Okay, This Is Interesting...

[catsittingstill]

Bill Moyers interviews Wendell Potter (who was, until recently, a major executive of the health insurance company Cigna. The transcript is here.

It is very interesting, and in some places moving.  For instance, Potter details the insurance industry's playbook for marginalizing Michael Moore after he filmed Sicko.  I think I have been played for a patsy and I resent it.

However, the part I thought was most interesting was this:

BILL MOYERS: Why is public insurance, a public option, so fiercely opposed by the industry?

WENDELL POTTER: The industry doesn't want to have any competitor. In fact, over the course of the last few years, has been shrinking the number of competitors through a lot of acquisitions and mergers. So first of all, they don't want any more competition period. They certainly don't want it from a government plan that might be operating more efficiently than they are, that they operate. The Medicare program that we have here is a government-run program that has administrative expenses that are like three percent or so.

BILL MOYERS: Compared to the industry's--

WENDELL POTTER: They spend about 20 cents of every premium dollar on overhead, which is administrative expense or profit. So they don't want to compete against a more efficient competitor.

Yes, you read it (t)here first folks: The health insurance industry is afraid that a government-run health insurance plan might be more efficient than they are.

Either Cigna believes that government can, too, be efficient---or Cigna believes that health insurance companies are really inefficient.  And it looks like they may have the numbers to back it up.

And apparently--get this--the part of the money the insurance companies take in, that gets used to pay claims (you know, the point of insurance?) is called "the medical loss ratio."  And of course any good company tries to reduce losses, and they have--it's down from 90% in the 1990s to just slightly over 80% now.

Interesting.
 

 

Comments

[randwolf]

You sound so shocked. & yet it could hardly have been otherwise--Potter is only confirming what was already clear from the insurance industry's conduct. Digby's been on this for a while; see here for instance. There is a general breakdown of the social contract, and many powerful institutions have become corrupt. In health insurance, there is a plain conflict of interest between insurance profits and providing health care, and increasingly the health insurance industry has resolved this conflict in favor of profit. The insurance industry, despite its size, has avoided national regulation for a century, and it has many unethical practices. The enormous overselling of "whole life" polices is probably the worst abuse I am aware of, followed by things like trip accident insurance.

"Change" can't happen soon enough for me.

[tigertoy.livejournal.com]

It's pretty clear to me that once you actually understand what a modern corporation really is, and really believe it, you have to be insane to want to have them in charge of health care, or any other public good. Unfortunately, nobody out there seems to actually get it.

It's a little surprising that a health care exec would actually say it so frankly. The corporate envioronment selects (in the sense of "natural selection") its executives very ruthlessly. But it's completely the opposite of surprising that the insurance racket would be thinking that way. That difference between what they take from society and what they give back, that ratio you decry, is also known as "shareholder value", whose maximization is the ONLY reason, by nature and even by statute, that any corporation is allowed to act.

[patoadam]

Nobel-prize-winning economist Paul Krugman has a different number, but the point is still the same:

"Private insurance companies spend 14% of their revenues on administration. Medicare spends 3%. Fundamentally, it's because private insurance companies spend a lot of money trying to figure out who really needs health insurance, so as not to give it to them. All the evidence suggests that more government intervention is actually going to reduce costs, not raise them."

[amycat1959.livejournal.com]

Yep, "Socialized Medicine" (cue Republicans' Scary SFX: "Booga-booga BOO!!! Medical RATIONING! You can't choose your doctor!!! You'll have to enter a LOTTERY to see a doctor!!!") with all its Evil Big-Government Beaurocracy, is actually proven to be MORE efficient than the oh-so-competitive Free Market/private sector. Can we get the right-wing "Free Market Uber Alles" crew to SHUT THE F*CK UP now?

Personally, I'm insured with a $5k deductible and a 20-80 co-pay, have never had a claim, had NO bad health history* or pre-existing conditions, and I'm still worried that my company won't pay if I ever get sick. (My insurer was the subject of a "Time" magazine expose' back in March, when they used sneaky tactics to deny a claim by the reporter's brother, who was high-functioning with Asperger's, & had kidney failure.) Even if they DO cover everything according to contract, I'd still have to dig into my retirement $$ to cover the rest. Of course, at the rate things are going, I haven't got a chance of actually retiring 'til I'm 80, so why worry? :-}

*it helps if you're adopted and haven't got a clue what your biological-family medical history is!

[ndrosen.livejournal.com]

The insurance industry may not want competition (the free enterprise system has few foes more vicious than existing businesses demanding barriers to entry), but the insurance industry (which does not employ me) can't shut out private sector competiition without government help.

I've been uninsured, and here's how it happened. My post-doc expired back in 1997, and I bought a bare-bones insurance policy for peace of mind. It had a substantial deductible, but if I ran up tens of thousands of dollars in medicla bills, most of them would be covered, and the premium wasn't much, because I was young and healthy. Then the Massachusetts Legislature enacted a law requiring insurers to charge young and old the same amount for policies like that. The insurer from which I had bought the policy stopped doing business in Massachusetts, and I couldn't find an alternative at a price I could afford.

This didn't even do older people much good, because young people weren't cross-subsidizing them by paying the same premiums with less chance of using insurance; young people without jobs were mostly unable to buy insurance at all. It made the newspapers.

That's one example, from personal experience. Another point is that government mandates requiring health insurance to cover various dubious procedures -- chiropractic, fertility treatment, mental health parity, treatment for baldness -- make medical insurance more expensive than it has to be.

And here's an article explaining (http://www.reason.com/news/show/134829.html) why we don't need a public option to compete with private insurance companies; we just need government to get out of the way.

[amycat1959.livejournal.com]

I find it particularly annoying that most health insurance WILL cover fertility treatments (hey, folks, if your bodies aren't producing rug-rats, what's wrong with ADOPTING?) but not birth control. And government-mandated "Buy insurance or else!" rules, without any changes to the options available, just force MORE customers to the same bloated rip-off artists in the current system. THAT is why we need a "public option": so those of us who aren't already in big "pools" through our jobs or schools or whatever can JOIN an even bigger risk-pool whose primary motive is NOT to make as much PROFIT off us as possible, but to provide us with affordable care. The business model for private, for-profit insurance companies REWARDS them for DENYING care even more than for keeping that care affordable.

[ndrosen.livejournal.com]

May I point out that a public option might covr mdical or quai-medical care which you consider frivolous or outright evil, while not covering the procedures you ned?

If you have such a low opinion of for-profit insurance companies, there are also non-profits, like, I believe, Blue Cross. They aren't always perfect, either, but if you think they operate under better incenives, you can seek coverage with them. If they're really so far superior, they should drive for-profit insurers from the market.

[judifilksign.livejournal.com]

I think that the public option as presented by the Obama people is not so much to *compete* with private insurance as it is to provide a place for people who are refused by insurance companies as a risk to their profit to get any insurance at all.

I think John Stossel is on a tangent to the core of the issue, here.

[catsittingstill.livejournal.com]

"Statist" this and "statist" that. I'm afraid they lost me; I'm not a libertarian, myself, and don't really enjoy the rhetoric.

It does seem to me that insurance companies, like any company that has made a public offering of stock, are required by law to maximize stockholder profit. If they can legally do this by cheating customers out of the health care they paid for, of *course* they're going to do that. I don't see how "deregulating" them is going to help. And "deregulating" medicine? Like, Joe the Plumber would like to earn as much as a doctor, so he buys a white coat and has business cards printed up that say "Joe Plumber M.D."? I don't see how that is going to help anything.

I totally agree, if that is your point, that government attempts to fix the problem, like *anyone's* attempts to fix *any* problem, may not work the first time. That is no reason to quit trying. People in Canada, and Great Britian, and the Netherlands, have a single payer system and seem generally pretty happy with it. Sure there have been individual cases where it hasn't worked well. But I've had, in my own person, cases where present American health-care/health-insurance system didn't work so well either.

But moving to Jackson's Whole, well, I'm not tempted.

[patoadam]

I just read an article by Nobel-prize-winning economist Paul Krugman about problems with market incentives for individual health insurance.

To which I would like to add that the intent of the Massachusetts law that drove your insurer out of the state was to prevent insurers from cherry-picking healthy persons to insure, and to prevent them from charging the sick as much as their medical care would cost, which negates the point of insurance. The problem, as I see it, is that insurers can still cherry-pick which states to do business in.

See also this article.

[ndrosen.livejournal.com]

By coincidence, shortly after I first saw your reply, I read a piece by Megan McArdle (http://meganmcardle.theatlantic.com/archives/2009/07/its_adverse_but_is_it_selectio.php) arguing that adverse selection is not that great a problem.

In my own case, the insurance company was not cherry-picking the healthy; I did not have to pass a medical exam to get insurance. It was offering insurance at different rates to the young and old, not quite the same thing. When the gov't of MA made that impossible, old as well as young were likely to be without coverage.

If we made it impossible for insurers to cherry-pick which states to do business in, no mater how much sme state legislatures burdened insurers with mandates, regulations, and community rating, insurers might cease to insure anyone at all, whether by their choice, or after going bankrupt. There Is No Such Thing As A Free Lunch.

[patoadam]

Thanks for pointing out an interesting article.

If insurance companies do avoid covering people who are "likely to need care," this suggests that the uninsured are unhealthy. But 60% of the uninsured are in excellent health (Table 10) (In fact, overall the uninsured are only slightly less healthy than the insured).

Health status of non-elderly insured individuals (from Table 10)

Excellent/Very Good:	154.6 million	71.4%
Good:			 44.6 million	20.6%	
Fair/Poor:		 17.3 million	 8.0%	
			-----
			216.5 million	

Health status of non-elderly uninsured individuals (from Table 10)

Excellent/Very Good:	 27.1 million	60.2%
Good:			 13.2 million	29.4%
Fair/Poor:		  4.6 million	10.3%
			-------------
			 44.9 million

Whether you consider the uninsured "only slightly less healthy", based on this data, is a matter of opinion. But adverse selection and refusal to insure the sick does not occur in company health plans or Medicaid; it only occurs with private individual health insurance.

Health status of non-elderly individuals with private individual health insurance (computed from Table 1)

Excellent/Very Good	11.0837 million	51.7%
Good			 9.537  million 44.5%
Fair/Poor		 0.8103 million  3.8%
			-------
total			21.4310 million

We see a smaller percentage of people in excellent or very good health, presumably due to adverse selection. And we see a far smaller percentage of people in fair or poor health, presumably because insurers refuse to insure them.

As you say, there is no such thing as a free lunch. Healthy people subsidize sick people; that is what makes health insurance possible. When healthy people choose not to buy insurance, or when insurers choose not to insure sick people, health insurance becomes more expensive and fewer medical costs are covered.

[judifilksign.livejournal.com]

Thank you for the post; it reinforces things I have thought about insurance companies for years.

[catsittingstill.livejournal.com]

Thought I'd boost the signal. :-)

[thnidu.livejournal.com]

thanks. quoted & linked (http://thnidu.livejournal.com/474078.html).

[kyle-land.livejournal.com]

Americans' beliefs about what would happen if health insurance (http://www.californiahealthplans.com) reform legislation were to pass sheds light on why opposition may be growing. Majorities agree the plans being considered cost too much money (62 percent), give too much power to Washington (60 percent) and take decision-making away from them and their doctor (54 percent).