WHO NEEDS INSURANCE
COMPANIES ANYWAY?
or
“Get the insurance companies out of
my health care”
Leonard Rodberg, PhD
Physicians for a National Health Program
New York Metro Chapter
Comments: pnhpnyc@igc.org
BEFORE HEALTH
INSURANCE BEGAN…
Before 1936
• Health care 1% or less of GNP
• Out-of-pocket payment for physician care
• Charity and public hospital care
BEGINNINGS OF PRIVATE
EMPLOYMENT-BASED
HEALTH INSURANCE
1936 - 1965
•
•
•
•
Blue Cross is formed in 1936; Blue Shield in 1946
WW II: health benefits linked to employment
IRS rules employer contributions tax deductible
Commercial life insurance companies begin
selling health insurance to employers
LIMITED GOVERNMENT
HEALTH INSURANCE
1965 - 1990
• Rising cost of medical care due in part to
innovations in medical technology and drugs
• Medicare for those over 65 years
• Medicaid for the poor
• U.S. remains the only industrialized nation
without universal access to health care
DOMINANCE OF FOR-PROFIT
HEALTH INSURANCE
•
•
•
•
1990 – present
Experience-rated premiums (where the sick pay
more) dominate the market
Expansion of for-profit managed care companies
Managed care restricts access and maintains profits
Non-profit Blue Cross plans convert to for-profit
companies
EXPANSION OF UNIVERSAL
HEALTH INSURANCE
•
•
•
•
•
•
•
•
•
•
1883 - Germany
1911 – Switzerland
1935 – United States*
1938 -- New Zealand
1945 – Belgium
1945 -- France
1946 – United Kingdom
1947 – Sweden
1948 – United States*
1961 – Greece
•1961 – Japan
•1966 – Canada
•1973 – Denmark
•1974 – Australia
•1978 – Italy
•1979 – Portugal
•1986 – Spain
•1994 – United States*
•1996 – South Africa
•2002 – Taiwan
* Proposed by the President. Strong public support for the principle. Failed in Congress.
None of these countries rely on private,
for-profit insurance companies.
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U
Percent
Our Public System Covers Fewer,
and Private Insurance Dominates
100
90
80
Population Covered by Public System
70
Private Health Insurance Percent of Total Cost
60
50
40
30
20
10
0
Source: F. Colombo and N. Tapay, Private Health Insurance in OECD Countries, OECD 2004
How Does the U.S. Compare
with Other Countries?
• We provide the same medical care
• We use the same medical technology
But…
• We have large numbers of uninsured
• We spend much more
• We remain the only major country that
builds its health care system around private
for-profit insurance companies.
Hospital Inpatient Days Per Capita
Physician Visits Per Capita
Bone Marrow Transplants
MRI Units/Population
CT Scanners per million population 2002
65
Source: OECD 2005
Turkey
Hungary
Slovak Republic
Poland
Mexico
Czech Republic
Korea
Denmark
Portugal
OECD
Ireland
Greece
Belgium
Luxembourg
Germany
United Kingdom
Finland
Netherlands
Austria
New Zealand
France
Norway
Canada
Italy
Sweden
Australia
Switzerland
Spain
Iceland
Japan
United States
United States
Years
85
US Life Expectancy is Less than
Many Other Countries
80
75
70
…and its Infant Mortality is Higher
The US spends more, but our system doesn’t
work well, and we aren’t happy with it.
Ranking by:
United States
Austria
Belgium
Canada
Denmark
Finland
France
Germany
Greece
Ireland
Italy
Luxembourg
Netherlands
Portugal
Spain
Sweden
United Kingdom
Per Capita
Spending
1
5
11
9
7
12
3
2
17
14
10
4
8
16
13
6
15
Overall
System
Performance*
17
4
11
14
16
15
1
13
6
10
2
7
8
5
3
12
9
Public
Satisfaction
14
3
7
12
1
2
6
9
17
8
15
5
4
16
13
10
11
* World Health Organization, The World Health Report 2000
Source: R.J.Blendon et al, Health Affairs, 2001
Number of Uninsured Americans (Millions)
45
40
Rising Number of uninsured
35
30
25
20
1980
1985
1990
1995
2000
Source: U.S. Census Bureau
Playing Doctor? (cartoon)
United States
U.S. Health Costs are 70% Greater
than the Median of Other Countries
Our Public Sector Alone Spends
More than Other Countries:
Americans Pay for National Health
Insurance but Don’t Receive It
Public Expenditures
Private Expenditures
$6,000
$5,000
$4,000
$3,000
$2,000
$1,000
$0
UK
Sweden
Germany
Canada
Norway
U.S.
OECD and “Paying for National Health Insurance—And Not Getting It”
Health Affairs: July / August 2002
THE COST OF CARE CREATES
HEALTH PROBLEMS AS WELL AS
FINANCIAL PROBLEMS
• In nearly 3 in 10 (29%) households, someone skips
a medical treatment, cuts pills, or does not fill a
prescription because of cost
• Nearly 1 out of 4 (23%) Americans have problems
paying medical bills
• More than 1 in 5 (21%) Americans had an overdue
medical bill at the time of a 2004 survey
• 1 million people experience medical bankruptcy
each year
Health Care Costs Survey, USA Today/Kaiser Family Foundation/Harvard School
of Public Health, August 2005; D. Himmelstein et al, Health Affairs, 2005
HIGH COST OF HEALTH
INSURANCE PREMIUMS
National Average for Employer-provided Insurance
Single Coverage
Family Coverage
$4,024 per year
$10,880 per year
Note: Annual income at minimum wage = $10,300
Annual income of average Wal-Mart worker = $17,114
Source: Kaiser Family Foundation/HRET Survey, 2005
CONNECTING THE DOTS:
So why do we spend so much and have so
many uninsured?
It’s the insurance companies!
Only the U.S. relies on private for-profit
insurance companies, the most inefficient,
ineffective, inequitable way to pay for health
care.
THE MAJORITY OF AMERICANS
HAVE PRIVATE INSURANCE …
Total Population
Million
288
%
100.0%
Private health insurance 174
60.5 %
- Employer-provided
- Individual
Public health insurance
• Medicare
• Medicaid
Uninsured
55.6%
4.9%
25.0%
14.2%
10.8%
14.6%
Source: National Center for Health Statistics, 2003
160
14
72
41
31
42
…BUT IT PAYS MUCH LESS THAN
HALF THE COST
2004
Personal Health Expenditures
Private Funds
$ Billion
$ 1,753
$ 965
• Private health insurance
$ 658
- Self-funded plans
- Insurance company plans
• Out-of-pockets payments
• Other private funds
Public Funds*
• Medicare
• Medicaid
• Other public expenditures
$
$
$
$
$
$
$340
$318
236
70
789
309
293
187
%
100%
54%
37%
19%
18%
13%
4%
46%
18%
17%
11%
* Does not include tax subsidy for private insurance. See Woolhandler & Himmelstein, HealthAffairs 2002
Source: Centers for Medicare and Medicaid Services, 2006
A PUZZLE:
If private insurance pays for such a
small portion of the total, how can it
be responsible for the high cost of
our system?
THE ANSWER:
Reliance on private insurance companies
accounts for 20% or more of total health care
spending due to:
• Insurance company profits, marketing, and
overhead costs, and
• Wasteful billing and administrative burdens
imposed on the entire system.
CEO’S COMPENSATION 2004
Note: Total Pay=Salary+Stock Options
Source: Modern Healthcare, Aug. 1, 2005; NYTimes, Apr. 3, 2005
Private Insurers’ High Overhead
30%
26.5%
19.9%
20%
16.3%
10%
3.1%
0%
Medicare
Non-Profit Blues
Commercial
Carriers
International Journal of Health Services 2005; 35(1): 64-90
Investor-Owned
Blues
Hospital Billing & Administration
United States & Canada
Physicians' Billing & Office Expenses
United States & Canada
Billing and Insurance Costs
Account For More Than 20% of
All Health Care Costs
BIR = Billing- and insurance-related costs; profit and marketing costs
not included
Source: James G. Kahn et al, The Cost of Health Insurance Administration in California: Estimates for
Insurers, Physicians, and Hospitals, Health Affairs, 2005
Half of Middle- and Lower-Income Adults Experience Serious
Problems Paying Medical Bills or Insurance Premiums
Percent
75
Percent
75
Somewhat serious
Somewhat serious
Very serious
Very serious
50
50
38
25
22
48
18
50
23
19
30
21
25
16
11
0
Total
38
33
19
28
48
6
Less than
$35,000–
$50,000–
$75,000
$35,000
$49,999
$74,999
or more
Medical bills
20
50
19
17
21
35
15
27
23
13
31
19
10
0
Total
Less than
$35,000–
$50,000–
$75,000
$35,000
$49,999
$74,999
or more
Health insurance
Source: Commonwealth Fund Survey of Public Views of the U.S. Health Care System, 2006.
Worries About Affordability and Access to High-Quality Care
Spreading to Middle-Income Families
Percent worried they will not be able to
pay medical bills in event of serious illness
75
50
66
48
32
Somewhat worried
Very worried
50
47
50
34
25
28
23
23
47
26
31
34
Somewhat worried
Very worried
75
52
20
25
Percent worried they will not get
high-quality care when needed
27
53
38
38
25
28
30
16
50
19
11
27
23
16
9
0
0
Total
Less than
$35,000–
$50,000–
$75,000
$35,000
$49,999
$74,999
or more
Total
Less than
$35,000–
$50,000–
$75,000
$35,000
$49,999
$74,999
or more
Source: Commonwealth Fund Survey of Public Views of the U.S. Health Care System, 2006.
Insurance Complexity: Two of Five Adults Report Having to
Spend Time on Paperwork or Disputes Related to Medical
Bills and Health Insurance in the Past Two Years
Percent
75
Somewhat serious
Very serious
50
25
46
39
23
16
23
23
39
38
21
22
26
18
15
Less than
$35,000–
$50,000–
$75,000 or
$35,000
$49,999
$74,999
more
0
Total
33
Source: Commonwealth Fund Survey of Public Views of the U.S. Health Care System, 2006.
7
The
U.S.
Health
Care
System!
The US Health Care System! –
Uwe Reinhardt
Source: Uwe Reinhardt, Ph.D., Princeton University
PROBLEMS CREATED BY PRIVATE
HEALTH INSURANCE #1
High cost
• Excessive administrative costs
• System complexity
And, as a direct consequence of high cost,
• Large numbers of uninsured and underinsured who cannot afford adequate coverage
And Health Insurance Costs Keep Rising
Health insurance premiums have
risen faster than health care costs
Wall Street Journal, July 31, 2006
US Health Costs Rise Faster than
Other Countries’ Costs
18
US
Health Costs as Percent of GNP
16
Canada
14
France
Germany
12
Japan
UK
10
8
6
4
2
0
1960
1970
1980
1990
1995
2000
Source: Health United States 2005, Natl. Center for Health Statistics
2004
Health Insurance is a Rising
Share of Employment Benefits
Firms Shift Health Insurance
Costs to Workers
A Declining Number of Firms
Are Offering Insurance…
And Small Businesses Especially
Can’t Afford to Offer Insurance
PROBLEMS CREATED BY PRIVATE
HEALTH INSURANCE #2
Failure to control costs
Continuing double-digit annual cost increases
Costs cannot be controlled in a for-profit
multi-payer system that resists
coordination, budgeting, and planning.
CLAIMS BY HEALTH INSURANCE
COMPANY SUPPORTERS
Private health insurance gives consumers:
• Greater choice
• Efficiency through competition
Most Employers Offer Only One Plan
Many With Insurance Lack
Choice
42% Are Offered Only 1 Plan
Employers Control their Choice:
Reasons for Changing Health Plans
Employer
changed*
74%
Less expensive
17%
Better care
9%
*Changed job, or employer changed plan offerings
Source: Health Affairs 2000; 19(3):158
Some Choices Don’t Really Matter!
The Choice that People Really
Want:
• Choice of doctor
• Choice of treatment and location of treatment
NOT
• Choice of health plan
Today’s managed care plans limit the patient’s
choice of doctor, treatment, and location.
The only choice they offer is:
How much freedom from our limits are you
willing to pay for?
The Health Insurance Industry is
Highly Concentrated
$50
$45
Annual Revenue 2004 ($Billion)
$40
$35
$30
$25
$20
$15
$10
$5
de
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e
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ig
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et
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er
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Source: Modern Healthcare, Aug. 1, 2005; PacifiCare was bought by UnitedHealth in December 2005
…And the Concentration is Growing
• Between 1995 and 2005, there were more
than 400 mergers involving health insurers
and managed care organizations.
• In 95% of metropolitan areas, a single
insurer had 30% or more of the market
• In 56% of the areas, a single insurer had
50% or more of the market.
Source: Competition in Health Insurance: A Comprehensive Study of US Markets,
American Medical Association, 2005.
THE TRUTH ABOUT HEALTH
INSURANCE COMPANY CLAIMS
They fail to provide real choice or competition
• Many employees have no choice of plan
• Many employers change plans
• People want choice of provider, not plan
• Competition is declining through mergers
OTHER PROBLEMS CREATED BY
PRIVATE HEALTH INSURANCE
• Financing by income-independent (and often
unaffordable) premiums is highly regressive
• Millions have inadequate coverage and high
out-of-pocket expenses
• One million households each year face healthrelated bankruptcy
• The “hassle factor: Filing of claims by
consumers is confusing, costly, stressful
• Claims are often denied or delayed
STILL MORE PROBLEMS CREATED BY
PRIVATE HEALTH INSURANCE
• Insurers avoid covering those who are sick
(underwriting or risk selection)
• Insurance companies interfere in physician
decision-making
• Trust in the doctor-patient relationship erodes
• Money is spent on treatment, not prevention
• Health care is treated as a commodity to be
purchased rather than a service to be provided
THE ULTIMATE PROBLEM
“Physicians have a professional and ethical
obligation to their patients; health insurers’
primary legal obligation is to their
shareholders.”
Competition in Health Insurance: A Comprehensive Study
of US Markets, American Medical Association, 2005
(Note: Perhaps now the AMA will reconsider its support for private
for-profit insurance over publicly-provided insurance plans.)
This Familiar Headline is Wrong!
Employer-Based Health Insurance System ‘Collapsing’
(Wall Street Journal, 7/17/06)
• It is not the employer-based system that is
collapsing -- it is the unaffordable and
inefficient private insurance system.
• U.S. employers should contribute their fair share,
but not through private insurance.
• Many countries use employer-supported non-profit
industry-based sickness funds – and they
achieve universal coverage with lower cost.
SOME PROPOSALS BASED ON
PRIVATE INSURANCE
•
•
•
•
Employer mandate to provide insurance
Individual mandate to purchase insurance
Tax credits for the purchase of insurance
Health savings accounts and high-deductible
insurance (“Consumer-directed health care”)
ALL OF THESE WILL FAIL
They are more of the same:
They all rely on private health insurance
WHAT’S WRONG WITH THE
ME/MA/VT PLANS
What is really wrong with these plans is not their
details. The problem with them is:
They continue to rely on private insurance.
• Covering the uninsured with private insurance
will increase the cost of health care.
• Costs will continue to rise as long as there are
multiple private payers with no coordination, no
budgeting, and no planning.
SO WHO NEEDS INSURANCE
COMPANIES ANYWAY?
The U.S. today runs a very successful program that
• Pays for comprehensive health services
• Covers more than forty million people
• Gives patients free choice of doctors and hospitals
• Is funded by a public agency, not by private
insurance companies
It’s called Medicare.
THE EVIDENCE FROM MEDICARE
Since 1997, the US has conducted a head-to-head
comparison between private insurance (“Medicare
Choice+”, now called “Medicare Advantage”) and
“public” Medicare.
The result:
• Private insurance companies require a subsidy of at
least 15% just to stay in the business.
• Fewer than 1 in 6 Medicare-eligibles choose the
private insurance option.
Medicare Coverage is Better than
Private
SO HERE’S OUR
SOLUTION:
• Expand Medicare to cover everyone
• Improve the coverage it offers
• Eliminate private insurance
Expanded and Improved
Medicare for All
Conyers Bill - HR 676
-- The “single payer” solution --
HOW WOULD “MEDICARE FOR
ALL” WORK?
• Everyone would receive a Medicare card
assuring payment for all needed care
• Complete free choice of doctor and hospital
• Doctors and hospitals remain independent,
negotiate fees and budgets with Medicare
• Progressive taxes go to Medicare Trust Fund
• Public agency processes and pays bills
SOME IMPLICATIONS OF
MEDICARE FOR ALL
• The same coverage for everyone: No means
testing; coverage would not depend on
income, employment or age
• Medicaid would no be longer needed
• Hundreds of billions of dollars in
administrative costs would be saved
• Costs would be controlled through capital
planning and quality reviews conducted
through the single insurer
How Would It Be Paid For?
One Example:
Revenue Sources for
Single Payer Program
Employer Payroll
Tax (8.17%)
33%
Employee Payroll
Tax (3.78%)
15%
Federal
Government
(existing)
34%
Other
8%
State and Local
Govt (existing)
10%
Note: Payroll tax on incomes above $7,000 and below $200,000 only.
Source: Health Care for All Californians Act: Cost and Economic Impacts Analysis, The Lewis Group, January 19, 2005
Covering Everyone and Saving Money
through Medicare for All
Additional costs
Covering the uninsured and poorly-insured
Elimination of cost-sharing and co-pays
Savings
Bulk purchasing of drugs & equipment
Reduced hospital administrative costs
Reduced physician office costs
Reduced insurance administrative costs
Primary care emphasis & reduce fraud
Net Savings
Source: Health Care for All Californians Plan, Lewin Group, 2005
+7.2%
+5.1%
-2.8%
-1.9%
- 3.6%
-5.3%
-2.2%
-4.3%
WHY IS SUCH A NATIONAL HEALTH
PROGRAM POSSIBLE TODAY?
• Private insurance is not addressing the fundamental
problems of cost, choice, access and quality.
• Everyone is affected: the uninsured, the
underinsured, and everyone else who is
insecurely insured.
• Employers who provide insurance want to be relieved
of the burden of rising costs and unfair competition
from employers who don't offer insurance.
• Small businesses want to offer insurance to their
employees but can’t afford it.
• Every other industrialized country has done it.
“Would you prefer the current system or Universal
Health Insurance…like Medicare…run by
Government…financed by Taxpayers”
Don’t know
6%
Current
32%
Universal
Health
Insurance
62%
Source: Washington Post/ABC News Poll, 10/20/03
PHYSICIANS FOR A NATIONAL
HEALTH PROGRAM (PNHP) says:
Who needs insurance companies anyway?
• Limited reforms that keep private insurance in place
have been tried and failed.
• If we get rid of the insurance companies, we can have
a Medicare for All system that is:
- Simpler
- Less costly
- Better for our health
- Equitable, and
- Covers everyone
Let’s do it!
RESOURCES
• Physicians for a National Health Program
(PNHP) www.pnhp.org
• PNHP New York Metro Chapter
www.pnhpnyc.org.
• Rekindling Reform
www.rekindlingreform.org
• HealthCare-NOW www.healthcareNOW.org
• Citizens Health Care Working Group (US
govt) www.citizenshealthcare.gov