Cartoons of the day

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Cartoon of the day

Special mention

  

Cartoon of the day

Special mention

  

Cartoon of the day

Special mention

Cartoon of the day

Special mention

Unhealthy healthcare: insurers

The Wall Street Journal refers to it as “insurers playing a game of thrones.”

Big U.S. insurers are courting one another for possible multibillion-dollar deals. How they pair off could have significant implications for the managed-care industry, its individual and corporate customers, and U.S. medical providers. . .

“Usually, fewer competitors means prices will be less advantageous for consumers,” saidGary Claxton, an insurance expert at the Kaiser Family Foundation. “It probably means they’re going to be in a better position to maintain their margins,” he said.

Given the high costs of U.S. healthcare, insurance is obviously the way most Americans are able to gain some kind of access to the health system.

According to the latest (January–March 2015) National Health Interview Survey (pdf), about two-thirds of Americans below the age of 65 rely on private health insurance. The rest either don’t have health insurance coverage (10.7 percent) or have some kind of public health plan (24.2 percent).

The problem is, even without the latest proposed mega-mergers, the U.S. private health- insurance industry is already highly concentrated. Treating Blue Cross Blue Shield (BCBS) affiliates as a single industry (since, with few exceptions, they have exclusive, non-overlapping market territories and hence do not compete with one another), and adding in Anthem (which operates the for-profit Blue plans across 14 states), the national market share of the four largest insurers increased significantly from 74 percent in 2006 to 83 percent in 2014. By comparison, the four-firm concentration ratio for the airline industry is 62 percent.

Much the same process of concentration has been confirmed by examining the so-called Herfindahl-Hirschman index.* Health insurance, as shown in the red line in the graph above, is the most concentrated industry (compared to, for example, hospitals and telecom). With a current index near 4,000 (having risen 79 percent between 2000 and 2014), and some states with indices exceeding 8,000, health insurance is easily considered highly concentrated.

It should come as no surprise that growing concentration in health insurance (based, mostly, on mergers and acquisitions) has meant both lower payments to providers (like physicians and hospitals) and higher premiums for payers (both employers and individuals)—thus boosting health-insurance profits.

So, within the U.S. healthcare system, Americans who don’t qualify for public programs are forced to rely (directly or indirectly) on a private health-insurance industry that is increasingly concentrated (and, if the proposed mergers go through, will rise even higher on the Herfindahl-Hirschman index) and is able to dictate both prices and the quality of policies.

Right now, if private health insurers suffer losses (as they claim has been the case under Obamacare, when they can’t pick and choose the healthiest customers in the exchanges), they can take their ball and go home. As James Kwak explains,

The obvious market-based solution is to keep increasing the penalties for not being covered until enough healthy people join the pool so insurers can make profits. But all that accomplishes is shifting more of the overall losses onto healthy people.

The obvious alternative is to reap the benefits of the current level of concentration and transform the existing private health-insurance programs into a public single-payer system.** That would succeed in creating universal coverage, lowering healthcare costs, and redistributing the losses across the society on the basis of an ability to pay.

 

*The Herfindahl-Hirschman Index is used by the Antitrust Division of the U.S. Department of Justice and the Federal Trade Commission to evaluate the potential antitrust implications of acquisitions and mergers across many industries, including health care. It is calculated by summing the squares of the market shares of individual firms. Markets are then classified in one of three categories: (1) nonconcentrated, with an index below 1,500; (2) moderately concentrated, with an index between 1,500 and 2,500; and (3) highly concentrated, with an index above 2,500.

**It’s possible, of course, to imagine a middle ground, with higher marketplace subsidies for purchasing private insurance, stricter penalties for individuals who aren’t interested in purchasing insurance, and a limited government option. But that’s just an attempt to juggle the parameters of the existing institutional structure, without recognizing and overcoming the social costs of a system based on private health insurance.

Language of commodities

I had never heard of the Rashi Fein, who died last week, until today. Apparently, he developed ideas for Medicare legislation in the 1960s and criticized the nation’s inability to create a federal single-payer system for healthcare.

He was also a critic of the language of commodities (in a piece that appeared in 1982 in The New England Journal of Medicine):

A new language is infecting the culture of American medicine. It is the language of the marketplace, of the tradesman, and of the cost accountant. It is a language that depersonalizes both patients and physicians and describes medical care as just another commodity. It is a language that is dangerous. . .

In speaking the new language, doctors have adopted the attitudes and methodology of economics — a narrow economics that emphasizes efficiency more than equity. Everything is to be evaluated in terms of benefit-cost relations, and cynicism has become apparent in the discussion. . .

In no small measure, physician-administrators speak the language that they speak because they reflect the world in which they live and the system in which they function. If society wants them to use different words, it must create conditions that encourage them to do so. . .

A decent medical-care system that helps all the people cannot be built without the language of equity and care. If this language is permitted to die and is completely replaced by the language of efficiency and cost control, all of us — including physicians — will lose something precious.

I cannot guarantee that we will structure the system in a way that will emphasize compassion and human values. I do believe, however, that these values cannot be nurtured in a cultural soil in which patients are described as teaching material, a medical practice is described as a business, delivering medical care is described as producing a product, and human interactions are increasingly described in terms of financial transactions.

“This brave little state of Vermont”

Back in 2011, the communities of Vermont—which Calvin Coolidge referred to as “this brave little state”—managed to survive and rebuild after Tropical Storm Irene.

Now, as Molly Worthen explains, they’re bravely rebuilding the state’s healthcare system, after much pushing and prodding from the Vermont Progressive Party.

The Progressives owe much of their success to the oddities of Vermont politics. But their example offers hope that the most frustrating dimensions of our political culture can change, despite obstacles with deep roots in American history.

Green Mountain Care won’t begin until at least 2017, but Vermont liberals are optimistic. “Americans want to see a model that works,” Senator Bernie Sanders told The Atlantic in December. (Mr. Sanders is an independent, but a longtime ally of the Progressives.) “If Vermont can be that model it will have a profound impact on discourse in this country.”

Before you dismiss that prospect as wishful thinking, consider: That’s how national health care happened in Canada. A third party’s provincial experiment paved the way for national reform. In 1946, the social-democratic government of Saskatchewan passed a law providing free hospital care to most residents. The model spread to other provinces, and in 1957 the federal government adopted a cost-sharing measure that evolved into today’s universal single-payer system.