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 ChapterComments: pnhpnyc@igc.org

BEFORE HEALTH INSURANCE BEGAN…

• Health care 1% or less of GNP

• Out-of-pocket payment for physician care

• Charity and public hospital care

Before 1936

BEGINNINGS OF PRIVATE EMPLOYMENT-BASED HEALTH INSURANCE

• 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

1936 - 1965

LIMITED GOVERNMENT HEALTH INSURANCE

• 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

1965 - 1990

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*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.

Our Public System Covers Fewer, and Private Insurance Dominates

Source: F. Colombo and N. Tapay, Private Health Insurance in OECD Countries, OECD 2004

0

10

20

30

40

50

60

70

80

90

100

Pe

rce

nt

Population Covered by Public System

Private Health Insurance Percent of Total Cost

United States

How Does the U.S. Compare with Other Countries?

• We provide the same medical care • We use the same medical technologyBut…• 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

US Life Expectancy is Less than Many Other Countries

65

70

75

80

85

Un

ited

Sta

tes

Jap

an

Icela

nd

Sp

ain

Sw

itzerl

an

d

Au

stra

lia

Sw

ed

en

Italy

Can

ad

a

No

rway

Fra

nce

New

Zeala

nd

Au

stri

a

Neth

erl

an

ds

Fin

lan

d

Un

ited

Kin

gd

om

Germ

an

y

Lu

xem

bo

urg

Belg

ium

Gre

ece

Irela

nd

OE

CD

Po

rtu

gal

Den

mark

Ko

rea

Czech

Rep

ub

lic

Mex

ico

Po

lan

d

Slo

vak

Rep

ub

lic

Hu

ng

ary

Tu

rkey

Yea

rs

Source: OECD 2005

Un

ited

Sta

tes

…and its Infant Mortality is Higher

The US spends more, but our system doesn’t work well, and we aren’t happy with it.

Per Capita Spending

Overall System

Performance*Public

SatisfactionUnited States 1 17 14Austria 5 4 3Belgium 11 11 7Canada 9 14 12Denmark 7 16 1Finland 12 15 2France 3 1 6Germany 2 13 9Greece 17 6 17Ireland 14 10 8Italy 10 2 15Luxembourg 4 7 5Netherlands 8 8 4Portugal 16 5 16Spain 13 3 13Sweden 6 12 10United Kingdom 15 9 11

* World Health Organization, The World Health Report 2000Source: R.J.Blendon et al, Health Affairs, 2001

Ranking by:

Number of Uninsured Americans (Millions)

1980 1985 1990 1995 2000

45

40

35

30

25

20

Source: U.S. Census Bureau

Rising Number of uninsured

Playing Doctor? (cartoon)

U.S. Health Costs are 70% Greater than the Median of Other Countries

Un

ited

Sta

tes

Our Public Sector Alone Spends More than Other Countries:

Americans Pay for National Health Insurance but Don’t Receive It

$0

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

UK Sweden Germany Canada Norway U.S.

Public Expenditures Private Expenditures

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 $4,024 per year Family Coverage $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

Private health insurance - Employer-provided

- Individual

Public health insurance

• Medicare

• Medicaid

Uninsured

Million %

288 100.0%

174 60.5 % 160 55.6%

14 4.9%

72 25.0%

41 14.2%

31 10.8%

42 14.6%Source: National Center for Health Statistics, 2003

…BUT IT PAYS MUCH LESS THAN HALF THE COST

2004Personal Health ExpendituresPrivate Funds

• Private health insurance - Self-funded plans - Insurance company plans• Out-of-pockets payments• Other private fundsPublic Funds*• Medicare• Medicaid• Other public expenditures

$ Billion %$ 1,753 100%$ 965 54%

$ 658 37% $340 19% $318 18%$ 236 13%$ 70 4%$ 789 46%$ 309 18%$ 293 17%$ 187 11%

* Does not include tax subsidy for private insurance. See Woolhandler & Himmelstein, HealthAffairs 2002Source: 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

16.3%

19.9%

26.5%

3.1%

0%

10%

20%

30%

Medicare Non-Profit Blues CommercialCarriers

Investor-OwnedBlues

International Journal of Health Services 2005; 35(1): 64-90

Hospital Billing & AdministrationUnited States & Canada

Physicians' Billing & Office ExpensesUnited 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 includedSource: 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

1928 30

11 6

19

22 18

23

16

0

25

50

75

Total Less than

$35,000

$35,000–

$49,999

$50,000–

$74,999

$75,000

or more

Somewhat serious

Very serious

2127 31

1910

17

2019

15

13

0

25

50

75

Total Less than

$35,000

$35,000–

$49,999

$50,000–

$74,999

$75,000

or more

Somewhat seriousVery serious

38

50 48

33

21

38

4850

35

23

Percent Percent

Medical bills 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

2334 30

1611

25

32

20

31

23

0

25

50

75

Total Less than

$35,000

$35,000–

$49,999

$50,000–

$74,999

$75,000

or more

Somewhat worriedVery worried

1927 23

169

28

2627 38

28

0

25

50

75

Total Less than

$35,000

$35,000–

$49,999

$50,000–

$74,999

$75,000

or more

Somewhat worriedVery worried

48

66

5047

34

47

5250

53

38

Source: Commonwealth Fund Survey of Public Views of the U.S. Health Care System, 2006.

Percent worried they will not be able to pay medical bills in event of serious illness

Percent worried they will not get high-quality care when needed

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

1623 18 15

7

2323

21 2226

0

25

50

75

Total Less than

$35,000

$35,000–

$49,999

$50,000–

$74,999

$75,000 or

more

Somewhat serious

Very serious

Percent

3946

39 3833

Source: Commonwealth Fund Survey of Public Views of the U.S. Health Care System, 2006.

The US Health Care System! – Uwe Reinhardt

The U.S. Health Care System!The U.S. Health Care System!

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 under-insured who cannot afford adequate coverage

And Health Insurance Costs Keep Rising

Wall Street Journal, July 31, 2006

Health insurance premiums have risen faster than health care costs

US Health Costs Rise Faster than Other Countries’ Costs

Source: Health United States 2005, Natl. Center for Health Statistics

0

2

4

6

8

10

12

14

16

18

1960 1970 1980 1990 1995 2000 2004

Hea

lth

Co

sts

as

Per

cen

t o

f G

NP US

Canada

France

Germany

Japan

UK

Health Insurance is a Rising Share of Employment Benefits

Firms Shift Health InsuranceCosts 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

Less expensive17%

Better care9%

Employer changed*

74%

Employers Control their Choice: Reasons for Changing Health Plans

*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 treatmentNOT• Choice of health planToday’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

Source: Modern Healthcare, Aug. 1, 2005; PacifiCare was bought by UnitedHealth in December 2005

$0

$5

$10

$15

$20

$25

$30

$35

$40

$45

$50

Annual Revenue 2004 ($Billion)

…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 highout-of-pocket expenses

• One million households each year face health-related 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!

• 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.

Employer-Based Health Insurance System ‘Collapsing’

(Wall Street Journal, 7/17/06)

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 FAILThey 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 onincome, 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%

Federal Government

(existing)34%

Other8%

State and Local Govt (existing)

10%

Employee Payroll Tax (3.78%)

15%

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 costsCovering the uninsured and poorly-insured +7.2%Elimination of cost-sharing and co-pays +5.1%SavingsBulk purchasing of drugs & equipment -2.8%Reduced hospital administrative costs -1.9%Reduced physician office costs - 3.6%Reduced insurance administrative costs -5.3%Primary care emphasis & reduce fraud -2.2%Net Savings -4.3%Source: Health Care for All Californians Plan, Lewin Group, 2005

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”

62%

32%

6%

Source: Washington Post/ABC News Poll, 10/20/03

Current

Don’t know

Universal HealthInsurance

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.healthcare-NOW.org

• Citizens Health Care Working Group (US govt) www.citizenshealthcare.gov