Linda Gorman
Linda Gorman is a Senior Fellow at the Independence Institute, a free market think tank in Golden, Colorado and director of the Institute's Health Care Center. A freelance writer and researcher, she was a weekly columnist for the Colorado Daily in Boulder. Her articles have appeared in local newspapers, professional journals, and publications such as The Fortune Encyclopedia of Economics.
She has worked as an economic researcher for a Denver mutual fund company, and was an adjunct professor and a principal investigator for several military manpower projects at the Naval Postgraduate School in Monterey, California. Her academic degrees are in economics.
Saturday, May 31, 2008Bad Debt BaloneyA Hospital Transparency Update By Linda GormanCategories: OregonA developing meme in the storyline against market oriented health care reforms is that consumer-directed health plans are responsible for an increase in hospital bad debt. Given that hospitals have a history of reporting thoroughly misleading data on the cost of care, as when they conflated uncompensated charity care with uncompensated Medicaid/Medicare care and then happily blamed the uninsured, such claims deserve close scrutiny. A nice little paper from Oregon Health Policy and Research at Oregon.gov suggests that one should take this latest storyline with a boulder sized grain of salt. To start with, the measure of uncompensated care used by hospitals in Oregon is “full established charges.” The report defines uncompensated care as “the total amount of health care services, based on full, established charges, provided to patients who are unable or unwilling to pay. Uncompensated care includes both unbilled charity care and bad debt (services billed but not paid).” Bad debt is “the unpaid obligation for care provided to patients who have been determined to be able to pay, but have not done so. Services are billed, but not paid. For insured patients, certain amounts that are patient responsibility, such as deductibles and coinsurance, are counted as bad debt if not paid.” In short, bad debt happens when the hospital figures that someone should be able to pay at the full, fanciful, amounts that hospitals list but no virtually one pays unless he is a) uninformed and b) uninsured, but doesn’t. The diagrams show that changes in uncompensated care in Oregon jumped in 2000 even though gross patient revenue and bad debt stayed more or less the same until 2002. In 2002 bad debt grew. This continues until 2004-2005 when it screeches to relative halt. AHIP estimates suggest that nationwide there were slightly more than a million HAS/HDHP policies in force by January 2005. Given the demographics of hospital use, the fact that HSA qualified policies were legalized in 2003 and the fact that only an estimated 2.9 percent of private Oregon health insurance policies were high deductible by January 2008, it is hard to understand how they would be the cause of the big bad debt increase in 2002-2003. Plus, the bad debt increase starts in 2002- 2003 and moderates in 2004-2005. If HSA/HDHP plans were the cause, one would expect to see bad debt continuing to increase as HSA/HDHP plans grew in numbers unless people who don’t pay their bills were the first group attracted to HSA/HDHP plans. Given that the previous storyline was that HSA/HDHP plans are attractive to only the “healthy and wealthy” this is difficult to believe. The wealthy generally pay their bills, and the healthy generally don’t use hospitals. Other possible reasons for the bad debt increase? Hospitals could have upped the expected payment rate for various services. Or perhaps they felt that more people could pay the full amounts that almost no one does. With hospitals, it is impossible to know for sure.
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Wednesday, May 14, 2008Why High Health Care Costs in Milwaukee?By Linda GormanCategories: WisconsinThe Wisconsin Policy Research Institute has issued a report on high health care costs in Milwaukee. I was the author. The basic conclusion is that prices would be lower if hordes of expert American shoppers were set loose on its highly integrated health care providers. It includes an overview of the literature on hospital pricing behavior in integrated health care systems. People who want to extend government control over health care generally laud integrated health care systems as a way to lower costs and generally save the world. As was the case when the same group of people said HMOs and capitated care would save the world, the truth is probably more complicated. The report tries to promote a beginning understanding of the behavioral drawbacks inherent in promoting integrated systems as the cure du jour. Understanding those drawbacks is essential to making cogent arguments against those who think more government is the cure for what ails us. The opening sections include some discussion of the more common claims about why health care costs are so high. The paper also contains an extended discussion of the savings that can accrue to purchasers of health insurance when they combine a health savings account (HSA) with a qualified high deductible health insurance policy (QHDP). Even under fairly severe assumptions about illness, there are still small lifetime savings from an HSA/QHDP. The calculations use real prices and make assumptions that would favor traditional low deductible insurance policies. Graphs are included. In addition, you might find the paper useful for its references.
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Tuesday, May 13, 2008Take $419,953 From Roads to Raise Health Care CostsBusiness as Usual at the Colorado Statehouse By Linda GormanCategories: ColoradoIn the annual General Assembly spend fest, this year’s Colorado legislature has sunk to new depths by diverting money from the state highway budget to fund regulations that will increase health care costs. While the roads and bridges crumble, Colorado politicians have already begun the campaign for future tax hikes. They are expected to claim that the state’s infrastructure needs more funding. This year’s legislative majority was clearly not satisfied with the fact that Colorado’s relatively lightly regulated individual health insurance market functions quite well compared to certain other states, with the fourth highest percentage of people enrolled in HSA eligible high deductible health plans among the 50 states. Hostile to insurance companies in general, and to health insurance companies in particular, it decided to divert taxpayer funding to HB 1389, a statute that lets the state set health insurance prices. Thanks to these hardworking Colorado legislators, the state Department of Insurance can disapprove rates if profits are “unreasonably high.” It can disapprove rates if profits are unreasonably low (“clearly insufficient to sustain projected losses and expenses”). The state can reject any rate increase judged “excessive, inadequate, unfairly discriminatory,” based on “The Commissioner’s” opinions about “profits, dividends, annual rate reports, annual financial statements, subrogation funds credited, investment income or losses, unearned premium reserve and reserve for losses, surpluses, executive salaries, expected benefits ratios…and any other appropriate actuarial factors.” Regulating by Commissar whim costs money. According to the fiscal impact statement accompanying the bill, Department of Insurance employees currently spend about half an hour reviewing rate filings. Department actuaries then spend about 3.5 hours in further review. Under the new rules, the initial review time will increase an estimated 1,000 percent, to an estimated 5.5 hours. The actuarial review time will increase by 186 percent, from 3.5 hours to 10 hours per filing. Overall, the bill will increase state government costs by an estimated $620,652. An estimated $419,583 of that will be funded by reducing “the annual diversion to the Highway Users Tax Fund” in FY 2008-2009. As no government expansion is free, policy holders will no doubt also have to pay higher premiums to defray the costs imposed on insurers stuck with having to interface with the 8 new state employees hired to carry out this monument to regulatory uncertainty. In the midst of spending one of its biggest tax increases ever, the Colorado legislature can think of nothing better to do than give Colorado residents higher health insurance costs by reducing road maintenance. In the immortal words of P.J. O’Rourke, giving money and power to government is like giving whiskey and car keys to teenage boys.
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Friday, May 2, 2008Grassroots Health Care ReformManitowoc County Saves Big With HSAs By Linda GormanCategories: WisconsinIn 2006 Wisconsin’s Manitowoc County needed to control its employee health care costs. With union agreement, it decided to experiment with a qualified high deductible health plan coupled with a health savings account. For single employees, the county planned to contribute $1,500 to a health savings account for each person. It hoped to save up to $825 an employee. Initial results are in. At the end of 2007, County Executive Bob Ziegelbauer told the Milwaukee Journal Sentinel that the county would save $500,000 from what it spent in 2006. The savings occurred even though it paid the entire employee health insurance premium, eliminated all copays, and put $1,500 into the health savings account of each covered individual or $3,000 into the health savings account of each employee with a family policy. In January, the county issued a report projecting savings for 2008. It estimates that employees with family plans will save a minimum of $2,126.70 in cash compared to what they would have paid under the old low deductible with co-pay plan. The County’s cash savings per family plan are projected to be $5,941.80 a year. An October 2007 op-ed by Mr. Ziegelbauer explains why it HSAs work. The slide show the county uses to explain the new plan to its employees is here. Even though Wisconsin legislators tax health savings accounts, an estimated 5.6 percent of people who were under 65 and privately insured were in them at the beginning of 2008. This puts Wisconsin among the top 10 states for HSA penetration, behind Minnesota (9.2 percent), Louisiana (9.0 percent), Vermont (7.4 percent), Colorado (7.1 percent), Nebraska (6.4 percent), and Connecticut (5.8%). Are your local officials looking at qualified high deductible plans coupled with health savings accounts for their employees?
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Friday, May 2, 2008A Liberal on Health Policy from EmpowerTexans:By Linda GormanEmpowerTexans sums up the child health care debate from the liberal perspective: “The word ‘children’ is magical.” Say the word and the money is magically transported out of your wallet. Video here.
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Wednesday, April 23, 2008Making Up Medicaid CutsBy Linda GormanIf Families USA were a newspaper, it would be a supermarket tabloid carrying articles about alien abductions. Its latest campaign is a series of press releases screaming that states will lose thousands of jobs and zillions of dollars due to the Bush Administration Medicaid cuts. Local newspapers in Colorado are repeating the Families USA press release almost verbatim. If you are in a tax and spend health care reform haven, you may soon be seeing quotes from the Families USA director, Ron Pollack, saying things like “These cuts in federal Medicaid payments will have a ripple effect through state economies that are already struggling during this economic downturn.” In fact, as the Heritage Foundation’s Nina Owcharenko explains, the Bush Administration has not proposed Medicaid budget cuts. Its FY 2009 budget proposal increases Medicaid spending by $12 to $13 billion over expected spending in FY 2008. This is in addition to FY 2005-2007 spending increases of about 10 percent. What the Bush Administration is proposing is a slightly smaller budget increase, about 7.1 percent rather than 7.4 percent. The 2009 budget numbers are available from the federal government here on page 61. If Families USA and its fellow travelers were a real family making $50,000 a year, these budget numbers would be the equivalent of having an expected windfall of $53,700 reduced to $53,550. This small reduction in the rate of federal spending will, the people of Colorado are being told, cost Colorado “more than 3,500 jobs and an accompanying $135 million in wages,” a neat trick given that Colorado is not an entity and does not earn wages. If a newspaper in your area reproduces this nonsense, perhaps it should be politely reminded Families USA is known for approaching health care with a well defined ideological slant and for producing lousy numbers on all manner of health care issues. It might also be asked to check before reproducing Families USA press releases as news.
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Monday, April 7, 2008When Health Care Transparency is a Trojan HorseBy Linda GormanStart your week right by enjoying the gate crashing call to action pasted below. An email from a progressive group, it clearly shows how calls for health care transparency are being used as Trojan horses--without more government control we'll never know what is going on--and why those interested in advancing market oriented health care reform should avoid them. It also shows once again that anything with FAIR in its name is anything but. The email content suggests that the leftist campaign to control health care is solidifying around name-calling, demonization (in this case of insurance companies now that physicians and pharmaceutical companies have been dispatched), and claims that reformers are brave revolutionaries standing up for the oppressed masses. The legislation that the left is rallying to support would impose certain price and regulatory controls in the name of insurance transparency and will likely show up soon in a state near you. If the Fair and Accountable Insurance Act passes, Colorado’s Insurance Commissioner could retroactively deny rate increases that he finds unjust, unfair, inequitable, discriminatory, excessive, inadequate, or incomplete. Insurance companies would have to make their pricing algorithms public. They would be safe from retaliatory rulings only if they adopted punitive minimum loss ratio standards that have, so far, often been associated with companies that provide crummy service. Does the legislation define these terms? Of course not! Why include definitions that might limit the state officials’ power to act in the public’s best interest? You just know that the Democrat legislators introducing this abomination feel in their hearts that all public officials are honest, caring, experts who will do their best for the public, especially when it helps stock their freezers with $90,000 in cold cash, brings them fabulous deals on valuable real estate, gives them the inside track on various financial offerings, and provides the Rolls-Royces and yachts so necessary to helping them endure the stress of public service. You want a lower health insurance premium because you are a young healthy non-smoker with a low risk of disease who watches his weight and takes care of himself? If the insurance commissioner thinks that "discrimination" includes letting people pay different prices for the same policy regardless of the risk of loss, you are going to pay the same rates as a 60-year old suffering from overweight, a disintegrating frame, and the dicey liver brought on by a lifetime of dissipation. Enjoy! From: Bobby Clark - ProgressNowAction [mailto:bobby@progressnowaction.org]
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Tuesday, February 19, 2008Should Medical Privacy Laws Hamper Murder Investigations?Is this a real Death of Common Sense? By Linda GormanA valuable posting at Overlawyered.com points out that HIPAA and state privacy laws may have unintended consequences. One is preventing police from having speedy access to medical records when a patient is a prime suspect in a murder. See Privacy Law and Criminal Investigations, Cont’d. Kathryn Faughey, a therapist in New York City, was hacked to death by an assailant wielding a meat cleaver. The police cited medical privacy law as a barrier to the investigation. According to the New York Times, the parents of the man now in custody for the murder “tried our best to keep him in the facility that he was hospitalized in over the many, many years of his illness,” he [the suspect’s father] said, standing outside his father’s home. “But they kept on releasing him, after we told them what had been going on.” Further evidence, in case any is needed, that health care regulation needs serious overhaul, and that government control often brings, as Philip K. Howard has so eloquently pointed out, the death of common sense.
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Thursday, February 7, 2008Can Families USA Count?Its Cost-Shift Numbers Make One Wonder By Linda GormanCategories: PennsylvaniaThe magic number being used to gin up support for a Massachusetts-style more-government-is-better health care reform in Colorado is $950, as in the "cost of doing nothing" about health care reform is $950. Or, as the Denver Post put it "Coloradans who have insurance spend an extra $950 each year to cover the costs of those who show up at the hospital without insurance." How does the Denver Post know this? It doesn’t. It merely prints what people tell it, and the local "government is the solution" health care reform elites are all repeating, in unison, is the estimate of uncompensated care published in a 2005 report from Families USA. Apparently we are to believe that if Families USA says so, it must be true. The problem is that the Families USA estimating technique is quite complex and has the added problem of using sparse national data to interpolate the cost for each state. This can introduce big errors. Before promoting the results of such estimation one would expect that the people producing it would compare their estimates with independent ones. As a public service, a few comparisons are provided in the table below. Unsurprisingly, these sketchy results suggest that the Families USA systematically overestimates uncompensated care. The Families USA estimates are based on 1996 to 2003 data. Estimates from the independent authorities are for the years given. The Families USA estimates do not include "uncompensated care provided to insured people, who may be unable to pay," they are said to be only the cost of health care that is not paid out-of-pocket by the uninsured themselves. The independent estimates include bad debts where indicated. The independent estimates do not include uncompensated care provided by physicians unless indicated. As estimated by Hadley and Holahan, adding physician care would raise the total by roughly 15 percent.
As another check on the Families USA numbers, the 2005 report states that the number of uninsured in the USA in 2005 would be 47,564,000, or 16.1% of the population. The pooled Census estimates for the uninsured from 2004-2006 were 45,102,000 or 15.1% of the population ±0.1%. In short, Families USA was high again.
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Friday, December 14, 2007Private health plans already doing reforms government control advocates pushFind another excuse for telling people what to do By Linda GormanThe usual argument that the health care central planners make is that a government takeover of health care would save money by focusing on wellness, cost saving measures, and consumer education. We need a public takeover, they say, because the private sector doesn’t do this. And, to be fair, the central planning devotees usually believe what they say because they have no idea what the private sector is actually doing. Their contact with it is limited to consumer goods and stories in leftie media. Living on other people's money provides a nice, comfy, cocoon. Teary-eyed Wall Street Journal front page articles on the failures of private insurance aside (and I’m still waiting for the profiles of failures in government controlled health systems—Walter Reed went down the memory hole really, really fast), it turns out that that private sector health plans are already doing the things that the planners want. It is time to start talking about this. And to make the obvious point that eliminating private health insurance and health care will slow innovation to the snail’s pace that exists in health care paradises like Britain, where they are still trying to figure out how to properly clean hospitals and give doctors a place to wash their hands. To get started, you might look at Innovations in Chronic Care, a report from America’s Health Insurance Plans detailing some of the experiments that are underway. Note to health care reformers: Want consumer education, waste reduction, case management, nurse hotlines, and wellness programs? Support consumer-directed account based reform. Want central planning for health care? Think up another set of excuses.
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