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Newsletters: The Whole Point of Health Insurance
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The Whole Point of Health Insurance

Robert Kuttner

The following article reflects the viewpoint of the author, and is offered as food for thought. Comments can be sent to LifelineLetter Editor, The Oley Foundation, 214 Hun Memorial A-23, Albany Medical Center, Albany, NY 12208.

President Clinton made headlines this summer by ordering the Department of Health and Human Services to deny Medicare contracts to health insurance companies that discriminate against high-risk consumers. And the Democrats and Republicans are currently outdoing each other to crack down on the excesses of HMOs.

It is certainly encouraging to see both parties addressing the public’s distress over misdeeds by private health insurers. But this sort of piecemeal regulation is useful only to spotlight the abuses of the present system. As policy, it runs the risk of adding more layers of bureaucracy without addressing the deeper problem of a fragmented, profit-oriented health system.

In such a system, insurers pursue profits in two basic ways. They avoid covering people who are sick or likely to get sick. And they work to minimize the costs of treating sick people they can’t avoid covering. This strategy, of course, is at odds with the whole point of health insurance.

HMOs put out a great deal of publicity about how they emphasize wellness, prevention, and coordinated care. This certainly described the community-oriented, non-profit group health plans of a generation ago.

But today’s for-profit HMO’s lack that social mission. They are responsive mainly to Wall Street. They have a much higher patient turnover than old-fashioned prepaid group plans, so it doesn’t make economic sense for them to invest in your lifetime wellness. And the cost savings that can be garnered by more comprehensive screenings and vaccinations pale next to the savings available from avoiding sick people and limiting care.

 

Patchwork Policy Doesn’t Work

Current regulatory policy towards HMOs mirrors the patchwork nature of the health insurance system. Most states now prohibit health plans from denying a new mother two days in the hospital; they require HMOs to pay for reasonable emergency room care and inpatient mastectomies. But it is just not practical to regulate health care, one condition at a time.

The federal Kennedy-Kassebaum law requires insurance companies to offer coverage at reasonable prices to people who have lost their health insurance because they moved or changed jobs. However, Kennedy-Kassebaum offers no assistance to people seeking insurance for the first time, and it is maddeningly vague on what is meant by reasonable prices.

But the worst abuses of the present HMO system are not touched by any of the proposed legislation or regulation. These include doctor-compensation formulas that make the doctor’s income contingent on how much care is withheld; subtle marketing practices by managed care companies that make plans attractive to healthy subscribers and unattractive to sick ones; and elaborate protocols that get between doctor and patient, aimed mainly at saving money.

If government tries to remedy these abuses one at a time, the consequences will be ever more creative marketing and pricing by insurance plans, ever more astute legal maneuvers -- and thicker books of regulations. Meanwhile, private insurers are turning away from seeking contracts to operate Medicare and Medicaid programs, because it turns out that the old and the poor are expensive to cover -- imagine that. And with for-profit companies skimming the cream of the well population, government gets stuck with the costly cases, which then busts the government’s budgets, which then leads to reduced government payments and so the cycle continues.

 

The Argument for Universal Coverage

The only way to cut through this mess is, of course, to have universal health insurance. All insurance is a kind of cross subsidy. The young, who on average need little care, subsidize the old. The well subsidize the sick.

With a universal system, there is no private insurance industry spending billions of dollars trying to target the well and avoid the sick, because everyone is in the same system. There is no worry about “portability” when you change jobs, because everyone is in the same system. And there are no problems choosing your preferred doctor or hospital, because everyone is in the same system. There’s a common theme here.

All national health insurance systems are facing cost squeezes, because people are living longer and costly new medical technologies keep being invented. But no national health system rewards doctors for denying care. It took the U.S. private sector to come up with that one. It is ironic to say the least, that our desire to keep health insurance in the private sector led to less patient choice, more gaps in coverage, more clinical interference by private bureaucrats, and a backlash of (mostly ineffectual) government regulation. At some point, one hopes soon, this system will collapse of its own weight, and universal health insurance will be back on the national agenda.

Reprinted from The Electronic Policy Network, an on-line source of information on health and other issues. Web site: http://epn.org.

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This website is an educational resource. It is not intended to provide medical advice or recommend a course of treatment. You should discuss all issues, ideas, suggestions, etc. with your clinician prior to use. Clinicians in a relevant field have reviewed the medical information; however, the Oley Foundation does not guarantee the accuracy of the information presented, and is not liable if information is incorrect or incomplete. If you have questions please contact Oley staff.

 

Updated in 2015 with a generous grant from Shire, Inc. 

 

This website was updated in 2015 with a generous grant from Shire, Inc. This website is an educational resource. It is not intended to provide medical advice or recommend a course of treatment. You should discuss all issues, ideas, suggestions, etc. with your clinician prior to use. Clinicians in a relevant field have reviewed the medical information; however, the Oley Foundation does not guarantee the accuracy of the information presented, and is not liable if information is incorrect or incomplete. If you have questions please contact Oley staff.
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