FacebookTwitterGoogle+RedditEmail

Health Care as Political Theater

by JEFF SHER

Reading into President Barack Obama’s health care summit on Thursday, the massive rate increases recently announced by Anthem/Blue Cross of California shine like a neon marquee over this episode of political theatre.

The magnitude of these rate increases – which are extreme but not unrepresentative of what is happening throughout the for profit insurance industry – expose the viability of all the watered down proposals that have survived the legislative gauntlet of special interest corruption and manufactured public outrage.

The message blinking bright and clear on the marquee: should any one of the extant proposals actually emerge from the summit (unlikely), or be passed by Democrats alone through reconciliation, it will be obsolete and ineffective by the time most of the provisions go into effect in 2014.

The Obama administration is trying to capitalize on Anthem/Blue Cross’s colossal timing blunder. The administration proposed Monday that any health reform plan should be enhanced to empower the federal government to regulate health care premium rate increases. With the government holding the power to deny rate increases that are unjustified, insurance companies would become like regulated utilities.

But this measure will do little to control rate increases. Such a regulatory board may trim a few points off an increase here and there. But after-the-fact review of rate increases will do nothing to alter the forces of technology, inefficiency, misplaced incentives and demographics that are driving the rate increases. Costs will go up. Big rate increases will be justified and approved by the regulators.

By 2014, health insurance costs will be so much higher (and continuing to rise every year) that the mandate to buy insurance will be experienced by tens of millions of Americans as an unaffordable burden. The subsidies intended to render this burden tolerable will be inadequate. People will avoid buying insurance in droves and opt to pay the penalties instead.

Or, at best, they will be forced to buy the only thing that they can afford: plans with high deductibles and co-payments, which in effect will leave them underinsured. Yes, if they ever need to go in the hospital, at least they will have coverage after they pay a very high deductible. But since they won’t be able to afford routine preventive care or properly managed care for chronic conditions, they will end up in the hospital more often and bankrupted anyway by the high deductibles and other costs not covered by their insurance.

Thus the two main goals of the health insurance reform effort will remain unfulfilled: coverage will not be effectively extended (even though many will nominally possess insurance); and because of the rampant under-insurance, health insurance costs will continue to soar out of control.

It is well documented that the greater the barriers to care (i.e. deductibles and high co-pays), the more likely it becomes that patients forego necessary care in order to save money. When that happens, the long-term costs for those individuals goes up. The short-term savings to the system of making the patient pay more up-front for care are more than offset by the lack of prevention and additional costs for people who become ill more frequently and seriously than they should.

The Blue Cross rate increases, up to 39 percent for its 800,000 individual policy holders in California clearly signal that entire segments of the for-profit insurance market are disintegrating at an alarming rate.

Blue Cross’s individual California insurance pool has slipped into what the insurance industry calls a death spiral. Large rate increases will be the norm going forward. The higher the price of insurance becomes, the more people will drop their insurance altogether, leaving fewer people in the insurance pool and requiring even greater rate increases to cover the cost of care, causing more to drop out, and so on.

Numerous states besides California are reporting double digit increases in individual markets as well. In 2008 there were some 13 million people covered by individual policies nationwide. These people are not all grouped into one pool but are divided into much smaller state pools.

The problem is not limited to the individual marketplace. The media has yet to latch onto rate increases in the premiums corporations pay to provide health insurance to their employees, but the same process is in play. Any corporation not large enough to create its own insurance pool and insure itself can testify that it has been years since it has expected annual health insurance premium increase to be less than 10 percent. 10 percent is a good year. Many employers have seen 20 percent-plus increases in the last several years, and some have seen increases that large more than once.

In order to cope, employers raise co-payments and deductibles and increase the amount employees contribute toward the cost of coverage. This trend will continue. Over time we will see more under-insurance posing as “good” insurance in the corporate world. The cost implications are the same. Short-term premium savings for the employers and long-term increases in the cost of providing care. And the more the corporations cut coverage and premiums, while health costs remain the same or increase, the greater future rate increases must be to cover the shortfall. It’s a game of constant catch-up.

None of this is addressed by the health reform bills still considered viable in Congress. The bills are designed as an attempt to maintain the current employer-based, insurance-industry-financed system, which is a major contributor to the cost problem.

Following Blue Cross’s announcement, there has been an uproar about health insurance industry profits. The 5 largest health insurers had record profits of $12.2 billion in 2009.

Democrats have expressed shock and outrage at such huge profits, especially at a time when millions have lost jobs and insurance due to the economic crisis. But there is no excuse for profits in the system at any time, since insurance companies do not add one iota of value to the delivery of health care from doctors and hospitals to patients, and since an estimated 45,000 people a year die in this country because we allegedly cannot afford to extend coverage to them.

It’s not primarily the amount of the profit that is the problem. The $12.2 billion profit is a miniscule fraction of the $2.5 trillion annual cost of the U.S. healthcare system. The real problem, rather, is the layers of inefficiency built into the structure of the system in order to create an opportunity for profit.

Rather than just allowing people to visit health care providers and paying the costs, the for-profit system requires the creation of competing plans, alternative levels of benefits, extensive marketing systems, and legions of underwriters to determine who can and cannot buy insurance depending on their risk profile.

While the average insurance company profit margin is in the range of 4 percent, the share of premium dollars actually spent on health care ranges from 70 to 85 percent. The rest, 15 to 30 percent of the total, is overhead, including profit as a component.

Compare that to Medicare’s 6 percent overhead costs. If we replaced the for-profit insurance companies with Medicare, we’d shave 15-20 percent off the cost of health care for all those now covered by private insurance due to overhead savings alone.

And that’s not counting the savings that would result from being able to eliminate the bureaucracy that is required for doctors and hospitals by the for-profit system. Doctors and hospitals hire legions of employees simply to navigate the complexities of eligibility and payment in the for-profit system.

The savings from eliminating for-profit insurance companies could amount to hundreds of billions of dollars per year. This will not be considered at the health insurance summit.

JEFF SHER lives in the Bay Area. He can be reached at: jeffsher@sbcglobal.net

 

Jeff Sher is a journalist specializing in the health care industry. He lives in San Francisco.

More articles by:

CounterPunch Magazine

minimag-edit

bernie-the-sandernistas-cover-344x550

zen economics

Weekend Edition
December 09, 2016
Friday - Sunday
Jeffrey St. Clair
Roaming Charges: Nasty As They Wanna Be
Henry Giroux
Trump’s Second Gilded Age: Overcoming the Rule of Billionaires and Militarists
Andrew Levine
Trump’s Chumps: Victims of the Old Bait and Switch
Chris Welzenbach
The Forgotten Sneak Attack
Lewis Lapham
Hostile Takeover
Joshua Frank
This Week at CounterPunch: More Hollow Smears and Baseless Accusations
Paul Street
The Democrats Do Their Job, Again
Vijay Prashad
The Cuban Revolution: Defying Imperialism From Its Backyard
Michael Hudson - Sharmini Peries
Orwellian Economics
Mark Ames
The Anonymous Blacklist Promoted by the Washington Post Has Apparent Ties to Ukrainian Fascism and CIA Spying
Erin McCarley
American Nazis and the Fight for US History
Yoav Litvin
Resist or Conform: Lessons in Fortitude and Weakness From the Israeli Left
Conn Hallinan
India & Pakistan: the Unthinkable
Andrew Smolski
Third Coast Pillory: Nativism on the Left – A Realer Smith
Joshua Sperber
Trump in the Age of Identity Politics
Brandy Baker
Jill Stein Sees Russia From Her House
Katheryne Schulz
Report from Santiago de Cuba: Celebrating Fidel’s Rebellious Life
Nelson Valdes
Fidel and the Good People
Norman Solomon
McCarthy’s Smiling Ghost: Democrats Point the Finger at Russia
Renee Parsons
The Snowflake Nation and Trump on Immigration
Margaret Kimberley
Black Fear of Trump
Michael J. Sainato
A Pruitt Running Through It: Trump Kills Nearly Useless EPA With Nomination of Oil Industry Hack
Ron Jacobs
Surviving Hate and Death—The AIDS Crisis in 1980s USA
David Swanson
Virginia’s Constitution Needs Improving
Louis Proyect
Narcos and the Story of Colombia’s Unhappiness
Paul Atwood
War Has Been, is, and Will be the American Way of Life…Unless?
John Wight
Syria and the Bodyguard of Lies
Richard Hardigan
Anti-Semitism Awareness Act: Senate Bill Criminalizes Criticism of Israel
Kathy Kelly
See How We Live
David Macaray
Trump Picks his Secretary of Labor. Ho-Hum.
Howard Lisnoff
Interview with a Political Organizer
Yves Engler
BDS and Anti-Semitism
Adam Parsons
Home Truths About the Climate Emergency
Brian Cloughley
The Decline and Fall of Britain
Eamonn Fingleton
U.S. China Policy: Is Obama Schizoid?
Graham Peebles
Worldwide Air Pollution is Making us Ill
Joseph Natoli
Fake News is Subjective?
Andre Vltchek
Tough-Talking Philippine President Duterte
Binoy Kampmark
Total Surveillance: Snooping in the United Kingdom
Guillermo R. Gil
Vivirse la película: Willful Opposition to the Fiscal Control Board in Puerto Rico
Patrick Bond
South Africa’s Junk Credit Rating was Avoided, But at the Cost of Junk Analysis
Clancy Sigal
Investigate the Protesters! A Trial Balloon Filled With Poison Gas
Pierre Labossiere – Margaret Prescod
Human Rights and Alternative Media Delegation Report on Haiti’s Elections
Charles R. Larson
Review:  Helon Habila’s The Chibok Girls: the Boko Haram Kidnappings and Islamist Militancy in Nigeria
David Yearsley
Brahms and the Tears of Britain’s Oppressed
FacebookTwitterGoogle+RedditEmail