How Not to Fix Obamacare: Part 1

The Kamakaze Mission

In my editorial published September 26, 2013 I characterized the Republican attack on the (then pending) ACA or Obamacare as a “kamikaze mission” because of course the fate of the pilots is the same whether or not they succeed in blowing up Obamacare.  Now we get to see how that plays out.  While Obamacare has substantially reduced the number of uninsured, it has had little effect on the overall cost of healthcare at around 18% of GDP, which is expected to rise with the aging baby-boomer population.  The fact is that healthcare costs in the U.S. have risen far faster than inflation over the last fifty years (not just since Obamacare) while other wealthy nations provide the comparable or better health care at half the cost.  Of 17 high-income countries studied by the National Institutes of Health in 2013, the United States had the highest or near-highest prevalence of obesity, car accidents, infant mortality, heart and lung disease, sexually transmitted infections, adolescent pregnancies, injuries, and homicides. On average, a U.S. male can be expected to live almost four fewer years than those in the top-ranked country.  A 2014 survey of the healthcare systems of 11 developed countries found the US healthcare system to be the most expensive and worst-performing in terms of health access, efficiency, and equity.  The only conclusions we can draw from this is up to half of cost of health care  in the U.S. is a result of waste and somebody’s getting richer at our expense.  And from the number of wrong-headed ideas I’m hearing out of Washington, Congress remains oblivious to the back-door deals creating this waste.

Let the insurance company do it’s job

For example, Kentucky Senator Rand Paul in explaining his plan to replace Obamacare says, “There’s no reason why (a business owner) with four employees shouldn’t be able to join with hundreds and hundreds of other businesses that are small to become a large entity to get leverage to bring your prices down.” Paul is a physician and I’m sure he knows medicine, but he doesn’t know insurance.  I’m sure the arguments the insurance lobby gave him for letting them contract with such groups were very convincing; I’ve heard them all.

As someone who spent 30 years in insurance and served as COO of an insurance company I can tell you, “There’s no reason why (a business owner) with four employees should have to join with hundreds and hundreds of other businesses that are small to become a large entity to get leverage to bring your prices down.” It makes no more sense than saying the only way to get affordable homeowner’s coverage is to join with hundreds and hundreds of other homeowners to become a large entity to get leverage to bring your prices down.”

If we could do that we wouldn’t need insurance.

Using the law of large numbers to spread the risk is the health insurance company’s job, not ours.

Spread the risk, not the profits

Now it is true that small businesses pay a lot more per employee for health insurance, but it’s doesn’t have anything to do with spread of risk as they would have you believe.  This is just another in a long line of potentially deleterious bills pushed through Congress by a strong lobby.  It’s all about a maze of contracts to stifle competition, to control prices, to take advantage of tax loopholes and build mutually advantageous partnerships with everybody but the consumer.

We have become just an afterthought in the process.

You probably know that health insurance companies often contract with employers as the buyers, with doctors, clinics and hospitals as payee “networks” and with pharmaceutical and medical supply companies as vendors.  You probably know these “deals” produce inefficient and unexpected results like not being able to choose your doctor (long before Obamacare), like hospitals billing uninsured patients more than insured patients or like having doctor’s recommendations overruled by the insurance company just to name a few.  And as we know from reading the “Art of the Deal” the deal is closed only when both contracting parties see a financial gain to be had and since we have no seat at the bargaining table it’s a good guess that we are often the big loser.  Any other industry caught making thousands of side-deals to lock in customers, prices and product would likely be prosecuted under antitrust laws.  Extensive use of contracts can create monopolistic interests between parties as strong as any merger.

There’s nothing wrong with the Affordable Care Act that can’t be fixed by rooting out the excesses buried in these contracts. 

Trump has said as much when he promised that everyone will be insured and will get to keep so many of its benefits.  In his recent interview with the Washington Post he said, “This includes insurance for everybody that will encompass great health care …in a much simplified form.  Much less expensive and much better …lower numbers, much lower deductibles.”

If President Trump stays in form, he will call for a meeting with health insurance executives to get us a better deal. So before we go adding to the list of under-the-table deals okayed by Congress,

the President should demand proof  that all of these existing contracts produce tangible benefits for the consumer. 

Kill the deals that are bad for everyone

If not we should repeal or renegotiate these. The kicker is as bad as these contracts have been for the economy and the American consumer; they are very expensive for the health insurance companies themselves. These deals, originally designed to squeeze out small competitors have long ago accomplished that goal.  But now, caught in their own trap, they have to keep making more and more deals just to fend off competition.