In the long debate over health care reform, Democrats have made hay by beating up on the health insurance industry. This week, the Obama Administration was at it again, going after California’s Anthem Blue Cross for a planned 25-percent rate increase in annual premiums for its nearly 700,000 customers.
Health and Human Services Secretary Kathleen Sibelius expressed indignation “at the whim of private, for-profit insurance companies who are raking in billions in profits each year,” while President Barack Obama called the rate increase “a preview of coming attractions” if Congress fails to pass his health insurance bill.
House Speaker Nancy Pelosi (D-CA) has led the attack. As Democrats cobbled together a health care bill over the summer, she predicted, “The glory days are coming to an end for the health insurance industry in our country.” As Democrats went home for the August recess, she accused the insurance industry of “carpet bombing, shock and awe” against public opinion and distributed a memo urging Democratic legislators to demonize health insurance companies.
When those same legislators heard from outraged constituents, Pelosi blamed health insurance companies, which she deemed “the villains in this.”
While health insurance companies might be an easy target for Democrats, their vilification of the health insurance industry is treacherous. Unlike 1993-1994, when they vigorously opposed President Clinton’s proposed health care plan, the health insurance industry supported the Obama Administration’s efforts to reform the system. By the time Obama was sworn into office, the Association of Health Insurance Providers (AHIP) had already come out in favor of proposals to require health insurance companies to enroll anyone - regardless of pre-existing condition, mandates to purchase health insurance and federally-imposed limits on premiums for the elderly, among other proposals.
The Democratic assault on the health insurance industry is also dishonest.
Each year, Fortune Magazine ranks the most - and least - profitable industries in America. From 2006 to 2008, the health insurance industry finished 33rd, 28th and 35th in profitability relative to other American industries. They were less profitable than public utilities, metals manufacturers, and even - in 2008 - the construction industry. So unprofitable are health insurance companies, in fact, that Fortune ranks the industry as among the worst possible investments, just above auto manufacturers.
As for Anthem Blue Cross, it loses money on its individual health insurance business in California (its $2.7 billion profit for the quarter came from the one-time sale of a business unit).
Health insurance rates are going up this year - but not because of greed. Instead, the economic downturn has prompted many healthy people to drop their insurance, leaving more expensive, sicker people in a declining pool, driving up premiums.
But perhaps the biggest villain of all is Pelosi herself, who - with Senate Majority Harry Reid - pieced together corrupt health care reform packages that did little to reform the system, and nothing to drive down costs for consumers.
Americans can be justifiably outraged at massive bonuses taken by executives in financial services companies that benefited from a multi-trillion dollar bailout just last year.
But to blame rising health insurance costs on a greedy health insurance industry is dishonest, at best, and demagoguery at worst. The facts tell a different story.
Jim Burkee is an associate professor of history at Concordia University Wisconsin and a former Republican candidate for Congress.
14 Comments
Don't blame the insurance companies? Is this for real? This is a joke, right? Are you kidding me? Check again at the bottom lines for Humana and Wellpoint for 2009. Record profits. Big time. Their CEOs and other top executives received millions in bonus compensation. All this at a time of the Great Recession, when the rest of us are losing jobs - AND health care coverage. And these insurance companies are charging us small business owners and our employees double-digit premium increases. This guy may be a professor of history, but he doesn't have a clue about what's happening today. Get real, man!
We just learned that our company is going to stop providing benefits in 2010, because the premiums are too high. All this at a time when insurance companies are recording record profits. Pretty sweet deal for the insurance companies. They can jack their rates up double-digits every year and their profits go up at the same rate. No wonder they're spending millions of dollars to try to stop health care reform. No wonder they don't want to compete with a public option. They don't want reasonable competition. They're more interested in shareholder returns and executive bonuses than providing cost-effective coverage. They have no incentive whatsoever to do the right thing and charge the right price. What an inflated, inefficient and immoral health care system we have!
With health insurance companies only using about 75% of there revenue to pay claims, this money has to come from somewhere.
It is time that we as a people -- and yes, the government represents us the people -- take control of this situation and follow the example of Switzerland by turning these companies into public utilities.
What value do these companies add to the health care system, other than taking money out of our ability to buy health care?
This blog is a perfect example of what's going wrong regarding this issue. Instead of fostering an open, honest and realistic discussion, it's a study in partisan finger pointing. Listen, associate professor of history and former Republican candidate for congress Burkee, it's really sweet of you to sit there and name "villains" (who are somehow all conveniently in the other party) while giving the insurance companies a pass. But this very morning on Fox News (yes, Fox News), I heard the commentators state our health care system is indeed in need of reform. The question is how to do it. Pelosis come and go. But the insurance companies ARE the system.
Question is, what are YOU going to do change things? Perhaps you want to share that with the class.
Jim, I agree that the insurance people are not necessarily bad guys, except when they deny care that was paid for by the patient and their life depends on such care. But by and large they are doing what the law requires; keeping profits UP to satisfy shareholders. And yea, and they are very often too greedy and heartless.
But that's not the major problem, it's that they are even in the loop. They are an unnecessary middleman that consumes 31% of our healthcare costs without ever laying hands on the patient. They are a "payer" that can be eliminated without reducing "patient care" even one iota.
If in your classroom you were forced to give your speeches and take questions from students using a teacher's aide as a go-between, your students would call that a total waste and demand that you eliminate the costly middleman. That's what business leaders are asking for today.
We need a single-payer Medicare-for-all system. We'll pay through taxes rather than wages, which will keep corporate costs down and jobs in the states. With a single-payer system we could provide first-class Cheney-care to 100% of our population and reduce this nation's overall health care costs by $400 billion dollars. It would NOT cost the $1.5 trillion they are talking about with the flawed system they are negotiating today.
We'd pay for the 45 million uninsured by eliminating the 31% waste currently consumed by the insurance bureaucracy (high CEO salaries, bonuses, shareholder profits, broker commissions, actuarial costs, and even their lobbying and campaign contributions that are passed on to the patient). THAT is why the insurance industry is so opposed. They want to continue getting into your pocket.
Yea, after deducting all of the above costs their "profits" are only 2%. I wish I had their accountants when I ran my company, but I don't feel for them. They are adding massive costs that need not be there, and it seems that they are paying off the politicians to keep it that way,
Can you imagine our US manufacturers being able to compete with foreign companies that already have universal health care, who do not have to add high health care costs to their product price? More Big Three autos are currently made in Canada than in the US because employer's there spend $800 per year versus $6500 here. GM is closing plants in the US and opening them in Canada. Now multiply that be millions of companies and you can see why our economy has been trashed (not the only reason, but a significant part of it).
And excuse me if I get mad as hell at our politicians that are getting a piece of every health care dollar through the industries' campaign contributions. I foolishly thought they worked for us peon voters. We could fix this system overnight if they were not on the take.
Lohman- So what is your best estimate of overhead costs for government health care- 29%? Medicare has approximately $38 Trillion of unfunded liabilities. It may appear to be running OK to you, but it has been mismanaged and is bankrupt. As to Canada's health care system, have you heard about the Newfoundland Premier that went to the US a few weeks ago for heart surgery- when it came to his personal health, he decided he didn't trust Canada's system. Some endorsement,eh. Also, maybe if the UAW didn't have Rolls Royce health care plans, the Big Three would build more plants here. Toyota, Honda, BMW, Mercedes, and others can build cars in the US without UAW health care plans.
PS-When is Obama going start going after the $500 billion of Medicare/Medicaid waste and fraud? Why is he waiting?
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It is in the nature of business to boost profits by cutting costs. INsurance businesses profits comes from premiums and costs come from benefits. Is it a surprise that they boost premiums and dodge benefits? It's part of the bargain we struck to have coverage IN CASE something goes wrong. Insurers aren't greedy, they are just businesses.
But insurance companies share some blame in the high prices we have today because of a business decision they made years ago to make co-pays cheap and to hide the cost of physician visits and procedures, encouraging folks to come in for everything and anything. Insurers thought this would allow them to catch long-term health problems early and prevent the more expensive interventions later.
Insurers' plan backfired. Patients came in for sore throats, aches and pains, because it's cheap and they get off work or school. But they did not report the bloody stool, heart palpitations or numb fingers, because it slipped their minds or is embarrassing and might cause them to have to change something in their lives.
Everybody got too cozy with the status quo, until it started drinking their beer and eating their pizza. The problem is, folks woke up and now want to consume less health care and insurers don't want to help them.
Administrative costs for Medicare are a proven 3.5%, but a Medicare-for-all system will likely return 90% of the dollars spent on health care (compared to the 80% for privates. That's 10% overhead rather than the privates 31%.
Medicare opponents like to forget that private fraud is several times higher than Medicare fraud, but they both must be eliminated.
Yes, thanks to the Bushies, congress in 2003 added a $780 billion giveaway to the drug industry, part of his kill-the-beast philosophy. Only converting the drug program to drug stores will eliminate that pork.
And, uh, those "Rolls Royce health care plans" were private, not Medicare, but that seems to slip by insurance industry hacks.
And I can't answer for Obama; he's as corrupt as the rest. But I forget, you don't like public funding of campaigns either.
Actually it's misleading for me to say that private insurance overhead is 31% -- it is only 20%. When you add in all of the extra outside costs of the hospital and clinic's billing personnel, it's 31%.
Lohman- From what I have read, the government overhead numbers are not comparing apples to apples when compared with private insurers- somehow I am not shocked that the government numbers are rigged. See the following link: http://www.qando.net/?p=3362
As to fraud, you have that backwards, part of the overhead for private insurers goes to preventing fraud. Medicare has a larger amount of fraud compared with private insurers, that is why they are a pain in the butt when it comes to billing.
As to the prescription drug benefit (kind of like that Obama secret pharma deal but not secretive?)- How do you get from $780 billion for that to $38 trillion of unfunded Medicare/Medicaid liabilities? Admit it, government run health care has been mismanaged and is bankrupt. These are the same people that run the post office- ever stood in a long line with only two windows open?
You should know that 70% of health care is consumed in later years... that is, over 65. Of course Medicare costs per patient are going to be higher, and if we fold in the youngsters their costs will be lower.
Fraud and over-billing are two different things. I've seen privates billed $1800 for a test that Medicare fairly pays $400 for, and that is common practice.
Having been in health care for 40 years, and as a Medicare provider for 20 of those, I'll take Medicare over private any day. To compare Medicare with the post office, where one uses government employees and the other doesn't, seems a bit silly.
Do you care to disclose your expert background, or just throw rocks? Are you an insurance employee?
Lohman- Every time someone states a fact you can't refute you accuse them of working for an insurance company. Get over it. As I have stated in the past-I don't work for an insurance company. I notice you haven't refuted the fact that Medicare/Medicaid are $38 trillion in the red. As to Medicare "fairly" paying $400 vs. $1,800- you obviously know that private insurers and their customers carry the added cost of Medicare due to underpayment by the government. Also, don't tell me the people working at the post office don't work for the federal government. Just another reason why the public isn't buying the health care proposals from the left- they have to lie to sell their sham deals.
You don't know what you are talking about. Medicare doctors in Wisconsin are 100% private contractors who get paid for their services on a fee-for-service basis, unless they are an "Advantage" contractor and then they are paid on a capitated basis. They are paid fairly and doctors taking Medicare patients are not losing money, they are just not making as much as they make on private patients. If 100% of their patients were Medicare they'd make a living but not a killing. But some have built their practices to allow only privates. Same is true of hospitals, but they are paid differently. Medicaid is different. Doctors lose money on them.
The post office is 100% govt employees and was killed by the internet and is now trying to restructure itself as a package delivery. Much dead weight there but little in Medicare because it uses private contractors (doctors and hospitals). Private insurers carry the cost of Medicaid underpayment (cost-shifting), but not Medicare (though thanks to our politicians that may change this month if they allow the 20% cuts to take affect).