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Managers of for-profit insurance corporations have a fiduciary responsibility to maximize profits, which they do by cherry-picking the healthiest customers with lower prices, driving insurers who cover the sick to ever higher prices. Eventually there’s no affordable insurance for those who need it most. (For details on how this works, see Wikipedia’s entry on "adverse selection.")
The major industrialized nations have figured this out and bans for-profit insurers from the basic healthcare market:
Last year, former Washington Post reporter T.R. Reid made a great documentary for the PBS show Frontline titled Sick Around the World.
Reid traveled to five countries that deliver health care for all – UK, Japan, Switzerland, Germany, Taiwan – to learn about how they do it.
Reid found that the one thing these five countries had in common – none allowed for-profit health insurance companies to sell basic medical coverage.
[...]
Reid’s bottom line for health care reform – don’t let health insurance companies profit from selling basic health insurance.
They can sell for-profit insurance for extras – breast enlargements, botox, hair transplants.
But not for the basic health needs of the American people.
[…]
In the United States of America, free-market for-profit capitalism an article of faith. But, while profit-based capitalism works well in some areas, it doesn’t in the are of basic health insurance. But it appears that yet another generation of Americans is about to nail itself to that rugged free-market cross.
19 Comments
If one had–or even could have–a free market for healthcare in the US, it might be a good thing. Competition is always a better refining force than top-down management.
Unfortunately, we do not have and have never had a free market for healthcare. Insurance companies have effective monopolies in most if not all of the country. Even if more than one or two companies operates in a given market, they only have to compete on the price they charge the employer. They never have to compete on the price paid and the services received by the consumer. The consumer just gets to take what his employer offers.
When, moreover, the potential margins on honestly supplied healthcare coverage are so low and the costs of billing and related overhead are so high that it is hard to see where an honest profit could come from. Since you have to compete on price to get the employers’ business, you cannot pass on the high cost of treatment easily. So the only way to make money is to deny claims, push sick clients out of the covered pool, play games with doctor payments, and pay your politicians to keep regulations loose to non-existent.
We need single-payer public healthcare because high-quality, reasonably priced private health coverage is not a good business proposition. Halthcare is a natural government monopoly, like roads, air-traffic control, the currency, and the Navy.
I strongly disagree with this fundamental premise in the case of health insurance. The problem is that the fundamental way for insurers to compete is by not insuring people who will file legitimate claims, i.e., the people most likely to need healthcare. By doing so, they can offer lower rates and drive those who are less skilled avoiding sick customers out of the marketplace.
In textbook free markets, competitors compete to better serve the market. In the insurance market, however, it’s exactly the opposite. Insurers compete to minimize the amount of healthcare the purchase for their subscribers. The rewards are all backward.
I’ve postulated for some time there must be an “assigned risk” group and everyone gets their share of risk
this is done in the auto industry and must be done for private health care so we don’t pay for there rejected health individuals
I agree. Primary and secondary education were once luxuries paid for directly. Now they are an expression of a civil right and public obligation. So, too, should be health care, which is its status in Europe. Just as private universities have their place, they are not the fundamental deliverer of post-secondary education, but a luxury for the most advantaged. But no one doubts how avidly multi-billion dollar insurance companies will fight for their piece of the pie.
thanks wigwam. i agree and recommend.
I think we are making the same point. I am saying that competition is best when it can and does exist. Neither is true for healthcare.
Under our system, healthcare is a monopoly of sorts. The industry has captive consumers who get little or no choice. A minimum number of large providers divide the market among themselves, so that only one or two are active in any given geography. They own their own hospitals and pharmacies–or as good as. To the extent that they compete at all, they at most shave nickels off their prices to get each others’ customers–the employers–to switch from one to the other in any given year.
That isn’t competition. In fact, I’d argue that the single-payer systems actually promote more competition, because they give a free choice of doctors, labs, and pharmacies.
Agreed. On the provider side, the incentives don’t get reversed, the way they do on the insurance side of things. (There are still problems to address on the provider side, but first things first.)
Hi Selise. You posted a comment earlier on Teddy’s thread that was exactly what was going through my mind at the time, namely that segment of the Himmelstein interview where he explained how the for-profit insurers cherry-pick the healthiest customers and the adverse impact of that practice.
Thom Hartmann has also been hammering away on the absurdity of the open-market approach to primary insurance, and it was from him that I got the link to T.R. Reid’s work.
There is a list of myths about Canadian health care that she discusses.
*********
” As a Canadian living in the United States for the past 17 years, I am frequently asked by Americans and Canadians alike to declare one health care system as the better one.
As America comes to grips with the reality that changes are desperately needed within its health care infrastructure, it might prove useful to first debunk some myths about the Canadian system.
And these are just some of the myths about the Canadian health care system. While emulating the Canadian system will likely not fix U.S. health care, it probably isn’t the big bad “socialist” bogeyman it has been made out to be.
It is not a perfect system, but it has its merits. For people like my 55-year-old Aunt Betty, who has been waiting for 14 months for knee-replacement surgery due to a long history of arthritis, it is the superior system. Her $35,000-plus surgery is finally scheduled for next month. She has been in pain, and her quality of life has been compromised. However, there is a light at the end of the tunnel. Aunt Betty — who lives on a fixed income and could never afford private health insurance, much less the cost of the surgery and requisite follow-up care — will soon sport a new, high-tech knee. Waiting 14 months for the procedure is easy when the alternative is living in pain for the rest of your life.
Rhonda Hackett of Castle Rock is a clinical psychologist. “
http://www.opednews.com/populu…..nkid=91694
Exactly. Later is better than never.
i do not understand the desire to keep private insurers involved. but them i’m a single payer extremist (strangely the substance free “debate” has pushed me more in that direction – i don’t trust the process).
anyway, for people who keep saying “strong public option” without referring to actual legislation (as if none yet exists), i’ve x-posted a diary on stark’s bill.
DrSteveB: Strong Public Option: 100% Coverage & Cost Control
but i’m still, most definitely, in the single payer camp.
i just want to start nailing down what a “strong public option” might look like, so as to prevent further bamboozlement.
Yes, even though the wait should not be that long, she gets it for free. All follow up physiotherapy, hospital or doctor appointments involved, will also be free.
I agree.
Excluding for-profit insurers from the primary health-insurance market discourages the cherry-picking (adverse selection) that leads to the functional collapse that we have now, where the sick get priced out of the system.
Single-payer not only accomplishes that goal but also decreases the cost of healthcare by getting rid of much of the paperwork. It’s far superior and would be a likely next step once the greed-heads are out of the business. ;-)
or, alternatively, we could bail out the greed-heads with taxpayer money.
see bankster bailout.
… watching the process in congress so far this year, i actually think there is a fair chance proposed reform could end up being an insurance company bailout if we’re not careful (via mandates, subsidies, etc.). :(
Hi Selise: I have to agree. The mandates are money in the bank as far as the insurers are concerned. And the progressives’ sacred “public plan” is a way to off-load the people who are likely to file a lot of expensive claims.
Adverse Selection:
“The potentially ‘adverse’ nature of this phenomenon can be illustrated by the link between smoking status and mortality. Non-smokers, on average, are more likely to live longer, while smokers, on average, are more likely to die younger.”
So insurers accept as fact that smoking kills premature as a basis premise. Rather funny corporate tobacco claimed for decades, no relation between smoking and premature death, to protect the distribution of a product just as addicting as heroin, to realize billions of dollars in profit. Now the insurance industry today is protected and protects its own self interest, a the expense governed. When Jefferson spoke of monied corporate interests, having more clout and importance in society than the lif, think of Dred Scott! Where the clear language of law expressed in our constitution is usurped by special interests as a system is devise not to serve the govern first, but rather to protect, as in the past,
a King and corporate cohorts in colonial crime who mercantile our forefathers or the aristocratic slave ownercorporations which abuse tax status or buy the law with the accumulated wealth extracted from the citizen taxpayer insured! What a fucking racket! I say I say I say!!!How much money was spent protecting Exxon Mobile’s welfare/access to Iraqi Oil to perpetuate a “potential energy delivery system?”
Is this live or is it memorex?
that is my nightmare.
well that an an underfunded public plan. if the people who have a voice can still get their expensive private insurance (or self insure), what will be the incentive to adequately fund the public plan? a bunch of poor sick people? how likely is that?
so, that’s the second reason (after adverse selection which you’ve described so well) that don’t believe all the happy, substance free, talk about a public plan (i see a lot about the “principles” but not what specific policies are needed): in our current political climate, i think we need to have all of congress and their staffs on the same plan as the rest of us (and no competing private insurance allowed). that way our lawmakers will have an incentive to make the plan decent and adequately funded.
What’s missing in all these discussions is the morality & philosophy of what we are discussing. The rest of the first world recoils with amazement at the American view of health as a ‘business’. All the other rich democracies view univeral health care as a right of citizenship. It is a human right – everyone gets ill at some point – not something to be bartered for like a house or car. NOBODY is excluded. In the EU, a German needing treatment in France or Italy is accommodated like every other Frenchman or Italian. The costs of treating non-citizens are equalized by EU transfer payments between national health care services (NHS’s).
The NHS can be supplemented by additional (private) insurance to accomplish a particular end. For example, BUPA insurance in the U.K. means immediate acccess to both G.P.’s & specialists, while NHS NON-emergency appointments to either might involve delays of a week or more depending on the locale or the specialty involved. Emergencies are all dealt alike by the NHS.
The philosophical point is that a ‘market’ requires willing ‘buyers’ & ’sellers’, each of whom must be able to independently evaluate the costs and benefits of their respective partisipation. Unequal information on the ‘buyer’s’ side in not uncommon nor is oligopolistic supply on the ’seller’s’. This can lead to ‘regulation’ in dealing with ‘private’ goods. Either side, however, has to have the right to decline in the transaction.
When these conditions are not met ‘free’ market clearing is impossible. In econo speak: externalities come into play if a large numbers of citizens cannot participiate. If we’re dealing with normal goods and services – cars, haircuts, etc – many then have to use public transportation or ware their hair long. However, when market clearing fails, as it inevitably must in the provision of a ‘public good’, it’s grotescuely sub-optimal to GDP when large numbers of citizens cannot afford a human condition called ‘illness’.Market solutions are thus, by definition, failures. Clearly the current debate, in both moral & philosophical terms leads only to sub-optimal solutions. I, for one, do not accept’s Obama’s platitude/lame excuse that ‘you can’t get there from here’. We must have Single Payer!
” The scare ads and op-ed pieces featuring Canadians telling us American how terrible their government health-care systems have arrived – predictably.
There’s another, factual view – by those of us Americans who’ve lived in Canada and used their system.
My wife and I did for years, and we’ve been incensed by the lies we’ve heard back here in the U.S. about Canada’s supposedly broken system.
It’s not broken – and what’s more, Canadians like and fiercely defend it.
Not long ago, the CBC asked Canadians to nominate and then vote for The Greatest Canadian in history. Thousands responded.
The winner? Not Wayne Gretzky, as I expected (although the hockey great DID make the Top 10). Not even Alexander Graham Bell, another finalist.
The greatest Canadian ever?
Tommy Douglas.
Who? Tommy Douglas was a Canadian politician – and the father of Canadian universal health care. “
http://www.huffingtonpost.com/…..15256.html