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Letter to the editor:

Insurance industry isn’t a free market

Wed, Mar 21, 2012 (2:02 a.m.)

Health care costs today are in the hands of the health insurance companies. The United States has health insurance, while other countries have health care. U.S. health care is the most expensive in the world, and the World Health Organization ranked the United States 38th best in health care in the world.

Consumer Reports in November 2011 rated all the health insurance companies, and the results were alarming. The users of the health insurance companies (the consumers) rated the overall system as far too expensive and providing poor results. Only Kaiser Permanente (a nonprofit company) got good scores.

The health insurance industry is not a free market. Our only choice is health insurance or no health insurance. The industry monitors itself with only about five major players across the United States. They really do not compete with one another; they distribute themselves geographically and every state has different providers. You can’t necessarily carry your insurance to another state if you move. User choices are few and the cost differences are minimal. They are all expensive and offer limited options. Hence, it is a tightly controlled monopoly with prices doubling on an average of every eight years. What costs $400 a month today will cost $800 eight years from now.

Health care costs rise 9 percent a year and wages rise 2 percent a year. Do you see where we’re headed if the health insurance companies have their way?

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Discussion: 49 comments so far…

  1. Everyone has health "insurance", but not all pay for it. Any deadbeat can walk into UMC and be treated whether they have insurance or not. It is the law, and they cannot be turned away. Who pays? The losers that play by the rules and pay premiums for health "insurance". Hence the attempt by the Obama administration to mandate that EVERYONE purchase health insurance or pay a penalty for declining it. This issue is now before the SCOTUS, and a ruling should be made by the end of June.

  2. The health insurance industry is hardly a "free market". For one thing, they're exempt from anti-trust laws. We will continues to pay too much for healthcare and get inferior results as long as we insist on clinging to a model that requires us to pay $1 in insurance premiums to get 75 cents worth of healthcare. The rest of the industrialized world can spend much less and outlive us with a single payer system, but we're too clever to fall for that!

  3. Insurance is NOT a health cost. Insurance pays medical bills and adds a couple cents on the dollar for profit. It is an insurance cost.
    Health dollars go to doctors, nurses, big pharma, medical device makers, care facilities and administrators.
    800,000 doctors rake in about 28% of medical dollars spent. This year medical spending will approach $3 trillion.
    Some drugs cost close to $400,000 bucks a year. Provenge and Avastin which treat cancer can cost over $100K a year for LIFE. Provenge, which treats prostate cancer will bring medicare to its knees. Millions of men will get prostate cancer.

  4. The focus on the rising cost of health insurance is putting the cart before the horse. Granted, liability insurance for doctors and other providers contribute to the cost of health care, but health insurance does not.

    The simple fact of the matter is that manufacturers of medical equipment, pharma companies, doctors, clinics and hospitals and everyone in the chain have raised prices. Period. As well as there being many more options for treatment available.

    A good example is the simple blocked artery. Just a short time ago there wasn't much that could be done. A person would suffer an attack, go to the hospital in a basic ambulance, and die.

    Today, they get transported by a fully trained EMT team in a rolling ER, get surrounded by specialists, and have stent in place in a matter of a couple of hours. That procedure is a minimum of $50k now. Plus a one or two day stay in CCU at $25k - $50k/day.

    Of course the price of insurance to cover those costs has gone up!

    There is a hell of a lot more medicine and technology available today that people use. Combine that with the idea that everyone is entitled to the very best no matter what they can afford and it should be obvious why cost of coverage has skyrocketed.

  5. http://www.medicalbillingandcoding.org/b...
    The above is what is breaking the bank. Insurance is what pays these ridiculous bills. The cost of insurance is high because anything having to due with medicine is exorbitant.

  6. boftx...We were typing the same thing at the same time. That doesn't happen very often.

  7. zippert1,

    I noticed that. Must be something to it if you and I are in this much agreement on an issue. :)

    I suspect where you and I will knock heads will be on the issue of people being entitled to care they can't pay for or get coverage for.

    At least we have common ground for what we see as the root cause of the problem.

  8. There are thousands of different insurance plans in the US. Many you can take across state lines. Most Nevada plans exclude maternity coverage in the individual market. The PORAC Blue-cross plan I had was good in most states but it costs $20,000 a year. Some don't have a pharmacy plan. There are many mini-med plans.
    There is way too much insurance. The cost of administering all these plans is enormous. My sons asthma doctor has patients with over 100 different insurance plans. He has to hire two full time workers to decipher it all.
    Check the link. 90 individual plans for a 56 year old guy in Vegas. Give me a break!

  9. In terms of the free market it doesn't exist. It never has and never will. Special interest groups the world over cause economic distortions.
    Adam Smith wrote "An inquiry into the nature and causes of the wealth of nations". The Scotsman was credited with creating capitalism. The first thing he did was set up a good pension for himself to supplement his teaching. This was in the 1700s.
    George Washington had a major problem with sick and injured seamen. He mandated the purchase of hospital insurance by seaman and required shipping companies to provide health insurance for the men to reduce the burden of caring for these uninsured men.
    Free market discussions are theoretical.

  10. We will go to single payer when the entire system blows up. Last year 123 million emergency room visits. The majority of patients paid little to nothing. In Vegas 70% refuse to pay. The number of emergency rooms has dropped from nearly 2500 to just over 1700 in the last 25 years. That with a much larger population and millions more visits.
    Uncompensated care more than any other factor will cause the hospital system to implode. Less than 1000 hospitals out of 5700 still make $$$$. The rest are hanging on for dear life.
    Charging people over $400,000 a year for meds isn't going to be around much longer either. The majority of Americans cant come up with a grand.Check my above link....rediculous!!!

  11. The letter writer is correct in saying the health care market isn't a free market. Those who claim the present system isn't sustainable are also correct.

    Where I have a problem is where these two facts lead directly to the decision to have a single payer government run system. Look at those systems in other countries. They are not without problems of their own and some serious problems.

    I still feel we could have a free market system if we would change the way the system works. Government could do that but we have two sides battling instead... one side wants status quo and the other side wants single payer government run health care. Just like everything else, where is the compromise position?


  12. Michael,

    No free market solution is possible as long as there are a) people who think it is their right to have the maximum possible health care even if they can not afford it, and b) people who agree with that and say government must step up to provide it.

    The system that has been established by the ACA (Obamacare) is probably the worst possible compromise between free market and fully socialized health care. It is in essence implementing a government entitlement program using the private insurance market.

    It is ironic that much of what led up to this started when employers starting providing health insurance as a benefit. Because of that, what might have morphed into a social program like Social Security and Medicare has become an albatross around our necks.

  13. Obamacare was put together by insurance medical and govt. interests. The purpose was to increase coverage and reduce the deadbeat uncompensated care issue. In terms of an entitlement using private insurance. So what!! Switzerland has an insurance based govt regulated universal care model. It works fine. Canada and the UK have socialized medicine. Canadian citizens recently voted Tommy Douglas the greatest Canadian in history. He put together their health plan.
    The US and Mexico are the only countries with a PROFIT based healthcare model. That is why we pay trillions and have $400,000 drugs.
    Every country has issues with medical care. No perfect system. But $150 trillion in medical costs in the next 40 years. God luck!! Its going to suck the blood out of the country and everyone will be in line for assistance.
    Currently half the country is either on Medicare, Medicaid or uninsured.
    Poverty and an aging society are the albatross around our necks. It would exist with or without medicare.
    The Germans started their universal model in 1865. It is still going strong and they like it. My parents were from Germany and I lived there as a child and have been back many times. Medical care is easy to get and affordable.
    Here a couple days in the hospital costs more than a house and you better pay that bill quick, or off to collections and 10 phone calls a day. Plus 200 points off your credit score.

  14. The health care system is free market, they can pick and choose who they want.
    Obama care IS NOT what it says when referring to existing conditions. My health insurance which I have paid out of my pocket for many years recently closed down, they no longer offer the plan to individuals. I have applied at Humana only to be turned down due to pre existing conditions. Not life threatening, back bulging disk, but now I can not buy health insurance anywhere. I think I can pay twice what I should in 6 months thru a state plan with much worse benefits. It seems to me the Obama care is a big lie and does not take care of the most common problem, existing conditions. Total failure, Obama is out next term. I will be on the all you guys plan, I go in, file bankruptcy and your ins pay. I have paid over $90k in prem over the last 40 years it sucks and I am pissed off.

  15. The healthcare industry in the U.S. in general is "free market".

    The fact that providers don't get paid the full free market amount of what they bill for is part of the game of profits. Insurance controls payment, not charges. In that way, there is no difference between a private insurance company and the federal government, except one makes a profit, and the other is at the mercy of politics and special money interests.

    Insurance is a big profit maker, and they don't intend to reduce their profits by paying what providers charge.

    Providers keep hiking up their charges in order to get their insurance profiles to equal what they think they deserve and desire.

    It is the vicious circle of the free market profit game. This has been going on for decades and decades.

    The salaries and wages of the general public have not been able to keep up with percentages and speed to match the increases in the healthcare industry.

    Employers have steadily been decreasing the share they pay of the premiums.

    Periodically, employers choose different insurance carriers because the cost experience for the group increases so much that the premium increase to offset that goes up a huge amount. One catastrophic accident or illness case for one employee or dependent can send the premiums to very high levels.

    Increasingly, employers are opting out of sponsoring health insurance, and in many instances in small business, which have fewer employees, there less benefits and higher premiums which make it out of affordable reach.

    The premiums are increasing so much that some people cannot afford even employer provided insurance. Only those making higher salaries or wages can do so.

    Of course, those unemployed cannot afford insurance at all.

    The fewer the people there are who can afford insurance, the more premiums will rise.

    Insurance must keep its profits growing. They are beholden to investors, and high executive bonuses.

    Insurance profits also effect quality of care. Federal standards are what have raised the quality in some areas, or kept them from evaporating further.

    Pharmaceutical companies are halting production of some long effective inexpensive medicines in favor of higher profit margins on new drugs. Criminal theft of medicinal drugs and black markets are also adding to the costs and scarcity of some drugs.

    These are just the tip of the iceberg of the many, many problems within our healthcare system. It is very complex with many dependencies within the industry. In fact, it is so complex that individuals, physicians, and other providers don't understand. It is easier for the left hand to blame the right hand, or vice versa, while thinking only of oneself.

    After working in so many areas of healthcare for decades, seeing it evolve into the monstrosity it is now, and knowing the comparison with other countries, I believe a single payer healthcare system is the only solution.

  16. Tom Coburn, who I like, put together the GOP healthcare initiative. Read it. The key elements are a better diet,weight reduction and expanded insurance. All due respect to Mr Coburn. Americans love bad food and smoking. As stated above we have 5000 insurance options. How many more do we need.
    Peter....get a life. A bulging disc has never been grounds for refusal. Maybe a bump. I have been buying my own insurance since retiring to Nevada 6 years ago. I also have health issues and received multiple insurance offering long before the new law. I went with the Sierra Health and Life 1000 plan. $2 million in coverage.
    Go to my 11:25 post and click on the link. Plug in your info and you will get at least 50 offers. Even issues like cancer they can only go back a couple of years. When the plan is fully implemented you will have more options than you know what to do with.

  17. http://www.pciplan.com/forms/pdfs/2012Be...
    Peter...I was a tad harsh. If you truly cant get coverage wait a few months, save your refusals and apply for the Nevada PCIP plan above. It will get you to age 65 and medicare.

  18. boftx makes a very good point. Before insurance got a strong foothold, most people couldn't afford insurance and the cost of healthcare was kept in better control because the patient was considered the responsible party and insurance only reimbursed the patient.

    Then came assignments of insurance payments and that changed the picture. More and more providers depended on the insurance companies to pay first, and prices increased.

    People owed providers money that they paid off over time. The amount depended on the providers will. Sometimes it was excessive and other times it was lenient, allowing for the financial situation of the individuals, and what was owed.

    Then came debt ratio differences so great that the collection agencies got a bigger involvement, including liens in the name of the providers.

    I think it would have been better to evolve into a single payer national plan and eliminate the insurance middleman altogether.

  19. http://en.wikipedia.org/wiki/Socialized_...
    The first healthcare model put forth was the Truman universal care model. Socialized medicine.
    The AMA and auto workers union came out against it because of the fear of communism and socialism. Biggest mistake the UAW ever made.
    Health costs have destroyed the entire auto industry and many others. MGM pays $440 million to cover 40,000 workers. Doesn't even seem possible.

  20. wondering,

    I am not ignoring your question. I want to read up a bit more on the German and Swiss plans.

    That said, I think there is a very subtle, but essential difference between establishing a universal health care system because it is a proper role for government such as provide police and fire protection as opposed to doing because people feel they are entitled to it.

    In the former case, it is because it is a service that can be demonstrated to be in the ultimate best interest of every citizen, just like roads and public education. In the latter, it is a benefit that ultimately serves only to define another (or further constrain) a special class of citizens.

  21. peacelilly,

    Something else that should be kept in mind. The first healthcare plans (late 1800s, early 1900s) were much more akin to disability insurance such as that provided by Aflac. This was because the loss of income due to being sick was generally much greater than the cost of medical care.

    Again, back then, there was very little available as to what a doctor could do or prescribe, so medical costs were relatively inexpensive to begin with.

  22. As I browse through the various forms of universal health care, one thing stands out as being pretty much common to all. There is a mandated minimum level of care, and there is an optional level that can be purchased through private sources.

    That basically says that the mandated minimums are rationed care. In other words, public care does not provide the same benefits as private care. You get what you can afford.

    None of the systems seem to be without significant problem areas.

  23. Something else strikes me: In most cases, cost containment is achieved (or attempted rather) by government mandated limits on profit. In some cases, there are limits placed on how many providers can engage in private practice. Almost all the hospitals are publicly operated.

    In all cases rising costs are becoming a problem that must be dealt with, just as here. This is especially true in the cases that are essentially based on a model like Social Security and Medicare where the younger, healthy population must pay for an ever increasing older generation.

    With this said, I think we need to turn to the more philosophical debate I alluded to earlier to determine first what is just before addressing how to define a just system.

  24. You are correct. All have problems but have high levels of patient satisfaction and much lower per capita costs. Other countries hold people like Von Bismark and Tommy Douglas in high regard for their work on healthcare. Americans don't even know who is responsible for our convoluted system and would spit on him if they did.
    Here costs are sky high and various healthcare segments get voted the most HATED industries in the country.
    High costs and hatred don't make for a viable respected system.

  25. The first step for true healthcare reform is as simple as it is self evident: "medicare for everyone."

    We're behind every other first world nation on earth because we can't seem to come to grips with the obvious fact that healthcare costs skyrocket when there is a profit expectation at every conceivable stage of delivery.

    It doesn't have to be that way. We have some very fine hospitals -- not to mention several Universities that are the envy of the world - that operate very well on a non-profit model.

  26. http://www.politifact.com/truth-o-meter/...
    The above just provides a taste of the nonsense being said about the new law. If you check the site by subject nearly 700 statements have been made about the law and medical care in general. Most of it bull.

  27. http://www.politifact.com/truth-o-meter/...
    That number was a complete fabrication but I wouldn't expect you to research it first.
    Many provisions have kicked in and millions have taken advantage. Nearly 3 million kids have enrolled.

  28. http://realclearpolitics.com/epolls/othe...
    70% oppose it????? Another bit of nonsense. You need to stop getting all of your news from college drop outs like Limbaugh.

  29. http://www.realclearpolitics.com/epolls/...
    The most failed president????He is leading in every poll against every republican. Not bad.