Should Wall Street Run Health Care?
By Nick Gier, Unfiltered 7-06-09
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DO YOU WANT WALL STREET
TO CONTROL YOUR HEALTH CARE?
By Nick Gier
Private medical insurance companies, driven by a need to satisfy their investors, now take profits (a 170 percent increase from 2003-07) and management expenses that run between 17-30 percent of premiums, while Medicare's overhead is estimated at 2-6 percent.
Medicare Advantage plans, heavily subsidized private policies designed to substitute for Medicare, take an average 13 percent in administrative fees. They have not managed care nor have they reduced costs.
Private insurers participating in the Medicare drug prescription plan have overcharged the government $4.4 billion. Four companies have been fined or forced to pay court settlements totaling $1.6 billion.
A good portion of administrative costs for private insurance go to bloated CEO salaries, the 2008 median of which was $12.5 million per year. The median salary for CEOs in technology, oil and gas, and financials was in the $8 million range.
Wendell Potter worked as a senior executive for several health insurance companies, and he recently gave testimony before a Senate committee. Potter explained how Wall Street investors rates companies higher if they turn premiums to profits rather than payments to patients. As Potter states: "To help meet Wall Street's relentless profit expectations, insurers routinely dump policyholders who are less profitable or who get sick."
At a recent hearing before a House committee, insurance executives refused to end the practice of canceling the policies of those who have become ill. Potter reported that three major insurers had "cancelled the coverage of roughly 20,000 people in a five-year period, allowing the companies to avoid paying $300 million in claims."
Employees at small businesses have been especially hit hard by cancellations or increases in premiums that no one can afford. The Small Business Administration reports that since 1993 the number of small businesses that cover their employee' medical bills has decreased from 61 to 38 percent.
In his testimony Potter related the story of Aetna's reorganization in the early 2000s. New computer systems allowed Aetna to better identify risky policy holders, and since then about 8 million Americans have lost their medical coverage with the company.
Potter predicts that consumer-driven plans, favored by Republicans and which "cherry-pick the youngest, healthiest and richest customers," will force "managed care plans to charge more to cover the sickest patients."
Private insurers play a large role in the universal coverage enjoyed in Germany, the Netherlands, Switzerland, and Japan. In Germany private insurers are not allowed to take a profit, and premiums can rise only at the rate of increase of medical costs. No one is denied coverage in these systems and all them cost about half of what Americans pay per capita.
In Japan there are more private hospitals than in the U.S. and most doctors run their own businesses. Every Japanese is required to have non-profit medical insurance and the government pays the premiums of the poor. Average premiums for everyone else are $280 per month per family and in most instances companies pick up half the cost.
The U.S. should have gone to a single payer system decades ago, but the power of the private insurers is so great that this is no longer feasible. The solution is a public insurance option such as Senate Bill 1278, which would set the standard for comprehensive, accessible coverage; and Senate Bill 1050, which would "improve transparency and accountability" in private health insurance markets.
Basic health care coverage should not be a commodity but a basic right for each and every American. Our medical futures should not be bought and sold on the stock market. Just as we could have better government if we removed private money from political campaigns, so could we have better health care if medical insurers took care of patients' basic needs rather than looking at Wall Street's bottom line.
Nick Gier taught philosophy at the University of Idaho for 31 years. Read or listen to all his other columns at www.NickGier.com
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Comments
Unlike other businesses that need to provide you with their product in order to make any money, health insurance companies actually make more money for themselves when they restrict and do not pay claims.
In other words, they make more money when they do NOT provide the product that you have paid them for.
Read the 50 to 70 pages of your health insurance contract.
Pay particular attention to the section entitled “limitations and exclusions”.
People’s health is not a product that needs to be left to the whims of money motivated CEO’s and stockholders.
If that is your thinking, you might as well have your police and fire department protection based on insurance premiums you pay.
Then you can go to the police and fire protection insurance page for ‘limitations and exclusions’ on whether or not the police or fire department would come out to your house in the event of an emergency.
The point is, you would never think of discriminating against another citizen if he was the victim of a fire or crime.
So why would you be ok with health insurance companies discriminating against fellow citizens who have pre-existing medical conditions?
What's amazing, though, is how effective managed care companies have been in shifting the blame away from themselves and onto medical providers. They blame rising premiums on escalating medical costs even while doctors decry falling reimbursements from those same companies. Because managed care companies as the classic "middleman" control most of the buying and selling of medical care through their proprietary agreements with doctors and hospitals, employers and patients have no way to know that the blame is largely misplaced. The middleman's cut is simply too big (in terms of profits, etc.) for there to be any other explanation.
Experiments in "cutting out" the managed care middleman have proven quite successful. One national employer, with 45,000 covered lives has been dealing directly with doctors and hospitals for the past nine years through its own direct agreements with those medical providers. Without the middleman "skim", costs to the employer and reimbursements to the medical providers remain fair, reasonable, and fully-disclosed to both parties. The result of this true "buyer-seller" relationship has been seven straight years of flat medical trend and an annual medical cost per employee that is running 60% below the national average.
As long as the health insurance industry continues to control the buying and selling of medical care in this country, health care policy will remain largely at their mercy. It's unfortunate, but until employers and medical providers wake up to the fact that they don't need the managed care middleman to do business with each other, the sad state of affairs is sure to continue.