ObamcaCare Mergers: The Long Pole In The Tent Is Not The Savings To Be Made -- July 10, 2015, Part III

I don't know where I first saw this but it was in some introductory course in finances or economics that I took somewhere along the way. There are many, many reasons for mergers. Perhaps the number one reason for mergers is that one of the parties may not survive. When investors see a press release that a company they have invested in is looking to be bought out or looking for a merger, a smart investor knows that the company may have significant financial problems, and is looking for a way out.

Google mergers purpose survival.

Near the bottom of the first page when you google those three words:

• can mergers ensure the survival of credit unions
• mergers key to community hospital survival

Hold that thought.

Now go back and read the earlier post today on ObamaCare:

As leading health insurers scramble for market share through a series of multibillion-dollar mergers, consumers are no doubt wondering if their premiums are bound to skyrocket.

Short answer: Probably.

"That's what usually happens when you have less competition," said Erin Trish, a researcher at USC's Schaeffer Center for Health Policy and Economics. "At the same time, though, consolidation among insurers could mean a stronger position in negotiating lower rates with hospitals."

The question, she said, is whether insurers would pass along any savings to policyholders. Past mergers among insurance companies suggest that consumers seldom benefit. 

"When insurers merge, there's almost always an increase in premiums," Trish said.
Ironically, Obamacare had anticipated the negative effects of runaway capitalism with a safeguard that critics branded as socialism — the so-called public option, a government-run insurance plan offered alongside private plans.

The reason for the mergers among "leading health insurers" was not addressed. We can leave that for later, but here's a hint: go back to that thought you were holding.

This is what caught my attention in that segment from the linked Los Angeles Times article:

The question, she said, is whether insurers would pass along any savings to policyholders. 

There may or may not be any savings that result from these mergers, but let's say the savings are "incredible." 

But here's the dirty little secret. No matter how huge, or how "incredible" the savings are as a result of the merger, the savings (or reversely, the administrative costs for healthcare) are NOT the long poles in the tent.

The long pole in the US healthcare industry is uncontrolled costs for health care. Period. Dot.

No matter how much US insurers save by merging, those savings will never, never, never keep pace with the expense of US health care (and that's even before we get into fraud).

The three reasons health care costs are unconstrained:

• physicians practicing defensive medicine
• no one can understand health care costs
• Americans won't settle for second best

Three additional reasons why ObamaCare will make premiums rise:

• no caps
• no pre-existing conditions clause
• no penalties for intentionally harming the body

I firmly support the "no caps" and the "no pre-existing conditions clause" aspects of ObamaCare, but they require that everyone participates in ObamaCare.

Of the six points above, the one that interests me the most, and I think the one that will ultimately be the biggest problem for a US national health care program is the second of the six points: no one can understand health care costs. That includes how prices are determined; how to read a billing statement; how to "manage" a health care event from a financial perspective; etc., etc., etc.

If Americans cannot understand the concept of fracking -- which is just about the easiest thing to comprehend -- there is no way on God's green earth, as they say -- that Americans are ever going to be able to understand a medical billing statement and all that it entails.

As an example, 99% of female urinary tract infections in otherwise healthy females age 16 to 61 could be treated with a single dose of an antibiotic with no urinalysis or microbial culture. A single UTI-package, if available over-the-counter, and strict warnings about risk of allergies, would cost less than $10. But in today's health care system, the costs (remember, time is money):

• make an appointment 
• time loss from work (or babysitter expenses for children)
• cost of driving (and CO2 emissions) getting to physician
• check-in with admin clerk ($)
• pre-pre-eval by LVN ($$)
• pre-eval by RN ($$$)
• 5-minute visit with phyisian ($$$$)
• 5-second tap on the back to rule out kidney infection (ruled out by LVN pre-pre-eval)
• urinalysis
• urine culture
• three-day wait
• call from physician's office
• pick up prescription for single-dose antibiotic
• stop by pharmacy
• (Some steps left out).
• Total cost: easily $500.

At MDSave, the average cost of a urinalysis is said to be $224. MDSave will do it for $79.
Urine culture: walkinlabs says $72.
For a pretty good perspective on the cost to treat a UTI, see this site.
Remember: 99% of all female urinary tract infections... yada, yada, yada...

But if the average American can't understand fracking, there's no way the average American will ever understand health care expenses.

The long pole in the tent in health care costs is not the administrative costs; the long pole in the tent is common sense and/or education.