One of the key battles over the future of American healthcare is being fought right now: should the government offer a publicly managed program to compete with private insurance?

The Senate Finance Committee spelled out alternatives for overhauling the U.S. health-care system, including a mandate that all Americans get health coverage and creation of a government-run program to compete with private insurers….

Allowing people to keep their current coverage, if they wish, is one of the principles outlined in the proposal.

Obama’s administration says competition from a government- backed health plan will improve quality and lower costs.

Last week, Health and Human Services Secretary Kathleen Sebelius told the House Ways and Means Committee that Obama has no wish to “undermine” private health-insurance companies by supporting a government-backed alternative. She also said Obama would be willing to consider a requirement that everyone have health coverage, a proposal he criticized during his presidential campaign.

The so-called public option to purchase government-provided health care is a central issue. House Speaker Nancy Pelosi has said the chamber will include such an approach in legislation it considers later this year. Republicans and some insurers, including Aetna Inc., have opposed the creation of a new program modeled on Medicare.

Baucus and Grassley said one way to fashion a government plan would be to make it “Medicare-like” and have it administered by the Department of Health and Human Services. Alternatively, it could be run by the states or by private- sector, third-party administrators, they said.

The insurance companies are fighting tooth-and-nail against any sort of government health care plan they’d have to compete with. For good reason. Private health insurance is a massive profit and bonus generating pit of unethical conflicts of interest. A typical, for-profit insurance company only spends about 50% of premiums on health care for subscribers. Medicare, the 100% public parts at least, spend closer to 90% on patient care, a mere 10% on administration*. [Please see below.]

Private insurers do nothing other than add grief, paperwork and financial doom to health care, strip mining profit out of illness and despair. Forget about the uninsured in the US. The insured are faced with an increasingly impossible task of getting insurers to live up to their obligations, as well as a growing list of scams and traps written into policies.

The situation would be as if the USPS didn’t exist, with UPS and FedEx refusing to go at all to 1/3 of the country’s households (declaring them too unprofitable to handle), routinely failing to deliver parcels on time or intact to the remaining 2/3s while pocketing a tidy profit. Part of the reason why these private alternatives are so good is the competition from the government-run program (mandated to provide service to 100% of households.)

Or consider the ridiculous (but successful) effort to prevent Metro from offering special service to baseball and football games—in the name of preserving private industry’s right to “compete fairly” without governmental interference. The result is no service, private or public.

This industry campaign against a governmental-run health care plan is an effort to maintain these absurd profit margins. Even with such a governmental plan, private industry could “compete”. Remind your representative and senators of this fact right now. Demand your right to opt out of private healthcare.

Updated:
* This 50% / 90% figure came from a series of lectures I attended on healthcare in 2001 at the University. The data, in turn, is from the mid-1990’s and the height of the HMO movement when administrative costs proliferated. Belatedly, I’ve realized that this probably isn’t accurate for right now, a decade later as HMOs have fallen to be closer to overall costs.

Nor are these easy numbers to calculate. Deductibles, co-pays and uncovered percentages all must be added to premiums to calculate the total costs charged by a plan to the end user for an amount of healthcare benefit received, with all but the last generally lacking high quality estimates.

I’ll dig around for a contemporary estimate that I’d trust.

Updatedx2:

From a recent NEJM editorial:

A major reason why it is so difficult to reduce costs is that every dollar of health care spending is a dollar of income to someone involved in providing health insurance or health care. Administrative costs are undoubtedly too high, and insurance companies taking excess profits and executives with high salaries are frequently blamed. But they are only a small part of the story. The biggest part consists of payments to tens of thousands of telephone and computer operators, claim payers, insurance salespersons, actuaries, benefit managers, consultants, and other low- and middle-income workers.

And from a 2003 NEJM article:

In 1999, health administration costs totaled at least $294.3 billion in the United States, or $1,059 per capita, as compared with $307 per capita in Canada. After exclusions, administration accounted for 31.0 percent of health care expenditures in the United States and 16.7 percent of health care expenditures in Canada. Canada’s national health insurance program had overhead of 1.3 percent; the overhead among Canada’s private insurers was higher than that in the United States (13.2 percent vs. 11.7 percent). Providers’ administrative costs were far lower in Canada.

Between 1969 and 1999, the share of the U.S. health care labor force accounted for by administrative workers grew from 18.2 percent to 27.3 percent. In Canada, it grew from 16.0 percent in 1971 to 19.1 percent in 1996. (Both nations’ figures exclude insurance-industry personnel.)

Jonathan Golob is an actual doctor.

41 replies on “Fight for Your Right to Opt Out of Private Healthcare”

  1. ” Obama has no wish to “undermine” private health-insurance companies by supporting a government-backed alternative.”

    WTF?????????????????

  2. PC:

    There are two ways to interpret this statement. I’d like to believe this means “we’re supporting a government-backed alternative, but not because it’s going to eat your lunch or anything, private insurance industry. We just want one option that doesn’t suck.”

  3. I’m about to get kicked off of COBRA and I’m FREAKING OUT because I can’t get private health insurance due to previous injuries. I really hope the Obama administration will be able to get affordable health insurance to (us) people who need health insurance and can’t get it so we keep snowballing further and further into debt while remaining unemployed. Oh god, after reading what I just wrote I feel like my life blows. Yikes!

  4. 1. @2, thanks for that clarification.
    I shall sit down and have a toddy.
    2. As stated before, if Obama gets that reform, it could work.
    3. Your figure of fifty percent (“A typical, for-profit insurance company only spends about 50% of premiums on health care for subscribers”) is killer, do you have a good link ?

  5. Just go to single payer healthcare and stop whining – cost half as much, live 8-10 years longer, business (other than health “firms”) wins, citizens win, everyone happy other than whiny millionaires and billionaires who will still get extra livers in Thailand or India …

  7. WiS: That was the battle plan of the Clintons in the 1990’s. Went swimmingly, eh?

    Right now, I’m giving Obama credit for some strategic sense. This he can ram through congress, hopefully with a ‘government option.’ The private health insurance industry knows such a plan is their death.

    And the situation is more complex than you’re indicating. For example, consider the German health care system. It’s highly functional, efficient and basically where we’re heading. Not every country needs an English or Canadian -style system. Given the political climate, it isn’t feasible anyways.

    Thanks thebestpoetever.

  8. The public plan option is probably the most powerful and ambitious part of Obama’s proposal. If it actually passed, it might just save the private insurance business too. I’d like to be hopeful, but I’m more cynical. I predict the public plan option will be gutted from the final proposal, and the totally inadequate “reform” will fail to stop the death spiral of this country’s health insurance industry. Eventually, single payer might be built on the ruins, but the intervening years will be real bad for everyone.

    Private insurers do nothing other than add grief, paperwork and financial doom to health care, strip mining profit out of illness and despair.

    So very true.

  9. Yes, please post the 50% link – I’d like to reference it in my letter. Believe me, they’ll be hearing from me. I used to have to choose between food, bills, and medicine due to being uninsured. And when it’s the medicine that gets you out of bed in the morning to go to work to try and pay bills and buy food… not a great set of options.

  10. Golob, I love you’re writing. I popped out a quick e-mail to my rep and will spit one out to the Senator too.

    If I recall correctly, Jim McDermott has already gone on the record of supporting a single-payer option. He’s a pretty wise guy. Not sure about our senators.

    Here’s hoping we reach a bunch of people with senators outside of WA also.

  11. The biggest innovator in health care was Bush, who increased the number of free clinics in poor areas three times.

    Instead of “insurance”, Bush supplied actual health care directly to the people.

  12. Health care needs to be passed NOW. Just because we’ve been without public health care in the past doesn’t mean it’s not an urgent crisis. People are dying every day. People are becoming diseased every day. People are becoming lifelong slaves to medical debt every day. The US government is killing its own citizens and robbing people of life, liberty, and the pursuit of happiness. It needs to stop immediately.

  14. @7 – fuck you. The problem wasn’t the plan – the Clintons had this complex series of plans, whereas single payer healthcare if nationalized is very very simple.

  15. Not only does the insurance industry skim 50% off the top, but a fair chunk of the 50% that’s “health care” is bogus, too — customers being herded towards unecessarily expensive treatments, paid for by insurance (and your premiums) that add little value but enrich an entire sector of private companies that do no other business besides through insurance.

    For instance, if you talk to an HMO-referred sleep specialist, you will discover that EVERYBODY has sleep apnea, and needs to take a thousand-dollar test (paid for 100% by insurance) which everybody fails, by design, thus necessitating the purchase of a $1500 mouthguard or a $1500 CPAP machine. Your sleep specialist has all the brochures, and owns a share of the company that makes these things.

    Or you can buy a $30 mouthguard out of your own pocket that does the same exact thing exactly as well. Or you can lose a little weight, or ride it out and discover that you don’t have sleep apnea at all. But nobody makes big profits from that.

  16. I’m also interested in seeing a citation for the 50%-private/90%-medicare assertion. That’s a pretty big statement to not back up.

  17. Gotta love the wingers. For decades they’ve been crying: “free market economy is more efficient and competition solves everything”, “big government is inefficient and bloated”. Waaah.

    So how come they’re now whining about a bit of competition? How come the government can be almost 100% more efficient than the insurance companies?

    Hypocritical assholes.

  18. @16: Pretty please, Golob? If we don’t have a citation, the natural assumption by those we contact is that none exists. My natural assumption is that you found it somewhere but don’t recall the source. Please find it. That’s powerful stuff.

  20. Good post–you are so right. It’s extremely critical right NOW to show there is support for the option of a public plan–we just can’t let the opportunity slip away. This is the best chance we have ever had to actually achieve some real reform, but our legislators still waver (our Senators have yet to commit).

    I encourage everyone to get out to march on Saturday May 30th, starting at 12:30 at Pratt Park in the CD–the theme: Health Care for All, with more than 125 endorsing organizations.

    http://may30march.org/

  21. I’m joining the chorus of wanting a link to that study on the 90%/50%. I’d like to add that to my arsenal of health care facts…. Wouldn’t be that hard to verify the 50% by looking at the 10Ks of public insurance companies, but it’d be time-consuming.

    I just had a panic moment when I read the quoted sections that maybe what we’ll end up with as “health care reform” is mandatory insurance for everyone, with no government option (and just the insurance industry’s pledge to reduce the growth in costs by $2 trillion)… That would be bad. That’s not going to happen, right? No way.

  22. I just looked up Aetna because I’m procrastinating on finishing something else up… Their number was 82%:

    2008 Health care premiums = $25.5B
    2008 Health care costs = $20.8 B

    Now, I didn’t dig into what they classify as “health care costs” so maybe there’s some adjustments to be made to the data… (?)

  23. Why not just remove the age restriction from Medicare–then bam! Suddenly, everyone has health coverage and the program is sustainable because everyone’s paying the relatively low Medicare premiums. All the doctors and hospitals are already trained to take it, so there’s no need for a “new” gummit option.

  24. Quoting from the original Slog post:

    “Alternatively, it could be run by the states or by private- sector, third-party administrators, they said.”

    A “public” system run by private contractors isn’t really a public system. It’s actually just a giveaway to private firms getting sweet, lucrative government contracts.

    Thumbs down. The Dems better axe that nonsense.

    If we’re gonna have a public healthcare system, let it be truly public, meaning for the benefit of the people and not another sweet business opportunity for a private firm.

  25. That’ll never happen in a million years, of course.

    By the time the insurance industry’s puppets in Congress get done with their “reforms,” we’ll be begging for the salad days when a family policy was only $10K a year.

  26. “Republicans and some insurers, including Aetna Inc., have opposed the creation of a new program modeled on Medicare. “

    This is all I need to know to support a new program based on Medicare.

  27. What @23 said. For all the money that Democrats spend on consultants, they come up with remarkably few ideas that can actually be easily explained to the public. Instead of “single-payer option,” (i.e, “Canada” = boring and scary all at the same time), why not “Medicare For All”? Even Homer Simpson knows that Medicare saves his ass from having to pay for Grandpa’s care. It’s a very simple concept, expanding a program that already exists.

    (I still think Kerry could have been president if instead of “I voted for it before I voted against it” he had said “I voted to pay cash for the war and voted against putting it on the country’s credit card.”)

  28. @22:

    Yeah, I’m calling shenanigans on this one. Sorry, Golob. Please tell me you’ve got facts and are not regurgitating talking points.

  29. Golob:
    I live and work in Germany, and while the health system is definitely better than the US nightmare, it is no nirvana. It is a two-barreled system, the Government-mandated (Gesetzlich) insurance which is operated by a large number of private co-op organizations (Krankenkassen). Most people are in this realm. People always have the option (and if you are making a well-above average salary it is essentially mandatory) of getting private insurance, which at least in my (54-year-old) case is pretty much Cobra-ish in expense, and with a MASSIVE deductible. Typically your employer will pay half the premium of whichever health insurance you have.

    If you are on the Govt.-mandated insurance, you are definitely in the B-league when you see a doctor. You will get less attention, and less free access to resources, especially as you approach year-end, and the money in the plans is spent out.

    Another totally relevant data point: There is a massive oversupply of trained MDs in Germany. The pay and working conditions are far inferior (understatement) to the American standard. I am personal friends with a few MDs here. The training and general capabilities are as good, or better, than the American norm.

  30. Jonathan, you realize medicare is projected to go broke in 2017? And that figure is two years sooner than last years projection? And at that rate (each year the ‘go broke’ target moves up two years) it will actually go broke in 2012? And that we have an election in 2012?

  31. Medicare Advantage (MA) plans are second-generation “Medicare + Choice” plans, which were created under the Balanced Budget Act of 1997. This act gave Medicare beneficiaries the option to receive their Medicare benefits through private health insurance plans (Part C), instead of through the original Medicare plan (Parts A and B). According to the GOA they spend 85% of premiums on healthcare in 2005.

    http://www.gao.gov/products/GAO-08-827R

  33. According to the insurance industry group America’s Health Insurance Plans, administrative costs for private health insurance plans have averaged approximately 12 percent of premiums over the last 40 years. There has been a shift in the type and distribution of administrative expenses over that period. The cost of adjudicating claims has fallen, while insurers are spending more on other administrative activities, such as medical management, nurse help lines, and negotiating discounted fees with health care providers.

    http://www.ahipresearch.org/pdfs/Adminis…

  36. @Karlheinz Arschbomber: I never knew any MD’s while living in Germany, but I did work for a German firm, and didn’t make nearly enough to have private insurance. I had the lower insurance, as did all of my collegues. It could have been because I was in an area of small towns, but the care that everyone I know got from their doctors was pretty good.

    With the exception of one time in a German hospital, late at night, with my ex who was US military. He was very sick and the care we recieved was absolutely fightening. It was the first month I was in Germany, and I was like “zomg, everything the republicans say about national healthcare is correct”. But luckily I lived their much longer and got to know the system and I thought it was pretty good.

    I will say though, Germans don’t believe in giving pain medication. Like, at all. They won’t give an epidural to a pregnant woman just because she wants it. And similarly, when my friend has massive wrist surgery (in a German hospital) they just gave her tylenol and told her to deal with the pain, basically. So yeah, pain management not their forte’.

  37. “Nor are these easy numbers to calculate. Deductibles, co-pays and uncovered percentages all must be added to premiums to calculate the total costs charged by a plan to the end user for an amount of healthcare benefit received, with all but the last generally lacking high quality estimates.”

    That’s not even what your old numbers were talking about. You said percentage of premiums charged spent on administrative costs. Stick with your argument or pull the post and start over.

  38. I wish people would look more at the Group Health model. Heavy on preventive care, easy access to primary care and specialists, zero worrying about bills (just a standard copay for every visit), all records electronic and easily accessible by anyone working with you, most services in one central spot, customer-service-oriented staff. We’ve been with them for 17 years, had two babies there, had our share of health issues (some fairly serious), and thank our lucky stars for the care we’ve gotten. Why does this model work so well? And why can’t it be adopted more widely?

  40. @”Update”:

    Still old information, and now you’ve gone completely apples-to-oranges by completely dropping any reference to Medicare administrative expenditures. Keep looking… I certainly would be embarrassed to call my representative or senator with the half-baked argument you’re presenting.

  41. Golob:

    A two-second Google search yielded this article (http://www.pnhp.org/news/2006/january/ca…) that seems pretty fair (from a pro-Medicare group and addresses private trade group arguments). A gap probably exists, but not nearly to the extent you reference. Further, the main savings referenced are the result of a very large program with centralized administration, something that simply isn’t possible for private insurers right now, given that they would – barring a preemption of state regulation – be playing by state rules while a federal program would be exempt. And as far as your Canada v. America cost comparison goes, there are so many external factors in that comparison that it’s meaningless.

    I defer to you on all things physical science, but to be blunt, you’re out of your element on economic issues.

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