Would workers really be sad if health insurers didn’t grab a third of their pay?

axiosinsurancecost-300x170With the 2020 presidential campaign obsessing early about health insurance rather than costly health care overall, voters may wish to reframe their thinking about coverage and candidates’ views on making it affordable. Their chief query may need to be this: Just how much of the vig should the bagman take?

That may be a blunt a way to put it, but is the vernacular of the criminal “protection” racket all that out of place here? Michael Hiltzik, a financial columnist for the Los Angeles Times, makes pretty much the same argument, that the bagman’s share ought to be zero.  Why not get rid of health insurers, he asks in a bit of evidence-based hyperbole? He finds the companies don’t fulfill much of a public mission, save, as a former insurance executive describes it, to make themselves money and to persuade all of us that they are essential. Indeed, as Hiltzik sees it, insurers are not just a rip-off but a failure in their own terms:

“Let’s start by examining what the insurers say are their positive contributions to healthcare. They claim to promote ‘consumer choice,’ simplify ‘the health care experience for individuals and families,’ address ‘the burden of chronic disease,’ and harness ‘data and technology to drive quality, efficiency, and consumer satisfaction.’ (These claims all come from the website of the industry’s lobbying organization, America’s Health Insurance Plans (AHIP). They’ve achieved none of these goals. The increasingly prevalent mode of health coverage in the group and individual markets is the narrow network, which shrinks the roster of doctors and hospitals available to enrollees without heavy surcharges. The hoops that customers and providers often must jump through to get claims paid impose costly complexity on the system, not simplicity. Programs to manage chronic diseases remain rare, and the real threat to patients with those conditions was lack of access to insurance (until the Affordable Care Act made such exclusion illegal). Private insurers don’t do nearly as well as Medicare in holding down costs, in part because the more they pay hospitals and doctors, the more they can charge in premiums and the more money flows to their bottom lines. They haven’t shown notable skill in managing chronic diseases or bringing pro-consumer innovations to the table.”

Instead, as other critics have pointed out, health insurers — making steady profits — have helped send health care costs ever skyward — by striking favorable deals with Big Pharma, hospitals, and doctors, and keeping a slice for themselves as a reward. They work with brokers who boost costs to get their cut, while purporting to assist companies (the major source of most Americans’ coverage) in controlling expenses. They turn a seeming blind eye to waste, fraud, and abuse, unless it reaches significant levels, because policing bad conduct in the health system can cost them money.

Their chief function would seem to be to spread the cost and risk of health care — what would be a definitional role for an insurer. Instead, as Hiltzik reported, the companies show that their existence turns on gobbling up profits, including with their recent attempts to scale up, to buy into and up other related enterprises and to merge with each other. Little of this benefits consumer, or at least it hasn’t shown any sign of doing so.

Instead, as the news and information site Axios reported, Americans — especially those with the workplace coverage that some partisans keep praising and saying employees would be loath to part with — devours a sizable chunk of workers’ earnings. Between 1999 and 2017, according to U.S. Federal Reserve data, median American income went up and down but has settled around $61,400 annually, while employer-provided health insurance has risen to an average of $18,800. Worker pay has risen a puny 2% in that span, while coverage costs have soared by 121%, with ever increasing premiums and deductibles and less bang for workers’ buck in taking care of rising health care costs.

As Axios reported:

“American incomes have barely changed over the past 20 years on an inflation-adjusted basis, and that’s due in large part to the exploding costs of health coverage. The big picture: More people are plunging deeper into debt as the costs of housing, college and consumer goods greatly outgrow their paychecks. And those paychecks have been stagnant because employers are shoveling more money toward workers’ health insurance.”

Coverage now takes up a third or so of household income, as it has since 2012. Employers aren’t happy, either, because they’re footing an ever-increasing bill for their workers’ health care, while also seeing that it helps their people less and less. The whole deal is becoming an unsustainable burden for businesses and workers alike.

So, why aren’t there even more howls? Hiltzik reported that health insurers and their plans, as unpleasant as they may be, may be akin to other service providers like, say, undertakers or tax collectors. Most of us deal with them infrequently and count ourselves luck if we get any help in minimizing the harms. As he noted:

“In reality, Americans don’t like their private health insurance so much as blindly tolerate it. That’s because the vast majority of Americans don’t have a complex interaction with the healthcare system in any given year, and most never will. As we’ve reported before, 1% of patients account for more than one-fifth of all medical spending and 10% account for two-thirds. Fifty percent of patients account for only 3% of all spending. Most families face at most a series of minor ailments that can be routinely managed — childhood immunizations, a broken arm here or there, a bout of the flu. The question is what happens when someone does have a complex issue and a complex claim — they’re hit by a truck or get a cancer diagnosis, for instance? ‘We gamble every year that we’re going to stay healthy and injury-free,’ [one-time Cigna executive Wendell] Potter says. When we lose the gamble, that’s when all the inadequacies of the private insurance system come to the fore. Confronted with the prospect of expensive claims, private insurers try to constrain customers’ choices — limiting recovery days spent in the hospital, limiting doctors’ latitude to try different therapies, demanding to be consulted before approving surgical interventions. Indeed, the history of American healthcare reform is largely a chronicle of steps taken to protect the unserved groups from commercial health insurance practices.”

Let’s also not forget that government health insurance programs — Medicare and Medicaid — both stand up reasonably well to efficiency and quality tests compared with private companies. And neither, it is important to emphasize, helped concoct the middleman nightmare of prescription benefit managers aka PBMs that have made drug prices, a key component of rising health care costs, even more opaque, confusing, and costly.

In my practice, I see not only the harms that patients suffer while seeking medical services, but also their struggles to access and afford safe, effective, and excellent medical care. This has become a daunting challenge due to the ever-increasing costs, complexity, and uncertainty of medical treatments and prescription medications, too many of which prove to be dangerous drugs.

Americans know that we’re all a blink away from catastrophic injury or illness that also puts patients and their loved ones potentially saddled with mountains of medical debt, possibly leading to all too common medical bankruptcy. That’s unacceptable: Health care should be a right not a privilege, and it is wrong for Republican partisans to keep trying to strip the poor, working poor, and middle class of health coverage, while denying counter factually that they are doing so. And while they keep pushing health care costs up to the point that only the richest of the rich don’t feel the pain.

Business columnists can and should be provocative. So maybe private health insurers aren’t serving the public well and changes need to occur. Get rid of them? Maybe these bagmen need to go, leaving more money in the system — that “vig” to cover risks — and perhaps producing considerable efficiencies and cost savings in the longer term. That won’t be an easy transition and it carries its own risks. Universal coverage, and perhaps single payer through the Medicare system has virtues in the days ahead. Who, though, will protect patients and ensure their health care in the short term, especially as the GOP keeps trying to kill Obamacare, with its protections for those with preexisting conditions and against insurers’ attempts to impose lifetime limits on benefits. Voters will confront tough choices that they may want to suss out carefully in the months ahead.

Patrick Malone & Associates, P.C. listed in Best Lawyers Rated by Super Lawyers Patrick A. Malone
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