By Dave Lindorff

When the White House or Democrats in Congress talk about health
care reform, and about wanting to preserve the central role of the
private insurance industry in health care, it pays to look at just what
it is that they they’re so anxious to preserve.

According to the Health and Human Service’s department’s National
Health Expenditures report, private insurers will pay out $854 billion
in medical claims for health insurance policyholders this year. That
represents about one-third of the nation’s estimated $2.5-trillion
medical care bill for this year. But that’s not the whole story. The
premiums paid for those claims payments will total $1.2 trillion, which
includes $179 billion in “administrative” costs (21% or over $1 out of
every $5 dollars spent on health care) and another 150 billion in
profits (a tidy 15% return). That is money that was paid out in
premiums by individuals and by employers (who every year are shifting
more of the cost of health coverage onto employees).

A big part of that $179 billion you and your employer pay for
insurance company “administrative expenses” goes to fund private “death
panels” whose job, as insurance company whistleblower Wendell Potter
has testified in Congress, to deny coverage to sick policyholders.

And that $179 billion wasted on administration (Medicare, a
federally-run program, only devotes 4% of costs to administration by
way of comparison), isn’t all. Doctors, hospitals and pharmacies also
spend a similar sum on administrative expenses, much of it devoted to
fighting to get paid by those same insurance companies. How many of us
have spent hours struggling over claims forms, and getting signatures
from physicians in order to get reimbursed for care, or on the phone
arguing with insurance company “customer service” people on the phone?
Doctors, hospital administrators and pharmacists do the same thing.
That’s why your doctor’s office has such a large staff of people who
aren’t there to take your pulse or blood pressure—just to work with
paper.

Insurance companies, in their discussions with investment analysts,
actually refer to their payouts for patient care vs. their premium take
as their “medical loss ratio,” a figure which they vow to improve by
clamping down on “losses” (meaning benefits paid).

I took a look at the latest 10-Q financial statement filed by
Aetna, one of the nation’s largest private health insurers. Through
June 30, Aetna took in $14 billion in premiums, $10.7 billion of that
amount from employers and employees, $2.9 billion more from Medicare
recipients who bought a supplemental insurance plan to cover the gap in
what Medicare covers, and another $400 million for handling Medicaid
claims. Aetna reports that it paid out $11.9 billion in health care
reimbursements, and $2.3 billion in administrative expenses (20%).

By the way, this same Aetna is headed by CEO Ronald A. Williams,
who earned 24.3 million in 2008 according to Forbes magazine (about the
norm for insurance CEOs), as well as another $296,639 as a board member
of American Express. Williams also has unexercised options on Aetna
stock worth $194.5 million, according to Forbes. He owns a palatial
home in Farmington, CT assessed at $1.7 million. According to
Opensecrets.org, Williams has spent close to $10 million on lobbying
activity for his company and the insurance industry since 2005.

Somebody tell me why this is a system we not only want to keep, but
that, under proposals working their way through House and Senate, would
force another 40-50 million currently uninsured people, most of them
low-income, to pay into under threat of being assessed a $3800 tax
penalty by the IRS.

Common sense says that if this insurance intermediary were removed
from the process, besides Williams and the other industry CEOs and
other executives losing their fat paychecks and bloated homes, planes
and portfolios, the whole American healthcare system would run a lot
more smoothly and cheaply.

I remember back in 1990, when I was working on my book Marketplace Medicine
(Bantam 1992) about the for-profit hospital industry, talking to the
administrator of a Canadian hospital in Ontario. He told me he had
formerly worked as a hospital administrator in the US. He reported that
back then, when new less-invasive technologies, as well as reforms
introduced to Medicare, had begun reducing the amount of time people
were spending in hospital beds, his hospital had been able to shut an
entire wing because of a declining patient census. “But one year later,
we had to reopen it to accommodate all the staff needed to deal with
paperwork from the insurance industry,” he said. That problem has only
gotten worse over the ensuing two decades. Meanwhile, this same
administrator told me, “In Canada, I have only three people doing
paperwork for the whole hospital: one for Canadians, and two to deal
with paperwork for the occasional American tourist who gets sick or
injured.”

Let’s be clear. The only reason Congress and the White House are
pushing a plan that relies on the private insurance industry is that
the private insurance industry is flooding the capital with money. It’s
a great investment for them. If health insurers are collectively
earning $150 billion in profits in a year, and it only costs them
perhaps $50 million in legal bribes to keep their scam operating,
they’re earning a 3000% return on investment!
We would all be far
better off if Congress just passed Rep. John Conyers’ bill, HR 676, to
expand Medicare to cover everyone. As I have explained in an earlier article,
expanding Medicare would result in no net increase in taxes, and
because it would eliminate insurance premiums, workers’ comp and public
employee health expenses while also lowering car insurance rates, not
to mention lowering the prices charged by doctors, hospitals and
pharmaceutical companies, also a substantial savings for all Americans.

Some people worry that if we were all on Medicare, medical research
would suffer. But this is a spurious fear. Much of the most important
research in medical care and treatment is funded by the federal
government through the National Institutes of Health. In fact,
arguably, the profit motive leads industry to focus research on highly
profitable, but much less urgent things, so we get research on cosmetic
uses for Botox, but little or no research on finding a cure for Malaria
or drug-resistant TB.

There may be a valid argument for competitive markets, say for cars
or food production and distribution. But it should be abundantly clear
by this point that when it comes to health care, the market doesn’t
work. In fact, it is perverse. The end user—your and me—will never have
the information needed to make a wise decision regarding either cost or
quality. Furthermore, unless we were all buying our own insurance and
selecting our own doctors unimpeded by “preferred provider” or HMO
lists, we are being forced to chose, if we get any choice at all, from
a limited selection made available by our employers, who are motivated
only by bottom-line concerns. In fact, in countries like Canada or
France, which have Medicare-like single-payer systems, people have
vastly more choice as to physician and hospital than any American
patient.

Some people also worry that a government-run single-payer insurance
system, by pushing down the reimbursements to doctors and hospitals
through its monopoly position as sole paymaster, would lead to a
defunding of hospitals and would drive away the “best” students from
choosing the medical profession. But really, if you look at what
hospitals in the current “competitive” market spend much of their money
on, it turns out to be cosmetic things like fancy building exteriors,
pretty rooms, etc.—things that help lure patients, but that do nothing
to improve patient care. As for future doctors, does anyone really
think that having people go into medicine because of the prospect of
earning millions of dollars and driving fancy sports cars results in
better doctors than having people choose a medical career because of a
passion to serve humanity, or a passion for research into curing
disease? What changes is not the quality of the medical students, but
their motivation.

All the sturm and drang in Washington and in the media over the
course of health care “reform” in Washington is really much ado about
nothing. We are not getting real reform.

In a replay of last year’s to-do over mess in the banking industry,
we are watching our dysfunctional and corrupt government simply, to
quote President Obama, “kick the can” down the road, leaving the next
Congress and the next President to deal with the same disaster.
Meanwhile, tens of thousands of Americans will continue to die
needlessly every year because the care they need will be denied to them
by insurance companies that are focused on making as much money as
possible, and by a government that has sold its soul to the lobbyists.
_______________
DAVE LINDORFF is a Philadelphia-based journalist. He is author of
“Marketplace Medicine: The Rise of the For-Profit Hospital Chains”
(Bantam Books, 1992) and more recently of “The Case for Impeachment”
(St. Martin’s Press, 2006). His work is available at www.thiscantbehappening.net