Like Wall Street, Current Health Care Policy Privatizes Profit And Socializes Risk

The excesses of the health insurance industry resemble those of Wall Street and the subprime housing market, typified by privatized profits for insurers and socialized risk for taxpayers and consumers.
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The American Medical Association's proposed health care reform goes by the name Voice for the Uninsured and advocates government-subsidized purchase of private insurance. It sounds remarkably like the Massachusetts plan that mandates purchase of private insurance, reimbursed by government in the form of subsidies, vouchers or tax credits. Many "affordable" plans these days are "minimum benefit plans" -- sufficient until accident or sickness occur. A tax penalty is imposed for failure to purchase private insurance.

The AMA proposal mirrors John McCain's proposed move to individual insurance and elimination of tax credits for employer-provided health coverage. Both would shift some or all of the current $125 billion or greater employee health tax subsidy into taxpayer-subsidized vouchers or tax credits for individual purchase of private health insurance.

At root, AMA-proposed reform resembles proposals supported by America's Health Insurance Plans (AHIP), creating a captive market for purchase of private health insurance subsidized by taxpayers, who would also continue to underwrite health care for the sick. Private insurers could protect their bottom lines by insuring only the healthy.

The excesses of the health insurance industry resemble those of Wall Street and the subprime housing market, typified by privatized profits for insurers and socialized risk for taxpayers and consumers. It's called gaming the system for profit - whether it's Wall Street investments in dubious credit instruments for massive short-term gains, or the health insurance profiteers taking record gains while shifting an increasing burden of risk to consumers and taxpayers.

Uniquely within the industrialized world, U.S. health care is dependent on over 1200 for-profit private health insurances functioning as gatekeepers. Underwriting - the art of risk evaluation and avoidance - insures profits by covering the healthy and rejecting everyone else as a "pre-existing condition." Only the U.S. among industrialized nations treats health as a commodity to be negotiated and leveraged for profit, rather than a necessity to be covered within a shared-risk-pool. Profit-centered police or fire protection is unimaginable. Profit is an equally perverse incentive for health care.

Gaming-the-system-for-profit has spawned the $20 billion annual insurance subsidiary known as "denial management" - health insurance middlemen whose sole purpose is to search claims for excuses to delay, deny or renege on reimbursements. Furthermore, thirty percent of provider health claims are initially denied, requiring multiple resubmittals.

Commercial health insurance is the 800-pound gorilla, siphoning over 25% of health care dollars to overhead costs, including excessive administrative costs, lobbying, marketing, CEO salaries and profit-taking that have resulted in a downward spiral of inflationary premiums and declining coverage. (UnitedHealth's former CEO William McGuire's stock options alone were valued at $1.6 billion.) The 2007 McKinsey Group Study reported $30 billion annual health insurance after-tax profits and $32 billion insurance underwriting and marketing costs.

To protect their bottom line, commercial insurers write policies with reduced benefits, shifting increased out-of-pocket costs and risk to consumers, resulting in increasing numbers of underinsured unable to pay their medical bills, casting many into personal bankruptcy. A 2005 Harvard Medical and Law Schools study described 50 percent of personal bankruptcies precipitated by large medical bills - 75 percent of filers had insurance coverage at the start of their illness.

As premiums increased 87% over six years, employers moved more employees into underinsurance - high-deductible catastrophic plans with high out-of-pocket expenses. Coinciding with the introduction of catastrophic plans, the American Hospital Association reported a 59 percent rise in individual out-of-pocket health costs over the decade preceding 2005. Simultaneously, unpaid medical bills rose 60%, shifting more costs to taxpayers and consumers, and prompting some hospitals to require up-front payment from individuals carrying high-deductible policies.

The phenomenon of underinsurance is not addressed by the AMA proposal, or the many other proponents of two-track public-private insurance that effectively shift the cost of health care for the sick or high-risk to taxpayers, while private insurers continue to milk profits by covering the healthy.

No surprise, the big lobbies continue to steer health care policy. Medicare prescription drug reform of 2003 was written by profiteering insurance and pharmaceutical industries, with billions of dollars of taxpayer subsidies and inflated profits to benefit their bottom lines. The law was exploited as occasion to further privatize Medicare by moving recipients into private Advantage plans at 12% higher cost than traditional Medicare. The law protects big PHRMA profits by prohibiting bulk purchases of medicines, as done by the VA system to bring down medicine costs.

Notably, more than 20 federal and state studies since 1990, including federal proposals like HR676 and the 2007 Lewin Group evaluation of the Colorado single payer proposal, have demonstrated that single-payer health insurance is the only reform model that can both save money and provide comprehensive health care for all.

Legislators like polls, and polls by Pew and others have revealed increasing numbers in the U.S. - 54 to 65 percent - support a national single-payer health care plan. A recent study reported that 59 percent of U.S. physicians "support government legislation to establish national health insurance," an increase of 10 percent since 2002 (Annals of Internal Medicine, 3/31/08).

Dismissing single payer with buzz words like "socialized" or "government" health care is deliberate obfuscation. Single payer insurance is public insurance with choice of private providers. Currently, "government" health care means that taxpayers subsidize over 60 percent of often wasteful health costs; we fund 70 percent of our legislators' health coverage. Although the U.S. spends almost twice as much as every other industrialized nation, we have worse overall health outcomes.

Contrary to assertions by the "free market" chorus, only a single-payer insurance model permits true choice of private providers. Private insurance limits choice to "in plan" doctors, often requiring change of providers with change of plans. Only single payer provides comprehensive benefits and protection against medical bankruptcy, and redresses our hugely fragmented, cost-ineffective approach. It is the only equitable, sustainable health financing system.

To all those running for office: Why not quality-, safety-centered universal single payer health care in place of profiteering health care gatekeepers that feed the downward spiral of U.S. health care, turning it into a crap shoot for everyone? It is no less a catastrophe for the U.S. economy than the havoc wrought by U.S. investment bankers.

This week OffTheBus is publishing a variety of stories that cover the policy differences between Senators John McCain and Barack Obama. If you have a policy expertise and would like to participate, please see Calling All Policy Gurus.

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