Insurance fox guards henhouse of Obamacare

By Jonathan D. Walker, M.D.
The Journal Gazette (Fort Wayne, Ind.), April 26, 2013

Something worrisome just happened in Washington, but hardly anyone has noticed. The occurrence was a striking example of lobbyists exerting influence over our government and winning a profound victory for an industry we don’t need.

Most people don’t spend much time thinking about Medicare. If they do, they probably think of it as some old government insurance system that is too expensive. But the truth is that Medicare can be remarkably efficient. It has served as a model for health care systems in other countries. People eligible for it are much less likely to worry about their health and their money than the rest of us. Of course, Medicare could also be much better, but special-interest groups work hard to prevent improvements from being made. For instance, Medicare is the only health insurance on the planet forbidden to bargain over drug prices thanks to lobbying by the pharmaceutical industry.

However, Medicare’s problems go deeper. Americans have an ingrained attitude that for-profit entities can do things much better than the government, but numerous studies suggest that for-profit insurance companies cannot live up to this. They have too many expenses and they don’t have the market power to control costs. Plus, their business model demands that they do whatever they can to avoid paying for sick people – which is why you are now facing higher deductibles along with more restrictive networks and costlier premiums.

Yet politicians continue to insist that for-profit companies are better, and for that reason they created Medicare Advantage. Medicare Advantage plans are simply Medicare plans run by companies such as Humana and WellPoint but paid for by the taxpayers. Unfortunately, those plans have always cost more to cover people than standard Medicare. Because private insurance companies add so much bureaucracy and complexity, greater costs are inevitable.

We pay these companies on average about 14 percent more to do what Medicare already does. Then we pay an additional 14 percent on top of that because those companies are very good about adding more “diagnoses” to make their patients seem sicker. They get 28 percent more revenue for giving us extra hassles and less service than standard Medicare.

But if you are older than 65 and a smart shopper, these plans can offer you a great deal. Those extra taxpayer dollars allow the company to give you perks and still make a handy profit. If you have a Medicare Advantage plan that hasn’t abused you yet, you need to thank everyone around you who is younger than 65 for paying for your good fortune.

Multiple sources have shown that the Medicare Advantage program is a waste of money, including the Medicare Payment Advisory Commission (Congress’ advisory body on Medicare payments), the Congressional Budget Office and the Government Accountability Office. In fact, the one part of Obamacare that everyone agreed with was a plan to cut back on payments to those plans. But the for-profit companies rallied their lobbyists, and they were able to reverse the cut. And last week the private insurance companies were able to get the government to actually increase their payments by an additional 3.3 percent. A program that adds costs and creates more confusion is being rewarded with more money because we think it is better even when it isn’t.

And that is the real problem. Our gut tells us that for-profit companies have to be better, and those companies leverage that feeling to extract money from us. As we move forward into the new world of Obamacare, we need to keep that in mind. Those companies designed the basic principles of Obamacare – the mandate, subsidies and exchanges. A former WellPoint executive even helped draft the law, and back in 2009 Business Week announced that those companies had been able to get exactly what they wanted.

Obamacare actually has some great features, but it is also going to bring complexity, costs and confusion. We need to remember that all those things exist because we feel on a visceral level that for-profit companies can do things better. So much so that, rather than having a public option to buy Medicare, we handed over control of the new law to companies that avoid paying for our health care in order to make money. And they are so good at working the system that they were able to convince our government to pay even more to perpetuate a program that just plain doesn’t work.

Dr. Jonathan D. Walker is an assistant clinical professor at Indiana University School of Medicine in Fort Wayne. He wrote this for The Journal Gazette.