Private for-profit health insurance is a significant factor in our high medical costs in this country. The reasons are many, but one is externalization of their internal contradiction. In order to enhance and preserve their profits, insurance companies have to go to great lengths to avoid people who are already sick, examine claims in detail to see if they can be legally avoided, and rescind coverage for some people who get sick after taking out a policy.

In addition, insurance companies impose costs on health providers by making them submit precise and detailed paperwork to assist them in the weeding-out, avoidance and rescission processes.

In total, the private insurance system imposes an overhead burden on the entire system of 31% of each premium dollar.

Often these discussions devolve into exchanges involving “evil” insurance companies. They are not evil. They are merely doing what the market demands of them.

Three insurance executives were held in a submissive posture before a House Subcommittee and asked about the policy of rescinding coverage for people who take out policies when healthy and then get sick. (Often these people have lied about preexisting conditions, but that too is a rational response to market forces.) In a powerful act of grandstanding, the executives were lectured on the cruelty of the rescission process, and they agreed that it was indeed distasteful. They were asked if they would stop doing it. They said no. They would not.

They can’t. They can’t stop doing anything they do. The market will not allow it.

Say, for example, Dennis Kucinich leaves office and becomes CEO of Unitedhealth (NYSX: UHS). He immediately announces that Unitedhealth will no longer reject coverage for people with preexisting conditions. There’s a flood of new business for Unitedhealth. Unfortunately, the business is comprised of sick people, and Unitedhealth ends up paying far more in claims than they receive in premiums. Profits are reduced, investors become unhappy and begin unloading the stock, and the market price plunges. Investors who had hedged or borrowed on Unitedhealth stock are at an extreme disadvantage. Margin calls go out.

Kucinich is assassinated fired.

Health insurance companies cannot leave the pack. They must behave as the worst actors behave. Otherwise, they are at a competitive disadvantage. Even supposed “not-for-profit” insurers, like some Blue Crosses and Kaiser Permanente, have to follow the practices of the worst actors. Otherwise they cease to exist.

There’s nothing wrong with the behavior of the people who run and work for the health insurance companies. They have to do what they do. Even if they got together and agreed to behave in more socially conscious way, there would always be one who went for the gold and undercut the others

People who work for large organizations are not free human beings. They are occupants of slots in a machine, and must behave as the machine dictates.

This is why I often say that private for-profit health insurance is incompatible with health care. Provision of care undermines profitability. The market cannot do a good job of providing health insurance. It can’t even though it is loaded with good people.

Every other industrialized country has figured this out. But, as always, the United States is exceptional.

My mother was diagnosed with a form of skin cancer. Her doctor decided to treat it by applying Aldara cream over a period of time. 24 tubes of the cream cost $658.50.

Mom’s Medicare D provider, Humana, refused to cover the claim. I got a letter of medical necessity from Mom’s doctor, and then spoke to a Humana representative.

I was told that Humana only allows doctors to prescribe half the amount of cream that her doctor prescribed.

I suggested that they at least consider paying half the claim, the half they would have paid for had it been prescribed according to Hoyle.

I was told that since the claim was for the wrong quantity, the whole claim was rejected, and that was that.

This was refreshing – a letter in today’s Denver Post from Jandel T. Allen-Davis, M.D., Denver, vice president of government and external relations for Kaiser Permanente Colorado. It concerns Colorado legislation, rather than national, but that is beside the point.

Not all health insurance companies are opposed to House Bill 1355 [which passed the Colorado legislature in 2007], which prohibits rate hikes for businesses that have sicker employees. Kaiser Permanente Colorado supported that bill and many previous legislative attempts to encourage greater access to insurance. We believe that the rules of the game must change so that insurance carriers are encouraged to expand the pool of insured and take on their fair share of risk.

More importantly, the debate over HB 1355 is all about how we shift premium costs around and not at all about how we keep premium costs down. Americans spend more money on health care than any other country, yet the country is No. 37 in quality of care. We should be talking about how to get our money’s worth.

We should be talking about effective treatments, coordinated care, and electronic medical records — the kind of health care delivery innovations that enable Kaiser Permanente to keep rates 20 percent lower for small businesses, compared to other insurers.

I encourage readers to become familiar with Kaiser Permanente’s health reform proposals, detailed at http://www.kaiserpermanente.org/reform. Unless we address the fundamental delivery inefficiencies in our system, America’s health care spending will continue to skyrocket.

Kaiser Permanente is a non-profit health insurance provider. The part in bold I emphasized above is a plea to for-profit insurance companies to change the rules, take a little more risk. Kaiser has no choice but to play by for-profit rules when for-profits dominate the marketplace. Otherwise, they end of with for-profit rejects, and go under.

For-profit health insurance companies exist for the sole purpose of skimming money off the health care system, and therefore do everything in their power to maximize profits by minimizing payouts for medical losses. Kaiser is, oddly, different. Why?

Anyway, nice to hear a reaosnable voice from inside the business.

Upon hearing of the passage of H.R. 3962, the so-called “reform” bill, the voice I wanted to hear above all others was that of Rep. Dennis Kucinich. He has been the one true reformer among the Democrats.

It was Kucinich who offered up an amendment to the bill that would have allowed individual states to enact their own single-payer plans if they so desired. That amendment passed committee with bipartisan support, but was stripped from the final bill by the Democratic leadership under pressure from the White House.

In Canada, single-payer first passed in the Saskatchewan Province, and proved so successful that the private insurance system eventually collapsed. American insurance companies, working through the Obama Administration, stripped us of that weapon.

Here’s Kucinich on the overall thrust of the bill:

We have been led to believe that we must make our health care choices only within the current structure of a predatory, for-profit insurance system which makes money not providing health care. … When health insurance companies deny care or raise premiums, co-pays and deductibles they are simply trying to make a profit. That is our system.

This is why it was futile, from the beginning, to fight for anything other than single payer. It’s like trying to fight a cancer by applying a salve to some unaffected region of the body.

[Insurance companies] are driving up the cost of health care. Because their massive bureaucracy avoids paying bills so effectively, they force hospitals and doctors to hire their own bureaucracy to fight the insurance companies to avoid getting stuck with an unfair share of the bills. The result is that since 1970, the number of physicians has increased by less than 200% while the number of administrators has increased by 3000%. It is no wonder that 31 cents of every health care dollar goes to administrative costs, not toward providing care.

That 31% is an outrageous number, and it is the height of corruption to allow it to go on. It is imposed on us by sheer force of power – the power of private finance over politicians, the power of insurance companies over doctors and hospitals and other providers. The fact that the Democrats have done nothing about it speaks to their ineptitude and corruption.

In H.R. 3962, the government is requiring at least 21 million Americans to buy private health insurance from the very industry that causes costs to be so high, which will result in at least $70 billion in new annual revenue, much of which is coming from taxpayers. This inevitably will lead to even more costs, more subsidies, and higher profits for insurance companies—a bailout under a blue cross.

This is how Democrats work. They took all of the good energy for real reform, and turned it against us, and into another subsidy for business. This is what Bush and Baucus did with “Medicare D” – prescription coverage for seniors … isn’t it interesting that Medicare still cannot negotiate prices with Pharma even after Democrats took power?

Bloomberg reports that Curtis Lane, a prominent health industry investor, predicted a few weeks ago that “money will start flowing in again” to health insurance stocks after passage of the legislation.

This is anecdotal, but I was watching several health care stocks yesterday in the wake of passage of 3962 on Friday. They were all up, not dramatically, but the interesting thing was that they all spiked early in the day – that is, there was an influx of money into those stocks as the session opened. Someone or some institution saw some reason to stake out a position. If 3962 was any kind of threat at all to private insurance, the flow would have gone the other way.

The “robust public option” which would have offered a modicum of competition to a monopolistic industry was whittled down from an initial potential enrollment of 129 million Americans to 6 million….This health care bill continues the redistribution of wealth to Wall Street at the expense of America’s manufacturing and service economies which suffer from costs other countries do not have to bear, especially the cost of health care….Notwithstanding the fate of H.R. 3962, America will someday come to recognize the broad social and economic benefits of a not-for-profit, single-payer health care system, which is good for the American people and good for America’s businesses, with of course the notable exceptions being insurance and pharmaceuticals.

The key words there are, of course, “not-for-profit”. It is the profit motive that undermines our health care system, and makes it the most expensive and inefficient among the world’s industrial democracies.

With passage in the House last night of the Health Care “Reform” bill, I thought well, we’re f*****. Democrats have done it again – they’ve taken all of this healthy energy for reform that existed, and turned it against us. Industry has a new revenue stream, health care costs will continue to rise, the problem of the uninsured will continue to haunt us, and that creeping problem known as under-insurance will continue to grow. Medical bankruptcies will continue to climb, access to care will still be denied to millions of us.

Everywhere premiums, deductibles and co-pays are going up, coverages diminishing. The health insurers have us by the balls. What happened last night was a naked exercise of power. Insurers are sticking it to us, teabagging us in a battlefield victory dance. We will now be forced to buy their crappy and expensive products.

It’s humiliating.

But oddly, Democrats don’t seem to mind humiliation. I should say “liberals”, I suppose, rather than Democrats. But I don’t know. The terminology is confusing. Am I a “progressive”? A “Naderite”? A “radical”, “malcontent”? Terminology, like liberals, can be mushy. Maybe I am just a guy with two eyes and a brain. I only know this – the people in the room last night that passed this bill are not reformers, and are not our friends.

Saul Alinski said (in the 1940’s) that the difference between the liberal and the radical is that the liberal leaves the room when an argument turns into a fight. Oddly, he’s wrong. Liberals owned the room on health care, kicked the radicals out at the beginning. But it is true that they avoided the fight. They simply did not want us watching as they laid a wet and sloppy fellatio on the health insurance companies.

Baucus should have said what he meant when he had the single-payer doctors arrested: “No voyeurs!”

If any conservatives or right wingers are reading this – I want to give you a feeling of what it is like to be a Democrat, reformer, a radical – whatever you want to call us: The House Progressive Caucus issued a statement some months ago saying that they would not vote for any bill that did not contain a “strong” public option. Their numbers are up around eighty, and that is enough for force Pelosi’s hand.

They caved. The didn’t stick together. Pelosi, working with Rahm Emmanuel and Obama, worked behind the scenes to undermine them. Much pressure was brought to bear. They were told that funding for district projects would be cut off, that there would be no help from Obama in their reelection campaigns, and in the worst cases, that a well-financed primary opponent would emerge. They caved.

How do I know this? Oh, I don’t know. I just know things. Unlike liberals, I have an understanding of the nature of power.

Anyway, right wing friends, here is what it’s like to be a progressive, to rely on Democrats to achieve your ends. It’s like being drunk – too drunk to move, but conscious enough to be looking up through a haze at your friends as they stand in a circle around you pissing in your face. It’s a warm feeling, but not a good one.

There will be cheering and backslapping as this monstrosity makes its way through the Senate. Maybe we can kill it still. But I’m having a laugh – a good and hearty laugh as I realize that we would be so much better off right now if Conrad Burns were our senator instead of Jon Tester.

So, right wing enemies and detractors, if you read this, when you get a chance, raise a glass to me and to my comrades on the left, because we have on thing in common, if only one thing: Contempt for liberals.

Several studies here:

Aiming Higher: Results from a State Scorecard on Health System Performance, 2009 (Separate chart from this study here).

America’s Health Rankings, 2008 Edition

Kaiser Family State Health Facts, 2009 Rankings of Deaths per 100,000

There are scads of charts and comparisons. My curiosity was driven by one anomaly that turns up time and time again. Minnesota consistently ranks at or near the top in virtually all health care categories, along with Vermont and Hawaii and sometimes Delaware.

It could be many things … climate, ethnicity, occupations and industries. The reason, however, that I picked on Minnesota is this: For-profit health insurance in that state is illegal.

You might say that’s irrelevant, that the lofty scorecards for the state are dependent on many factors. You might be right.

I only draw this conclusion: Getting rid of for-profit insurers will not hurt us, might even help us.

This from an amazing email I received from “Bryce, Matt, John and the whole Forward Montana family.”

With historic health care reform so close to passing after a meager 60 years of debate, we at Forward Montana are ready to sink our teeth into the next big progressive issue.

Suggestion: If this is your best work, please don’t be about fixin’ anything else.

The Bozeman Tea Party group is organizing an event on November 6, 2009, and put out the following email:

EVENT NOTICE, FRIDAY, NOV. 6th, 12 PM NOON

OPPOSE HEALTH CARE TAKEOVER

Visit the offices of Senators Jon Tester and Max Baucus. Protest House and Senate health care bills. Bills are rapidly moving through committees of both houses. Now is the time to voice your concern.

When: November 6, 2009. 12:00 noon- 1:00 p.m.
Where: Avant Courier Building
1 E Main Street, Suite 202
Bozeman, MT 59715
Details: Bring a sign. Bring a letter. Or, simply come.

Are you alarmed by acts of Congress? Does liberal health care reform make you angry?

Are you perturbed to hear that ” ‘reform’ will double or triple premium prices”? (WSJ)

Do you sense that this bill and others are an erosion of founding principles of

* self-reliance
* individual liberty
* freedom to contract
* freedom to be left alone
* and freedom from onerous government exactions?

Does the vanity and heavy-handedness of Pelosi, Reid and Obama leave you incredulous?

We are planning to make our displeasure felt, our dissatisfaction heard, by the field staff of senators Tester and Baucus this coming Friday. Please join us.

Give your lunch hour to let your voice be heard.

These officials should know of our dissatisfaction, discontent and state of perturbation even if we don’t change their vote.

They must know!

We must not stand by mute while this catastrophic legislation gets imposed on us.

My top reasons for opposing health care reform as presently formulated:

* Fails to deliver its promise of universal coverage while lowering costs (The Impossible Dream. Duh.)
* Disproportionately expropriates from young adults
* Breaks Montana’s state budget by piling costs on Medicaid
* Forces individuals to buy something, a seemingly unconstitutional requirement
* Expands incessant government meddling in personal affairs
* Increases my costs, decreases my choices

Reminder: When: November 6, 2009, noon hour. Where: Senator Jon Tester’s office: Avant Courier Building, 1 E. Main St., Suite 202. Bozeman. We will walk the two blocks to Baucus’ office after meeting with Mr. Tester’s staff.

It’s not a bad sentiment, and organizing a protest is a nice way to spend a Friday, even if futile. Much of the email captures the fears, real and imagined, of the right wing of government oppression. It’s kind of where they live, how they think.

Most of it is hyperbole meant to inflame passions, and can be dismissed as such. One line is pure manipulation:

Are you perturbed to hear that ” ‘reform’ will double or triple premium prices”? (WSJ)

In reality, the “double” or “triple” was lifted from an opinion piece by Kim Strassel in which she cites nameless “insurers” who supposedly put forth that figure. Wording it the way they did in this email makes it appear as though it was actual WSJ reporting that produced the number. That’s misleading.

Anyway, I think we can make common cause with these folks, and perhaps should attend the rally as well. They say the proposed legislation forces individuals to buy something, a seemingly unconstitutional requirement. I agree – if government were simply to issue the insurance itself as part of its single payer program, there would be no constitutional issues, since it falls under the General Welfare clause. But forcing people to buy overpriced products from private companies is, in my view, odious and hopefully unconstitutional.

I’m no Ed Schultz fan – I think he’s a blowhard. Liberal talk radio has about 9% of the talk market – too bad he takes up so much of its limited bandwidth.

I just listened to a few minutes of him today, and got this: The House Health Care Reform bill, just let out of the paddock yesterday, contains a provision that health insurers must maintain a medical loss ratio of 85%. Since health insurance overhead is about 30%, Schultz says, this provision is significant reform.

“Medical Loss Ratio” is the percentage of health insurance premiums that are paid out in actual health care costs. It’s a number that Wall Street watches very closely. According to Wendell Potter, ex-CIGNA executive and active reformer, when our health care system was dominated by non-profits, the MLR was around 95%.

Today it is around 80%. The number that Schultz cites – 30% overhead, is the insurance burden on the entire system, which includes doctors and hospitals having to have staff and computers to deal with the insurers.

So what the House is proposing is a 5% shift in costs from overhead to medical cost payout, from 80% to 85%.

However, that 5% is significant. There are two ways of achieving that objective – one would be to reduce overhead. Another would be to raise premiums to add some padding to the overall framework*.

Since the latter would naturally be the obvious solution, there’s another provision in the House Bill that would seek to regulate premium increases. I suppose that has some merit, but again, they have failed to address the underlying problem – the profit motive. All else is much ado about nothing.

Anyway, as seen down below, the stock market didn’t even hiccup at the House bill, so I doubt that investors are troubled by any of its contents. Anything offensive will likely be stripped out in conference or disappear before our eyes, as the Kucinich Amendment did.

*Apparently Pelosi and company thought ahead. Here’s Dennis Kucinich on one section of the bill:

“It’s on page 22 of the bill, right here, it says that rates shall be set at a level that does not ka
exceed 125 percent of the prevailing standard rate for comparable coverage in the individual market. Now … It’s very easy to understand what that means.”

“It means a 25 percent increase, they’ll have the ability to execute and since insurance companies have already raised rates for the last four years by double-digits, we can expect — based on the bill — another rate increase by the insurance companies.”

So a provision that raises the MLR payout to 85% within a 125% rate framework is, as we accountants like to say, legerdemain.

The problem faced by private health insurers is simple: How to avoid sick people. The business exists to siphon money off of our health care system, and sick people conflict with that objective.

Even supposed non-profit health insurers are caught up in this system – if they accept rejects from private insurers, they will end up with all the sick people. So they avoid them too.

As always, it is not about evil people. It’s about a corrupt system. People who occupy slots within that system have two choices: Play the game, or do something else for a living.

This should be well understood by this time – it’s Health Insurance 101, but it’s not. The debate is so well managed in this country that the bare naked facts are still obscure to most people.

Down below, I tracked the behavior of several insurance stocks as the debate has raged on in Washington about “reform”. There’s been no great upheaval. Those stocks are a little depressed compared to the market as a whole, but there doesn’t seem to be any investor hiatus. It’s business as usual.

And it’s not hard to know why. Any real threat to the business model vanished months ago. Politics is playing out the fate of a supposed “public option” now on the hill, but it doesn’t threaten the model.

In fact, as Congressional Budget Office Reports, the house version of the public option, supposedly more aggressive than the Senate’s, might reach about six million people, and at higher cost, than private plans. (WSJ gives a rundown here.)

Why so? Because it would operate under the same business model as private insurance, and would therefore attract private insurance rejects – sick people. And as any insurer will tell you, if your plan attracts sick people, you won’t be long in the business.

Which is why we need single payer. Health insurance is a government job, or at least needs to be made entirely non-profit, as in Switzerland and the Netherlands (and Minnesota). It’s not rocket science. It’s merely counterintuitive to people indoctrinated in “free” market ideology.

Interesting – I’ve said from the beginning that Democrats are the problem, and of course, I catch hell for that. But there was a glimmer of hope. The House Progressive Caucus put out a bold statement – it would not support any bill that did not contain a strong public option.

What happened? Politics happened. These House members have been approached behind the scenes and told that their financing will be cut off, their district pet projects threatened -Nancy Pelosi, who appears weak before the cameras (as does Harry Reid), is actually quite a ruthless bitch behind the scenes.

How do I know that? Oh, I don’t know – I guess just from following politics. One must pay close attention to detail and intrigue, as everything that happens in front of the cameras is mere theater.

P.S. Here’s some high comedy – A fellow named “Livingston, I Presume” put up a piece banging on congressional Republicans for accepting Medicare while opposing a public option. Steve W. quickly puts him in is place in the comments, reminding him that Democrats killed reform, and that the Republicans, while interesting, are irrelevant.