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No Fault ‘caps’ shift costs – not reduce costs (Part 2)

October 1, 2015 by Steven M. Gursten

Michigan No Fault caps

Yesterday, I wrote about the deliberate misinformation campaign we’re seeing by those who wish to cap No Fault insurance in Michigan, especially when it comes to medical payouts for people seriously hurt in automobile accidents.

I explained that many of the people who are pushing for these No Fault medical caps are related to the auto insurance industry or getting a lot of money from the industry itself. And they aren’t giving us the full story. For example, they aren’t explaining that while the insurance companies will win big with caps on No Fault insurance in Michigan, for the rest of us, those staggering costs for medical care and treatment do not magically disappear.

Rather, they are shifted. And they will be shifted in ways that we will distinctly not like. Furthermore, for those of us unlucky enough to be personally involved in a serious auto accident one day, the consequences will be disastrous.

A great example of the misinformation I’m seeing is this “less-than-the-full-story” column advocating medical payment “caps” on No Fault insurance benefits in the July 9, 2015, an op-ed written by Eric S. Poe, COO of CURE Auto Insurance (based in New Jersey and Pennsylvania) that first appeared in The Detroit News.

It should come as no surprise that Mr. Poe has a dog in this fight and has a rather one-sided view of things. This is what he writes:

“A PIP cap does not preclude injured parties from receiving proper medical care or force them to pay for the care themselves. It merely shifts a portion of the cost from auto insurers to either the injured party’s health insurance, the negligent driver who caused the accident, Medicaid, or other jointly funded programs.”

CPAN, the Coalition Protecting Auto No-Fault, in its post, “No-Fault Lies and the Lying Liars Who Tell Them,” made the following excellent points in rebuttal to Mr. Poe’s claims:

  • “At least Mr. Poe admits that the goal of D-Insurance is to shift costs. But he also completely ignores the impacts that those costs shifts would have on the state. A 2011 study by Public Sector consultants looked at the impacts of a proposed $50,000 PIP cap – double what is currently proposed – and found that it would result in a $30 million annual shift to Michigan’s Medicaid system.”
  • How many of the “catastrophically injured” people who could be “shifted to Medicaid” will be “unable to get the rehabilitation and other treatments necessary to live full, dignified lives.”
  • “The ACA [federal Affordable Care Act, aka “Obamacare”] does not cover many important and necessary treatments, such as therapies that help catastrophic accident victims learn how to talk or walk, but Michigan’s auto insurance system does.”
  • “If Mr. Poe was being honest, he would admit that taking away injury benefits for auto accident victims and shifting tens of millions of dollars in costs per year onto taxpayers will mean big profits for insurance companies.”

Where the truth lies on efforts to cap No Fault medical

As an auto accident attorney, I’ve heard too many “sales pitches” by insurance industry lobbyists and propaganda insiders about how “caps” on No Fault medical benefits is the “holy grail” of  insurance reform that will magically lower prices for the rest of us.

It’s not.

I know it. They know it.

They’re just hoping the public doesn’t find out.

Below are some of the things the public should know – which I’ve shared previously – about how No Fault medical benefits “caps” will shift – rather than reduce – the costs that auto insurance consumers will have to pay:

  • No guarantee that capping No Fault medical benefits would lower auto insurance prices and, thus, generate savings for consumers. The No Fault states of New York, New Jersey and Florida have capped their No Fault medical benefits at levels considerably lower than Michigan’s – $50,000, $15,000 and $10,000, respectively – yet each state’s auto insurance prices are higher than Michigan’s prices.
  • No guarantee that capping No Fault medical benefits would result in meaningful, long-term savings on auto insurance for consumers. Under HB 4612, which included a $1 million cap on No Fault medical benefits, the only savings that was guaranteed for consumers was $150 for one year. (Pages 32 and 52 of HB 4612) Similarly, House Speaker Jase Bolger’s and the House GOP’s draft bill included a $10 million cap on No Fault medical benefits, yet the savings for consumers was only 10% for two years. (Pages 40 and 65-66 of the draft bill)
  • More people will rely on their health insurance to pay for motor vehicle accident-related medical expenses, which will result in increased health insurance premiums.
  • More people will rely on Medicaid and Medicare to pay for motor vehicle accident-related medical expenses, which will result in increased burden on taxpayers – both state and federal. [Note: Supplemental Security Income (SSI) [poor and over 65, blind or disabled] is paid through Medicaid; and, Social Security Disability Insurance (SSDI)[ Disabled from working] is paid through Medicare.]
  • Enormous cost shift to Medicaid. When $1 million cap on No Fault medical was proposed with HB 4612 in 2013, it was estimated that the cost for just the catastrophic claims over $1 million would result in an approximate $630 million cost shift to Medicaid. (Page 10 of the House Fiscal Agency’s 10/22/2013 “Legislative Analysis” of HB 4612)
  • Medicaid won’t cover many of the necessary products, services and accommodations that are covered by No Fault, which will be catastrophic for the quality of medical care for people with serious neck and back, spinal cord and traumatic brain injuries. “[T]he state’s Medicaid program does not provide coverage for bill review, home purchase or modification, replacement services, van purchase or modification, wage loss or survivor’s loss, and various other products,services, and accommodations covered under the current no-fault law …” (Page 16 of the House Fiscal Agency’s 10/22/2013 “Legislative Analysis” of HB 4612)
  • More people will have to pay out-of-pocket (i.e., resort to “self-pay”) which will have the following adverse consequences: Using up savings; taking on debt; declaring bankruptcy.
  • As medical bills and thus medical debt grow, they will lower victims’ credit rating. And because of the credit scoring process this will ultimately lead to higher auto insurance prices (Ironic – Capping No Fault to lower auto insurance rates can result in medical debt that lowers credit ratings and, thus, increases auto insurance rates).
  • Medical bankruptcy rate is already approximately 60% (i.e., approximately 60% of all bankruptcies are based on medical debt )
  • As former Michigan Insurance Commissioner Thomas C. Jones observed, capping No Fault medical benefits would cause the cost of paying for auto-accident-related medical benefits to “be shifted forward to the injured individual through inadequate medical care, through inadequate rehabilitation, through increased health insurance costs, or through total financial ruin of some individuals, and finally onto public assistance programs.” Moreover, he said, capping No Fault medical benefits “would simply result in a renewed increase in tort cases as people were required to sue for benefits denied by a limitation on medical and rehabilitation expenses.” (“No-Fault Insurance In Michigan: Consumer Attitudes And Performance,” Thomas C. Jones, Michigan Insurance Commissioner, April 10, 1978, Pages 76-77)

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