What are we purchasing from the private plans?
Passing the Buck
By Paul Krugman
The New York Times
April 22, 2005
Isn’t competition supposed to make the private sector more efficient than the public sector? Well, as the World Health Organization put it in a discussion of Western Europe, private insurers generally don’t compete by delivering care at lower cost. Instead, they “compete on the basis of risk selection” - that is, by turning away people who are likely to have high medical bills and by refusing or delaying any payment they can.
Yet the cost of providing medical care to those denied private insurance doesn’t go away. If individuals are poor, or if medical expenses impoverish them, they are covered by Medicaid. Otherwise, they pay out of pocket or rely on the charity of public hospitals.
So we’ve created a vast and hugely expensive insurance bureaucracy that accomplishes nothing. The resources spent by private insurers don’t reduce overall costs; they simply shift those costs to other people and institutions. It’s perverse but true that this system, which insures only 85 percent of the population, costs much more than we would pay for a system that covered everyone.
Think about how crazy all of this is. At a rough guess, between two million and three million Americans are employed by insurers and health care providers not to deliver health care, but to pass the buck for that care to someone else. And the result of all their exertions is to make the nation poorer and sicker.
Why do we put up with such an expensive, counterproductive health care system? Vested interests play an important role. But we also suffer from ideological blinders: decades of indoctrination in the virtues of market competition and the evils of big government have left many Americans unable to comprehend the idea that sometimes competition is the problem, not the solution.
http://www.nytimes.com/2005/04/22/opinion/22krugman.html?hp
Comment: The debate today rages on as to whether we want to build on the current system, or replace it with a single, universal system. But why would we continue to support an industry that is consuming ever more of our health care dollars when its primary function is to devise methods of shifting the funding of health care from the insurance risk pool to patients and taxpayers? We are paying for a complex and expensive administrative system designed specifically to defeat the function that is the reason for its existence: pooling risk.
To quote further from Krugman’s article: “According to the (World Health Organization), the higher costs of private insurers are ‘mainly due to the extensive bureaucracy required to assess risk, rate premiums, design benefit packages and review, pay or refuse claims.’ Public insurance plans have far less bureaucracy because they don’t try to screen out high-risk clients or charge them higher fees.”
Why then are we even considering the option of expanding our current system? It’s broken beyond repair. Installing a new universal system would be cheaper and more effective. And we would all be healthier, both physically and financially.