The Private Health Insurance Distortion Field
One of the pervasive themes I've followed in TPM blogs is that we must divide the campaign for better health care into two parts.
- Regulating and supervising the insurance side, and
- Reducing waste and duplication on the provider side.
Fred Moolten, for one, argues that we are about to make some progress on #1 and hopefully can get around to #2 at a later date. He presents the case well but I am not convinced. I think what we are doing now may change some of the rules of the game, but the game will still be afoot.
Private insurance creates a distortion field that inserts itself between patients and providers in ways that are inimical to the interests of both. The industry takes hundreds of billions of dollars out of health care but does not add commensurate value back. We only put up with this situation out of fear.
If we manage some incremental reform, even including a crippled public option, the insurance industry will not roll over just because we have passed new laws and written new regulations. While we are patting ourselves on the back because we finally made partial progress on part of the problem, they will be organizing board retreats and hiring consultants and ginning up work groups to figure out how to gain back any profitable ground they have lost, plus a little more. It is the nature of any for-profit organization to work that way.
If you and I have a vision of providing high quality health care, affordably, to every American, we must pursue a truly game-changing strategy. Patients, providers and our government all have positive contributions to make to this new game, but insurance companies can never be counted on to be part of the team. The incentives that help make them profitable are not the same incentives that help make health care better and more equitable, and vice-versa.
We can't do this piecemeal.
I am with you. But we live in a democracy and legislation does not work the way we like most of the time.
Today I am for a package that can amended later on. Anything is better than the mess we have now. Just think...a thousand a month just to insure your kids, your family.
I would have though that there would have been a revolution a lot sooner than this.
Tomorrow, if this heartburn continues, I probably will support your position a thousand percent.
October 13, 2009 6:48 PM | Reply | Permalink
$1,000 a month today, $2,000 a month ten years from now. That's a promise from AHIP - America's Health Insurance Plans.
For the insurance industry, whatever legislation we pass will initiate the battle of the bulge. No matter where we press it, it will bulge out somewhere else. How could it be different? The only reason these companies exist is to turn a profit. That's what we hope and expect for-profit corporations to do.
The cost of the private insurance industry is much, much more than it's stated profits. The entire operating costs of the industry, plus profits, are removed from the health care pot without providing commensurate health care benefits. Hundreds of billions of dollars annually.
Add to that the costs of the dis-incentives the industry creates, that operate against effective delivery of health care, and the true costs add up. And we haven't even talked yet about the plight of patients caught up in this maelstrom of competing interests and agendas.
I don't see how your heartburn is going to get any better absent a comprehensive change to the system. Incremental change will just give the insurance companies wiggle room while Pharma sucks bucks into its black hole.
In my humble opinion.
October 13, 2009 9:30 PM | Reply | Permalink
I could not agree with you more Red. This just sucks.
October 13, 2009 10:39 PM | Reply | Permalink
Red - Thanks first for trying to represent my position fairly. One of the frustrating elements of some of these discussions is the tendency of arguers to misrepresent the views of those they disagree with. My only amendment to your description is that I believe the proposed legislation is already starting to reform the provider side. I think those reforms are inadequate, but a start.
I have consistently argued that the insurance reforms are necessary to make sure everyone is covered and none are treated unfairly. The proposed bills don't go far enough in approaching universality, but they certainly bring in more people, and make insurance more equitable. I have also argued that insurance reform will only constrain costs slightly. Some readers may therefore have gained the impression that I'm a fan of the insurers, or count on them to do the right thing. Not so - I'm simply describing what I see to be the limitations of an exclusive focus on insurance reform.
It is for that reason that I'm distressed when some reform advocates claim that the public option is central to reform, and that without it, reform would be either worthless or much too "incremental" to be valuable. I strongly favor the public option, but I will insist that it's not central. Without it, we can and will reform insurance so that no-one will be cheated as they are today by the insurers. Even with it, all we will additionally accomplish is a minor degree of cost control, but not the major cost reductions we need to avert the collapse of the healthcare system. The latter depends on reform on the provider side. Therefore, I believe that an obsessive focus on the public option as the criterion by which to judge reform efforts is misguided.
Finally, I believe the Senate Finance Committee bill that the Committee just past is not bad, and certainly not worthless, but is far inferior to the House bills or the one from the Senate HELP Committee. If all we end up with is the Finance Committee version, I will be disappointed, but I will still rejoice at the major step forward we have taken from where we are now. Among other things, it will start us on the road to provider side reform that will be critical for the survival of an intact healthcare system in this country - one that begins to emulate what all the other major democracies already have achieved.
October 13, 2009 7:19 PM | Reply | Permalink
Fred, I haven't read everything you've written but what I have read doesn't even hint that you're a fan of insurors.
Two powerful industry groups play an outsized role in our health care system: insurance companies and pharmaceutical companies. Between these two, the insurance companies provide less value to the system per dollar spent on their services. And insurance companies distort the delivery of health care in ways that are not just harmful to patients and providers, but often fatal to patients.
I don't believe we can control health care costs and improve outcomes absent a comprehensive approach, in which the interests of the third-party payers are aligned with those of patients and providers, the goal being better health care outcomes for everyone at lower costs. And, I can't conceive how private insurors will consent to be part of the solution. Their stockholders would crucify them, rightly so, from their point of view. How will the legislation as currently proposed change the game?
Here's just one example of the problem. In a competitive insurance marketplace, preventive medicine results in higher, not lower costs. Why? Because the long-term cost savings of preventive medicine are not realized by the insuror who pays for preventive care. Employers change insurance companies. Employees change jobs. The patient who received preventive care from one insuror is now healthier but the savings accrue to a new insuror.
Since the cost/benefit ratio of preventive care is upside down, from the insuror's point of view, care for chronic illnesses suffers - diabetes, heart failure, stroke, cancer, respiratory ailments and more. And that's where the real extra costs are in the health care system, not in duplication of equipment and services. Here's a quote from the CDC:
The CDC goes on to state that 70% of all deaths in the USA result from these chronic diseases, and 75% of all health care costs.
Mandatory coverage may go some distance toward solving some parts of this problem. But too many people will not be covered under any of the existing plans, and too many insurance companies will find too many loopholes in the system, or else just pile cost on cost and pass it on to us.
Why will so many people still not be covered? Because we are straining so hard to preserve the role of insurance companies in the system, a role that contributes little and costs hundreds of billions of dollars.
Only single-payer universal coverage gives us the comprehensive tools needed to improve the health of patients with chronic illnesses - systemwide - while reducing the cost of their care.
October 13, 2009 9:18 PM | Reply | Permalink
We certainly agree on the need to regulate the insurers, but the proposed bills would do that. For example, they all require that the basic plans include preventive care, such as regular checkups, and that the insurers be prohibited from charging copays for these. They also provide income incentives for physicians to go into primary care. These are examples, in my view, of how we can do some of the things done by other nations that rely heavily on private insurers, such as The Netherlands - i.e., impose requirements that serve the public interest. Of course, a single payer system could do the same thing, and perhaps better, but I don't agree that without single payer, these goals can't be achieved.
I do agree with you that the proposed legislation doesn't come as close to universal coverage as it should, with the Baucus bill the worst of the lot. The reason for this is simple - money. The greater the coverage, the more expensive it will be for the governmennt to subsidize everyone who can't fully afford the premiums. However, if we can't even persuade our Congress to come up with a few extra hundred billions for these subsidies, forget about asking them to pay for a single payer healthcare overhaul.
October 13, 2009 10:15 PM | Reply | Permalink
Well put Red Planet.
You wrote:
"The industry takes hundreds of billions of dollars out of health care but does not add commensurate value back."
You're being super nice here. The don't add anything at all. The insurance industry is nothing but a parasite and needs to be taken out of the equation altogether.
The only game changer available is some form of single payer. My own preference is for Medicare for All.
October 14, 2009 1:06 AM | Reply | Permalink
Shucks, I try to be nice Oleeb. Doesn't always work.
Seems to me the "hundreds of billions of subsidies" Fred is looking for in his post immediately above yours are hiding in plain sight, in the non-productive revenue streams of insurance companies, and in the damage they do to our health care system.
I'm on Medicare these days and like it very much, thank you. I consulted for several years with a Medicare Quality Improvement Organization (QIO) that did both federal Medicare and state Medicaid work, so got a pretty good look inside both government-run systems.
Guess what. Everyone I met during that time worked hard every day to find ways to improve health outcomes for patients while holding the line on costs. Far different from my early experience, fresh out of college, working as a health insurance underwriter in the home office of Occidental Life. Far, far different. Nobody there was interested in the health outcomes or systemic cost containment. The only outcomes that concerned Occidental were its stock prices, and the only cost savings that concerned Occidental were savings in "medical losses."
October 14, 2009 1:26 AM | Reply | Permalink
Hi Red Planet. You might want to check out my post "Refuting Myths on Health Care and Medicare for All." I hope it helps--it was inspired partly by the above discussion.
October 14, 2009 3:19 PM | Reply | Permalink
Will do.
October 14, 2009 3:59 PM | Reply | Permalink
The problem with incrementalism in this case is that we're about to pass a sweeping new requirement that people purchase insurance from the very insurance companies that have so far been part of the problem. Once the insurers get that subsidy they will never give it up, nor will they countenance competition from a public option. They will have won a generation of captive customers and a secure place in the American economy. That's dangerous.
October 14, 2009 3:30 PM | Reply | Permalink
Here's the rub, Destor. The insurance companies will behave the way I would behave if I were CEO of United Health. We can't expect them to be something they are not.
Sometimes I think of this administration (including Congress) as the frog in that story about the scorpion and the frog crossing the river.
October 14, 2009 3:58 PM | Reply | Permalink
Destor - I think you're right that the private insurers will never willingly give up income sources, but that's true with or without a public option. If we pass a public option, now, they won't have any choice. If we pass it later, as Olympia Snowe suggests, they won't have any choice then, so in either case, a public option would not occur because the insurers chose it, but because it was imposed on them. I favor passing it now.
However, as I've argued elsewhere, I believe the term "incrementalism" overstates the reality of current reform efforts, at least as they involve insurance reform. The insurance reforms that are already about to pass are major, dramatic, advances to be achieved in one large piece, and should not, in my view, be termed incremental simply because a public option component passed later rather than now would be an increment.
If I were to use the term "incremental" pejoratively, I would apply it to the half measures currently proposed to constrain costs within the healthcare industry itself. We need dramatic reforms to eliminate duplicate or unnecessary services and facilities, and the reform bills take only baby steps in this direction.
October 14, 2009 4:00 PM | Reply | Permalink