As described in our last three posts, this bill calls for both an individual and employer mandate as well as a small public option to be available to the uninsured and employees of small employers through a national insurance exchange.  Individuals would be subsidized by the government to offset their premium and out-of-pocket costs.  People with household incomes up to 400 percent of the federal poverty level (FPL) would be eligible for subsidies.  Tax credits would also be provided to small employers with fewer than 25 full-time workers, covering up to 50 percent of their premium costs.  These new subsidies, of course, are in addition to the many subsidies the government already provides to individuals and employers through long-standing tax-exemptions of  insurance costs.  H.R. 3200 also calls for expansion of Medicaid for all individuals with incomes up to 133 percent of the FPL (about $14,000 for an individual and $88,200 for a family of four).

The CBO projects the cost of H. R. 3200 to be about $1 trillion over 10 years, not including the increased costs of Medicaid, for which it lacks jurisdiction to score.  “Conservative” projections estimate that the bill will increase the U. S. budget deficit by $239 billion in 2019.  Governors have already weighed in against the increased costs of Medicaid expansion, pleading for an increased federal role in paying for it, and political opposition to the bill’s inflationary trends seems certain to spread beyond the Republicans and Blue Dog Democrats to others.  As the debate intensifies, we can expect that eligibility for subsidies will be tightened up.

Returning to the affordability of health insurance, the supposed reason for reform legislation, there is an obvious disconnect from the impacts of a deepening recession.  Much of the population, including the broad middle class, are in increasingly dire straits in their ability to pay for necessary health care.  Average annual health care costs for a family of four are now $16,771, including insurance premiums, deductibles and other out-of-pocket costs.  For a family of four with an income of $88,200 (four times the FPL and much more than the median U. S. median income), these average costs exceed 19 percent of family income, well above the 10 percent considered by the Commonwealth Fund as a hardship level.

We have to remember that the costs of health insurance often have little to do with the total costs of health care for individuals and families.  For those with significant health problems, their costs will be much higher.  And although the current proposals in Congress call for annual limits on out-of-pocket spending ($5,000 for individuals and $10,000 for families), insurance premiums and out-of-network charges are not counted against these limits.

This bad situation is getting worse. The unemployment rate is poised to soon rise above 10 percent, and the broader unemployment rate is already more than 20 percent in a number of states.  Tax revenues have fallen precipitously in many states, and 16 states are now paying for unemployment insurance in borrowed funds.  Draconian cuts are being made in safety net programs all across the country.

So it seems certain that federal payments for subsidies will far exceed any projections that are now being discussed. There are at least 100 million Americans less than 65 years of age with incomes below 400 percent of FPL.  If eligibility for federal subsidies is set at that level, the CBO projects that their cost will be about $773 billion between 2013 and 2019. Concerning Medicaid expansion, the CBO has also estimated that extending Medicaid to an additional group of Americans with incomes for a family of four up to $33,000 a year would cost about $500 billion over 10 years.

We can be sure that the Senate will restrict subsidies below these levels and that any final health care reform bill, if ever enacted, will further exacerbate the problems Americans face in paying for health care.  And to boot, federal law would mandate them to purchase health insurance, under penalty of fine, and an underinsurance product at that.  A working draft of the “actuarial value” of insurance coverage in the Senate Finance Committee last month stated that a policy of “bronze” or “silver” value would cover 65 and 73 percent of total health care costs, respectively — undercoverage by any standard.  A family of four with an income at 300 percent of FPL would pay 15 percent of their income on health care. So we would end up with a mandate for inadequate coverage which much of the population, as well as taxpayers, cannot afford.

The strong conservative challenge that is building against H. R. 3200 is largely due to its deficit-busting certainty as well as its increase in entitlement to health care without credible cost containment requirements.  As a progressive advocate of real health care reform, I can only agree with these concerns.  What is likely to emerge from Congress on health care reform this year, if anything, will not be real reform and will only add to our problems.

Although still very much under-recognized and fought against by the medical industrial complex and complicit corporate media, there is only one solution to cost containment of our runaway market-based health care system.   H. R. 676, coupled with a private delivery system, is a paygo alternative that assures universal coverage of necessary health care for all Americans.  It would save up to $400 billion a year and provide a structure within which to put in place other cost-saving efficiencies.

The private health insurance industry is an impediment to reform, not part of the solution.  It has survived to this time only through generous subsidies from the government, whether in the employer-based or individual markets or privatized Medicare and Medicaid programs.  Until we recognize this, all of our incremental approaches to build on our multi-payer system will be of no avail.

Adapted from Do Not Resuscitate: Why The Health Insurance Industry Is Dying, and How We Must Replace It, and The Cancer Generation: Baby Boomers Facing a Perfect Storm, with permission from the publisher, Common Courage Press.  Order link
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John Geyman, M.D. is the author of The Cancer Generation and Do Not Resuscitate: Why the Health Insurance Industry is Dying, and How We Must Replace It, 2008 by John Geyman. With permission of the publisher, Common Courage Press

Buy John Geyman’s Books at: http://www.commoncouragepress.com

The public option refers to a new public plan that would compete with private health insurers in an effort “to keep them honest”. It is a concept trumpeted by Jacob Hacker, now a professor of political science at the University of California Berkeley. His original idea, as first envisioned in the 1990s, was that a large public program, operated along the lines of Medicare, could cover as much as one-half of the non-elderly population by shifting all or most of the uninsured, as well as all Medicaid and SCHIP enrollees, into the plan from the start.  Because of its size and efficiency, such a large plan would be able to keep its premiums much lower than private plans, thereby increasing its attractiveness to enrollees. In addition, all non-elderly Americans, whether privately insured or not, would be eligible to participate. Government subsidies would be extended to those unable to afford the plan. Private insurers would be required to offer the same minimum benefits as the public plan.

So the initial idea was premised on the idea that a public plan could bring needed competition into the financing of health care. Forget that dream.  Although the current House and Senate bills both include a “public option”, it is in name only. What might have roared like a lion is becoming, at most, a mouse that barely squeaks. The details change every day, but already these kinds of changes from Hacker’s original concept make it a policy non-starter:

•  Many people with private insurance who want to change will not be able to select the public option
•  The public plan may not kick in until 2013 or until such time as private plans have been demonstrated not to save money (a so-called “trigger”)
•  Whatever new regulations that are imposed by the reform bill will only apply to new private plans; existing plans will be grandfathered in as is
•  Private insurers worry that a public plan would crowd them out by undercutting their premium levels, so they lobby to keep the public program small
•  The current proposals in Congress do not impose caps on private insurance premiums; nor do they allow the public option to significantly lower its premium rates below private plans
•  The public plan will not be “pre-populated” with all Medicaid and SCHIP enrollees from the start, thereby keeping the plan small
•  Instead of initial coverage estimates in the range of 120 million enrollees by public plan advocates, the Congressional Budget Office (CBO) estimates that only 10 million would be enrolled because of the fine-print restrictions now being placed on the plan within Congressional committees. These restrictions are being heavily lobbied by the private insurance industry to ensure that they won’t have any real competition.

The transformation of the public option from a potentially useful policy to its present irrelevance is well described in the recent brilliant analysis by Kip Sullivan, attorney and member of the Minnesota chapter of Physicians for a National Health Program. (PNHP web site at www.pnhp.org)  This transformation is no accident.  Opponent of a public plan have so far successfully and deceptively argued that it would be a “government takeover”. The Lewin Group, a supposedly non-partisan health services consulting group now owned by UnitedHealth, the second largest private insurer in the country, serves its new masters in two ways — by making projections for a public plan in the range of 120 million (a scare tactic), and keeping its silence during Congressional testimony on the cost-saving advantages of single-payer financing (as it has demonstrated in many state studies in recent years).

The fight against real competition is a do-or-die battle for the private insurance industry. Over many years, it has demonstrated its inability to control health care costs, is in business to make money for its shareholders by covering healthier people and avoiding sick people, and has already failed to compete against Medicare in efficiency, reliability or value. The currency of the realm in this industry is the medical-loss ratio (MLR), or how much is paid out for actual medical care, its “losses”. Between 1993 and 2008, industry-average MLR’s dropped from about 95 percent to 80 percent, diverting more money away medical care to administration, profits and shareholder returns.

We are now being told by the Obama administration and many legislators that the public plan will bring competition into the system and will help to cut costs and make insurance more affordable. At the same time, they are trying to reassure the insurance industry that the public plan will not put them out of business. This is double-talk and snake oil of the worst kind.

As just another plan available to a small segment of the population, the public plan if ever enacted will further fragment the system, increase bureaucracy, and still not result in either cost containment or open choice of coverage. The playing field would remain tilted in favor of private insurers, and the public plan would likely become a dumping ground for poorer and sicker patients through adverse selection.

Though many may not yet realize that the public option is dead on arrival if it ever gets to a floor vote in Congress, it is high time to move the debate on to consider real policy alternatives in our quest for cost containment, universal access, and improved quality of care. Let’s check the closet. Where is that H. R. 676 when we need it?

John Geyman, M.D. is the author of The Cancer Generation and Do Not Resuscitate: Why the Health Insurance Industry is Dying, and How We Must Replace It, 2008 by John Geyman. With permission of the publisher, Common Courage Press

Buy John Geyman’s Books at: http://www.commoncouragepress.com

Employer-sponsored health insurance (ESI) dates back to World War II when the nation rapidly mobilized to a wartime economy. Facing a severe labor shortage and needing a healthy work force, employers had to compete for workers by offering higher pay and health benefits. IRS rulings freed employers from taxes on the costs of health insurance, and these benefits were not taxable for their employees.

We now have an almost 70 year experience with ESI, and that method of financing U.S health care has been steadily unraveling. Employers today are spending an average of about $10,000 a year for health coverage for each employee with a family of four.  Premiums have gone up by 120 percent for ESI since 1999, nearly triple the rate of inflation and six times cumulative wage growth. Only three in five large employers now offer any kind of health care coverage, and many are cutting back or eliminating retiree health benefits.  Smaller employers are abandoning ESI at a rapid clip.  National surveys have found that the proportion of small businesses offering coverage dropped from 61 percent in 1993 to just 38 percent today.

So are employer mandates good health policy?  If we base that answer on history and their track record, instead of ideology and wishful thinking, we have to say no. Employer mandates will not give us an effective way to control health care costs, which will only become a bigger burden on employers and make them even less able to compete in a global economy. Taking General Motors as an example, it has had to spend about $1,500 per car for health care, hardly competitive with manufacturers across the border in Toronto that spend one-fifth of that amount on health care within the Canadian single-payer system.

Employer mandates have been tried for many years in a number of states, and have never resulted in universal coverage or cost containment. The longest experience has been in Hawaii – 30 years – where initial gains in coverage later reverted to growing numbers of uninsured and higher health care costs. Later experiments with employer mandates, often combined with individual mandates, have been carried out in California, Connecticut, Massachusetts, Maine, Minnesota, New Mexico, Oregon, Vermont, and Wisconsin.

Over the years, employer mandates have usually been opposed by the business community, including conservative market advocates and the Chamber of Commerce.  In the current debate over reform proposals, the business community is increasingly vocal in its opposition to the cost and burdens of an employer mandate.  Flash points in the debate now focus on whether ESI health benefits should be taxed and what exemptions ought to be extended to small business.

Forty percent of the private U.S. labor force works for employers with fewer than 100 employees, who are represented by the National Federation of Independent Business (NFIB). The small employer market is one of the most profitable markets for private insurers, but small employers find insurance premiums increasingly beyond their reach.  According to the Kaiser Family Foundation, premiums for single workers in small businesses climbed by 74 percent between 2001 and 2008. Not surprisingly, the NFIB is very concerned about the impacts of reform proposals in Congress. There is a basic economic truism that will come into play — make the purchase of something mandatory and its cost will rise, if only because the seller knows the buyer must but it.

What American business desperately needs is containment of its health care costs and a healthy work force in order to compete in the 21st Century.  It will not get that from “reforms” now being debated in Congress. If enacted after political compromises with the major corporate stakeholders, a bill will likely make the plight of American business, as well as the broader public, even worse.

Ironically, the goals of health care reform — cost containment, universal access, and improved quality of care — can be met by a paygo option, single-payer national health insurance, which would provide universal coverage and cost less than what employers and the public are paying now.  But since that option would reduce corporate profits in a runaway market system, it is still not being considered by most politicians, beholden as they are to corporate money.

John Geyman, M.D. is the author of The Cancer Generation and Do Not Resuscitate: Why the Health Insurance Industry is Dying, and How We Must Replace It, 2008 by John Geyman. With permission of the publisher, Common Courage Press

Buy John Geyman’s Books at: http://www.commoncouragepress.com

• only about one-half of the previously uninsured now have some coverage.
• The public “Connector” established to implement the program has added another layer of 4 to 5 percent overhead without enough leverage to rein in costs of private insurers.
• As health insurance and out-of-pocket health care costs take up 15 percent or more of their family income, many people still forego needed care because of  costs.
• the State has had to exclude many people from the program, the cost of  subsidies (for those earning up to three times the federal poverty level) are much  higher than anticipated, and the costs of health care continue to soar out of control (Massachusetts pays one-third more per person than the national average).
• In its budget crisis since the Fall of 2008, in order to keep the program going, the State has had to cut safety net programs, including providers, emergency rooms, primary care, and chronic mental health services; and coverage of legal immigrants will soon be eliminated.
• In order to try to get a handle on soaring costs and overutilization of health care, the State is now considering a plan to radically change how providers and hospitals are paid, eliminating the customary fee-for-service system and replacing it with some kind of risk-adjusted global payments.

Mandates are not a new idea.  They have been tried in a number of other states, including California, Oregon, Pennsylvania and Maine. The results in Maine are no better than they are in Massachusetts.  As a state with a large rural, poor and elderly population and an economy based on small business, employer-based insurance coverage is limited.  The State enacted a law in 2003 with the goal of covering all 130,000 uninsured residents by this year.  It has also failed:
• the plan now covers only a small fraction of the target population.
• the State had to cap enrollment due to financing problems.
• Most private insurers have left the state, and the dominant insurer has priced coverage in the individual market beyond the reach of most uninsured.

So we already know that mandates don’t work as well as their supporters claim.  They have not resulted in universal coverage in any state.  They are complex, very expensive, not sustainable, and have unforeseen unintended consequences.

Yet an individual mandate that requires all, or nearly all, uninsured Americans to purchase health insurance is a basic part of all the proposals now being developed in Congress. Government subsidies will be provided for people below specified federal poverty levels, and those who still cannot afford insurance will be exempted. Under the House bill, a family of four earning less than about $88,000 a year won’t have to pay insurance premiums that take up more than 11 percent of their income.  Individuals will be penalized by fines if they do not have at least a minimal level of coverage. The current House and Senate bills vary a bit on the penalties (eg. 2.5 percent of adjusted gross income over $18,700 for a couple in the House version and up to $750 a year a person a year in the Senate version).  Many other details lurk in the fine print.

The basic goal of a 2009 health care reform package is to address the problem of 46 million Americans without health insurance through a combined mandate on individuals and employers. The current House bill will cost $1 trillion over 10 years, but will still leave 36 million Americans uninsured, according to the CBO.

Based upon the poor performance of mandates in all states in which they have been tried, why is it that policy makers, politicians, and most stakeholders still support the concept of mandates? The basic answer, of course, is money.  Insurers see nearly 50 million new enrollees, many subsidized by the government. The drug industry sees new profits for its products.  Hospitals and physicians foresee many previously uninsured patients becoming insured. And many legislators benefit from corporate money flowing into their future campaign war chests.

Based on substantial experience at the state level, we can anticipate that “reforms” based on mandates will be very expensive (for both patients and taxpayers), add even more bureaucracy and complexity than we now have, fail to control costs and still not provide much additional access to care. In sum, if enacted as these bills are shaping up, these “reforms” will be policy failures but another bonanza for the medical-industrial complex.  In the next post, we will look at the other mandate — the employer-based mandate — to ask whether that makes any sense.

John Geyman, M.D. is the author of The Cancer Generation and Do Not Resuscitate: Why the Health Insurance Industry is Dying, and How We Must Replace It, 2008 by John Geyman. With permission of the publisher, Common Courage Press

Buy John Geyman’s Books at: http://www.commoncouragepress.com

As the debate gets more heated and polarized, confusion increases among the public. Not surprising, especially since that is the goal of stakeholder disinformation campaigns. Since the stakes are enormous — health care being 17 percent of our economy — market stakeholders are pulling out all the stops in their lobbying and advertising efforts to make sure that their markets aren’t bothered too much.

Individual mandates are part of the proposals being developed in both the House and Senate. Employer mandates can also be expected from the House and (except for small employers) from the Senate. The Senate’s Committee on Health, Education, Labor and Pensions (HELP) recently approved, by a party-line vote of 13-10, a proposal that would stop the ability of insurance companies from denying coverage based on pre-existing conditions and provide a public option for those unable to find an insurance plan. The House proposal calls for an individual and employer mandate, a public option, various attempts to offer guaranteed coverage and insurance market reforms, a government-run insurance exchange, graduated surtaxes on those making more than $350,000 a year, and government subsidies for those with incomes up to 400 percent of the federal poverty level ($88,000 for a family of four). Tax credit support is being considered by Senate committees for those with low to middle incomes.

The most intense disagreements are now whether (and how robust if included) a public option will be in “keeping the insurance industry honest”, changes in tax policies for employers and employees, the cost of a reform bill, and how and who will pay. After a charm offensive in recent months by the major corporate stakeholders — insurers, business, PhRMA, hospitals, and the AMA — which included voluntary pledges to save up to $1.5 trillion over ten years, most are now starting to backtrack on what were never solid or enforceable commitments. And now we are starting to see a circular firing squad forming up among the stakeholders intended to shift more risk to other stakeholders. For example, business organizations are describing the employer mandate in the more than 1,000 page House bill as a job-killer by requiring employers to pay a fee or penalty of 8 percent of wages and increasing the costs of hiring a new worker.

So doesn’t all that give us hope that health care reform is just around the corner? Unfortunately, no. All of these proposals are based on faulty assumptions:
• We are asked to assume that the private health insurance industry is worth preserving, that it offers increased choice, that its products offer better value, that it best fits our culture; all of these claims have been discredited by its track record, as documented by my recent book Do Not Resuscitate: How The Health Insurance Industry Is Dying, and How We Must Replace It.
• There is nothing in these various proposals that can rein in uncontrolled inflation of health care costs; they lack significant cost containment mechanisms; they relate only to federal spending on health care, not total health care spending or that which patients will pay; the costs of government subsidies are not clear, and the costs of expansion of Medicaid have not even been scored by the Congressional Budget Office (CBO).
• The non-partisan CBO today gives us the following sobering assessment of costs: “In the legislation that has been reported, we do not see the fundamental changes that would be necessary to reduce the trajectory of federal health spending by a significant amount and, on the contrary, the legislation significantly expands the federal responsibility for health care costs.”

So while we are getting assurances from the President and some legislators
that this year’s health care reform effort is on track, there is growing evidence that it will soon leave the track when and if an actual bill emerges from Congress.

You might think that the current legislative debate draws from health policy science. We do have such a science, with a substantial literature of what works and what doesn’t, but that knowledge is unfortunately not driving the debate. Instead, the debate goes forward based on unfounded ideology, corporate money and influence. Subsequent posts will examine some of the elements of the reform effort in more detail.

John Geyman, M.D. is the author of The Cancer Generation and Do Not Resuscitate: Why the Health Insurance Industry is Dying, and How We Must Replace It, 2008 by John Geyman. With permission of the publisher, Common Courage Press

Buy John Geyman’s Books at: http://www.commoncouragepress.com

Fast forward to the current debate in the United States over how to reform our increasingly unaffordable and dysfunctional health care system. Do we have any blind spots as this debate boils over such fundamental issues as the roles of the free market vs. that of government, and whether health care is just another commodity to be bought and sold on the open market?

Based on the content of the debate swirling around these questions and how the mainstream media are covering the story, we have two major blind spots in American culture today concerning health care — continuing denial that markets fail the public interest in health care, and that market failure leads to serious adverse economic, social and moral consequences. These two blind spots are interrelated and mutually reinforcing.

This recent statement by Rep. Paul Ryan (R-WI) illustrates the extent of our ideological blind spots about our market-based system. Commenting on a report by government analysts that health care spending will grow by about seven percent a year to a total of $4.3 trillion in 2017, he has this to say: “These are not signs that the health care market has failed.  In fact — and it is crucial to understand this — they are the predictable results of vast distortions imposed on the market over decades.  The government is the single greatest contributor to this problem.”

But markets in health care do not work the way they may in other sectors of the economy.  Here there is much less competition than market advocates proclaim, extensive consolidation within health care industries, wide latitude to set prices at what the traffic will bear, and pervasive conflicts of interest throughout the system encouraging over-utilization of wasteful, unnecessary and even harmful care.

The wreckage of markets in health care is all around us. Private insurers pursue their profits by many strategies to exclude or limit coverage of the sick. Their goal is to keep their medical loss ratios (the industry’s term for payments for medical care) below 80 percent, whereby they can retain at least 20 percent of premium revenue for overhead, profits and returns to shareholders. Whether hospitals, HMOs, nursing homes or mental health centers, investor-owned care has been documented by many studies to be more expensive and of poorer quality than not-for-profit care. The Medicare Prescription Drug, Improvement and Modernization Act of 2003 has proven itself to be a bonanza for the drug and insurance industries. The government was prohibited from negotiating the prices of drugs as the Veterans Administration does so effectively, and the costs of drugs (the problem the bill was supposed to address) continue to surge upwards. Meanwhile the unregulated marketplace allows widespread profiteering through overuse in such areas as imaging centers, many of which are owned by the very physicians ordering the tests.

All this is predictable and of no surprise.  Joseph Stiglitz, Ph.D., Nobel Laureate in Economics and former chief economist at the World Bank, has this to say about markets: “Markets do not lead to efficient outcomes, let alone outcomes that comport with social justice.  As a result, there is often good reason for government intervention to improve the efficiency of the market.  Just as the Great Depression should have made it evident that the market does not work as well as its advocates claim, our recent Roaring Nineties should have made it self-evident that the pursuit of self-interest does not necessarily lead to overall economic efficiency.”

Our market-based system breeds costs, not restraint.  Despite the claims of their advocates, all of the various multi-payer proposals being considered in Congress, intended as they are to preserve a dying private insurance industry, have no effective methods to contain health care costs. With by far the most expensive system in the world, we ration care based on ability to pay. Despite the money we throw at health care, the quality and outcomes of our care compares poorly with many industrialized countries around the world that spend far less than we do.

And our societal blind spot extends as well to the social and moral consequences of our pro-market policies. As the income gap widens between the rich and poor and as the middle class falls into increasingly difficult straits in affording health care, our sense of social solidarity continues to erode.  Medical costs are now responsible for 62 percent of personal bankruptcies, most of whom were insured at the onset of their illness or accident.  All this while our supposed safety net, already frayed, further deteriorates in the face of increasing federal and state deficits.

So it is now time to take off our blinders and recognize these problems for what they are.  The government needs to play a greater role in health care, starting with a public system of financing that incorporates and builds on the strengths of our private delivery system.  Single-payer financing along the lines of the Conyers bill (H.R. 676) is an essential first step in the reform of U. S. health care for all Americans.

Whether we yet realize it or not, future generations will look back and wonder how we don’t see past our blind spots, in the same way as we find it hard to imagine the blind spot about cancer in France more than two centuries ago.

Adapted from The Cancer Generation: Baby Boomers Facing a Perfect Storm, 2009, with permission from the publisher Common Courage Press.  Order link

John Geyman, M.D. is the author of The Cancer Generation and Do Not Resuscitate: Why the Health Insurance Industry is Dying, and How We Must Replace It, 2009 by John Geyman. With permission of the publisher, Common Courage Press

Buy John Geyman’s Books at: http://www.commoncouragepress.com/

So what does this vaunted increased choice, as claimed by the insurance industry, look like? Is it a choice of plans that offer financial security against the cost of major illness or injury, as should be the goal of insurance? These examples belie that premise:

The trend in employer-sponsored health insurance (ESI) is to cover fewer people with less coverage all the time, and to eliminate coverage for retirees if at all possible (eg., the auto industry)

Even when covered, there are many circumstances where enrollees’ choices are minimal or non-existent, such as when their health plans make changes in network providers and hospitals, when plans withdraw from the market, or when lock-in rules restrict them from making changes at their own option

If one loses ESI, there is little recourse for many in the individual market, as these examples show:  because of pre-existing conditions, many applicants are rejected for coverage; many who are not rejected cannot afford the premiums, which are one and a half times higher than the usual costs of ESI coverage; if one loses one’s job, COBRA guarantees coverage for another 18 months, but only one –quarter of those people can afford continued coverage.

The Boston-based Access Project, a non-profit resource center working to improve health and health care access since 1998, recently conducted in-depth interviews with 45 people in seven states who had  accrued medical debt while being privately insured.  They found that only one-half of interviewees who had ESI were offered any choice of plans; even if they had a choice, they tended to choose a plan with the lowest premium because that was all they could afford, even though they felt vulnerable to increased out-of-pocket expenses.

The insurance industry has trotted out a growing number of limited benefit policies (LBP’s) in recent years; do they offer useful choices? Here are two examples of heavily marketed plans at the moment: large employers such as Wall Mart, McDonalds and Lowe’s, often have annual caps of coverage as low as $1,000 to $2,500; Aetna’s Affordable Health Choices caps hospital benefits at $2,000 and accident/ER benefits at $1,000. Is this what market advocates have in mind about choice?

The health insurance industry is actually much more consolidated than we might think; the American Medical Association has found that private insurers have near-monopolies in 95 percent of HMO/PPO metropolitan markets; many of these markets have triggered antitrust concerns by the Department of Justice; as the accompanying graphic shows, a few insurers dominate the market in most states

The trends are obvious for the private health insurance industry – less coverage all the time for more money.  It is a failed industry, though many have not yet recognized it (Wall Street is beginning to have concerns about its future). It succeeds only as long as its enormous administrative and overhead costs are paid by consumers convinced that their “choice” offers more value. All trends indicate, however, that it is an unsustainable industry. The sooner that Americans realize that, the better, since we have another, better choice as to how to finance health care – a single-payer public financing system with one big risk pool, combined with our private delivery system.

Adapted from Do Not Resuscitate: Why the Health Insurance Industry is Dying, and How We Must Replace It, forthcoming, August 2008 by John Geyman. With permission of the publisher, Common Courage Press.

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