Bashing Insurance Companies May Be Fun, But Avoids the Real Issue

That health insurance carriers were ascending to the throne of political piñata in the health care reform debate has been apparent for some time now. Last July President Barack Obama began referring to health care reform as health insurance reform. A couple of weeks later Speaker Nancy Pelosi described insurance companies as “almost immoral” for opposing the creation of a government-run health plan. That insurance companies were to be cast as the villains was pretty much inevitable. People like and trust hospitals and doctors much more than health insurance carriers. And pharmaceutical companies, while profiting far more from health care than medical carriers are a bit removed from people’s daily experience. The reality is the only group Americans trust less when it comes to health care reform than insurance companies are Republicans in Congress.

Compounding the situation the health insurance industry has had atrocious timing. America’s Health Insurance Plans (AHIP), the industry’s trade organization, released a report warning that health care reform plans being considered by Congress would dramatically increase medical insurance premiums for many Americans. The message was hardly welcomed by Congressional Democrats, but what infuriated them was the timing. The Senate Finance Committee was about to vote upon the closest lawmakers had come to a bipartisan agreement (meaning at least one Republican voted for it. The vitriol the report inspired went far beyond its substance.

Then there’s the timing of recent rate increases in the individual health insurance market. While Anthem Blue Cross’ individual market increase first captured the public – and lawmakers’ attention – it’s now clear several carriers have levied double-digit premium increases in multiple states in both the individual and small business market segments. Many political observers believe that these rating actions breathed new life into flagging reform efforts.

But the 24-hour news channels and other media along with their innumerable pundits need fresh meat. Their job is to keep people watching (or reading) so the commercials don’t run together. There’s only so many ways you can use “insurance company” and “venal” in the same story before it gets old. Insurance company bashing will continue, but there are signs that serious attention may be given to aspects of America’s health care system reform beyond insurance markets.

Consider: Daniel Weintraub is one of California’s most respected journalists. In addition to reporting for and providing opinion pieces to the Sacramento Bee he maintains an excellent blog on health care issues, HealthyCal.org. In the past, Mr. Weintraub has been hard on insurance carriers. Nor is he a fan of the health care status quo in this country. So it must have been a surprise to even him when he wrote a post that makes clear that bashing health insurance companies is not the same as enacting meaningful health care reform.

Mr. Weintraub begins his post citing the political travails California insurance companies face in the state today, ranging from separate investigations by Attorney General Jerry Brown and Insurance Commissioner Steve Poizner to a host of legislative hearings led by lawmakers who, like the Attorney General and Insurance Commissioner, are seeking higher office in this election year.

While noting the entertainment value of this spectacle and recognizing that “it might actually produce information relevant to the health care debate,” Mr. Weintraub makes clear that “health insurance company profits and administrative costs remain a relatively small factor in driving the cost of coverage skyward. The biggest reason that health insurance is getting more expensive,” he continues, ”is that health care is getting more expensive.”

The post includes a useful pie chart describing national health expenditures as broken down by the US Centers for Medicare and Medicaid Services. Of the $2.3 trillion on health care Americans spent in 2008, $159 billion (approximately seven percent) “went to private insurers after deducting all the costs they pass through to the doctors, hospitals and other health care providers.” Put another way: “health care costs nearly doubled between 1998 and 2008, increasing by 96 percent. If we had eliminated private insurance companies in 1998, and assuming they provide no benefit in managing costs, health spending still would have increased by 83 percent during that decade.”

None of this means that health insurance companies and their behavior should be ignored nor their misdeeds forgiven. But as Mr. Weintraub notes, “when this election year is over and the current political bash-fest comes to an end, the core costs of health care will still be there, and chances are they will still be rising.”

That a respected journalist is noting that attacks on health insurance companies are diverting attention from other serious issues with America’s health care system is significant. But he’s not alone. According to Politico.com, Warren Buffett is advising President Obama “to scrap the health care bill and start over” because the legislation “does not focus on controlling costs.” (He went on to say that he’d vote for the Senate bill as opposed to maintaining the status quo).

President Obama and his allies will argue that their legislation does attack rising costs – and they have some evidence to back their claim. But few could honestly say it goes far enough. And while good starts are important, the question is whether the Administration and Congress have the political will to follow-up with meaningful cost containment measures.

Attacks on the health insurance industry will continue. Every drama needs a villain and in this particular theater, carriers are the bad guys. But that folks like Mr. Weintraub and Mr. Buffet are calling out politicians for failing to more fully address the most critical issue undermining America’s health care system – runaway medical costs – is an encouraging sign.

2 thoughts on “Bashing Insurance Companies May Be Fun, But Avoids the Real Issue

  1. Jim

    If you pay for heating oil or propane gas, neither of which is provided by a regulated utility you will be without heat. There are financial assistance programs for individuals in need, but unless your heat source is provided by a regulated utility you are at the mercy of the market.
    Therefore your analogy is appropriate to a degree, those who have heat provided by regulated utilities have protection, those who do not must seek alternate means for heat, the same as the medical industry.

    That being said, the Obama proposal is seeking to treat the insurance industry as a regulated utility, but much the same as the regulated utilities, if their prices go up the increases are passed along to the ratepayer.
    I do believe that an individual mandate is necessary but first and foremost fraud and abuse must be addressed on a meaningful level.

    In both the Medicare and Medicaid programs fraud costs the taxpayers billions of dollars in overcharges. A key industry in manipulating the Medicaid system is the pharmaceutical industry. There are various methods they use such as instructing medical providers on ways to maximize their profits through altered dosing of medications but a key point here is that the medical providers are usually complicit in these arrangements.
    The following link is from a pharmaceutical blog known as Pharmalot. This is a Blog devoted to the good and bad of the pharmaceutical industry and this particular post deals with the sale of several drugs to medical providers. One such drug is a an anemia drug known as Aranesp and the following lengthy lawsuit (134 pages) describes in detail the steps that were taken to market the drug and to induce third party providers to prescibe the drug.
    While the sale of prescription drugs represents approximately 10% of the total medical sending in the US it is one the most profitable areas of healthcare with pharmaceutical companies ranking as the most profitable industry from 1995 through 2002.

    Another area of concern in the pharmaceutical industry is the increased use of marketing based sales methods over science based methods. The efficacy of the product is secondary to the revenues that the product may generate.
    The Senate plan to ban the reimportation of drugs and the previous Medicare Drug Prescription Modernization Act’s provision to disallow the government from negotiating with the pharmaceutical companies over pricing are just further indications of the “damn the public” attitude of our elected officals and to feed into the pharmaceutical industry’s consitent quest to maximize profits as the expense of the American consumer.

    http://www.pharmalot.com/2010/01/former-amgen-rep-stymied-by-arbitration/

    http://www.ag.ny.gov/media_center/2009/oct/pdfs/AMGENMULTISTATECOMPLAINT%2010-30-09.pdf

    http://www.kff.org/rxdrugs/upload/3057_07.pdf

  2. It’s a fascinating conundrum.

    In my layman’s opinion, if you reduce this whole business to its essence, what you have on the one hand, a medical industrial complex that has gotten increasingly good at saving lives and mitigating disabilities and infirmities and all sort of human suffering.

    On the other hand, you have people who don’t want to die, suffer illness or pain. Not only do they not want such fates for themselves, they want it even less for their loved ones–parents, children, friends.

    If faced with the prospect of your child dying or suffering, who among us wouldn’t pull out all the stops to try to keep this from happening?

    In this, health care is different from many other “industries.” You might want, for example, the latest and greatest car, computer, house, vacation, or other consumer good or service. But you don’t feel this absolute 100 percent do-or-die need for it the way you do when your child is facing death or great suffering.

    If there is anything remotely analogous to this need, it might be heat in the winter time for those living in regions of the country where the absence of heat is a death sentence.

    It is for this reason that utility companies are at least somewhat constrained by government–you can’t shut down an old person’s heat when it’s 20 below zero just because he or she can’t afford to pay.

    The problem, from my point of view, in viewing health care purely from the “free market” perspective, and treating it like any other consumer good that people will shop around for to get the best price, is that it’s profoundly different than most consumer goods.

    On some level, this is where I believe the debate devolves down to: those who have no problem affording “the best healthcare system in the world” (the sultans that Obama referred to) who want the engine of innovation to keep on cranking, generating new exorbitantly expensive drugs and interventions they are confident will never be priced out of their reach; and those who believe that it is immoral to take even the most basic care and demand that only those who can pay for it deserve it.

    Consumer good or human right?

    As a have not, I come down on the second side. But I am sure that those with excellent coverage they can afford, and perhaps more than a few whose basic needs are being covered by governmental policies or Medicare or veterans benefits, tell themselves that people like me deserve what we get.

    By the way, my new individual policy price arrived in the mail yesterday: up from $1711.50 per month to $1865.50 a month–take it or leave it, no changes allowed.

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