Health and Human Services Secretary Doesn't Understand What Insurance Is

Health and Human Services Secretary Doesn't Understand What Insurance Is - The Daily Beast var _sf_startpt = (new Date()).getTime(); Follow @thedailybeast TUMBLR Home Politics Business Video Entertainment Fashion Books Art Women in the World Newsweek Featured: WITW Summit Travel The Royalist Howard Kurtz David Frum Newsweek Subscriber Help Content Section Health and Human Services Secretary Doesn't Understand What Insurance Is by Megan McArdle Mar 27, 2013 10:13 AM EDT Kathleen Sebelius thinks insurance isn't really insurance unless it covers routine expenses. This is exactly backwards.

How can insurance make everyone better off?  

After all, the insurance company has to make money.  That has to mean that the expected value of the claims they pay out is lower than the expected value of the premiums their customers pay in.  In some sense, then, the expected value of your insurance premium is negative.  

But insurance does make everyone better off, because it covers very large costs that most people would have trouble paying.  Even most really good savers would have a hard time replacing the value of their house, or paying off a $250,000 judgement for an auto accident.  The expected value of those incidencts is very, very negative--more than just the value of the cash, you have to factor in the horror of being homeless or bankrupt.  When you factor in the homelessness, the bankruptcy, and so forth, the slighly negative expected financial value is more than outweighed by the positive value of being protected against personal catastrophe.  Not to mention the peace of mind one gets from not having to worry about homelessness, etc.  

This is the magic of risk pooling.  But notice that it's the catastrophe which makes insurance a good deal.  You wouldn't get much value from buying "grocery insurance".  At best, you'd be paying an extra administrative fee to route your routine expenses through an insurer, rather than paying them directly.  At worst, you'll end up with bills skyrocketing as all sorts of perverse incentives appear.  After all, if the insurer is paying all your grocery claims, why not load up on filet mignon instead of ground turkey?

But insurers try very hard never to sell insurance for less than the cost of your expected claims.  If you expect to buy $10,000 worth of groceries next year, it will not charge you less than that for a "grocery policy".  And if we all drive up the costs of grocery insurance by consuming more, the insurer can do one of two things: raise everyone's "insurance premiums" to cover a filet mignon budget, or create a list of "approved groceries" that it will cover, and start hassling anyone who tries to file an excessively expensive claim.

Sound familiar?

This is why you should always have liability insurance, but should think twice about collision damage coverage.  It's why high deductibles are a good idea--for small expenses, it's better to self insure.  And it's why "catastrophic" health plans, which only cover the sort of extremely expensive events that most people would have difficulty financing, are a much better deal than the soup-to-nuts plans that most people get through their employers.  Those plans are expensive, both because they're paying for a higher percentage of your expenses, and because they drive up utilization--which means that they drive up next year's premiums even more.  Imagine what your car insurance would cost if it covered gasoline, routine maintenance, and those little air freshener trees you hang from the rearview mirror.  Then stop asking why health insurance costs so much.

But Kathleen Sebelius, the Secretary of HHS, thinks that catastrophic insurance isn't really insurance at all.  

At a White House briefing Tuesday, Health and Human Services Secretary Kathleen Sebelius said some of what passes for health insurance today is so skimpy it can't be compared to the comprehensive coverage available under the law. "Some of these folks have very high catastrophic plans that don't pay for anything unless you get hit by a bus," she said. "They're really mortgage protection, not health insurance."

She said this in response to a report from the American Society of Actuaries arguing that premiums are going to rise by 32% when Obamacare kicks in, as coverage gets more generous and more sick people join the insurance market.  Sebelius' response is apparently that catastrophic insurance isn't really insurance at all--which is exactly backwards. Catastrophic coverage is "true insurance".  Coverage of routine, predictable services is not insurance at all; it's a spectacularly inefficient prepayment plan.

Now, it occurred to me that Sebelius might be thinking about the scam insurance that is all too often sold to naive, mostly lower-middle-class folks who labor in the service industry.  That stuff isn't insurance at all; it's a fraud, and the people who sell it will richly deserve any justice that is meted out to them in either this life or the next.  But that stuff doesn't protect your mortgage, either; they're almost-worthless discount plans or very-limited-coverage insurance sold by fly-by-night operations who tend to evaporate as soon as claims have to be paid.  So I don't think that's what she's talking about; I think she's talking about catastrophic plans.

Nor do I think that Sebelius is responding awkwardly to a report that the administration would like to wish away.  I think she's sincerely confused about the difference between insurance, and prepayment.  Which explains a lot about the new health law.  

Last week, I was at a health care conference where the subject of catastrophic plans came up.  Obamacare has, unfortunately, sharply curtailed the ability to offer these plans; very high deductible plans are now effectively illegal.  Which is a great shame, because these plans, combined with a dedicated health savings accounts, were showing real promise at controlling costs.  

A liberal policy professor at the event explained this as a result of the toxic political environment surrounding policy these days; since Republicans wouldn't cooperate on Obamacare, Democrats stuck the knife in one of their favorite programs.  

But Sebelius' answer suggests another explanation: the Democratic opposition to castrophic plans was not strategic, or vengeful, but entirely heartfelt.  The Secretary of Health and Human Services genuinely believes that health insurance should do more than just, well, protect your ability to keep paying the mortgage.  Unfortunately, "more" is very expensive and inefficient.

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Megan McArdle is a special correspondent for Newsweek and The Daily Beast covering business, economics, and public policy. A former senior editor at The Atlantic and writer for The Economist, Megan has a diverse work history including three small startups and a disaster recovery firm at Ground Zero.

For inquiries, please contact The Daily Beast at editorial@thedailybeast.com.

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Budget proposal 'not my ideal plan,' Obama says in weekly address

President Obama on Saturday laid down his marker in the looming budget battle, saying his upcoming blueprint will reduce the national deficit while stimulating growth among the middle class.

"While it’s not my ideal plan to further reduce the deficit, it’s a compromise I’m willing to accept," the president said during his weekly address.

"My budget will reduce our deficits -- not with aimless, reckless spending cuts that hurt students and seniors and middle-class families – but through the balanced approach that the American people prefer, and the investments that a growing economy demands," Obama said.

The plan, which is expected on April 10, will serve as the White House's opening gambit in what promises to be a political dogfight with congressional Republicans over how to how to increase the nation's $16 trillion debt ceiling.

House and Senate lawmakers already approved their own version of the budget earlier this year.

The House plan cuts $5.7 trillion in spending and anticipates a balanced budget within 10 years. The Senate plan raises taxes by $1 trillion and does not include any budget balancing goals.

Both plans passed each chamber along strictly party-line votes.

The administration's spending proposal will represent a "balanced approach" between nearly $2 trillion in deficit-reduction measures coupled with "critical investments" to accelerate job growth among the middle class, the president said Saturday.

This approach, according to Obama, is his attempt to "move beyond [the] cycle of short-term, crisis-driven decision-making" that has dominated the budget debate in Congress.

"It’s a budget that doesn’t spend beyond our means. And it’s a budget that doesn’t make harsh and unnecessary cuts that only serve to slow our economy," he said during the address.

In a nod to House Republicans, Obama vowed to make the "tough reforms required to strengthen" Medicare and other social welfare programs.

Spending for many of those programs was cut under the House budget plan.

Those reforms will be paired with "commonsense tax reform" that will close a number of loopholes in the current code, he added.

On the investment side, Obama's budget follows up on the administration's goals to increase high-tech manufacturing jobs and eliminate some of the governmental red tape hindering the growth of small businesses.

The president's spending plan also accelerates public infrastructure programs, to "put people to work building new roads, bridges, and schools," Obama said.

"All of these investments will help grow the economy and create jobs. None of them will add to the deficit," he added.

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HHS Seeks Obamacare Funds — But Is Ready To Scramble

Here’s today’s billion-dollar question: Are Republicans going to allow the administration to spend more money on Obamacare?

Don’t count on it.

Continue Reading The landmark health law may have survived the Supreme Court, countless repeal efforts and a presidential election — but none of that required Republicans to shower money on Obamacare. And with at least 33 states refusing to build the critical health insurance exchanges, the federal government is unexpectedly on the hook to set them up — and short of money to do so. 

The White House requested $1.5 billion more for the health law implementation in its budget Wednesday, but health officials know they’re not likely to get it.

As past funding requests have been spurned, Health and Human Services officials contend they’ve been able to cobble together the funds and won’t miss the Oct. 1 start of open enrollment in exchanges. Any big delay, or major hitches would be a huge blow to Obamacare and reopen the law to  political warfare before the 2014 mid-term elections.

“The Supreme Court has ruled, there has been an election, we intend to implement the law,” HHS Secretary Kathleen Sebelius told reporters Wednesday.  She acknowledged that without an infusion of new money, she’s probably going to have to keep juggling and scrambling to keep it all on track.

HHS to date hadn’t been very specific about how it’s been moving ahead — even when lawmakers asked. But Sebelius told reporters that the department hadn’t yet spent the full $1 billion that was initially allocated for implementation — a figure that was decided on long before the states balked at exchange-building. Sebelius said the department had been  “judicious” in spending it, and officials said approximately $235 million is left in that fund.

In addition, like other Cabinet secretaries, Sebelius has some discretion over certain department accounts, and she has also dipped into a public health and prevention fund that’s part of the health law.

The money for the 17 states and Washington DC doing their own exchanges isn’t such a challenge: The health law basically gave them a blank check. HHS expects to send out another $4 billion in exchange grants between the 2013 and 2014 fiscal years.

Republicans have declined requests for more implementation money repeatedly. Just a few weeks ago they refused to add nearly a billion dollars to the latest continuing resolution — and the Democratic-led Senate didn’t push the issue.

HHS is getting used to searching for alternatives.

“We’ve had to come up with Plan B and we’ve been working very hard to develop that,” HHS Assistant Secretary for Financial Resources Ellen Murray told the Wednesday afternoon briefing.

Even when the law was passed three years ago, $1 billion for implementation was thought to be just the start. Getting the massive law up and running was expected to cost 10 times that. And that was before the federal exchange task ballooned as conservative states refused to do much to make the law a success.

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Virginia Lawmakers Agree: Banning Insurers From Covering Abortion Hurts Low-Income Women

This week, Virginia became the 21st state to restrict coverage for abortion services in the health insurance marketplaces set up under Obamacare. Over the past several years, that’s become an increasingly common tactic to restrict abortion access, as anti-choice lawmakers rush to prevent insurers from being able to cover the cost of the legal medical procedure.

Even though the measure banning abortion coverage — which was an amendment that Gov. Bob McDonnell (R) tacked onto a broader General Assembly bill — ultimately passed the legislature, it still sparked a debate that cut across party lines. Republican and Democratic lawmakers both suggested that preventing women from using their insurance coverage to pay for abortion services is ultimately a class issue, a point confirmed by women’s health advocates:

But members of both parties agree that the measure’s biggest impact will likely fall along class lines, landing hardest on some of the people the federal health-care overhaul was designed to help: working women who barely get by on their incomes.

“Those people that can afford insurance outside of the exchanges will be able to buy whatever they want. People that can’t afford to buy outside of the exchange will have to buy policies that don’t cover these procedures,” said Sen. John C. Watkins (R-Powhatan), who sponsored the bill but opposed the amendment by Gov. Robert F. McDonnell (R). “It just sets up a class situation, in my mind.” [...]

Cianti Stewart-Reid, executive director of Planned Parenthood Advocates of Virginia, said that the only real effect of the amendment would be to limit access for women who make too much money to qualify for Medicaid but not enough to purchase their insurance on the private market.

“What it means is that women — by and large low-income but working women in Virginia — won’t have access to abortion,” Stewart-Reid said.

Abortion access is, of course, an incredibly important class issue. Of all the women who have abortions in the United States, 42 percent fall below the federal poverty line — partly because low-income women often still struggle to access affordable and reliable contraception. And when women are denied the opportunity to have a legal abortion, that greatly increases their risk of falling into poverty.

And the restrictions that state lawmakers pile on top of women seeking to have an abortion often hit low-income women the hardest. For example, 24-hour waiting periods — which force women to make multiple trips to a clinic — ultimately mean women are paying the costs for the additional transportation, the additional childcare, and the additional lost income during the time off of work. On top of the hundreds of dollars that an abortion procedure can cost out-of-pocket, that quickly adds up to be too much for poor women who are already struggling to pay the bills.

Virginia lawmakers were correct to identify the class dynamics exacerbated by unnecessary restrictions on abortion coverage. Unfortunately for the women in the state, however, their anti-abortion governor is expected to sign the legislation into law.

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Big Brother

(Difference between revisions)[[Image:Big_Brother.jpg|right|thumb|250px|''Big Brother'']][[Image:Big_Brother.jpg|right|thumb|250px|''Big Brother'']]'''Big Brother''' is the name of the autocratic and absolutist dictator of Oceania in [[George Orwell]]'s dystopian satire [[Nineteen Eighty-Four]]. The novel frequently refers to the slogan ''Big Brother Is Watching You,'' a term that has becomeassociated with situations where the state exercises excessive surveillance over the individual citizen.'''Big Brother''' is the name of the autocratic and absolutist dictator of Oceania in [[George Orwell]]'s dystopian satire [[Nineteen Eighty-Four]]. The novel frequently refers to the slogan ''Big Brother Is Watching You,'' a term that has become associated with situations where the state exercises excessive surveillance over the individual citizen.Big Brother as a character was probably influenced by figures such as [[Joseph Stalin]], who promoted a brutal atheistic, communistic , and dictatorial ideology.Big Brother as a character was probably influenced by figures such as [[Joseph Stalin]], who promoted a brutal atheistic, communistic , and dictatorial ideology.

Big Brother is the name of the autocratic and absolutist dictator of Oceania in George Orwell's dystopian satire Nineteen Eighty-Four. The novel frequently refers to the slogan Big Brother Is Watching You, a term that has become associated with situations where the state exercises excessive surveillance over the individual citizen.

Big Brother as a character was probably influenced by figures such as Joseph Stalin, who promoted a brutal atheistic, communistic , and dictatorial ideology. Today the term "Big rother" is frequently used to refer to non-beneficial monitoring of law-abiding citizens.

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Upcoming Guidance on “in Performance at the White House: Memphis Soul”

The White House

Office of the First Lady

Event includes Evening Performances and Daytime Student Workshop
Honoring Memphis Soul Sound

Tuesday, April 9 * White House – As part of their “In Performance at the White House” series, the President and First Lady will invite music legends and contemporary major artists to the White House for a celebration of Memphis Soul music. The program will include performances by Alabama Shakes, William Bell, Steve Cropper, Al Green, Ben Harper, Queen Latifah, Cyndi Lauper, Joshua Ledet, Sam Moore, Charlie Musselwhite, Mavis Staples and Justin Timberlake, with Booker T. Jones as music director and band leader. The President’s remarks will be pooled press and the entire event will be streamed live on  www.whitehouse.gov/live starting at 6:55 PM ET.  “In Performance at the White House: Memphis Soul” will be broadcast Tuesday, April 16 at 8 PM ET on PBS stations nationwide (check local listings).  The program will also be broadcast at a later date via the American Forces Network to American service men and women and civilians at U.S. Department of Defense locations around the world.

As she has done with previous White House music events, the First Lady will host a special daytime event for students. The First Lady will welcome 120 middle and high school students from across the country to take part in an interactive student workshop event: “Soulsville, USA: The History of Memphis Soul.” Beginning at 11:00 AM in the State Dining Room, Robert Santelli, Executive Director of The GRAMMY Museum in Los Angeles, will lead the students in an overview of the origins of Memphis Soul, discuss important artists from throughout its history, and explore the elements of soul and gospel that helped contribute to the genre’s unique sound.   Featured performers from the evening event will share their experiences as well as answer student questions about the music and entertainment world.  Students from 16 schools and organizations from the following ten communities will participate: Herndon, Virginia; Los Angeles and Oakland, California; Memphis, Tennessee; New York, New York; Sandy Spring, Maryland; Seminole, Tampa; Tarpon Springs, Florida; and Washington, D.C.

The workshop, “Soulsville, USA: The History of Memphis Soul,” will stream live on www.whitehouse.gov/live. This event will be open press, but space is limited. Members of the media who wish to cover this event must RSVP to firstladypress@who.eop.gov by Friday, April 5, 2013 at 12:00 PM ET. Press who do not have a White House hard pass must include their social security number, date of birth, country of citizenship, current city/state of residence and gender.

“In Performance at the White House: Memphis Soul” will be the tenth “In Performance at the White House” program hosted by the President and Mrs. Obama.  Starting in February 2009, these events have honored the musical genius of Stevie Wonder, Sir Paul McCartney, Burt Bacharach and Hal David; celebrated Hispanic musical heritage during Hispanic Heritage Month; marked Black History Month with events featuring music from the Civil Rights Movement, Motown and the Blues; spotlighted Broadway and the unique spirit of the American musical; and explored the rich roots and resiliency of Country Music.

President Obama tell the American people about the budget he is sending to Congress, which makes the tough choices required to grow our economy and shrink our deficits

Here’s a quick glimpse at what happened this week on WhiteHouse.gov.

President Obama marks the end of the Easter season with a prayer breakfast at the White House.

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Sequestration Order for Fiscal Year 2014

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For Immediate Release April 10, 2013 Sequestration Order for Fiscal Year 2014

By the authority vested in me as President by the laws of the United States of America, and in accordance with section 251A of the Balanced Budget and Emergency Deficit Control Act (the "Act"), as amended, 2 U.S.C. 901a, I hereby order that, on October 1, 2013, direct spending budgetary resources for fiscal year 2014 in each non-exempt budget account be reduced by the amount calculated by the Office of Management and Budget in its report to the Congress of April 10, 2013.

All sequestrations shall be made in strict accordance with the requirements of section 251A of the Act and the specifications of the Office of Management and Budget's report of April 10, 2013, prepared pursuant to section 251A(11) of the Act.

BARACK OBAMA

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President Obama sends a message to the White House email list to explain why he asked Francine Wheeler to deliver the Weekly Address.

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