Having followed the health care reform machinations since the late-1980’s, I sadly concede that it is, once again, time to go back to the drawing board. This time, however, let’s handle it somewhat differently. First, let’s bring the participants to the table, and let them point fingers at one another, rather than hiding behind their hired guns of the respective policitical parties. Second, let’s limit the discussion to a select few major topics, all of which must be addressed, resulting in some sort of model consensus legislation: universal care; costs; federal and state involvement; and others as appropriate. Rather than watch Republicans and Democrats square off yet again, let’s let the major players (providers, pharma, insurance, hospitals, users) come up with a comprehensive solution, sans the predictable posturing of the political parties.

Naive as this approach might seem, the prospect of even modest improvement depends on “re-inventing” the process.

However I’m not sure where you derive your pie chart figures. I looked at the “Nation’s health dollar – where it came from, where it went” pie chart at the webpage you linked to and it put “Program Administration and Net Cost” for the nation’s spending at a whole as a whole at 7%. The “National Health Expenditures by type of service and source of funds, CY 1960-2008″ spreadsheet file from that webpage put the 2008 private insurance spending on premiums at $783,157 billion and benefits paid at $691,179 billion, which I calculate comes to a 88.26% average loss ratio. But that includes all lines of private insurance that includes private group insurance, which doesn’t have the underwriting, administrative and marketing costs of the individual market.

Loss ratios are important because they represent the amount spent on the actual provision of health care services of the premium dollars we pay to insurance companies. It’s been reported that the regulatory minimum in California is 70%. That’s 30% in overhead and profits compared to an overall average of 11.74% in all private health insurance. That’s a big difference.

In the congressional hearing, a Wellpoint representative said it was at 82.6% enterprise wide which would put them almost 50% below the national average for all companies. I recall that during the recent failed California healthcare legislation effort, almost all insurance companies were accepting of the loss ratio mandates, which I believe were 85%, except Blue Cross.

But there’s also a difference between loss ratios in the aggregate for a company and those of individual lines and in different places. I assume that each line in California must have must have the minimum 70% regulatory loss ratio. But I would like to know how the various lines rate in that regard individually. I say that not only as an individual policyholder in Blue Cross for a quarter of a century but as a way of understanding the policy implications it might reveal. Is this kind of information submitted to the insurance regulator subject to public disclosure?

As for the loss ratio difference across areas, Wellpoint said that losses in the individual market in Maine exceeded the premiums received and that most carriers had abandoned that market. Maine has guarantee issue but no effective mandate that people carry insurance. New York and New Jersey have similar rules so I wonder if those states also are paying a disproportionately low share of the company’s total overhead and profit. And when some pay less than their share that means some are paying more. Is it policyholders in California that are paying more?

All this about insurance companies does mean that your premise about the greatest source of increasing costs lie elsewhere. Health policy is composed of many parts and getting it right means looking at all of them and giving them their proper context and weight. Unfortunately I see little of that. People choose their narratives about health care those narratives drives their thinking, not the facts.