The following article is by Paddy Quick, a Professor of Economics at St. Francis College and a member of the Union of Radical Political Economists (URPE).
I encourage you to read this article. It displays a lack of understanding of both people and the health insurance system and for a professor of economics he puts a lot of faith in the federal government’s ability to manage anything that involves the political views of Congress.
Here are a couple of examples.
Why are health insurance premiums so high? The corporations that provide health insurance are driven by the need to profit. They charge as much as they can for it, and they structure their policies to minimize the payments they make to the actual providers of health care. Before Obamacare, they regularly denied policies to people who weren’t in perfect health, those who had “pre-existing conditions.”
Medicare uses only about 1-3 percent of the tax money it collects in for administrative costs, with the remaining 97-99 percent going to health-care providers. In contrast, only about three-quarters of the premiums private insurance companies collect go to providers. Obamacare tried to increase that proportion to 80-85 percent. The remainder goes not only for profits, but also for administering this profit-making system.
Health insurance premiums are high because we spend a lot on expensive health care services. This is why large employers, most of whom are self-insured, also struggle with high costs.
Insurance companies structure their policies to keep premiums as low as possible which is what people demand. The profit made is always relative to the claims paid. If the premium for a high deductible plan was the same as a low deductible he would have an argument, but that is not the case. In addition, to characterize health insurance as a high profit-making machine is misleading when in fact the profits are very similar to regulated utilities while the risks are higher year to year.
The Medicare administrative percentage is also misleading because all the costs for administering the program are not allocated directly and thus not counted in the percentage. But more important the low percentage also contributes to high levels of fraud and abuse. Medicare follows a pay and pursue policy that allows fraud to go undetected for decades. In addition, under the Medicare system there is little incentive for beneficiaries to care about fraud or abuse because there is little direct incentive for them to care about costs. Medicare pays a different type of claim with many being high cost and hospital based which skews the percentage.
He also fails to recognize that Medicare can’t function without supplemental coverage paid for by beneficiaries and the ability to pay at the level it does is only possible because the private sector absorbs the true costs and without that the health care system would be very different.
Large companies typically have some such plan, although usually only for their own full-time employees, not their part-time or temporary workers or their subcontractors’ employees. (Very small businesses usually find any such coverage too expensive.) The advantage of this way of providing insurance is that individuals can’t be denied coverage for pre-existing conditions. However, insurers charge companies premiums based on the general characteristics of their workforce, an incentive for employers to hire healthy, young workers.
The fact is large employers are mostly self-insured and there are no premiums. The insurance company or administrator is paid a fixed fee to manage claims and administration; there is no profit motive to not pay claims. About 70 million Americans have this type of coverage. The hiring process in large companies is totally independent and unrelated to the health benefits provided, there is no incentive in hiring as described above and to do so would be illegal. This professor apparently never heard of the ADA or other anti-discrimination laws.
Finally, the article makes the old argument about health care itself and the health outcomes compared with other countries in the world. This argument fails to recognize the differences in lifestyles, the size of the United States and the diversity of its population all of which are far different from other countries the size of Denmark or even European countries.