Death of the Health Insurance Industry

(or death of the way things are currently done)



by

Contributor Rebecca Stamm

With presidential elections looming, the debate on healthcare reform is once again in the headlines. Every candidate has their opinion and their ideas of how to reform the system.

American citizens want to be able to choose a doctor they can trust and respect; they also want coverage that is adequate and affordable. With premiums rising between 13-25 % per year, our current system is incapable of providing that. But to understand the debate about reform you need to have some knowledge of the terminology that is being used in these debates. There are a few different systems that are currently being discussed. The first, Private Insurance, is the system that we are on now. The second, Socialized Medicine, is a system where the doctors and the hospitals work directly for the government and are paid by the government. This system is similar to the VA. Another, National Health Insurance or Single Payer, is a system that is managed by the public and the services provided remains in the private sector.

Our current system of spending more for lower quality has left 46 million uninsured and 50 million more with insufficient coverage. Those 96 million people are hard working middle class citizens. Lower income citizens are cared for through Medicare/aid and the higher income citizens can afford to purchase a decent plan. Private insurance has proven itself to be an ineffective means of providing care. They waste money on outrageous executive salaries, they have to worry about profit margins for the stockholders, they maintain very expensive sales and marketing departments, and there is overhead to run the company. Private insurance knowingly drives up the cost for the consumer, while forcing the provider to lower the cost of their services, and pocketing the difference.

Hospitals are forced to maintain a costly administrative staff to deal with the bureaucracy created by the insurance industry. All of these problems (and many more) are eating up a third of the money we spend on healthcare. We spend two times as much on our healthcare (about $7,000 per capita) than other developed nations. In short, the insurance industry is responsible for using up a whopping 30% of our healthcare dollars.

Private insurance has also created much of the mess that is associated with Medicare/aid. Healthy people use very little of the premiums that they pay in and that helps to pay for the sick people. Insurance companies cherry pick the healthy patients and provide them with coverage. Once they become sick, the patients’ premiums sky rocket and they drop out of the plan. This leaves programs like Medicare/aid to cover only the sick people and creates huge deficits in their budgets.


Single payer national insurance will solve these problems. Representatives Kucinich (D-OH), Conyers (D-MI), and McDermott (D-WA) are working on a bill, HR 676, which provides America with an intelligent solution to our health care crisis. The proposal provides all American citizens with a comprehensive medical plan which includes primary and preventative care, inpatient/outpatient services, ER services, prescription drugs, long term care, mental health services, dental coverage (excepting cosmetic), hearing, and vision coverage. It even provides for substance abuse treatments and chiropractic services. There are no deductibles, co-pays or other out of pocket expenses. This plan is also portable and will allow you to see any doctor anywhere in the United States.

It sounds good so far but many will raise the question of how we will pay for such a plan. We all know that nothing is free. The good news is that the majority of the funding is already there. Right now we pay 64% of healthcare costs through our taxes. Those funds cover citizens that are on Medicare/aid, the VA, public employees, and teachers, elected officials, the military, and tax subsidies to employers for offering insurance to employees. The citizens are currently paying 17% for healthcare out of their pockets. Employers that offer insurance pay 19% of the cost out of their profits. In fact, 25% of their payroll is dedicated to the cost of health care.

Under a single payer system, we will be saving the $350 billion dollars wasted by the insurance industry per year. Along with those savings, the payroll taxes for employers will be reduced to about 7% saving them 12% of their profits. Citizens will contribute about 2% of their payroll taxes. The plan actually gives the average citizen a 10% raise. They will increase taxes on personal income for the top 5% of income earners, and place a small tax on stock and bond transactions to accommodate for any differences in funding.

The plan will not affect a doctor’s income. There will be reduced malpractice costs and overhead to run their offices. Licensed practitioners will be paid a fee based on the service that they provide. Some physicians will be paid a salary. Hospitals will be given a budget that will be determined by the regional, state, and national board. The plan will be managed by the National Board of Universal Quality and Access, and will be comprised of elected officials with extensive knowledge of the health care industry.


Private insurance will be allowed to cover anything that the national plan doesn’t. It will, under no circumstances, be allowed to compete with the national plan. Competition from private insurers will create a deficit of healthy people in the national plan. This deficit will cripple the plan and we’ll end up back at square one. The only thing that the current bill doesn’t provide for is the retraining and placement of those currently working in the private insurance sector. This is a serious flaw that will need to be considered before the bill is passed.

Whether we like it or not, the government is determined to overhaul our system of delivering healthcare in this country. There are a number of ideas being proposed that could be devastating to the average middle class family. You have to ask yourself if you want a system like Gov. Mitt Romney’s (R-MA) and Gov. Arnold Schwarzenegger’s (R-CA) that forces citizens into expensive policies that are written by insurance companies. These policies will cost a single person $4,000 per year with a $2,000 deductible including co-payments. This law will fine people a $1,000 and up for not purchasing a plan they’re unable to afford. When you consider that the median income is around $29,000 per year, the cost of a policy like this will be devastating to hard working Americans.

There is little to no regulation written into these types of bills to stop the insurance companies from basing the cost of coverage on risk factors. So, future costs are guaranteed to skyrocket. Is this a plan that will help the citizens or is this a plan that will only serve to make the insurance company stock holders wealthier? With plans like this, we’re still forcing Americans to choose between their health and other basic necessities. A single payer program means death to the insurance industry and I’m grabbing my shovel.

They’ve had a nice run but all profitable things may end. Let's just hope they made enough money to retire gracefully. It’s time to seriously consider a single payer plan. It’s time to consider HR 676.

Sources:
Physicians for a National Health Program
House of Representatives Bill 676
Who's Afraid of Corporate Medicine?