To put it baldly, the health insurance companies make money by denying you coverage that you, as the policy holder, have paid for. This becomes especially true if you become really ill and desperately need that coverage, although you’re probably okay if you just get a cold.
That’s just crazy making.
Under modern capitalist management theory, corporations try to minimize the impact of what they call, in polite corporate circles, “cost centers” and maximize the impact of what they call “revenue centers.”
For an operation like an auto maker, a megastore like Wal-Mart, or a meatpacking operation, a “cost center” might be wages and benefits paid to workers. Alternatively, “revenue centers” may consist of sales of SUVs, sales of hormone-laden, additive-spiked dead cow burgers, or sales of cheap nasty plastic garden gnomes.
And in the case of health insurance companies, payouts to health care providers would constitute a “cost center,” while the collection of premiums constitutes a “revenue center.”
In other words, if you become really ill and really need medical care to save your life, your health insurance company would benefit from spending as little as possible on you, even to the point of denying you the very coverage that you paid for. That’s about when the insurance company starts looking for some “undisclosed preexisting condition” or some other dubious reason to drop your coverage, as I explain below. The insurance companies make money by saying “no” when you need coverage, and they lose money by saying “yes” when it comes time to pay your medical bills.
That unappetizing economic fact is the most salient point to keep in mind when looking at the present political spitball fight going on in Washington.
Now you may think the insurance companies feel a fiduciary responsibility to the policy holder, but actually, it’s the investors and corporate CEOs to whom they feel a fiduciary responsibility.
As a matter of fact, the policy holder on the one hand and the insurance company owners on the other hand find themselves in a zero-sum game.
That is an example of what some economists call “adverse selection.”
You can read about adverse selection in this Wikipedia article.
Paul Krugman, in a Washington Post Op-Ed, explains how adverse selection affects our present system.
Krugman asks us to imagine that the USA has only one health insurance company that sells one standard policy that covers all medical care for all Americans. That insurance company could determine the cost of each policy by dividing the total aggregate cost of health care by the total number of policy holders (which would include everyone) and then adding on a small administrative cost above that.
That’s actually not too different than what exists in most economically advanced countries. In most advanced countries, with the stunning exception of the USA, not one citizen, let alone millions, goes bankrupt each and every year because of medical costs. Moreover, the cost of providing health care is far less in those countries than in the USA
Yes, citizens of such countries as Taiwan, South Korea, the UK, Germany, France, Switzerland, Israel, Japan, the Scandinavian countries, Australia, and many other others (even third-world Cuba), do not lose their life savings or get tossed out of their homes because of medical bills they can’t pay.
As one who has worked in the American health care industry for decades and who understands exactly just how first-rate our medical doctors and medical technologies really are, the appalling state of US medical care delivery just drives me to despair.
According to the August 2009 issue of The American Journal Of Medicine:
Using a conservative definition, 62.1% of all bankruptcies in 2007 were medical; 92% of these medical debtors had medical debts over $5000, or 10% of pretax family income. The rest met criteria for medical bankruptcy because they had lost significant income due to illness or mortgaged a home to pay medical bills. Most medical debtors were well educated, owned homes, and had middle-class occupations. Three quarters had health insurance. Using identical definitions in 2001 and 2007, the share of bankruptcies attributable to medical problems rose by 49.6%. In logistic regression analysis controlling for demographic factors, the odds that a bankruptcy had a medical cause was 2.38-fold higher in 2007 than in 2001.
That comes to around one medical bankruptcy every 30 seconds, most of those being people who had jobs and who thought they were covered! If you want to read a PDF of this entire journal article, click here.
In his August 7, 2009 Washington Post op-ed piece called Harry and Louise, Closet Socialists, Michael Kinsley makes the following point:
If your business is gambling against your customers — charging each one a set amount and then paying out an amount that varies depending on how much medical care they need — you’d be crazy to greet with equal enthusiasm the robust physical fitness freak who jogs into your office and the invalid carried in on a stretcher.
Now, after decades of tolerating and even benefitting from this moral and social travesty, the politicians tell us they’re going to fix this social and political ulcer.
So the politicians meet with the “stakeholders,” that is, those affected by the outcome of their legislation, to craft some sort of unwieldy compromise.
But you, if you’re an ordinary American citizen, do not number among those “stakeholders” sitting down at the bargaining table to bang out a compromise. Ordinary insurance policy holders have zero input because only their health and personal financial future are at stake, not massive corporate coffers.
The politicians and “stakeholders” alternate between having one heck of a genial chin wag and having an un-genteel, nasty squabble.
Then, after the politicians have worked out a deal in a mostly-closed process, characterized by grade-B drama scripts, crocodile tears, hissy fits and snits, statesmanlike posturing, and thunderous platitudes, the winners smile for the press, slap each other on the back, and publicly congratulate each other about the “bipartisan” deal they manage to make and the collegiate atmosphere of the legislature.
Those other politicians and “stakeholders” who lose something in the bargain, that is those who ended up supping from the slops at the bottom of the pork barrel instead of the top, make snide remarks and try to torpedo the whole deal, demagogically appealing to the populist rage and anger of the ordinary folk, who never stood to gain no matter which way the debate ended.
And if you are an average American, you wonder why your interests come out at the bottom?
Realistically, what the USA needs is a single-payer system to address the American health care crisis. A single-payer system is one where all medical fees are paid by a single public entity, which operates openly and is publicly accountable, which bargains for the best rates from the hospital chains, the drug companies, just as Medicare does now.
Single payer would take the obscene profit margins out of the equation and end up being less expensive, even in terms of taxes. Numerous studies show that a single payer system that covers everyone would be far less expensive than the for-profit system we have now, the system that leaves so many in a lurch.
Here is a list of dozens of these studies done by such entities as the GAO, the Congressional Budget Office, many states, foundations, and think tanks that have been conducted over the last several decades.
But don’t look to the Obama administration or the Democrats to bring this type of fresh approach to the American public.
President Obama and his Democrats, as well as the “loyal opposition,” cater to the interests of the “stakeholders.” —all those folks who have earned vast fortunes by causing the problem in the first place.
And whoever else these “stakeholders” include, they don’t include you if you’re the average American, one whose very health and life hang on the outcome of this debate.
You see, you simply don’t count as a member of this august group. That’s because you don’t stand to lose millions if our system actually provides simple, elegant, efficient, and relatively less expensive single-payer health care financing.
It’s a zero-sum game.
Some of the conservative politicians argue that we should let the market work. The problem is that it has been working—working a zero-sum con.
The more liberal politicians, especially President Obama himself, make wonderful, even inspiring statements about the plight of average American, whom they call “the middle class,” but it’s actually the the lobbyists, the bankers, pharmaceutical manufacturers, big hospital corporations, in short, the corporate interests who set the parameters of what is “politically possible.” They’re the “stakeholders,” the real constituents of the politicians, be they liberal or conservative.
We Americans simply must build an independent mass movement, in the streets (meaning outside the control of the Democratic-Republican duopoly), a mass movement like the one that ended America’s home-grown version of Apartheid and the notorious Jim Crow laws with its legacy of lynching and violence. We need a movement like the mass movement that ended the Vietnam war.
It was not really the liberal politicians or the Democratic or Republican party that accomplished these social gains. It was the millions of ordinary Americans who turned out in a mass movement, largely in the streets, that forced the hand of the politicians. After being forced to accede, the politicians were plenty willing to take credit for these accomplishments, saying they were for the reforms all along, when all they really did was buckle at the knees in the face of mass anger.
As a matter of fact, every important social gain the American people have made in the past 200 or so years has come about by independent mass action in the streets and has been opposed by the politicians and the corporations of the day. That includes the abolition of slavery, the abolition of child-labor laws, women’s right to vote, enactment of universal education laws, the right to family planning including access to legalized birth control, the right to form labor unions, the 8-hour work day, the integration of our schools and neighborhoods, the right to marry outside one’s race, the elimination of poll taxes, literacy tests, and other forms of racial discrimination in voting, the elimination of Jim Crow laws and segregation, protection of freedom of conscience, etc, etc, etc.
Power takes a backward step only in the face of power, and the only power ordinary working people have is the power of mass action.
In the future I will be writing more about single payer health insurance, as well as about the major American political parties, the Democrats and Republicans.
I will write about how I think we can get real health care reform, how we can achieve full employment, how we can end America’s penchant for war, how we can dare hope build a decent and humane future for our children and grandchildren. I will show how relying on the Democrat’s cheap political theater and the Republican’s even cheaper political theater amounts to playing in a political sandbox. And I will expose the political fraud of those Republican allies, who both embarrass them and give sustenance to them, the reactionary just-say-no zealots and conspiracy theorists, people like Glenn Beck.
But in the meantime, I hope you will peruse the website of the Physicians For A National Health Plan (PHNP), which has a lot of valuable resources on this vital issue.
You will see why the “free market” can only make this problem worse and why we need the universal coverage under a single payer plan, operating on a nonprofit basis like Medicare, administered by a publicly accountable board.
- Google definition of a zero sum game.
- Wikipedia on Adverse Selection
- New York Times, Nov 14, 2009 Health Economics 101 by Paul Krugman.
- Abstract of article on medical bankruptcies from the August 2009 issue of The American Journal Of Medicine.
- Link to a PDF of the entire above journal article.
- Michael Kinsley’s Aug 7, 2009 op-ed piece in the Washington Post, titled Harry and Louise, Closet Socialists.
- List of dozens of reputable studies on the cost of universal health care via a single-payer system.
- Ferris State University’s web page on the history of Jim Crow laws.
- Link to a horrifying picture of an African-American female lynching victim, dated 1911.
- Excellent website of PHNP (Physicians For A National Health Plan), an outstanding resource for facts, figures, and analyses on single payer.