For-profit insurers widely despised,

but can single-payer dethrone them?

 

By Roger Bybee

 

"Americans will always do the right thing, but only after everything else has failed." –Winston Churchill

 

 

Sitting atop America’s healthcare system is an enormous, Jabba the Hut-like beast straight out of Star Wars, belching out commands to patients and doctors alike, and greedily consuming everything in sight: the for-profit healthcare industry

 

Healthcare administrative costs, necessitated by the private health-insurance industry compulsively gobbles up about 31 cents of every health dollar, adding up to $400 billion in excess administrative costs[i] to what is already the world’s most expensive healthcare system. The CEOs of the top health-insurance firms and for-profit HMO sucked in an astounding average of $9.1 million in 2006, while building palatial corporate headquarters to house their vast legions of bureaucrats.

 

Not only as insatiable as Jabba the Hut, the industry also shares his dictatorial ways. Insurers commonly restrict the doctors patients may see, often deny authorization or payment for vital coverage, and regularly bury patients in a bewildering blizzard of paperwork, aimed at wearing them down and getting them to pay for services that the insurers themselves should cover. Doctors are similarly under siege from insurers, whose "utilization review specialists"  try to dictate courses of treatment from hundreds of miles away and whose ever-growing army of bureaucrats is devoted to the highest possible rate of denying payments to providers.

 

INDUSTRY UNPOPULAR WITH PUBLIC, NOT CONGRESS

Small wonder, then, that, the insurance has an approval rating slightly above another major menace to public health, Big Tobacco, according to Harris polls. Given the industry’s unpopularity coupled with its place as a counterproductive, cancerous growth at the heart of the healthcare system, could a Canadian-style single-payer plan with majority public support among both the general public and doctors alike wind up as a serious contender in the looming health reform battle?

 

That scenario is still a long shot, given the enormous power of the insurers and their allies, the dependence of Democratic leaders on the medical industry’s campaign contributions, and the dismissal of single payer by prominent pundits and mainstream media news programs dependent on pharmaceutical and other medical ads. The public debate continues to be dominated by the ongoing acceptance by elites of the very force most inimical to their proclaimed goals of free choice of doctor, quality care, universal access,  reasonable cost, and heightened American competitiveness: the private insurers running US healthcare. So it may not be prudent to bet against for-profit health insurers, although they are widely perceived as one of the nations most spectacularly useless, harmful, and widely-despised industries.

 

But in the view of many health policy experts, some version of single-payer is ultimately the only solution to controlling costs that make secure healthcare steadily more unaffordable and out of reach for a growing number of Americans. Efforts to regulate insurers’ spending of their revenues on patient care would seem certain to be thwarted by insurers pressuring doctors to cut back services in a manner difficult for regulators to detect, predicts Minnesota health-reform activist Kip Sullivan, author of The Health Care Mess.

 

During the last major healthcare battle in 1993-94, despite strong support in polling among American voters and more than 90 supporters in Congress, advocates of a single-payer system were marginalized by the Clinton administration and the mainstream media. When Dr. David Himmelstein of Harvard Medical School argued to Hillary Clinton that only a single-payer plan could eliminate bureaucratic waste and impose effective cost controls, she breezily dismissed him with, "Tell me something interesting, David."

But 13 years after the defeat of the 1,342-page insurer-focused Clinton plan and much of the media discrediting the notion of large-scale reform, healthcare reform is back at the top of the nation’s domestic agenda–and with it, discussion of a single-payer alternative.[ii]

CRISIS INTENSIFIES, ELECTION LOOMS

Healthcare reform has polled as the most pressing economic issue and has the dominated much of the debate in the 2008 presidential primaries. Moreover, the for-profit insurance companies–the chief target of Michael Moore’s popular documentary "SiCKO"–are increasingly the target of outrage both by the general public and the medical profession.

 

Meanwhile, the urgency of reform has probably never been higher, with premiums soaring 87% since 2000, over 47 million Americans uninsured, healthcare now absorbing 16.7% of gross domestic product, and bureaucratic overhead consuming an estimated 31% of healthcare spending. US costs are twice those of any other nation, yet the US ranks only 37th in a composite of health outcomes, according to the World Health Organization. The US also has a rate of preventable deaths from causes such as infections, diabetes, treatable cancers, and heart and vascular disease that is 60% higher than that of France.[iii] The differential between the two rates amounts to 101,000 " excess" deaths in the US each year.

 

Fast-rising costs, stagnant or declining wages, and incessant job insecurity have created new anxieties for seemingly-established members of the middle class, who now worry about loopholes in insurance policies, increasingly unaffordable rising co-pays and deductibles, or the outright loss of insurance. Medical bills have become the leading cause of bankruptcy, with these bankruptcies occurring mostly among those who were actually insured, according to a study published in Health Affairs.

BUSINESS WEEK: 67% WANT CANADA-STYLE PLAN

Thus far, popular sentiment over the best direction for healthcare reform healthcare somewhat diffuse, but the for-profit health insurance industry has become a magnet for special contempt. Consequently, two-thirds of the American people favor replacing the current health system with a single-payer system. A poll reported in Business Week (5/17/05) showed “67% of all Americans think it’s a good idea to guarantee healthcare for all US citizens, as Canada and Britain do, with just 27% dissenting.”[iv]

 

Even more remarkable is the growing intensity of doctors’ support for a single-payer system. A national poll published recently in the Annals of Internal Medicine showed that a stunning 59 percent of U.S. doctors support a "single payer" plan that essentially eliminates the central role of private insurers. The new poll was conducted by Indiana University‘s Center for Health Policy and Professionalism Research.

Similarly, a survey in Minnesota among Medical Society members showed 64% favoring a single-payer plan. This duplicated almost precisely the results of a survey of Massachusetts doctors in 2004 that showed 61% backing for a single-payer plan.

 

A single-player plan would effectively marginalize the giant health insurance industry by substituting one state-level public entity in each of the 50 states for the current 1,500 to 2,000 insurance companies operating in the US. Such single-payer systems, with private doctors and hospitals, exist in nations as diverse as France, Taiwan, Denmark, Norway, Australia, and Canada. Additionally, single-payer systems directly run by the government operate in Great Britain and Spain.

PUBLIC’S VIEW NOT REINFORCED BY POLITICANS OR MEDIA

However, ordinary American citizens may not generally recognize the full implications of their support for a single-payer plan, perhaps viewing single-payer as an expression of their desire for "maximum strength" reform rather than as a specific solution. Dr. Marcia Angell of Harvard Medical School and the author The Truth About the Drug Companies, argues that the public finds little reinforcement among pro-insurers "experts" for their support of a single-payer alternative and tends to lose confidence its perspective on reform.

 

"They’re told again and again by the congressional representatives and health ‘experts’ that they can’t have singlepayer," she says. "They are that told their instincts are wrong. They love Medicare for everyone, but they’re told they can’t wrap their tiny little minds around the healthcare mess. So they assume the experts must know something. But the truth is that the ‘experts’ are bought."

 

As a result of an incessant bombardment of anti-single-payer messages, "The public knows the right thing to do, but faces uncertainty in the midst of being told they don’t know what to do," says Dr. Angell. This has been paralleled by doctors’ rising resentment against insurers and support for single-payer.

 

Some others take a somewhat more cautious view  of the public mood, "I think the public basically means any public approach to reform," says government and sociology Prof. Theda Skocpol of Harvard, who took an active role in the task force developing the Clinton health reform plan in 1993-94. "But there’s been a real movement among doctors [toward single-payer] even before 1994. Doctors have experienced managed care for a decade and don’t like it. Doctors are less enamored of insurance practices than even the general public."

CURRENT AMA DENOUNCES ‘PROFITS OVER PEOPLE’

Another indicator of the changed mood among the medical profession can be found in the American Medical Association’s news release (6/29/07) issued in response to the film "SiCKO," which focused on the plight of those with insurance. The AMA–which blocked inclusion of health insurance in the Social Security Act of 1935 and defeated President Harry Truman’s healthcare plan in the late 1940’s–declared with a stunningly populist flourish, "This movie addresses some of the core issues that AMA has been working on for years: the plight of the uninsured, the abuses of corporations that put profits over people."

 

The medical profession no longer serves as the central player in the anti-health reform coalition, having been decisively replaced  by the insurance industry. While still specifically opposing the notion of single-payer reform, the AMA has now designated itself as "the voice of the uninsured" and frequently fought with the insurance industry over HMO-imposed restrictions on care that culminated in patients’ bill of rights legislation.

 

Clearly, the insurance industry has taken the place of the AMA as the core of the coalition blocking substantive healthcare reform. says Prof. Jill Quadagno of Florida State and author of One Nation Uninsured, argues that the strength of this coalition, although changing in its makeup, has been the most central factor in preventing form in the US. "The changing composition of the anti-reform coalition, dominated first by physicians and then by insurers, has obscured the persistence of stakeholder mobilization as the primary impediment to national health insurance," Quadagno concludes.

 

The public’s experience with insurers has generally lacked any of the positive feelings they may have held about their comforting doctors’ bedside manners, and instead has often ranged only from antagonism to outright fury. Clearly, there is a heightened resentment against health insurers’ "profits over people" mode of operations, emanating both from the general public and doctors. As Dr. Angell of Harvard Medical School concisely explains the driving forces of the US health system, ""Private insurers maximize profits mainly by limiting benefits or by not covering people with health problems. The United States is the only advanced country in the world with a health care system based on avoiding sick people."

INSURERS MOBILIZED BY MEDICARE

While the insurance industry has been around since the 1920’s, it expanded massively  during World War II at a point when wage increases were tightly controlled and health insurance was extended to workers in the auto and other industries as an alternative  form of compensation. The industry again grew substantially after the 1965 Medicare debate that highlighted the vast pool of non-elderly Americans who were uninsured.. Much of the growth was absorbed by Blue Cross and Blue Shield plans, which were initiated by hospitals and doctors during the Great Depression to insure that bills got paid. The Blues were initially committed to the social purpose of providing low rates to a large pool of the insured and held down rates via "community rating," setting premiums on the basis of their outlays for coverage in a particular community.

 

"The insurance industry really grew after Medicare was enacted," observes Quadagno. "What the insurers were looking for were profitable markets [instead of senior citizens who were likely to have expensive health problems]. They kept marketing health insurance as a product and working politically to take away momentum for national health insurance," she says. "Medicare was a turning point in terms of their political mobilization."

 

As private for-profit insurers began to aggressively market themselves, they drastically changed the healthcare picture in the US. For-profit insurers" cherry-picked" healthier policyholders and lured them away from the Blues with more attractive rates. As a result, the Blues shifted to "experience" ratings based on their expectations of cost for a particular pool of employees in trying to stay competitive. Eventually, Blue Cross and Blue Shield transformed themselves into for-profit insurance firms, operating on this same principle of seeking to avoid policyholders who are likely to have costly illnesses.

 

INSURERS STILL BUILDING BUREAUCRACY

Insurance firms engage in costly and expensive "underwriting" of individual and small-employer policies, looking for pre-existing conditions which result either in rejection for a policy or excluding the condition from insurance coverage.  This scrutiny has intensified in recent years. As economist Paul Krugman of Princeton points out, insurers watched the number of Americans covered by health insurance fall by 1% during the 2000-2005 period.

 

But during the same time, the insurance companies took on 32% more workers. This has permitted for-profit insurers to step up screening of the applications of those seeking policies and to more aggressively challenge claims submitted by doctors and hospitals. Often, these intensive "denial management" strategies seem aimed at persuading patients and doctors to assume costs that should rightfully be paid by insurers.

In response, the doctors and hospitals meet the insurers’ increasing challenges by building up their own wasteful bureaucracies to engage in combat with the insurers’ bureaucrats in order to get paid. Dr. Atul Gawande, explained in The New Yorker that "a well-run office can get the insurer’s rejection rate down from 30 percent to, say, 15 percent. That’s how a doctor makes money. It’s a war with insurance, every step of the way."

GROWING INTRUSIVENESS

The scrutiny of potential policy-holders threatens become much more invasive of privacy in the near future. Developments in genetics have raised the possibility of a whole new dimension of intrusiveness by insurers, as discoveries about human genetics can help to predict  proclivities toward costly medical co

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