Why Health Insurance Firms Fight the Public Option

Whether measured by GDP or on a per capita basis, Americans spend more money on healthcare than any other industrialized nation. It would stand to reason that Americans would therefore have the best system for the average citizen. Yet measure after measure, it is in the bottom rather third. Here are just some of the measures, life expectancy, infant mortality before the age of one, life expediency at age of sixty, recoverability from treatable medical conditions, etc.

In America 20% of medical premiums is insurance company overhead and profit. This figure does not include the medical billing costs and overhead experienced by provider. Nor does it factor in the amount of time a patient and the patient’s family spends pouring over medical bills to ensure accuracy. For Canada’s single payer system, the overhead is 3%, the same as it is for Medicare and the Veteran Affair’s program for Vets.

When an insurance company pays a bill, they call it a “medical loss”. The companies seek to have a “medical loss” no worse than 80%, and some aim to push it toward the 76% market. To achieve this end, they deny coverage to people they consider to be too risky. Another vehicle is to put great efforts into avoid and delaying payment on medical claims. About 30% of claims are “denied”, the most of which are paid upon appeal by the recipient of the treatment.

Some excuses for denial are dubious, such as a signature not in the right place. One person’s claim was denied because the services were given to this businessman while he was in Japan. The insurance company denied the claim for two reasons, the bill was in yen and they could not verify treatment. The company says that the provide insurance for out of country treatments but policy holders only learn later that the statement must be in US dollars and is paid in US dollars. Second, and the more daunting is that treatment must be verified by the insurance company personnel which creates two problems, a) the company’s phone system does not allow for out of country calls to verify treatment and payment information, and b) having to find someone who speaks English well enough on the other end to answer satisfactorily the range of questions being asked by the company. Hence, the insurance company puts up walls that the insured must find a way to overcome in order to have the out of country treatment paid by the plan.

A host of minor treatments provided within the US are routinely denied with the hope that the insured will cover the items out of their own pocket (one out of two will not appeal) even though the company knows they will pay the bill if the insured appeals the decision. A majority of the 30% denied claims fall into this category. For profit companies have teams of people who examine bills to find reasons to deny them so as to maintain the targeted profit margin.

Medicare on the other hand which does not have to pay out high seven figure and eight figure salaries to executives or pay out dividends to shareholders, or have teams of people whose primary purpose is to deny claims, which is why it has a 3% administrative overhead versus from profit companies 20%. Insurance companies are right when they say that they will not be able to compete with a public option as either the government will be able to offer the same coverage for about 15 to 17% less or for the same premiums offer greater coverage. Regardless of what other reasons the health care insurance firms will give, the 17% difference will kill them.

Little Will Happen with Healthcare Reform

Listening to some opponents of reform you will hear deep anger, fear, distrust of government (and by extension their neighbors) and suspicion that there is a hidden agenda. Such a pool, and it is a significant pool, is fertile ground for people to be gullible and quickly accept created mythical claims. There is a host of mythical claims being made around proposed health care reform.

Here is a story about some of those claims.
http://news.yahoo.com/s/livescience/20090824/sc_livescience/majorityofamericansbelievehealthcarereformmyths

I am not surprised by the polls. As you will recall, though I am a fan of healthcare reform and a public system I anticipate that reform efforts to fail. Something will get passed, but a year or two later most people will realize that the changes were cosmetic and made not real differences. Regardless of the claims of insurance and health care executives are making, they are not interested in serious reform. Their eyes are upon the dollar and trying to keep the gravy train going a little longer. They have the same attitude of financial services and insurance executives who created, marketed sub-prime loans that nearly brought the financial industry into total ruin….keep the train going, allow us to make as much as possible hoping that the collapse we see coming will not happen.

Two of the most powerful motivators are fear and greed. Both those emotions are at play in the healthcare debate.

What is interesting is that the views of those who have been to other developed countries, and intentionally listened to those citizens and understood the dynamics of their what is happening in those countries, tend to see the value and importance of healthcare reform. Interacting, listening, learning and grasping what is happening elsewhere changes a person’s worldview and impacts their views. To hear the those against healthcare reform, the Canadian healthcare system is a backwoods system with ancient hospitals thinly staffed by second-rate healthcare providers.

Though Americans may travel widely in their own country, and take quick little vacations to a foreign resort, Americans are for the most part insular in their worldview. Traveling outside your own country does not give you a worldview when you go to a resort filled with fellow Americans, or travel in tour groups and do not really interact with those from other countries. Such individuals continue to view their own nation as being superior and as not needing to learn from others. They have bought into the political mantra of superiority, enlightenment and that other societies are falling apart and less vigorous than American society.

While I hope I am wrong, the myths will continue to hold sway and be proclaimed as truth. There will be not political inertia to bring forth reform. Meaningful healthcare will not happen until about half of the middle class is without adequate healthcare…a day that may be as near as twelve to fifteen years.

American Healthcare, Is It the Best?

Americans, particularly those on the right, strongly claim the American healthcare system is the best in the world. The greatest system, by what measure and standard? If it is the greatest number of doctors per capita, yes. If it is the most ornate and beautiful hospitals, yes. Most moderate to large communities have hospitals that are as appointed as major corporate offices. If the measure is the country that develops more medicines and machines than any other, the United States comes out on top. If the measure point is the country with the most well equipped hospitals on a per capita basis, the answer is a clear yes. Small hospitals have a plethora of the latest machines even if they sit idle several hours of the day for if they did not patients would go to the hospital down the road. Each hospital needs to have the machines in order to compete with their neighbors. It the measure is the country with a greater number of skilled medical professionals on a per capita basis than any others, yes the United States is the best. If the measure is the system that creates wealth for doctors, suppliers, hospitals, etc., most definitely the United States is the place to invest in healthcare!!

As the American healthcare system is the best, it is a reasonable expectation for that to translate into having one of the highest overall life expectancy rates in the industrialized world. If it is not at the top, American should be in the top five, and then barely edged out by those above. Does that expectation hold up?

The United States has an overall life expectancy of 78.06 years. There are 44 countries in with longer overall life expectancies than the United States. The major industrialized countries with a longer life expectancy rates are: Sweden (80.83), Australia (80.62), Canada (80.34), Italy, Spain, Norway, Israel, France, Switzerland, Japan, Austria, South Korea, Netherlands, New Zealand, Germany (78.95), Belgium, United Kingdom (78.7), and Finland (78.66). The only major industrialized country that has a lower overall life expectancy rate than the United States is Russia.

In America the Canadian healthcare is disparaged as being inferior to the United States. Whenever arguments for a government run health system is raised, the medical lobbyists ask if Americans want to settle for an inferior system like Canada’s. Canada has a life style so similar to the America. The difference between Ontario and Michigan, Ohio and New York is less than the differences those states have with North Carolina or Texas. If Canada which is culturally similar to the US has a healthcare system that is so inferior, then why are Canada’s overall life expectancy rates two years higher than their neighbor?

While the American health care system has great strengths, the claim becomes suspect when we look at how this great system translates into the care received by the average middle class family. Amongst western countries, on a per capita basis the United States has one of the lowest rates of its citizens with health insurance. Yet on a per capita basis is spends more on healthcare than most other industrialized countries.

In America tens of millions of its citizens will go three or more years without seeing a doctor for a basic check-up. Every year millions delay receiving care due to the cost of medical care. Thinking they only have a mild ailment that will clear-up too many Americans delay going to the doctor only to find out that they have a major issue that only has become more significant during the delay.

That a good number of Americans fear government healthcare should not be undervalued. A large portion of that fear is created and sustained by the healthcare industry which clearly has a significant invested interest in maintaining the status quo. While they are in the business of providing healthcare, their primary goal is not quality service as inexpensively as possible. We must be clear, the primary goal of the industry is to maximize profit throughout the system. The lobbyists have the public that managed care means some bureaucrat will make their medical care decisions rather than them and their doctor. They are told that they will not be able see the doctor of their choice but that as some government official will make that determination for them.

Those who live in places Canada, England, Sweden, Norway, Australia and Germany have not experienced some bureaucrat making such decisions in their government managed care system. In America a good number of health care plans require patients to call their insurance company, in other words an insurance bureaucrat, prior to receiving a host of treatments. Many health insurance plans in America have an approved list of doctors and hospitals, and if you receive treatment from medical practitioners or hospitals not on the list, the patient pays a much greater portion of the expense. In other words, the rationing of care by bureaucrats that the healthcare industry says will happen in government run system happens more frequently in the existing American healthcare system than it does in Canada.

The healthcare lobby, whether it is the lobby for doctors, hospitals, pharmaceutical firms or the healthcare insurance industry, has an invested interest in maintaining the current structure. They have and will continue to play upon the ignorance of the general public about what the care the average citizen receives in other industrialized countries through their government managed care. They have and will inflame the fears of the unknown. Amongst the uninformed, the fear of the unknown is a powerful weapon.

One of the fundamental principles of the free market is that if you produce a superior product that is properly priced that you will not only be the leader in the market but that others will follow your lead. In other words, if you are successful others will mirror you practice. If America truly has the best medical system in the world and government healthcare is such a terrible system, why is it that no other industrialized country is adopting the American system?