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If Private Insurers Compete with Government, They'll Lose
Competing Views of Government: Universal Medicare or Government-Protected Insurance Companies
These competing views of government are coming to a head in the debate over national health care reform. Those who think that the role of government is to serve the public good are likely to favor some form of universal Medicare. Such a system would almost certainly save a huge amount in administrative costs at the level of insurers, providers and government oversight.
Private insurers spend more than 15 percent of the money they collect in premiums on administrative costs. By contrast, Medicare spends about 2 percent. Part of the insurers' administrative expenses go toward marketing - an expense that would be unnecessary in a universal Medicare system.
The other major factor driving administrative costs with private insurers is associated with their efforts to game the system. Gaming is the best way to make profits in the current system. If insurers can find effective mechanisms for either keeping sick people from being insured, or finding ways to deny coverage for expensive care, then they stand to make large profits. Naturally, profit-maximizing insurers will therefore devote substantial resources to trying to avoid ways to provide health care to people who need it.
At the level of providers, the wide range of divergent forms and policies employs hundreds of thousands of people in administrative positions in hospitals, doctors' offices, nursing homes and other providers. These people are often quite adept at dealing with various insurers, which is an important skill in our current system, but a task that would disappear if we had a universal Medicare system.
Finally, the state and federal governments must devote substantial resources for oversight to police the practice of insurers. Oversight agencies are essential for limiting abuse. This task would be much simpler if there were not corporations that stood to profit by keeping people from getting needed care.
While we could in principle shift to a universal Medicare system immediately, this would be an extremely difficult task politically and would present some serious practical problems as well. During his campaign, President Obama proposed something far more modest: give employers and individuals the choice to buy into a public Medicare-type program. Under this system, if people are happy with their current health care insurance, they would have the option to keep it. However, if they decided that the plan offered by the government was better, they could buy into it.
In this situation, insurers would compete with the government plan in the market. If private insurers could offer health insurance that provided better coverage or charged less, then people would have the option to buy into a private plan. Of course, the government would also regulate the market so that private insurers could not cherry-pick their way to profitability by insuring only healthy people and dumping them when they became sick.
The insurance industry already recognizes that it will lose out in this sort of competition. A government-run plan will be more efficient. We already know this based on the experience with Medicare. When private insurers have competed side by side with the traditional government Medicare plan, in the absence of government subsidies, the overwhelming majority of beneficiaries opted to go with the traditional Medicare plan.
This is why the insurers are yelling that they don't want to face "unfair" competition from a government plan. But, their complaint should be all the endorsement that the public needs to support a public Medicare-type plan. The public plan will be cheaper and better than what the private insurers have to offer. Why shouldn't the public then have this option?
We all know that the insurance industry executives and the company shareholders want to make lots of money, but maybe they should try to find an industry where they can compete. If the government can provide health insurance better and cheaper, then why do we need private insurers?
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138 Comments so far
Show AllIf Private Insurers Compete with Government, They'll Lose
In the word of the sneering Cheney, "So?!!"
Poet
In addition to the private insurers' 15% administrative cost, insurance executives tell us that they make a "6% profit after taxes". 21% vs. 2% !
I believe that private insurers spend more on lobbying than Medicare spends on overhead.
We definitely need a single-payer system extending Medicare instead of private health insurance. But beyond the lobbying clout of huge private insurance companies there is a real problem for jobs and the transition as these companies
shrink. It seems to me there should be a transition plan to Medicare single payer for all - perhaps extending Medicare coverage from both ends of life -
first covering the young which is already being subsidized for lower incomes with SCHIP anyway, and also extending Medicare from 65 down to 55 year olds.
Eventually this could be extended from 55 to 45 and 21 to 30 until it encompasses the whole of the population over some years.
This would allow some time to "liquidate" much of the private insurance industry
without causing yet another major economic shock.
Some "boutique" private insurers greatly reduced in size will continue to
exist but no longer as the dominant and disruptive players they are today.
I suspect part of the primarily political obstacle to liquidating the private health insurance industry is precisely the economic shock of such a liquidation.
Not all these jobs would be destroyed by any means. Many would transfer the the public system. In additions many jobs would open up in clinics and hospitals as over-inflated administrative costs could be rolled over into more adequate staffing. Furthermore, there are alot of new jobs that could be created as the system moves to a more evidence-based approach- researchers, supervisors, clinicians etc. In fact, medicine is the fastest growing sector of the economy so that also nixes the concern about job losses.
Besides that, lots of people lose there jobs for many reasons and find new ones. We are being told that that's the nature of the modern economy- less job security- on a daily basis. So, somehow, those in the private insurance companies should be exempt from this reality- at cost to millions of citizens not only in terms of money but their health and lives? Why should we worry about job losses in non-productive sectors like finance, insurance and real estate? They are basically parasites on the system in the first place, a big drag on GDP. Let them get real jobs.
How is real estate a drag on GDP? Do people not need shelter? Or businesses not need stores? Where do you even build the hospital without real estate?
Concerning parasites, though, what of the people who walk around outside in t-shirts during the winter on their way to McDonald's to buy junk food, then catch a cold and can't work so end up in the hospital for a month? Are you going to work overtime to pay for their medical care? If you would, that's great -- you are nobler for it. But I would rather save my money to put food on my table for me and my family then have you come into my house and take it by force for the "real jobs" you happen to fancy that day, or whatever other purpose you feel is more important than my free choice.
The real estate market is itself a sham. Last years, foreclosures showed that.
Oh, I want to play this game too. Freedomcorpse, how many times have we seen the police going to the same house to relieve drunken domestic situations? Why should my tax dollars pay for drunken idiots that don't know how to behave? You really want to play that game? So if we take the Republican method of doing things, we would have private police forces serving only those that are insured. Not insured, the police just drive by while your house is being robbed or your daughter raped. If the rapist has really good police insurance, they might just pepper spray the homeowner for complaining. Hey, it is your own fault for not buying protection, er I mean insurance. How about a privatized firehouse as well? No insurance or don't happen to have your deductible with you? Burn baby burn! We already have privatized politicians and look how that is working out.
Aside from your confusion of rights violating actions like rape and clearly voluntary lifestyle choices like obesity, do you really let the police take care of you like that? When seconds count and they are only minutes away? Or would you rather install a home security system that shrieks an alarm and automatically dials a 24/7 private security company that you contract with on a monthly basis?
Number one, you are confused sir. For profit healthcare is social violence at best and class based eugenics at worst. It is very cleverly concealed and couched in lofty words like capitalism, fairness, and free market. I was simply pointing out that if taken to the same extremes of privatization, the police would stand by and watch you die for not being properly insured just as todays American medical industry does. Number two, as for your aversion to paying taxes to heal people, I would hope you have the same aversion to using tax money to build bombs with only one nefarious purpose. If you feel that it is okay for tax dollars to be used to kill people to protect corporate profits and not okay to be used for healing, then you are one sick individual.
Please refer to my comments above about my opposition to the dual welfare-warfare state. When it's big enough to give you everything you need or want, then it's big enough to take away everything you have.
Typical rightwing Boortzy shit. You're brainwashed sir.
Firehouses used to be private companies, and they did indeed let buildings that didn't buy protection from them burn down. Oops.
Wait, isn't that how the police already work? People with power and influence are immune to police scrutiny. They can afford to pay to leverage the legal system to their benefit, even when they do come under legal scrutiny. I simply do not have the money to back a lawsuit or defend myself in court, and therefore I am not afforded the full protection of the law that a rich person enjoys.
There are external benefits to police services that everyone enjoys and it is not practical or possible to collect payment for the benefits everyone receives. We set rules for each other on public roads and everyone benefits if I hire a police officer to enforce the laws. So taxes for police services are legitimate. The idea is that taxes are used to compensate for positive and negative externalities in the market.
Has no one on this site read Milton Friedman??
Milton Friedman would not read this site. My advice to you is to read The Shock Doctrine if you want to learn about Friedman and the effects of his disaster capitalism.
You are right Milton Friedman would not come to this site but that isn't my point. Everyone should listen to opposing viewpoints if for no other reason, than to help you understand your own viewpoints. I have heard Naomi Klein talk about Friedman and his role in Chile and so on. I have not read her book yet though.
It is a pity that you have no concept of democracy or a sharing and caring society. But that is OK because we will build one despite you.
I've got no problem with sharing and caring, voluntarily. I guess I don't understand why you think forcing everybody to do something is the same thing.
I would guess you do not mind others sharing and caring. I believe it is the function of govt to spread a social safety net, using taxes gathered for that purpose, so that all our citizens have a minimum of care and dignity. You apparently do not. Sad for you.
I would rather people be able to receive the maximum of care and dignity.
Paying doctors enough to afford more comfortable lifestyles so they're not worrying about missing the mortgage payment while performing open heart surgery demands much more that the minimum of care. Maybe that's why the AMA was so opposed in the past when this nationalization program came up for discussion:
http://www.pbs.org/healthcarecrisis/history.htm
"President Truman offers national health program plan, proposing a single system that would include all of American society.
Truman's plan is denounced by the American Medical Association (AMA) , and is called a Communist plot by a House subcommittee."
So? Of course the AMA was against anything that limited their ability to charge exhorbitant sums for their work. Do you find that unusual? Why do you seek to prove a point using the cold war climate and anti communist sentiments of that era when it fails to apply to today's reality? The AMA killed Hillary Clinton's attempts to reform health care also, to what do you attribute that ill conceived attempt?
Do you seriously think a heart surgeon is worried about his mortgage payment? You just gotta do better than this.....
I'm glad you recognize that the physicians in this country are largely opposed to the single payer proposals. I'm no doctor, but I think they know something about health care that I don't. Maybe you should look into the AMA's arguments against government intervention into the market.
As I noted earlier I believe the Doctors are focussed on their individual bank accounts rather than on quality or affordable service. The statistics seem to bear this out as well. Actually ,rather than focus on the doctors I prefer to blame our abysmal and terrifically expensive health care on the insurers and the HMO's et al.
The previous was a sop to my sister and her husband, the doctor and the surgeon respectively.
tn 8:48 ------ We have to look at the large,long term picture, part of what is destroying this whole nation is the health care system, it needs to be changed. Whatever job loss there is will be balanced by the tremendous savings of single payer(in my dreams we will get single payer). No economy can afford useless,harmful, insurance parasites, capitalist or socialist.
US employers find it harder to compete with foreign companies who are not burdened with employer-based medical insurance (not just auto makers). This is causing the loss of far more than the 2-3 million insurance industry jobs that may be reallocated from the private sector to the public sector if single-payer is adopted.
The idea of gradually lowering the age for medicare eligibility in 10 year increments would not only solve the insurance issue in a managable fashion, it would open millions of family wage jobs to twentysomethings. There are millions of 55-64 year olds who are delaying retirement ONLY because they cannot afford to lose their employer-based medical insurance until medicare kicks in at age 65.
Look forward to increased numbers of unemployed or underemployed twentysomethings as the combination of employer-based medical insurance and the current depression delays retirements.
Straw man alert.....Certainly our insurers employ many , many thousands. But our employers in almost every form pay a ton of money for health insurance, a fact you "overlook". Once we have single payer health care the money formerly spent on such care would create many more opportunities than are lost in the insurance field.
Further our health insurance industry is a mess, provides very poor care for very high cost, allows folks to die in the name of profit and deserves its fate.
Yes, and I was not aware healthcare was a jobs program either.
A false flag alert for tnnotsomoderate
After the invention of the automobile noone seemed to say,"back to the horse, we must protect the buggy whip manufacturers".
The object of health care is to care for the health of the nation, not to protect the jobs of those who make our health care inefficient, incredibly expensive and exclusive to the healthy and wealthy.
Single payer does not exclude private care, one is still free to buy such coverage, and many will choose that option.
Another explanation of why we need to get the insurance industry out of our health care program, they do not help, should not get between us and our health. The best plan still would be single payer, everyone enrolled, and the administration knows that. If there was no insurance companies lobbyist money involved I think it would be a slam-dunk. Our problem here is the fascist, corporation owned government that allows the companies to write the laws, think prescription drug plan. One group of doctors has organized to help us with single payer. Sign up for their newsletters. http://www.pnhp.org/
Absolutely! If people think Obama's plan is a step toward a real solution, they would do well to remember the last time Congress tossed $600 Billion into the corporate maw. The last bill, promoted as the need to make prescriptions affordable for our seniors, was another give-away to the legalized graft and crony system. All it did was make the system that much more profitable, that much more corrupt. Like the banking system (with which the insurance industry is intimately connected) it is too big to fail no matter what outlandish taxation and hardship is placed on the peasants to pay for it.
The first step needed to fix medical insurance is to revise the 2003 bill that Pitch Fork refers to. The bill is a classic example of pure, overt pork.
I have Medicare that I have paid for all my working life, and am still paying for from my SSI check.
If one is catastrophically ill, one pays deductible and co-pay with Medicare.
If one is healthy and needs maintainance healthcare, like vision and dental, well, that's not covered under Medicare.
I am healthy.
When I need a blood test to update my thyroid meds, well that falls, by a couple of dollars, under the deductible. So I pay the full amount for that healthcare & I pay for all my thyroid meds, because theyre not covered.
That's Medicare, a really lousy healthcare insurance policy, from my point of view.
In contrast to Canada's system. My son had a massive asthma attack while visiting there. Was hospitalized for 12 days, and it cost him nothing.
My son was born in Scotland, where I also was born. His birth cost me nothing.
Seniors, who can afford it, always have supplimental insurance to Medicare, because it is a lousy policy. I cannot afford Medicare and some shark insurance from private insurance carriers.
Wake Up People! Medicare, as it is currently set up, is not the answer
"Wake Up People! Medicare, as it is currently set up, is not the answer"
I believe that Obama has addressed this issue. He knows the system is broken and is well aware of the fraud which he said he intends to fix. None of this can be accomplished overnight but at least he recognizes the problems and is determined to correct them over time.
Gail sez:
"Wake Up People! Medicare, as it is currently set up, is not the answer"
*********************
But neither is delegating the management of healthcare rationing to "for profit" businesses. If we were not too proud to think that nobody elses experience had anything to teach us, we could study places like Germany, France, Britain, Canada, Japan, and the Scandanavian countries to learn from both the strengths and weaknesses of their systems.
Instead we have the best healthcare that big money can bribe into continued existence while tens of millions of our citizens have no healthcare, our health longevity and other indicators lag behind those countries with single-payer systems, and the cost we pay for this inferior care is greater than any other country in the world. .
Poet
Poet,
Give him time to make the changes that are necessary to provide real health care in this country. The guy has been in office for 50 days. He has to start somewhere to get this thing in motion. He also has a lobbyist-loving Congress to deal with while he's trying to insure everyone to some degree.
Obama has been handed the worst economic crisis in 80 years in addition to the mess that George Bush started in the Middle East. We can't expect miracles under those conditions.
All true, and so what? The criticisms are about directions taken or proposed, and the obvious fact that Obama does not seem to think outside the box all too often. For profit health care has had its chance and has failed us miserably.
Obama has proposed a plan that leaves an estimated twenty five million uninsured, that doesnt sound like real health care to me, does it to you?
That this President inherited a mess is obvious, that we should remain silent because this nation is a mess does not follow!
Try no Medicare at at all.
Of course Medicare is not the entire solution. A great part of the current expense is failure to adopt an evidence-based system so the sale imperatives of drug and equipment manufacturers, hospital and nursing homes "bottom -line" (profit incentives and exec. salaries) are driving forces behind the practice of medicine. Patent monopolies distort the costs of medications. Unproven practices,new drugs only incrementally better than the old ones, advertising and other "competitive costs", medical errors add a huge burden both to the cost but to the efficiency of the system.
A unified, national, single payer system would afford many more opportunities to improve practice and therefore extend coverage; to organize, rationalize medical practice and set up useful boards of governance which operate consistently and are accountable in more effcient ways than through malpractice suits (not eliminating the right to sue, of course).
In fact, one of the problems with the computorization of medical records as provided in the stimulus package is unless the system is integrated on a nation-wide basis and all the software compatible- instead of in an unorganized and poorly regulated competitive market- it will turn out to be next to useless and a completely wasted expense.
Almost all the objections to a univeral single payer system are absurd. Concoctions which simply disguise naked self-interest. Of course there will be problems but is this the ONE CASE in which the proverbial "can do" spirit of the American people is going to be dumped even before reform is started?
The problems with Medicare stem from insurance and HMO lobbyists who purposively order our politicians to curtail services ...Nice try though.
Exactly. If all people had the exact same health care services available, the elites wouldn't risk thier own health by undermining their own system. All these scare tactics against single payer health care are nothing but smoke and mirrors designed to confused a stultified public into supporting a class based health delivery system.
A government run system like single payer would also make the government more likely to want to keep costs down. The result would mean more regulation on harmful substances in food, products, and the air we breathe. Currently, there is less regulation because the corporations are not held accountable for harmful propaganda and harmful products because of the money and lobbying involved. I would think a government system would bring more regulation back for the health and safety of the people to lower overall health costs which would benefit everyone. This is why Europe is ahead and the US is getting left behind. It is ludicrous that the US is the only developed nation that does not have national health care. What amazes me is how fast the government can find money to bail out these good ol' boy banks (Citigroup and G-Sax) but always finds excuses to fund health care and education. Time to grow a pair President Obama and leave a lasting legacy.
The US Government bans hemp, stevia, transporting raw milk across the state unless it's labelled pet milk, etc ... so don't think they don't regulate. What they're doing is really MISregulating but yeah, since they're corporate puppets, I can see where they're getting their double standards from.
Stevia? The plant-based sweetener? We had packets of that available at my old job, Evos, a healthy fast food restaurant. What was the objection to that, or am I mistaking it for something else?
Oops, I forgot to mention that the ban on stevia was partially lifted. It's now a "dietary supplement" although I hear they recently gave approval for a water-down version of it for Cargil and all to use. I didn't know that there even was a fast food restaurant that does this. I need a link to that please.
http://www.evos.com/
It's not very widespread yet, unfortunately. I miss it :-(
I don't think the road to freedom is paved with more regulations on everything along the way.
And how is this supposed benevolent government -- that keeps its military garrisoned around the globe in over 130+ foreign nations, with wars in several of them at any one time -- expected to help us all out to get free health care? Throw off your chains! This dual welfare-warfare state cannot last.
The road to freedom you say..
Please define Freedom in your own words:
Thanks....
I think your handle says it all.
When one sees the current mess in our financial community and still argues against regulation one might very well be accused of being rather blind or exceedingly agendized.
How many more government regulatory agencies intervening in the economy do you want? The Federal Reserve, FDIC, SEC, CFTC, PPT, FHA, HUD, FNMA, FHLMC, etc., are all blameless bureaucrats who had nothing to do with it? The illusion that the government can eliminate risk through regulation ignores the hazards of regulatory arbitrage and makes every move in the market riskier, to the point where nobody knows any more how risky things really are -- like AAA ratings assigned to junk mortgages.
See:
http://www.regulatory-arbitrage.com/