What’s Really Wrong with Obamacare
Obamacare is the popular name for the so-called Patient Protection and Affordable Care Act (ACA). Lots of people don’t like Obamacare — for all the wrong reasons. Some are angry about being forced to buy a product they don’t want, and some fear that the government will insert itself between patients and doctors and tell the doctors which medicines and procedures will be permitted and which will not. Some fear there will be death panels that will decide who among the elderly and the sick deserve to be saved, and who are to be denied medical care and left to die. Those are very real concerns, but they totally miss the point.
What’s really wrong with the ACA is that it is not Obamacare — it’s Ignagnicare. That’s Karen Ignagni, the two million dollar a year president of, and top lobbyist for, the $800 billion a year insurance industry’s most powerful lobbying group, America’s Health Insurance Plans (AHIP). Ignagni is the genius behind AHIP, and the ghostwriter behind the ACA. You may remember her as the charming lady who so sincerely, and so publicly, promised Obama that the health insurance industry would work with him and help him pass health care reform for America. She meant it. And she got almost everything she wanted. What she wanted was an ACA that included a law that says everyone has to buy health insurance, and she wanted to be damn sure there is no public option in the ACA. The public option would have been a government health insurance plan available to everyone, and offered in competition with the plans of the private for-profit insurance companies.
At the peak of it’s lobbying effort, AHIP was spending $700,000 per day, and employed four lobbyists for every congressperson and senator. Nowadays, corporations are people, and money is free speech. When corporation lobbyists and their money talk, our elected officials listen. The ACA was written to the satisfaction of the insurance industry, and what they didn’t get immediately, they will get eventually.
Although many of us have not yet grasped the full reality of this, for-profit insurance companies are the very thing that is feared by the paranoid and the thoughtful. Insurance companies do insert themselves between you and your doctor. Insurance companies do tell your doctors which procedures will be financed, and which medicines will be covered. Insurance companies do have the very kind of death panels people fear. Insurance company employees decide who will get the health care they need, and who will be abandoned to their fate.
The problem is not that insurance companies are evil. The problem is the way in which insurance companies are structured. The manner in which an organization is structured determines what the organization is, what it does, and how it does it. The main component in the structure of private for-profit insurance companies is the stockholders collectively. It is the existence of stockholders that determines a company’s purpose, and the purpose of every private for-profit corporation is to increase the wealth of its stockholders. It works like this: The stockholders supply the investment money, the boards of directors decide how to spend it, and the executive officers have to figure out how to increase it. The CEOs and the many executives know if they don’t produce, they’ll be replaced. Their big salaries keep them eager to do whatever it takes (within the law, more or less) to keep the stockholders happy.
About 80% of every premium dollar goes to pay for actual health care. The insurance companies keep 20% of every health care dollar. About 3% of that goes to pay for the labor and expenses for collecting and dispersing enormous amounts of money. About 17% of the money spent on insurance premiums goes to the stockholders. Seventeen percent of 800 billion dollars is 136 billion dollars, and that’s before the personal mandate in the ACA kicks in and everyone has to buy private insurance. The stockholders will rake in untold billions of dollars from the ACA.
The stockholders aren’t the only ones getting rich. CEOs and executive officers get rich, too. In 2011, the largest U.S. health insurer, UnitedHealth Group, paid its CEO Stephen J. Hemsley $13.4 million a year. WellPoint’s chairwoman and CEO Angela Braly received $13.2 million. CIGNA’s CEO got $18.9 million, Humana’s got a $7.3 million salary and $10.4 million from exercising stock options. Aetna’ former CEO Ronald A. Williams was compensated $72 million in 2010, his last year on the job.
Those salaries are not the problem with the system. They’re just drops in a great sea of money. But, those salaries absolutely do motivate CEOs to make every effort to increase premiums, reduce coverage, cut expenses, and do anything else they can to increase their company’s profits. That’s why Americans pay far more for health care than people in other industrialized countries, and it’s also why Americans get far less for their money.
What needs to be done is obvious. This society needs to develop a different institutional structure to finance health care, and the new one has have no stockholders and no profit motive. There are over two dozen industrialized nations around the world that can provide us with ideas for financing health care without being obliged to submit ourselves to the predation of private for-profit insurers. The simplest, most transparent, and all-around best idea is the single-payer system, and we are all familiar with it because we already have it right here in America. Medicare is a single-payer system. Medicare spends about 3% of every health care dollar for administrative overhead, and 97% goes to actually funding health care. We can extend Medicare to cover everyone and eliminate the dominance, the large profits, and the life-ending practices of America’s for-profit insurers. If we extended Medicare to everyone, we could use that 17% that’s been going to stockholders to give full health care coverage to everyone who doesn’t have it now, and we would have money left over to make every medical school tuition-free, and we could produce all the doctors and health care providers we need.
But before that can happen we have to answer a question about morality and the kind of society we want to live in. The question is this: Is health care just another product to be sold for a profit, or is health care a human right? If we answer that it is a human right, then we must change the way we finance it.
Published in Aug 8 Sentinel
Good piece, Bob.
Your diagnosis of the problem is accurate and your prescription for curing it is exactly right. However, I think you’re a bit too harsh on the ACA and the negotiation of it.
Primarily, Obama wanted to get a deal done on health care. I think he was motivated by Medicaid’s growing impact on the budget deficit. He realized that must be curbed in order to do anything serious about the deficit and consequently the economy. The deal he cut with AHIP was to guard against the industry attacks that sunk “HillaryCare” in 1993. That plan would have become law if not for the infamous “Harry and Louise” ads. To pass the ACA, Obama knew he had to have AHIP, Big Pharma, and the hospital lobby on board — or at least neutral. That’s just politics however distasteful we may judge it to be.
Next, the 20% profit margin is set by the ACA. It is much less than it has been in previous years. Already, rate payers are receiving reimbursement checks from their insurers due to overpayment in violation of ACA guidelines. This is a problem the ACA is helping to fix. The ACA has brought other important reforms as well: ending rescission, establishing a patients rights board, eliminating pre-existing condition denial, adult children benefits, and so forth. More reforms on their way in the coming years. Reps are so keen to repeal the ACA quickly because they realize in the long run the law is very, very good for ordinary Americans. Eventually talk of repealing the ACA will be about as popular as talk of repealing Medicare.
Regarding Medicare, you are correct to point out that “Medicare For All” is the solution that the US is inevitably moving toward. The conversation among progressives should be: How do we get there the fastest? Once again, the ACA proves extremely useful. Under the ACA, states like Vermont have begun to draw up a single payer system. Right here in Oregon, the Governor’s Health Board is launching Coordinated Care Organizations (CCOs) across the state this month designed to provide better coverage to more people while reducing costs. Ours in Coos County is regarded by the Governor’s office as one of the best. When — not if — CCOs work, they will become a model for other states. They will also be a model for private insurers. As the health care exchanges become active (and yes, public options will be on the menu, thanks for Senator Wyden including an exemption provision for them in the ACA) we will have a fair market place for health care insurance. Then private insurance, with an overhead of 20%, will have to compete toe-to-toe with pubic insurance, with an overhead of 3% (or less). I think we both know how that will turn out.
So, the ACA is a great advancement in fixing America’s broken health insurance system. It is by no means perfect. But it does provide us with real avenues to improve it, over and over again. After decades of having nothing, this is a huge step forward.
Of course, I argue that the fastest way to make the improvements we’d all like to see is to elect as many progressive Democrats as possible, in both Wash DC and Salem. And push the not-so-progressive Democrats to do the right thing. Left to the leadership of Reps and TPers, we will only takes steps backwards and the incredible opportunity we have before us will be squandered.
Thanks again for the piece. Very thoughtful and well done. If you haven’t already you should read Atul Gwande’s work on health care policy. He has a new article in the New Yorker about, of all things, Health Care and the Cheesecake Factory. Interesting stuff.
http://www.newyorker.com/reporting/2012/08/13/120813fa_fact_gawande
Best,
Mark