The Public Option: Stakes for the Vampire

... but these aren't the real problems.

On marketing and lobbying: Companies spend money on marketing and lobbying because they expect they will make more money than they spend.  If marketing wasn't pulling its weight, some firms would try to live without it, succeed, and then beat the competition.

Same reason I don't buy the claim that women make less money for the same work -- if they reliably did so, any thinking businessperson would hire only women and crush the competition by undercutting them on labor costs.

Those companies lobby because the return on investment is spectacular: the government has the power to kill their competition or kill them.  Insurance companies are in a highly regulated market, and the government already does over 45% of health care spending in this country.  If your company's success depended to that degree on what legislators do, you would spend a lot on lobbying too.  Like defense companies do.

Isn't that an argument for less government rather than more?

On executive compensation: This is a thornier matter, because some companies do indeed have messed-up incentive structures.  But if you don't have anyone bailing you out or protecting you from competition, those inefficiencies can bury your company.  If companies are allowed to compete freely, there's a big fat incentive to weed out those practices. 

Executives, for their part, also spend a lot of time between gigs these days, with interview processes measured in months and years, not minutes.  They're people with highly specialized knowledge and backgrounds, who make special kinds of decisions.  Firms don't hire them lightly.

Consider the serial CFO, who works as a consultant in the long periods between exec jobs, who can make hundreds of thousands of dollars in a weekend.  As someone who probably earns a 5-figure annual salary, you think, how can that possibly be justified?

First, consider the fact that she works obscene hours doing a highly demanding job, setting her sleep schedule around daily marathon calls to Europe and Asia, and never gets to settle down because she has to move around all the time.  Many people aren't willing to do these things, even if they had the brains and temperament to function that way.  They want flexibility and families.

But set that aside for a second.  Sometimes you just need the one person who can save 1000 average workers' jobs over the weekend.  She's the kind of person who can dig through your company's finances when you're facing a potentially crippling IRS audit and don't know what time bombs are hidden between the lines of your records.  She knows all that byzantine tax law inside and out in a way that few people can match, and she won't make the same errors and omissions that a lot of other smart people would make--mistakes that could prove extremely costly.  She can work fast and do the job right, end of story.

Supply and demand: she supplies a highly desirable service that few are able (or willing) to do, you demand it because your business depends on it.  Of course you pay top dollar.

Cite your source for that $60 billion figure -  is t yet another number Coburn picked out of the air?

An actual expert in insurance fraud puts the figure at $60 billion for the entire American healthcare system - public and private.

Here is another credible source saying annual Medicare fraud totals $18.6 billion. Which would mean it is about on par with what the insurance companies take out of the system in profits. Given that the overheads are 3% for Medicare and 30% for private insurance, Medicare is still the better total outcome!

The National Health Care Anti-Fraud Association, an organization of about 100 private insurers and public agencies, estimates that some $60 billion is lost to fraud every year, but that figure is for the entire healthcare system - public and private.

Homeland Security lookined into "improper payments" in the Federal Government and came up with a figure of $18.6 billion for Medicare.

Which would put the level of fraud in Medicare on par with the profits taken out of the system by private health insurance companies. However, medicare's overheads are 3% vs 30% for the insurance companies, meaning the Medicare is still the better outcome, especially when you remember that private insurance companies have their own fraud problems - a rate of about 3%.

Now, as for your questions:

For starters, insurance companies won't reject people with pre-existing conditions if they're allowed to charge people rates commensurate with the increased risk (who passes up a customer, as long as they make it worth your while?), and they'll minimize the price from that inflated risk if they're competing for customers.  Without mandates and similar regulations, they'll sweeten the pot in a variety of ways (including very low pricing and, as I'll describe below, a way to lock in low rates) to try to attract customers while they're young and healthy.

I would favor cutting back regulations that get in the way of individual, portable insurance combined with health-status insurance.  Health-status insurance protects you from changes in your classification like if you move, get divorced, or come down with a new condition that makes you more expensive to cover.  And it would make it much easier for people to change policies.  This would be much easier than setting up a whole new bureaucracy in the form of an "Exchange."

And the way to get affordable insurance for people who work for employers who don't offer it is to:

• Equalize the tax breaks that employer- and individual-provided health insurance receive.  Why are we encouraging a system that sticks an extra party between the consumer and his health care decisions, much less a system that causes people to lose their coverage just when they get most sick?
• Remove mandates that force people to purchase a lot of coverage they don't want or need.  Don't limit our choices to a mansion or public housing.
• Allow insurance companies to discriminate based on risk -- if they're forced to insure people without knowing important things about their risk profile, they'll just jack up the price for everyone to pad themselves against risk.
• In general, make routine care an out-of-pocket expense, so that we can have some price discovery and bring the cost of the common and little things down, as well as reduce the amount of time doctors have to spend on paperwork instead of patients.  Insurance should cover events that are rare, unpredictable and expensive -- otherwise it's insulation, which just inserts a middleman and gets in the way of consumer-oriented care.
• If you must have a government program to help the poor to handle their routine expenses, give them HSAs without any pointless provisions like "use it or lose it."  If you must have a government program to help the poor deal with catastrophic costs, abolish Medicare and Medicaid and just have a program that covers costs above 15-20% of income, and exempt the poor from paying the associated payroll taxes.
• I have several other ideas to reduce the costs from defensive medicine and malpractice torts, pharmaceuticals, routine care, and pretty much everything else in the health care industries, if you want to hear them.  These things would lower health care costs broadly, foster innovation, improve quality of care and expand consumer control over health care decisions.

My idea of affordable is that basically prudent people can budget for it.

And no, I can't point to working examples of my full alternative system because in the small set of countries you can somewhat compare with the US (based on size and approximate wealth), unfortunately they're all broadly intervening in health care.  If you want evidence of the various principles at work, you can look at:

• Lasik (price drops and quality rises over time)
• veterinary medicine (more responsive than socialized healthcare for humans in the same country)
• life insurance (illustrates how risk-based pricing rewards those who insure young, before they develop those pre-existing conditions)
• car insurance (insofar as there can be price competition in insurance, and some discrimination is allowed based on risk profiles, and routine care is an out-of-pocket expense)
• industries that have been ruined by competition-killing regulation, including licensing and safety regulations that approve or ban, rather than inform the consumer
• poorly run government services, especially those that deal directly with the public (like the DMV, public housing, public schools)
• pretty much anywhere the government installs price controls (floors or ceilings)

I think we could allow people to have affordable, portable, reliable, customizable coverage from cradle to grave.  I think that to do that, we'd have to implement a variety of reforms aimed at allowing free, competitive markets to provide consumer-oriented care.  And I think that the Democrats' currently proposed reforms would take us in the exact opposite direction.