of single payer. Or they could reject the idea of insurance altogether, proposing some sort of fantasy world where health care services were put up for bid in eBay, where heart attack victims could maybe bid for triple bypass surgeries on their iphones on their way to the hospital.

  7. Submitted by Hiram Foster on 06/26/2014 - 09:57 am.

    Employer mandate

    Speaking on behalf of my fellow liberals everywhere, we aren’t terribly concerned about the employer mandate. That’s because the tax laws currently in effect place enormous pressure on employers to provide health care coverage to their employers, and that’s why we are confident that employers will continue to provide such coverage. The mandate in the ACA is just pushing on the string.

    The reason for this is that health insurance benefits are part of employee compensation, but with the advantage that they are tax deductible, like all compensation paid, to the employer, but tax free to the employee. If the employer were to terminate such benefits, to make the employee whole, he would have to increase the compensation to the employee both for the amount of the premium payment the employer was previously paying, but also in the amount of the additional tax liability the employee would assume, which would result in a loss for the employer. In addition, the employer would be at a disadvantage in the market place for employees because their competitiors would be offering health insurance while also receiving the attendant tax advantage.

    There is a broader question here of course. Should health care benefits be employment based? No, they shouldn’t, but that seems to be a question no one in this discussion seems to have much interest in asking.

  8. Submitted by Neal Rovick on 06/26/2014 - 10:40 am.

    Don’t let facts intrude on your fantasy….


    The long-awaited Rand Corp. study of Obamacare’s effect on health insurance coverage was released Tuesday and confirmed the numbers that had been telegraphed for more than a week: At least 9.3 million more Americans have health insurance now than in September 2013, virtually all of them as a result of the law.

    That’s a net figure, accommodating all those who lost their individual health insurance because of cancellations. The Rand study confirms other surveys that placed the number of people who lost their old insurance and did not or could not replace it — the focus of an enormous volume of anti-Obamacare rhetoric — at less than 1 million. …

    A few other important takeaways:

    –The number of people getting insurance through their employers increased by 8.2 million. Rand said the increase is likely to have been driven by a decline in unemployment, which made more people eligible for employer plans, and by the incentives in the Affordable Care Act encouraging more employer coverage. The figure certainly undermines the contention by the healthcare law’s critics that the legislation gave employers an incentive to drop coverage.

    –Of the 3.9 million people counted by Rand as obtaining insurance on the individual exchange market, 36% were previously uninsured. That ratio is expected to rise when the late signups are factored in. Medicaid enrollment increased by 5.9 million, the majority of whom did not have insurance before signing up…..

    (end quote)

    As of March 2014 under Obamacare:

    3.9 million more newly insured via exchanges under individual policies
    5.4 million more newly insured via Medicaid
    8.2 million more newly insured via employer plans

    Yup, it’s a hell-hole of a disaster–17.5 million more insured.

    Time to dismantle it.

  9. Submitted by Amy Farland on 06/26/2014 - 11:49 am.

    GOP position on Obamacare is unrealistic

    The GOP has boxed itself into a corner on health care and repeal and replace. And like it or not what McFadden is selling as pablum to voters cannot and never will be legislated for the simple reason that like Ryan’s budget, when you have to actually craft the beast you have sold, it simply can’t be done.

    witness this article:

    • Submitted by Dennis Tester on 06/26/2014 - 01:33 pm.

      That blog piece

      is nonsense with a capital N.

      His history and assumptions are inaccurate and so his conclusions are irrelevant.

      The rank and file conservatives’ biggest complaints with Obamacare is that:

      1) it’s mandatory – we can fix that tomorrow in a one-page bill.
      2) it lacks choice – you must buy the Cadillac plan even if you don’t need it – we can fix that tomorrow in a one page bill.
      3) it’s too expensive – we can fix that when we do tax reform, maybe not tomorrow, but soon.

      Everything else is negotiable.

      • Submitted by Jon Lord on 06/27/2014 - 09:22 am.

        Yeah sure

        1) Just throw it out and replace it with the ‘way it was’.
        2) Just throw it out and replace it with the ‘way it was’.
        3) Just throw it out and replace it with the ‘way it was’.

        “Optionality”…is that even a word?

        The thing about ‘pre-existing’ conditions…what he is suggesting is how it was before ACA. A person could still buy insurance, but how it was priced was unaffordable for the average person. It also meant that most companies didn’t want to pay the higher premium for having an employee with a pre-existing condition on board. It also meant that a person with a pre-existing condition faced a much harder time finding employment because of the higher premium placed on that person. It had absolutely nothing to do with that persons capabilities, abilities, or knowledge. Just the higher premium.

      • Submitted by Paul Brandon on 06/27/2014 - 10:03 am.


        Sometimes I wonder if Mr. Tester is a Progressive troll lobbing the rest of us softballs.

  10. Submitted by Harris Goldstein on 06/26/2014 - 09:18 pm.

    It’s a rather incoherent view

    McFadden wants to eliminate the individual mandate but keep the requirement to cover pre-existing conditions. The mandate is what’s required to cover pre-existing conditions. So he wants to replace the mandate with a federal subsidy. But he wants a more market-based healthcare system.

    He wants to open up insurance across state lines. But it’s already open. The real restriction is that policies have to comply with state requirements. So apparently, he’s in favor of federal requirement (or no requirements) over state requirements. (BTW, it’s the MN requirement that health plans be non-profit that keeps UHC out. I think that requirement has outlived it’s usefulness).

    He wants price transparency (don’t we all). But says nothing as to how that’s achieved. Price transparency in insurance rates is achieved by having standard definitions to allow comparison and making the rates easily visible. Let’s see, why don’t we call that an insurance exchange.

    Then there’s price transparency in healthcare procedures. Again, he says nothing as to how that’s to be achieved. We could start with hospitals reporting a standard list of prices for their medical services (necessary, but not sufficient). But wait, that’s a requirement of the ACA.

    His position is like saying I want to lose weight, but don’t want to change my diet or my level of activity.

    Or, as that song went, “Wishin’ and hopin’ and thinkin’ and prayin'” Or maybe just the wishing and hoping part.

  11. Submitted by James Hamilton on 06/26/2014 - 01:42 pm.

    Deductibility and subsidies.

    I’m a long way from an ACA maven, but as I understand it, many now receive federal subsidies for their premiums. Providing them a deduction as well seems ill-advised, at least without factoring in the subsidy.

    Those not receiving a subsidy and paying their own health insurance premiums using after-tax dollars can include those premiums in their medical expense deductions, if they itemize, subject to a 10% floor (7.5% if 65 or older). (Those paying with pre-tax dollars already receive the equivalent of a subsidy/deduction.) Those who receive health insurance through an employer sponsored plan currently may deduct their contributions, while the employer-paid contributions already are tax-exempt and deductible by the employer.

    Any inequity appears, to me, to lie in the existence of the 10% floor and apply at primarily to those paying for health insurance with after-tax dollars and receiving no subsidy.

    Let me use myself as an example. Under my current plan, our maximum out of pocket, including premiums, will be about $16,500. Assuming an income of $100,000, and the use of pre-tax dollars, we would avoid roughly $5,000 in state and federal taxes. If I paid using after-tax dollars, with the same assumed incomde, I will have a medical expense deduction of $6,500 and reduce my state and federal tax obligation by roughly $2,000.

    Removing the floor should be considered.

  12. Submitted by Paul Brandon on 06/26/2014 - 01:47 pm.

    The vague

    ‘doesn’t-add-up’ nature of McFadden’s statements is a clear indication that he doesn’t think that the answers to these questions have any connection to how he would vote if he were elected and the ACA were still under consideration.
    He has already decided that it’s bad; the rationalizations change with the music of the tap dance.

  13. Submitted by Paul Udstrand on 06/26/2014 - 02:09 pm.

    “Market” based fantasies and “big” ideas

    I have to disagree with Hiram in one regard, he says that republicans understand health care but underestimate it centrality. The continued attempt to offer or describe “market” based health care in fact betrays a fundamental failure to comprehend not only the problems with health in the US but the very nature of heath care itself.

    There are millions of things that go wrong with the human body and millions of medical interventions to treat all the things that can go wrong. Almost nothing about the human body or its possible disfunctions is “simple”. Even diagnosing a case of food poisoning requires laboratory tests that few lay people can understand. The basic lab results you get from a basic check-up are incomprehensible to most people. What does it mean if your “K” (do you know what that is?) is too high? And what can that possibly tell you about your health care provider?

    Furthermore, basic comparisons between health care providers are extremely difficult and almost impossible to summarize in any meaningful way. Simply comparing one hospital to another is hugely problematic. For instance Mayo has much higher rates of mortality in a several areas than many other hospitals, does that mean Mayo’s a bad hospital? Or does in mean that Mayo takes on more complicated cases than many other hospitals? A hospital can for instance have higher mortality rates for open heart surgery simply because it does a lot more open heart surgeries than other hospitals your trying to compare it to. We’ve been trying for decades to figure out some way to make meaningful provider comparisons and the more we try the more we realize how hugely difficult is it sooooooo many reasons. And you think as a “consumer” you’re gonna sort this out? Based on what? Customer satisfaction surveys? I’m sorry but that’s pure fantasy. Again you can have the best brain surgeon in the world who takes the most difficult cases and looses 60% of his patients… what kind of “satisfaction” do you think his “customers” are going to report when 60% of them are dead? And even if you could make a choice, how are you going to come out of your coma long enough to sort it out and make a choice?

    The upshot is that the very idea of “consumer centered health markets” is incoherent because the information consumers would need is simply impossible to provide in any meaningful way, and such information even if it were provided would simply be beyond most consumers comprehension. Such a system is also ultimately immoral because patients would constantly suffer the consequences of their own bad choices. And in any even, when do you make these choices? Do you tell the ambulance driver where you want to go in the middle of stroke (assuming you speak)? And any of choice is ridiculous in any event because the no matter how we do this without a single payer national plan, you are always limited to whatever providers are in your plan anyways. It doesn’t do you any good to know who’s the best heart surgeon if the Doc isn’t in your plan anyways, and that’s assuming its possible to know who is the best heart surgeon.

    So forget actual medical metrics, let’s have a market with consumer choice based on cost. This is even stupider than basing it on medical metrics because what’s a “good” consumer choice in this kind of market? Guys like McFadden seem to assume that people will choose “cheap” health care if they have to pay for it. Well, unless cheap is better that’s NOT a good health care decision. That’s a race to the bottom for everyone but the wealthy who can deduct premiums and afford decent health care.

    Look, if people could afford good health care we wouldn’t need any health care insurance in the first place and if people could afford top notch health insurance we wouldn’t have millions of uninsured. Any system that limits people to the health care they afford, which is exactly what this “market” would do, is simply unethical health care rationing. So your talking out of both sides of your mouth if you’re claiming that your health care market will let people “choose” the best health care (i.e. give them “freedom”) but your plan assumes that cheap health care is the best health care many people have a right to expect. So you’re “free” to choose whatever health care you can afford which means the wealthy are whole lot freer than everyone else. And your never going to be “free” anyways as long as we have multiple health care insurance plans because you’ll always be limited to whatever providers are in your plan. So what is this “freedom?” Freedom to choose your plan? We always had that, and we have that now. Obamacare has already increased the freedom because it’s made more plans affordable to more people which is why more people are now insured.

    McFadden’s health care market would turn that back. He’s promising a whole lot of stuff that he’ll never be able to deliver like affordable plans. And look, the problem with tax deductions is that they exist at the whim of congress, YOU KNOW that those deductions are on the chopping the block during the next republican manufactured budget crises because tax breaks like that are actually government expenditures. Anyone who will vote to eliminate unemployment insurance for millions of Americans won’t think twice about eliminating a health care subsidy rather than raising taxes to maintain it.

  14. Submitted by Hiram Foster on 06/26/2014 - 03:34 pm.

    republicans understand health care but underestimate it centrality.

    What I said was that Republicans don’t understand the centrality of the problems which are inherent in their approach to health care, the approach they adopted. For reasons long understood by economists, ordinary market forces don’t work in the area of health care, and that’s something we are seeing played out, for many of the reasons Paul discusses.

    Mr. McFadden is running as the business candidate but as is commonly the case, the intellectual acuity, that might possibly have contributed to his success in the business world has somehow deserted him as he entered the realm of electoral politics. Instead we get barely warmed up talking points, magical thinking, and mostly a tub of words, designed to take the place of any real clarity on the issues. Business who run for office are by definition, politicians. The sad thing is that too often they are really bad politicians, abandoning what made them successful in their old profession, and too often so contemptuous of their new profession that they are unable to master the intellectual tools of their newly chosen trade.

  15. Submitted by Dimitri Drekonja on 06/26/2014 - 04:47 pm.

    This idea that you can shop for the best price and empower consumers is a pipe dream. Mr. Tester brings up one of the few places where it is feasible– elective, non-emergent, very routine surgery. Lasix is another such example. But most health care can’t be priced like that, because in much of healthcare you don’t know what you need to buy. I work as an infectious disease specialist, and I couldn’t give anyone a quote beforehand because most people seeing me don’t know what they have– and until I see them (and sometimes after), neither do I. Perhaps I can make a diagnosis with a history and an exam; or, I might have to get numerous lab tests, imaging studies, biopsies, hospitalization, etc– so the price for a week of having a fever might be the cost of an office visit (~100, depending on complexity), or >$10,000. Not a very precise estimate.

    Have chest pain? Perhaps you just need an electrocardiogram and some bloodwork to rule out cardiac causes, and a history that is suggestive of heartburn. Then off you go with an antacid and some behavior modification. Or, perhaps you have a dissecting aorta– in which case you need to be in the operating room ASAP, not calling around getting quotes on thoracic surgeons.

    Another reason prices are so opaque is because the free market is over-involved– with 2,000 insurers in the US, each is trying their best to woo new clients. They do this by getting preferential pricing for those enrolled– “We have all of 3M’s employees, so if your hospital doesn’t give us a really good rate on inpatient stays we’ll go to your competitor”. So the price you pay depends on whether your insurer was a good negotiator. And whether they were willing to get a cheaper rate by going to a hospital that may not be top-of-the-line. If everyone payed the same price (such as through a single payer system– than hospitals/docs could actually compete on quality, not on how good a deal they give).

    I’ve pointed this out here before, but it’s worth repeating: a free market requires 1) the ability to walk away, and 2) equality of information. If I go car shopping, and I don’t like the deal– I can walk. I can get along with no car, get a used car, ride-share, public transit, etc. If enough people walk away, prices come down, the market adjusts. Similarly, when I look for that new car, I can do my homework, find out what the dealer paid, and be on pretty even footing with the salesperson. Neither of those things work in healthcare. Don’t like the price for the trauma surgeon you need after you were hit by a car? Too bad–are you going to walk away with your leg dangling? Or, when your doctor tells you a CT is needed to diagnose why you are having several days of abdominal pain– are you going to quickly read up on the various causes of abdominal pain and the optimal way to diagnose each one? Good luck with that.

    These platitudes of getting the market involved ignore these facts, and also ignores the fact that the multitude of private insurers makes pricing more opaque, not less. The last fact that gets ignored is that the affordable care act was basically a plan designed by a moderate republican (remember Pawlenty needling Mitt about “Obamneycare”?). So my ambivalence to it (better than status quo, but by no means the end goal) is explained. What’s not explained is why a plan that came from their own party is so detested by the republicans. Could it be that they just despise anything that comes from this administration? Sure seems so to me.

    • Submitted by Paul Udstrand on 06/27/2014 - 02:17 pm.


      “Or, when your doctor tells you a CT is needed to diagnose why you are having several days of abdominal pain– are you going to quickly read up on the various causes of abdominal pain and the optimal way to diagnose each one? Good luck with that.”

      Exactly. And even then, if you could read up on it, you’d probably just get yourself killed because you don’t know what you don’t what you don’t know. Think of it this way, do you want a Doc who practices medicine that way treating you? Maybe there’s a reason they don’t just teach Doctors how to google stuff?

  16. Submitted by Mike Schumann on 06/26/2014 - 07:59 pm.


    I’m totally for more transparency on pricing. I have a high deductible plan, so most of my day to day health care expenses come out of my own pocket. I don’t have a problem with this. It’s a good way to keep a lid on overall health care expenses. However, in the current system, there is absolutely no way to price shop. Health care providers should be required to post their prices and give estimates, just like auto repair shops.

    The other issue that bugs me is the elimination of lifetime caps on policies. In the long run, with the technological advances that are going to be able to keep people “alive” for ever, this is going to bankrupt our health care system. Personally, when I get into an end of life scenario, I have no desire to live on life support forever. I’d rather be comfortable and have a peaceful exit. I have no interest in subsidizing someone else’s desire to postpone the inevitable.

  17. Submitted by Tom Anderson on 06/26/2014 - 09:34 pm.

    What I can’t wait for

    Are the policy positions advocated by Senator Franken. (Per the subtitle) Although the record pretty much speaks for itself. The U.S. has insured maybe a third of the 47 million uninsured for the low, low, price of over a trillion dollars. The real costs haven’t kicked in yet but at least Americans can decide now whether the ACA is worth the price even without the negative costs having factored in yet.

    • Submitted by Paul Brandon on 06/27/2014 - 10:00 am.

      Of course

      most of the real benefits of better health care haven’t kicked in yet either.

    • Submitted by RB Holbrook on 06/27/2014 - 11:54 am.

      What I can’t wait for . . .

      . . . is some explanation of why certain types keep saying they can’t wait for the policy positions advocated by Senator Franken every time there is an article about Mr..McFadden. One would think it would not be that difficult to comprehend that an article about one candidate should focus largely on that candidate.

      I’m also looking forward to see the final costs of the ACA compared to a figure for the probable costs of continuing to leave that many people uninsured.

  18. Submitted by Hiram Foster on 06/27/2014 - 05:59 am.


    “In the long run, with the technological advances that are going to be able to keep people “alive” for ever, this is going to bankrupt our health care system. ”

    It’s a decision we have made that health care will not be denied because of an inability to pay.

  19. Submitted by Hiram Foster on 06/27/2014 - 07:46 am.

    Health care

    It’s important to understand that Obamacare is a response to America’s health care problems, it didn’t create them. We did that when we decided to have fewer children and not die at a young age. We still have a chance to at least partially reverse those decisions and lessen the need for Obamacare in case anyone is up for it.

    • Submitted by Jon Lord on 06/30/2014 - 03:38 pm.


      That’s true, it’s a response to a problem. It certainly didn’t cause the problems of health care.

      I mean, it’s fine to have more children and we are. The population will keep going up. A lot of them are too young to put money in the system yet though. And the die off rate will remain high in the coming years but will eventually drop off once the boomers leave this mortal coil. This might be the answer, coming soon near a Social Security office near you!

      I am for allowing a person to opt out of life if it’s medically painful enough that living is torture. We tend to balk at allowing that though and it probably wouldn’t put a dent in the population.

      Another suggestion a friend had is that we need more wars. The problem there is that although people do die, many are also wounded, some needing serious medical help for the rest of their lives. That’ll always be a problem and I seriously doubt that there’s an answer there. Plus drones and etc, might reduce the numbers of people on the battle fields in the future anyway.

      Obamacare seems like the best of all choices, to me anyway.

  20. Submitted by Kenneth Kjer on 06/27/2014 - 10:59 am.

    The real problem with health care in this country is education. Most people can’t read an insurance policy and understand it. Of the major things in life, banking, health insurance or insurance in general, home ownership, and so on none are taught in our schools. When it comes to healthcare most people don’t have a clue what they are going to get or how much it is going to cost. All they have to do is understand the policy and then ask questions. I do it all the time and it has saved me thousands of dollars. I had major surgery in January with a total bill that came to over 35,000 dollars, my cost 200 dollars. Number one, I questioned the specialist and after I got my answers I changed specialists. I also picked my hospital. It took a little work, but big deal, I saved a ton of money.

    • Submitted by Paul Udstrand on 06/27/2014 - 12:00 pm.


      “The real problem with health care in this country is education. ” Kenneth, it costs around $160,000 to get your MD and finish the residency. Let’s assume that in addition to all the education we already have we ALL went to Med school…. how would you pay for that? By the way, its not that easy to get into Med School so I don’t know you teach medicine to people who barely got out of high school or college?

      Anyways, I’ve always wanted to be a brain surgeon. What kind of Doctor do you want to be in your spare time?

      You need to be a MD in order to second guess your MD. That’s why we get second opinions form other MD’s instead of our accountants. Even if you understand your insurance policy, you have no power to change it. All you can do is go to a different insurance company that will have the same policy unless you just want less coverage and that brings back to the notion of people getting the health care they can afford. I’ve noticed that some people think health care they can afford is a great idea… until they need health care they can’t afford.

      Again, this whole idea of somehow empowering patients as consumers is simply incoherent given the existential nature of health care. In fact, the whole idea of “empowering” consumers is largely a marketing ploy based on a myth in the first place. Consider the “Organic” food craze, or the bottled water fiasco. By this time next year we’ll all know that these glutton free diets are waste of time for 99% of the population. And the vaccines, my god the vaccines! Empowered consumers indeed. Look, importing consumer mentalities and models into health is just a really good way to get a lot of people killed and injured, we’ve already some limited experience with it and it’s always a fiasco. Remember that Cancer Center a while back with all the glitzy TV commercials that turned out to be killing patients and had to shut down? We want MORE of that? One of their gimmicks was transparent billing.

      • Submitted by Jonathan Ecklund on 06/27/2014 - 03:15 pm.

        MD cost

        A friend of 25 years just finished his residency last week and if moving back here… I can guarantee you, the debt burden is waaaaaaaaay over 160,000. More like 350-400,000, at least for an ER surgeon.

  21. Submitted by Paul Udstrand on 06/27/2014 - 11:18 am.

    Just few more comments from me…

    First thanks for clarifying Hiram, I apologize of I miss-paraphrased your position. My only challenge is to you suggestion that private sector intellect seems to abandon guys like McFadden when the run for office. I’ll say it again, I think one of the problems we have in the country is a mediocre executive class. Guys like simple are not the smartest guys in the room to start with, their success in the business world is product of a variety of factors, not their intellect.

    It seems to be clear enough that it silly to expect consumers can “buy” health care the way they buy lawnmowers or golf clubs. And the idea that consumers in markets will control costs is easily dispensed with… consider the billion dollar Dish TV and Cable industries, if cost were the primary factor for consumers only a fraction would be paying for stuff they can get for free. At the very least price conscious consumers would have demanded more responsive “plans” instead of paying for potential access to hundred of channels they never watch.

    One canard that seems to have persisted however is the notion that “transparency” might control costs. I think some transparency might make some patients “feel” better about their bills, but it does nothing to control cost. In a medical situation for instance you go the ER because you have abdominal pain, the Doc want to order a series of blood and stool test, and an MRI with contrast. So what? They tell you how much each of these items costs? And then what? You decide to pay for the MRI but NOT the contrast fluid or stool analysis? What good is transparency? Let’s talk about bill: so you have a colonoscopy and you get a bill for $1,000, or some portion of that $1,000 (this is actually about what most places in the US charge for a colonoscopy). What makes this bill “transparent?” Let’s say they list 90% of the items that add up to $1,000, the anesthesia, the Docs fee, the office space, the cost of the colonoscope, whatever… so what? Do you know how much any of this stuff “should” cost? How is that going to control costs? Listen, detailed bills don’t control costs at your dealers auto mechanic, why would expect them to control costs at a Doctors office or hospital?

    Listen, its a fact that we pay more than the rest of the world for our health care, and its a fact that we’re paying more than we should. But that has nothing to do with transparency or the consumer choice. Our health care costs are generated by two things: a) exorbitant administrative costs and b) providers simply charge too much. Simply having for profit and even our versions of not for profit insurance companies is adding as much as 30% to our health bills. And the private sector is extremely inefficient in this regard. Private sector insurance is spending up to 30% on administrative costs compared to 3% or less for instance for Medicaid and the VA.

    Our health care providers charge too much for services. Remember that $1,000 colonoscopy? Well in France or Germany that same colonoscopy costs $500 – $600. I worked in a hospital for over a decade and all management would tell us was that we were always short money because we only collected 52 cents for ever dollar we billed. Well, they’re charging 300-500% above cost for everything and they get away with it in this country because our health market can’t control that. Even with payers negotiating discounts they get away with it for a variety of reasons. This is why providers are death on Medicaid, Medicaid actually calculates what a procedure or medication should cost in a given region and pays accordingly. Providers don’t lose money with Medicaid like they claim they do (remember the 52 cents on the dollar claim). They just don’t make what they want to.

    There was nice little article about this in the NYTs a while back:

    Now you’ll note an interesting fact here, we have a system with a government run insurance plan that is less expensive and pays less for health care than the private sector plans that are supposed to be more efficient not only in paying the bills, but also at extracting discounts from providers. How does that happen? For one thing, Medicaid budgets are focused almost entirely on negotiating payments. Private health insurance companies try to manage budgets not only by negotiating discounts, but they also spend a lot of time and money denying coverage and limiting providers. This is why even if you have good insurance in this country you be bankrupted by medical costs.

    • Submitted by Jon Lord on 07/02/2014 - 02:12 pm.


      “I’ll say it again, I think one of the problems we have in the country is a mediocre executive class.”

      That is a major problem, perhaps one of the biggest problems facing our country today. Those who fall in line are paid the most and are promoted higher up the ladder faster. Those who fall in line the quickest and easiest are the least bright. Ergo…we have a problem!

  22. Submitted by Hiram Foster on 06/27/2014 - 12:26 pm.

    Private sector

    I do kind of wonder what’s up with McFadden. He exhibits a sort of intellectual listlessness. He repeats the usual buzz words and catch phrases but he doesn’t seem to have thought about them in any serious way. His passion seems to be for education, but the creation of education policy isn’t a very big part of a senator’s job. He would seem better suited, based on his interests, to a run for the school board.

    Transparency doesn’t control costs as such. What a lot of these market type folks miss is that what they are buying when the are buying health insurance is health care. What a doctor is selling you isn’t a series of medical tests and procedures, he is selling you medical care. And it follows that what you should be concerned about, where transparency is valuable is in establishing a price for what you are actually buying, and the MnSure website is excellent at doing that. Now there is a view that the creation and existence of markets reduces prices. As an absolute thing, that simply isn’t true. If it were, the stock market would always go down. Markets can create efficiencies, and that might lead to “better” prices, but not necessarily lower or higher prices. With respect to health insurance, I doubt if the creation of markets has had much impact on prices, not because we have too little information, but because we have too much information, and don’t have the tools to handle that excess of information efficiently. The pricing disparities Paul discusses are characteristic of inefficient markets. It’s an interesting question to ask why insurance companies don’t regulate costs, impose uniformity on what they pay for. My guess is that they don’t do that because there is too much resistance from providers for that to happen and over the years they have learned to maintain profitability, by focusing on who as opposed to what they insure.

    • Submitted by Paul Udstrand on 06/27/2014 - 02:04 pm.

      Yes but…

      Hiram: “The pricing disparities Paul discusses are characteristic of inefficient markets. It’s an interesting question to ask why insurance companies don’t regulate costs, impose uniformity on what they pay for. My guess is that they don’t do that because there is too much resistance from providers for that to happen and over the years they have learned to maintain profitability, by focusing on who as opposed to what they insure.”

      Absolutely. But I think it’s important to remember that “efficient ” markets are largely a myth once you beyond transportation infrastructure. And even then, the post office can most time deliver a package faster and cheaper than UPS or Fedex these days. Listen, my folks house sustained storm damage last summer. The mortgage company decided to they wanted to drop another claim process on top of the process we were already following with the insurance company. This attempt failed because I defeated it, AND it was completely unnecessary. I know they spent hundreds dollars trying to “monitor” our claim instead of simply asking for a copy of the receipts and an inspection when the work was done. We upgraded our DSL to a higher speed and that’s cost Century Link a couple hundred bucks because they keep screwing things up and having to give me discounts not to mention the time (a young lady spent an hour and half on the phone with me yesterday fixing a problem they created with our long distance calls) they’ve spent on my tickets. This should have been a routine procedure. From banks to phone companies THIS is typical private sector efficiency. You see that inefficiency sprinkled all over the health care system in this country from the private insurers to the hospitals.

      The point is, efficiency isn’t product of magic markets or unseen hands in the market place. Efficiency emerges when people, in whatever environment they’re working in, care about what they’re doing and try to be efficient. This is how Eisenhower got a million guys across the English Channel and kept them supplied for weeks with narry a private contractor to be seen. And its how Amazon gets orders right and delivered on a daily basis. It’s not about the markets, it’s about the talented, intelligent, and competent people who care about making it work.

      Guys like McFadden hire efficiency consultants… what does that tell you?

  23. Submitted by Paul Udstrand on 06/27/2014 - 02:45 pm.

    Hiram’s question

    “The pricing disparities Paul discusses are characteristic of inefficient markets. It’s an interesting question to ask why insurance companies don’t regulate costs, impose uniformity on what they pay for. My guess is that they don’t do that because there is too much resistance from providers for that to happen and over the years they have learned to maintain profitability, by focusing on who as opposed to what they insure.”

    There is certainly resistance from the providers, but frankly I think insurance companies are extracting sufficient revenue from their customers, I think that’s actually their business model. I don’t think they actually try to control costs by negotiating better prices, they control costs by denying coverage. They don’t process claims for free, they charge higher premiums than they need to, and they invest that revenue. Even the HMOs ended up swimming in revenue at the end of the day. I mean that’s the thing, we’re talking about corporations here, they don’t have a societal mission, they have fiduciary missions to make money. On a very basic level they don’t actually have to care how much health care costs as long as they’re making bank. They have no moral obligation to provide affordable health care. Even the so called not for profits here in MN have money making business plans.

    Remember all the “freedom” that HMO market innovation brought us? Remember Group Health? We used to call it “Group Death”. I worked with a woman who died from a brain tumor right in the middle of her forehead. Her Group Health Docs told her it was a sinus infection for over a year. Yeah, HMO’s not so much the big solution, although we have had slightly better and more affordable health care in MN over the last couple decades.

  24. Submitted by Hiram Foster on 06/27/2014 - 03:36 pm.

    Efficient markets

    When I talk about “efficient” markets, I am being very literal minded. Efficient markets are ones that buyers and sellers meet easily and cheaply, and where there is transparency in pricing. They can exist in the real world or in cyberspace, just as stocks are traded both at the physical NYSE, or in the cyber world of the NASDAQ.

    The MnSure market is efficient in that pricing is transparent. The Republican idea is that the existence of markets drive down prices because of competition. What they don’t understand is that markets aren’t competitive, they are simply a venue where competition may or may not occur. Consider a street corner where there is more than one gas station each of which is selling gas for the same amount. That’s a place where product is bought and sold, which is the definition of a market. Transparency is present, with prices posted on big signs outside. But they aren’t driving down each other’s price. Why is that? It’s because they aren’t competing for your gas business.

    Much the same thing is going on with health insurance. The website is the market place, the prices are quoted in a transparent matter, but prices aren’t being driven down as Republicans thought they would be. That was the complaint in the Mack Hoppe op ed in the Star Tribune earlier this week. What Tara and Joe missed was that premiums aren’t being driven down by Obamacare, rather premiums aren’t being driven down because of a basic and fundamental flaw in Republican thinking which was adopted by Obamacare, that the creation of markets would drive down prices. What they missed was that while the insurers may compete, like the gas station owners with respect to gas,the insurers don’t compete on the basis of price. All the transparency in the world doesn’t matter if what you see clearly is the wrong thing.

  25. Submitted by Paul Udstrand on 06/28/2014 - 10:16 am.

    In summary

    Listen, following up on Hiram’s comment, if markets inherently delivered more product for the least amount of money, markets would never create bubbles. McFadden should know this because he come out of the banking industry that produce the financial sector meltdown. It’s simple, why would you expect a health care market would “control” prices any more than the real estate market controlled home prices? This is magical thinking masquerading as economic theory.

    And if markets created the most efficiency the government wouldn’t have to bail them out on a routine bases.

    And as Hiram points out, even if competition emerges within a market (which doesn’t necessarily happen) it’s not necessarily the competition society or the “real” economy needs. Sure, health insurance companies may “compete” on some level, but they compete for more revenue, they don’t compete to drive health costs. In fact, its actually illogical to assume that companies trying to make money will attempt to depress the price of their products. Even Walmart charges as much as they think can, even if it is two cents less than Target. And of course the off-shoring Walmart model doesn’t work with health care or insurance even though providers are trying- some providers are off-shoring their radiology consults for instance.

    And in addition to all of this we have the basic basic observation that no market is legitimate when the “customer” isn’t free to walk away from the sale. As Dimitri points out, you can always walk away from a car dealer or a set of towels at Target, but you can’t walk away from chest pain, complicated pregnancies, gunshots, or broken bones. A very small percentage of our health care is elective. The idea of “shopping” for plans in an unregulated market always devolves into a situation where people can only get the health care they can afford instead of the health care they need. Remember in the pre-Obamacare days we had insurance companies that limited they liability by denying coverage to people who actually needed it (i.e. preexisting conditions). This forced people into plans with high deductibles and co-pays that most people couldn’t afford, and coverage limits that were quickly exhausted leaving patient with crushing medical bills despite having insurance. Inuring the healthy is not about providing health care, it’s about making money, and they made billions.

    All this really tells us is that McFadden, like all his Republican friends, never really recognized the fact that we have a health care crises in the first place. His “plan” basically is to return us to the crises we partially solved with Obamacare. As far as guys like McFadden were concerned we had a market, people were making money, what’s the problem? In a lot of ways guys like McFadden actually fear more affordable health care more than anything else.

    Really intelligent people CANNOT be blinded by ideology. And people with integrity don’t even want to appear to be blinded by ideology. Either way McFadden has a problem.

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