street roots
Oct. 26. 2012
Health Care Reform without Tears, Part 3: Private health insurance
BY SAMUEL METZ
C O N T R IB U T IN G W R IT E R
art two of this series left readers with the
unhappy prospect of an Affordable Care Act
(ObamaCare) failing to achieve universal
access, lower costs or better health. What about our
private health insurance industry? Many individuals
and organizations advocate unfettered competition
among insurance companies on a nationwide basis,
releasing them from the jungle of regulation created
by 50 individual states. Free market competition
brought down the costs of flat-screen televisions.
Can’t it do the same for health care?
There is some foundation for this position. After
all, most central Europeans finance health care with
private insurance companies and their health is
better than ours while spending half of what we do.
The flaw in this proposition is in vocabulary.
European “Private health insurance” resembles
American “Private health insurance” the way
European football does to American football.
Different games, different goals, different rules.
Yes, European health insurance companies both
compete with each other and provide better care at
lower prices than American companies do. However,
they operate under regulations both alien and
unacceptable to American insurance companies.
Europeans created rules to achieve specific goals:
provide access for every citizen no matter how sick,
or poor, or unemployed; reduce total costs; and
improve everyone’s health. And European
companies succeed.
Americans designed their health insurance rules
to achieve what any business in America wants to
achieve: to enable insurance companies to make as
much money as possible. And, to be honest,
American insurance companies succeed. But our
rules are different and our goals are different from
Europe.
Here are the European rules. Remember none
apply to American companies.
(1) An insurance company can charge whatever it
wants for a policy, but it must sell it at the same
price to everyone regardless of health.
(2) Insurance companies cannot refuse a policy to
anyone, sick or healthy. As the Good Book says,
“Ask and it shall be given.” No exceptions.
(3) Insurance companies cannot drop a patient for
any reason, not even failure to pay - the
government will make sure premiums are paid.
Patients, on the other hand, can change insurance
companies at any time without notice. If your client
gets one grumpy customer service agent, she takes
her business elsewhere.
(4) Every policy must cover every treatable
disease. No patient can inadvertently pick a policy
P
Samuel Metz is a
Portland
anesthesiologist active
in health care reform.
He is also a member
of two organizations
advocating publicly
funded universal
health care: M ad As
Hell Doctors and
Physicians for a
National Health
Plan. He is the local
chapter representative
to Health Care for A ll
Oregon, an umbrella
organization o f over
50 groups working
for better health care
in Oregon. He can be
reached at 3Q9A@
samuelmetz.com.
The author would
like to thank Dr.
Stephen Kemble,
President-elect o f the
Hawaii Medical
Association and
director o f the Hawaii
Health Authority,
whose essays on
health care reform
inspired much o f this,
content
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that risks bankruptcy or death if they acquire a
treatable disease. Supplemental policies may offer
additional benefits, like single hospital rooms,
cosmetic surgery, or experimental drugs. Patients
can always get more than they need for basic health
care, but they can never get less.
This next rule only applies in a few countries.
(5) If the government discovers that an insurance
company still manages to cherry-pick healthier
patients, the company pays a premium to subsidize
companies with sicker patients.
Within these constraints, how can European
insurance companies compete? There’s not much
wiggle room: lower premium prices, added benefits,
and improved customer care.
If you were an American insurance executive
playing by American rules, how would you compete
in the US? Remember, no insurance company
makes money selling policies costing more in health
care than are collected in premiums.
Offering comprehensive coverage at affordable
prices to sick patients who will need expensive care
is the highway to bankruptcy.
You would compete by playing it safe.
(1) Pay expert medical underwriters high salaries
to predict which patients will cost the most money.
Then avoid those patients. The extra costs of
underwriters can be passed on to patients by
increasing policy prices.
Pricing your policies as high as possible is an
excellent way to avoid sick patients. With our health
care access determined by income, health follows
wealth. If only healthy people can afford your policy,
you have elegantly eliminated the most expensive
patients to insure.
(2) Carefully craft benefit packages to reduce
your financial liability. Remember most patients
(and physicians for that matter) are incapable of
deciphering what their policy will really pay for.
(3) Discourage policyholders from seeking health
care by passing as many costs on to patients. High
deductibles, high co-pays, and restricted benefits do
the job quite nicely.
Remember most American workers change
insurance companies every six years. It makes no
sense for an insurance company to invest in
preventative care if the savings ten years later
accrue to a competing insurance company.
(4) Delay or deny payment to providers as long as
possible. After all, you’ve got the premium money as
soon as it is paid; the longer you hold on to it the
more investment return you accrue. If you exhaust
the patience of the provider long enough, they may
even give up without any payment at all. That’s
money in the bank.
These practices sound cruel, and they may be.
However, in contrast to Europe, our rules align
business interests against patients and providers.
Competition rewards those insurance companies
who avoid the sick, pass the most expenses onto
patients, and deny both care and payment.
Insurance CEO s who place their clients medical
interests ahead of their company s financial
interests will, at best, be fired or, at worst, be
arrested for violating their fiduciary obligation to
make the interests of their owners paramount.
Removing regulatory barriers to allow free
exercise of these rules is thus unlikely to promote
better access, reduce costs, or improve health.
One last industry protest: Passing costs to
patients (also colorfully known as “cost-sharing,
“skin in the game,” and “catastrophic-only
insurance”) makes patients sawier consumers of
health care and decreases their health care costs. Is
this true?
The experience of European health care systems
reveals the opposite. Europeans see their physicians
two to four times as frequently and spend more time
in the hospital than we do. At first glance they
appear to be consuming more care than Americans
do. Yet these non-US patients spend half as much as
we do for health care and enjoy better health
outcomes.
Now it gets easier to understand why health care
economics drive us to distraction. Health care does
not follow conventional rules of supply and demand.
Health care needs do not change when health care
costs increase. However much we might covet flat-
screen televisions, everyone has a minimal need for
health care. But once that need is addressed, we
have little incentive to consume more. Few people
look forward to painful procedures or hospital food.
European health insurance companies have much
to teach us. If our goal is to provide better care to
more people for less money, we must apply the
three rules of health care financing, noted in the
first part of this series and used successfully in
every industrialized country other than ours.
(1) Include everyone, even the sick.
(2) Encourage patients to seek care by lowering
or removing deductibles, co-pays, and excluded
conditions.
(3) Finance health care with publicly accountable,
transparent, not-for-profit agencies.
With considerable disappointment, we must
acknowledge neither the Affordable Care Act nor
our American health insurance industry will pull our
health care system back from the brink of
destruction. But, as promised, the next and final
part of this series will present refreshing news, that
we can still create a cost-effective health care
system in Oregon.
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