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Medical Reform: 250 Fun Facts

September 3, 2009

FAILURES

  • Every wealthy country except the United States already has some form of universal care.
  • Insurance companies discriminated against more than 12 million Americans in the three years between 2004 & 2006 because they had a pre-existing illness or condition. The companies either refused to cover the person, refused to cover a specific illness or condition or charged a higher premium.
  • 700,000 Americans go bankrupt each year because of medical bills. In France, the number of medical bankruptcies is zero. Britain: zero. Japan: zero. Germany: zero.
  • Economic growth is retarded by American businesses adding massive health care costs — about 70 percent greater as a share of GDP than other countries’ — into the cost of their exports.
  • “They (insurance companies) welcome your policy when you don’t need it and shred it when you do. Adding financial insult to personal injury, they take the savings you’ve worked so hard to earn and throw it into high-risk investments you’d never touch with a ten-foot pole.” Martin Weiss, moneyandmarkets.com

pay how much three charts v other countries jpeg export

  • 46 million are uninsured, but that number includes 9.7 million people who are not U.S. citizens, 17.6 million who have annual incomes greater than $50,000, some number of whom have chosen not to purchase insurance, and 14 million who qualify for Medicaid. Subtracting out those groups, about five million people are truly uncovered out of a population of 307 million.
  • “For many Americans, (the failure to pursue) legal reform has become proof that President Obama is more interested in an ideological triumph than his stated goal of lowering health costs. … The estimated dollar benefits of (legal) reform range from a conservative $65 billion a year to perhaps $200 billion. In context, Mr. Obama’s plan would cost about $100 billion annually. … The legal industry was the top contributor to the Democratic Party in the 2008 cycle, stumping up $47 million.” Kimberly Strassel. The President’s Tort Two-Step. 9/11/09. WSJ.

concentrated markets crop jpeg

  • A single illness can wipe out a lifetime of savings.
  • Current tax policy permits employers, but not individuals, to use pre-tax income to buy health insurance.
  • Health care costs have spiraled out of control.
  • Health care is a text book example of an uncompetitive market with the primary players setting high prices and providing poor quality.
  • Hospitals and doctors, generally speaking, are paid not for improving the health care of people with chronic diseases. They’re paid for doing things — like surgery, tests, a doctor’s visit. This has fragmented our health care system. It works against the needs of the people with chronic diseases and disability. They account for three-quarters of U.S. health care costs.
  • If the patient doesn’t care about costs, only those who want higher costs—like doctors and drug companies—care. And what they care about is getting paid more, not less.
  • Innovations in health care can take up to 17 years to find their way to an exam room or operating table.
  • Talk to any doctor in a practice that’s part of insurance company networks and you’ll probably find there’s one person who fills out forms for each physician.
  • The current debate does not factor in the massive increased costs of an aging population.
  • We don’t have universal care, and our insurance is expensive.
  • We have close to the lowest life expectancy of any wealthy nation.
  • We have not one big national market for insurance with robust price and service competition, but 50 smaller, heavily regulated markets.
  • We have the highest infant mortality of any wealthy nation.
  • A paradox of medical insurance is defined as “adverse selection”: those who will benefit from insurance want to buy it, while the carrier wants to cover those who will not need it.
  • If insurers are forced to sell coverage to everyone at any time, many people will buy insurance only when they need medical care.
  • New York, New Jersey and Massachusetts, which guarantee coverage and a uniform cost, have the three most expensive individual insurance markets among all 50 states. Premiums are two to three times higher than the rest of the country.
  • The more expensive the insurance, the less likely people are to buy it before they need it.
  • Economic growth is retarded by workers opting for jobs in big companies that offer health insurance; rather than taking productive jobs in small companies that do not offer medical care. Small companies create 70% of new jobs.
  • Economic growth is retarded by “job lock”—the phenomena of millions of people afraid to change jobs because they will lose insurance.
  • Tax-exempted employer-based insurance is not portable. Workers can’t take it with them when they change jobs.
  • We are spending almost 50% more per person on medical care compared to the next most costly nation.

cost of medical care family four

INSURANCE COMPANIES

  • “They’re working harder than ever at identifying people who really need medical care, and ensuring that they don’t get it. In the past, they mainly concentrated on screening out applicants likely to get sick. Now, it seems, they’re also devoting a lot of effort to finding pretexts for revoking insurance after they’ve already granted it. They typically do this by claiming that they weren’t notified about some pre-existing condition, even if the insured wasn’t aware of that condition when he or she bought the policy.” Paul Krugman. New York Times. 9/22/06.
  • Abuse # 1 Denial machines: Do everything possible not to pay claims.
  • Abuse # 2 After-the-fact policy cancellations. Cancel insurance when people become sick.
  • Abuse # 3 Direct interference with medically recommended procedures. Fight against paying for procedures that doctors want.
  • Admin costs: For every premium dollar insurers receive, they spend 83 cents on medical costs.
  • Admin costs: Medicare has administrative costs equal to one-third of private health insurers.
  • Admin costs: “A new report by Sherlock Company found that private health plans’ costs to administer benefits represented an average of only 9 percent of premiums across all policies sold.” Blue Cross Blue Shield Association. 8/13/09. New Study Finds Health Plan Administrative Costs Far Lower Than Previous Estimates.
  • As a result of mergers and acquisitions since 2000, the top two insurers today, WellPoint and United, each have memberships, respectively, of 34 million and 33 million, totaling more than 67 million covered lives — approximately 21% of the total population.
  • Health insurers avoid covering the poor, the elderly, those in poor health, and the unemployed – some 47 million at last count out of 305 million Americans.
  • Insurance companies can charge you more based upon  poor health or gender or age.
  • Insurance companies sometimes devote significant effort to finding pretexts for revoking insurance if a client becomes ill.
  • Insurance companies don’t effectively negotiate lower prices on our behalf from hospitals, pharmaceutical companies, and other health providers.
  • Insurance companies limit our choices of doctors, tests, treatment, and access to new medical technology, worsening our health outcomes.
  • Insurance companies only cover the healthy and charge exorbitantly for that.
  • Insurance companies with a bad reputation: American International Group, Atlantis Health Plans, Inc., Celtic Insurance Company, CIGNA Healthcare of NY, Inc., Fortis Group, GHI HMO Select, Inc., Mutual of Omaha Group, Oxford Health Plans of NY, UnitedHealth Group. Source: moneyandmarkets.com. Martin Weiss.
  • Insurance companies with a good reputation: CNA Insurance Group, Mass Mutual Life Ins. Co., Northwestern Mutual, Sun Life Assurance Company of CN, Universal American Financial, UNUM Provident Corp. Group. Source: moneyandmarkets.com. Martin Weiss.
  • Insurance companies, in the past, mainly concentrated on screening out applicants likely to get sick.
  • Insurers try to avoid covering people who are likely to need care.
  • Insurers try to deny as many claims as possible.
  • Premiums have doubled over the past nine years (Three times faster than wages.).
  • profit motive: A rule of thumb is that 4% of revenue goes to profits for private insurers. A not-for-profit or a public option can eliminate this cost.
  • profit motive: Aetna spends less than 80 cents of each dollar on medical care. The other 20 cents go to profits, marketing and administrative expenses.
  • They are driving many doctors to leave the profession just when we need them most, and those that remain are overspecialized.

MEDICINE: IN FRANCE, JAPAN, and AROUND THE WORLD

  • France’s national health insurance is mostly financed by taxes on labor. A Frenchman making a monthly salary of 3,000 Euros will pay approximately 350 Euros (deducted by his employer) for health insurance. Then the employer will add approximately 1,200 Euros, making the total monthly cost to the employer of this individual’s services not 3,000 Euros but 4,200.
  • The French taxes on wages are not enough to cover deficits for the payment of national health insurance. France imposes an additional levy to close the insurance deficit called the CSG (contribution sociale généralisée). This levy applies to all income, including dividends. Altogether, 25 percent of French national income goes toward what’s called Social Security, which includes health care and basic retirement pensions for all.
  • High labor costs in France affect not only consumer prices but also unemployment rates, since employers are reluctant to pay for medical care and other benefits for low-skill workers. Economists agree that unemployment rates and the cost of national health insurance are directly related everywhere, which partly explains why, even in periods of economic growth, the average French unemployment rate hovers around 10 percent.
  • The French health care system covers everyone, offers excellent care, and costs barely more than half as much per person as the American system.
  • “The 18 week referral to treatment pathway is about improving patients’ experience of the National Health Service (the name of the health care system in England) ensuring all patients receive high quality elective care without any unnecessary delay.” From an announcement in June 2004 setting a goal that all non-emergency care be provided within four months of diagnosis. The English system is a socialist model: The government pays the bills, runs the hospitals, and employs the doctors.
  • An MRI scan of the neck region costs about $1,500 in the United States. An identical scan costs $98 in Japan.

political hurdle health care reform

  • Canadians have their health care rationed, wait in long lines, and are denied  timely and critical procedures.
  • GDP percentage paid for universal coverage for four major countries: 10.9% Switzerland. 10.7% Germany. 9.5% France. GDP percentage paid for non-universal coverage in the United States: 17%. Percent who are not covered in the US? @ 15%.
  • Germany, the Netherlands, Japan and Switzerland — provide universal coverage using private doctors, private hospitals and private insurance plans. Government officiates and subsidizes, but it’s role is limited.
  • In 1995 less than 60 percent of Taiwan’s residents had health insurance; by 2001 the number was 97 percent. This huge expansion in coverage came virtually free. It led to little if any increase in overall health care spending.
  • In Japan: The world champion at controlling medical costs is Japan, but they aren’t shy about using the doctor. The Japanese go to the doctor 15 times a year. That is three times our rate.
  • In Japan: waiting times are so short that most patients don’t bother to make an appointment.
  • In many ways, foreign health-care models are not really “foreign” to America, because our crazy-quilt healthcare system uses elements of all of them. For Native Americans or veterans, we’re Britain: The government provides health care, funding it through general taxes, and patients get no bills. For people who get insurance through their jobs, we’re Germany: Premiums are split between workers and employers, and private insurance plans pay private doctors and hospitals. For people over 65, we’re Canada: Everyone pays premiums for an insurance plan run by the government, and the public plan pays private doctors and hospitals according to a set fee schedule.
  • Rest cure: In Austria and Germany, if a doctor diagnoses a person as “stressed,” medical insurance pays for weekends at a health spa.
  • Socialized medicine – the purest form is in countries such as Britain, New Zealand and Cuba. Health care in government hospitals is paid from government funds. Others — for instance, Canada and Taiwan — rely on private-sector providers whose services are paid by government-run insurance.

MEDICINE IN SWITZERLAND

  • The Swiss have universal coverage and excellent health care at costs 40 percent lower than ours and all providers and insurers are private companies.
  • The poor in Switzerland are given money to buy individual policies.
  • Swiss insurers do not discriminate against the sick. The unhealthy pay the same price as everyone else. They are guaranteed coverage.

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  • The general and administrative expenses are equal to five percent of revenues in Switzerland — as compared to 12–18 percent for American carriers.
  • The sick among the Swiss are not discriminated against. The private insurers reinsure each other so that high-cost enrollees pay the same price as the average person.
  • The Swiss have approximately 90 private health insurance companies. They compete aggressively to cover individuals. Each citizen has his own policy.
  • The Swiss have universal coverage, but no government-run insurance.
  • The Swiss model achieves universal coverage, individual ownership of policies which cannot be cancelled, excellent health care for the sick and healthy, the highest client satisfaction in the world, and it costs 40 percent less, as a percentage of GDP, than medical care in the United States.
  • The Swiss require coverage and enforce the requirement through their IRS. They have achieved 99% coverage through a private medical insurance system.
  • You can buy a five‐year policy in Switzerland. At the beginning, your health status is measured. If you hit a health target at the end of five years, you may get up to half your insurance premiums back.
  • Healthy Living Pays: If the money used to purchase employer-sponsored health insurance had been given as cash to joint 2006 tax filers who earned less than $73,000 after taxes, 90% would have had a raise of 16 percent. After purchasing high deductible plans, some large part of their gain would be retained. In Switzerland, where this is an option, about a quarter of the market has opted for lower-cost high-deductible plans.

MODELS: OF SUCCESS & FAILURE

  • 35 states impose no limits on how insurers vary premiums. Six others allow wide variation.
  • A patient-centered reform begins with individual ownership of insurance policies.
  • About nine states practice “Community rating” and impose uniform pricing including New York, New Jersey, Massachusetts, Vermont, Colorado, and Oregon.
  • Allow consumers to buy insurance across state lines. The Obama plan maintains a ban on this basic requirement for a free market. Today, a 25-year-old in New York pays six times as much for coverage as someone in Kentucky, but the New Yorker cannot buy the Kentucky policy.
  • American children are given a free education in grades K through 12. Which begs the question: Shouldn’t they be given free medical care? Doesn’t every American deserve good medical care when other major wealthy nations provide it?
PEACE ON EARTH:

PEACE ON EARTH: The Obama plan is a model of simplicity and pastel colors. Or is it? The Republican version of events is listed immediately below.

The Wild & Crazy Chart of Democratic Health Reform

DO THEY ANSWER THE PHONE? Reform legislation assures that all departments (listed above) will make staff available to answer the phone a minimum of one day a week and without fail. All department phone numbers will be published in a prominent public location -- at the post office of your home town. Find the "Most Wanted" list and look to your left. That's easy to remember. If you need to look up a telephone number of a department right away, you can drop off your mail and at the same time look up the phone number. You can kill two birds with one stone. It's efficient and effective. This new and organized medical world era we are now entering has eliminated SNAFU contingencies. A SNAFU happens only in the military Jack. We don't have that problem here in the United States Department of Exceptional Wellness. No need to go POSTAL either brother. Your treatment has been scheduled. I must remind you, however, that your driver's license has expired. It must be renewed prior to your surgery receiving an active-and-confirmed status. The bureau will require two active forms of government-issued identification prior to the renewal of your driver's license. We wish you exceptional wellness.

  • Auto insurance, which is typically required of us by states, and home insurance, which mortgage lenders demand, give us protection from financial ruin at more reasonable prices than health insurance.
  • Capitalism has centuries of proof in making goods and services cheaper and better.
  • Capitalism: The free market has worked, by constantly pushing costs down and increasing quality, in many fields of endeavor including agriculture, chemicals, construction, computers, electronics, entertainment, food manufacturing, hotels, housing, mining, publishing, telecommunications, transportation.
  • Duke University organized a team for congestive heart failure. In one year, costs went down by 40 percent. And they didn’t go down by preventing the use of care. They increased the patient visits to cardiologists six‐fold.
  • Group insurance carriers cannot discriminate based upon medical history. Individual insurance can. Why do we allow this difference?
  • In a fee-for-service plan, doctors have an incentive to do more so they will be paid more. In a per-capita plan, doctors have an incentive to do less because they are paid the same amount no matter how much work they do.
  • The Obama plan — the essential elements appear to be: a. a public health option b. mandated minimum coverage c. mandated coverage of pre-existing conditions d. required purchase of health insurance.
  • One price fits all: “Community rating” imposes uniform pricing regardless of health.
  • One price fits all: Premiums for individuals covered by a group plan are uniform. If reform mandates “community rating”, this uniformity would apply to the individual market.
  • One size fits all: Why shouldn’t New Jersey residents be free to decide whether their state mandates are worth the added cost, and be free to buy a cheaper policy in some other state? One group has this ability today: big businesses. The federal ERISA law (the Employee Retirement Income Security Act) lets larger companies ignore state mandates. They can create their own plans, and their employees can take that insurance anywhere in the country.
  • One strong benefits package fits all: A “standard benefits package” in 20 states — including Maryland, Colorado, California, Florida, and New York — requires that dozens of specific benefits be covered in any insurance plan. A typical list includes hearing aids, chiropractic services, obesity treatments, autism care, and drug-abuse therapy.
  • Spending other people’s money: The health-care wedge is the gap between the price paid for a service and the total cost. The theory behind this approach is that we will use a lot of health care if we are not paying for it; and we will use much less if we are paying for it out of our own pocket.
  • The sick shall be covered: “Guaranteed issue” requires that insurers accept anyone who applies. Insurers cannot discriminate based upon pre-existing conditions such as diabetes and cancer.

MONOPOLY & THE PUBLIC OPTION

  • “To my mind, private insurers would be left (after a public option was established) with a solid boutique market (51 million people) for which they ought to be grateful.” Timothy Noah. 4/10/09. Slate.
  • “In a memorandum to union leaders last year, Gerald W. McEntee, president of the 1.6-million member federation, said a public plan would ‘create a competitive check on the private market and build both public support and the infrastructure for a single-payer system.’” NYT. 8/13/09. Public Option Fades From Debate Over Health Care.
  • “In April, Representative Jan Schakowsky, Democrat of Illinois, said insurers were right to fear that a public plan could ‘put the private insurance industry out of business.’ That might happen because of ‘the superiority of the public health care option,’ said Ms. Schakowsky, one of 86 co-sponsors of a bill to establish a single-payer system.” NYT. 8/13/09. Public Option Fades From Debate Over Health Care.
  • “Also, and importantly, the public option offered a way to reconcile differing views among Democrats. Until the idea of the public option came along, a significant faction within the (Democratic) party rejected anything short of true single-payer, Medicare-for-all reform, viewing anything less as perpetuating the flaws of our current system. The public option, which would force insurance companies to prove their usefulness or fade away, settled some of those qualms.” Obama’s Trust Problem. NYT. 8/21/09 Paul Krugman.
  • “In the end, the private-insurance market would be eviscerated (by a public option), leaving millions of Americans with no choice but the government-run program. No choice. No competition. To truly create more choice and competition, Obama should tear down the regulatory barriers to choice by letting people buy insurance from states other than the one in which they live. Though few realize it, it’s illegal to purchase health insurance across state lines. This effectively creates insurance cartels in each state.” Michael Tanner, 8/13/09, cato.org, Obama Kills Health Competition.
  • America has a huge public-option plan: Medicare, which covers the elderly and some other groups.
  • The ten largest publicly traded insurance companies made total profit of $12.9 billion in 2007. If total spending on medicine equals $2.4 trillion, then profit of the top ten equals .5% of total spending. One estimate says medicare loses $60 billion/year to fraud. If correct, the fraud represents 4.5 times the total profit of the top ten.
  • American Socialist: The Veteran’s Health Administration customer satisfaction exceeded that for private health care for the sixth year in a row. This high level of quality was achieved without big budget increases. The veterans’ system has managed to avoid much of the huge cost surge that has plagued the rest of U.S. medicine.
  • American Socialist: The Veterans Health Administration doesn’t just pay the bills; it runs the hospitals and clinics. It is a single-payer single-provider system.
  • American Socialist: The Veteran’s Health Administration is a purified version of a government-run health care system.
  • American Socialist: The Veterans Health Administration is a success because it is a universal, integrated system. All veterans are covered. Administrative staff is minimal because there is no need to check patients’ coverage and demand payment from their insurance companies. It is an integrated system providing any and all forms of medical care. It is a leader in electronic record-keeping.
Doctor Marx Will See You Now

"Doctor Marx is ready to see you now. He will be conducting the egalitarian examination today."

  • Economist Linda Blumberg envisions a public-option plan that pays medical providers more than Medicare, but less than private insurance. Her study estimated it could grow to a membership of 47 million, leaving 161 million with private insurance.
  • Efficiency: Medicare, which doesn’t spend large sums on marketing or screening out people with high medical bills, spends about 98 percent of its funds on medical care.
  • Government-run health care already covers about a third of Americans through Medicaid, Medicare, veterans’ care, and the military.
  • Medicare users who want drug benefits (known as Part D) must purchase private insurance.
  • Our government’s role in the health system, through Medicare and Medicaid, and state government regulations, sets prices paid to providers, determines who is covered for what in its insurance plans, and requires that certain benefits are included in insurance policies.
  • Powerplay: Medicare is able to pay hospitals roughly 30 percent less than what private insurers pay.
  • Powerplay: Medicare pays doctors roughly 20 percent less than private insurance.
  • Powerplay: Private insurance subsidizes government-paid health care with about $90 billion annually.
  • Powerplay: The public option could use its market power to impose much lower reimbursement rates on doctors and hospitals. Medicare and Medicaid do that now, to the point where they often pay less than cost. Providers would recoup the income lost by raising what they charge to private insurance. This increases premiums and makes private insurance even less competitive. Failures of private insurers will be common.
  • Powerplay: Under Medicaid 40 percent of doctors refuse to see patients due to reduced payment rates.
  • Proponents of a public option say it could restore a competitive balance and lead to lower costs. It would not be required to turn a profit.
  • The federal government oversees health care through Medicare, Medicaid, and insurance programs for children, veterans, military personnel, and federal employees.
  • The public option would take away 70 percent of the customers of private insurers, according to a study by the Lewin Group.


 

MYTHS: FOR-PROFITS HAVE NO COMPETITION

  • 61 percent of the 138 health plans in the United States with at least 100,000 medical enrollees are nonprofit.
  • 97 million people are covered by not-for-profit insurers (48 percent of the people covered by the country’s 138 largest insurers.).
  • Blue Cross Blue Shield, the not-for-profit medical insurance companies, dominated the individual market in 39 states.

MYTHS: THE MEDICAL INSURANCE INDUSTRY IS COMPETITIVE.

  • Mobster Model: In 24 percent of  urban areas (74 of 313), one insurer has a combined health maintenance organization (HMO)/preferred provider organization (PPO) market share of 70 percent or greater.
  • Mobster Model: In 64 percent of urban areas (200 of 313), one insurer has a combined HMO/PPO market share of 50 percent or greater.
  • Mobster Model: In 95 percent of urban areas (299 of 313), one insurer accounts for at least 30 percent of the combined health maintenance organization (HMO)/preferred provider organization (PPO) market.

insurance company market share map by state business week

Market share for 50 states. The top carriers for each state.

Competition Fails: In a strong healthy market, the leading two competitors should have perhaps 30% of the market. Compare a goal of 30% market share for the top two competitors with the numbers in the column on the far right. You can see that our state insurance markets are very uncompetitive. The state markets are controlled by monopolistic competitors. The center of our debate on the reform of the medical industry should be focused upon the market failure defined here. The key failure is that one or two competitors in all markets control too much of the total business. They can raise prices, and the buyers have nowhere else to go. The buyers are forced to pay the high price. This is a text book example of an uncompetitive market.

  • 100 percent of the PPO markets are highly concentrated according to Department of Justice guidelines for monopolies.
  • 95 percent of statewide insurance markets have a single commercial carrier controlling at least 30 percent of the insurance market.
  • anti-trust invisible: In the past 12 years, out of more than 400 mergers, the Department of Justice has challenged only two.
  • anti-trust invisible: Market concentration hasn’t necessarily flowed from consumer preferences in a free market, but from barriers to entry erected by state insurance regulation.
  • Barriers: Entry into state-wide health insurance markets is difficult. Significant barriers to entry include state regulatory requirements, the cost of developing a health care provider network, and the cost of building up sufficient business to spread the risk.
  • Barriers: If entry is easy, even a high market share may not necessarily translate into unfair market power. If entry is difficult or takes a number of years, then a health plan with a strong market position is more likely to be able to charge high prices without the threat of competition.
  • Competition is imperfect because many regions of the country have dominant hospital chains that dictate rates to monopolistic insurers. As an example: You simply could not offer a competitive insurance product in Northern Virginia if Inova’s Fairfax Hospital weren’t in your network. In many rural communities, there’s only one hospital. If we have a system which introduces true competition, patients will choose to travel for care either based on quality or price — the classic factors which differentiate competitors in a free market. Or their insurer will require that they travel. They will not be a slave to the local hospital.
  • Competition is undermined in hundreds of markets across the country by the collusion of providers and insurers.
  • Economics textbooks tell us that concentrated markets reduce the competitive behavior that makes things better for consumers. They also lead to outsize profits for dominant firms. Health-care premiums have increased 90 percent between 2000 and 2007. The profits of the 10 largest insurers have increased 428 percent over the same period. If these pricing facts are correct, they are classic symptoms of monopoly markets.
  • In 4 states –  Alabama, Alaska, Hawaii, and North Dakota – the largest insurer held at least 75 percent of the group market.
  • In 94 percent of urban areas the market was controlled by one or two companies.
  • In 99 percent of urban areas the health maintenance organization (HMO) market is highly concentrated — meaning that those markets fit widely accepted definitions of being uncompetitive (309 of 313 areas).
  • Mob Model: In Indiana, WellPoint controls 60 percent of the insurance market; in Iowa, Wellmark accounts for 71 percent; and in Alabama, Blue Cross/Blue Shield holds 83 percent.
crossShieldBlue

MALIGNANT CANCER: You can see in both symbols the clever depiction of the numbers 666.

  • Mob Model: Instead of one big national market with robust price and service competition, what we have is 50 smaller, heavily regulated markets.
  • Mob Model: Many state insurance markets are dominated by only one or two insurance carriers. In at least 21 states, one carrier controls more than half the market. More than half of the market is controlled by two carriers in at least 39 states.
  • Mob Model: Market share for Blue Cross / Blue Shield in North Dakota: 93 percent.
  • Mob Model: The insurers who populate the American market have grown stronger. The Justice Department judges an industry “highly concentrated” if a single company controls more than 42 percent of the market. By that definition, 94 percent of statewide insurance markets are highly concentrated.
  • Mob Model: There have been minimal new entrants into health insurance markets in the past five years.
  • Powerhouse: Median market share of all Blue Cross / Blue Shield carriers in the 34 states supplying information: 44 percent.
  • Powerhouse: Medical-insurance markets are concentrated in the hands of a few large insurers.
  • Powerhouse: One to three insurers dominate the medical-insurance market in nearly every state.
  • Stricter enforcement of antitrust laws will make it more difficult for hospitals in the same region to merge. Hospital chains should be broken up if they charge rates that are significantly higher than in other markets.
  • The federal ERISA law (the Employee Retirement Income Security Act) allows larger companies to ignore state mandates and avoid uncompetitive state markets. They can create their own plans, and their employees can take that insurance anywhere in the country. If true, then how do state markets maintain their highly monopolistic nature?
  • The largest insurer held half or more of the group market in 12 states and at least half of the individual market in 34 states (2003).
  • “The health insurance market is a collection of 50 state-wide monopolies.” Michael White, NewObservations.net.

MYTHS: PREVENTATIVE MEDICINE SAVES MONEY.

  • “Although some preventive measures do save money, the vast majority reviewed in the health economics literature do not.” New England Journal of Medicine. 2008.
  • Almost all savings from prevention are achieved by age 5, when childhood immunizations end. Chronic illnesses, developed later in life, are managed rather than prevented by early intervention.
  • Preventive care, according to a definitive assessment in the New England Journal of Medicine that reviewed hundreds of studies, found that more than 80 percent of preventive measures added to medical costs.
  • Preventive care, according to a study in the journal Circulation, found that for cardiovascular diseases and diabetes, “if all the recommended prevention activities were applied with 100 percent success,” the prevention would cost almost 10 times as much as the savings, increasing the country’s total medical bill by 162 percent.

MARKET SHARE & MONOPOLY IN MEDICAL INSURANCE:

FIERCE FIGHT:

FIERCE FIGHT: In the global candy market, the two ten-ton gorillas hold a total of 25% market share. In state-wide medical insurance markets in the United States, market share for the top two runs from a low of 44% to a high of 98% (see chart below "Insurance Market Concentration: Ranked List"). These markets are obviously uncompetitive. In an uncompetitive market, consumers pay high prices for poor service. They have no alternative competitor to chose who provides better price and quality--so they stick with something expensive or of poor quality becuase there is no other choice. Our medical reform will fail unless the sham of competition in state-wide insurance markets is the central issue which we address.

Medical Insurance Markets In the US. Market Share of Top Providers.

MEDICAL MONOPOLY MYSTERY: High prices and monopolies go together. If these market share figures are accurate, the companies listed clearly have the power to be primary drivers in the dysfunction of our medical insurance industry. Their market shares support an opinion that we are fighting a country full of state-wide monopolies. True reform would have to break the medical insurance power players in each state – which can probably best be done by changing state-wide markets to one national market, or by simply allowing buyers to go to any insurance company in any state. If you want to know why it’s so hard to fix health care, this chart may be the Rosetta Stone. One irony: Many of the power players are nonprofit companies. The center of gravity and power in medical insurance appears to be held by Blue Cross Blue Shield affiliates. As to who is represented on this list, I believe it is both individual and group plans. Individuals are forced to buy medical insurance within their own state, which explains why they would be powerless against monopolistic service providers. I don’t have good information on how group plans purchased by corporations are limited or not limited by state boundaries. If it’s a one-state company, you would expect they are subject to the same pricing controls that individuals face. I believe the numbers shown here do include group plans run by insurance companies. They do not include self-insurance plans run by corporations for their own benefit. The graph which immediately follows this comment covers much of the same ground except the figures are more inclusive. The AMA study which produced the numbers above says “most sellers (insurers) market locally, for the obvious reason that purchasers (employers) are interested in purchasing health insurance products that will service their employees in proximity to where they work and live.”  Do these numbers define the market which multi-state corporations face? If you have good information about if and how monopolistic practices are maintained in the medical insurance industry and hospital industry, please send your suggestions to michael.white@thenewmortgagecompany.com.

commercial (not public) insurance enrollment market share 1st one to three antitrust measure

PAID BY WHO?

  • America had 4.6 workers per retired person (2000). By 2040, that will fall to just 2.6.
  • Government health insurance in the US is already bigger, in dollar terms, than private insurance.
  • Government pays for half of all healthcare.
  • Government pays more medical bills (47% of the total) than private insurance (which pays 35%).
  • Governments — federal or state — fund over half of the total health care expenditures in this country. In 1960 it was less than a quarter.
  • Insured families pay an additional $1,000 a year to subsidize the people who receive care but don’t pay.

Who Pays Our Medical Bills?

  • Medicare generally pays doctors and hospitals less than private insurers.
  • Medicare represents about 20 percent of the entire health care market.
  • The federal government will account for 35 percent of the expected $2.5 trillion in health spending this year. That does not include subsidies built into the tax code.
  • The uninsured shift their medical costs onto the insured population.
  • Today only $1 out of every $10 spent on health care is paid for by individuals out of their own pocket. It used to be $5 of every $10 was paid out of pocket.
  • We have a system where employers, not employees, usually purchase health care because during World War II strict wage controls prevented companies from attracting scarce workers by offering higher pay. They offered medical benefits instead.

PAY FOR WHAT?

  • 1 percent of our health care spending goes to examining what treatments are most effective.
  • 62 million CAT scans are conducted in a year for 300 million people.
  • 75 percent of the costs of health care are spent on people with chronic diseases and disabilities.
  • For public medicine, 96% of expenses pay for the care of chronic illness.
  • The truly sick constitute only 20 percent of health-care users, but account for 80 percent of healthcare costs.

What does a medical dollar pay for?

PAY HOW MUCH?

  • $12,700 is the average annual premium for a family of four, when $10,712 is the gross annual earnings at minimum wage.
  • $2.4 trillion, or $7900 per person, was spent on health care in 2007. $2.4 trillion equals 17% of GDP — or more than one of $6 we spend.
  • Americans spend more on health care per person than any other country. We spend twice as much as the French, whose medical care is among the best in the world.
  • Lifespan has increased from 47 years to 78 years since 1900. The increase of health spending as a proportion of GDP has risen from 1% in 1900 to 16% today. Given the expansion in years we live, the increase in cost may be reasonable; or more reasonable than we think.
  • Maine enacted strict rules on accepting all applicants and equalized pricing in 2003. Today a healthy 30-year-old male faces a monthly premium of $762 in the individual market. In neighboring New Hampshire, which shuns community rating and guaranteed issue, similar coverage costs $222 a month.
  • Medicare spending at Cleveland Clinic for the last two years of life is $55,333, lower than UCLA Medical Center ($93,842), John Hopkins Hospital ($85,729) and Massachusetts General Hospital ($78,666). Only Mayo Clinic (St. Mary’s Hospital), Cleveland’s main rival, was lower, at $53,432.
  • Premiums in New Jersey were $5,326/year (2007) for singles versus a national average of $2,613.
  • Premiums in New York cost $12,254/ year (2007) for a family. The national average was $5,799.
  • The tax break for employer-provided insurance in 2007 was worth about $246 billion in foregone tax revenues.
  • total bill: 45% of U.S. health care expenses are paid for by government. Insurance and other private spending pays for 40%. Consumers pay out-of-pocket 15% of the total.
  • total bill: One of every $3 we earn will be spent on health care within 30 years.
  • total bill: One of every $5 we earn will be spent on health care within a decade.
  • total bill: Per person, $5,267 was spent in the United States (2002) on medical care. For Canada: $2,931. Germany: $2,817. Britain: $2,160. The United States has lower life expectancy and higher infant mortality than any of these countries.
  • total bill: We spend about $2.3 trillion on health care.

PEOPLE WHO ARE COVERED

  • 13 percent of low wage workers who had the option of group insurance took advantage of it.
  • 25 percent of U.S. adults depend upon public plans like Medicare for insurance.
  • 26 percent either buy their own health insurance or get it through government programs like Medicare and Medicaid.
  • 52 percent of private-industry workers elected to receive medical benefits offered by their employer.
  • 59 percent of the U.S. population receives employment-based health insurance.
  • 66 percent of Americans get health coverage through their employer.
  • 71 percent employed by private industry had access to employer-sponsored health benefits. 25 percent of low wage earners had access to employer-sponsored health benefits.
  • 73 percent of government workers elect to use their medical benefits.
  • 90 percent of adults under 65 are covered by their employers.
  • 90 percent of premiums were paid for by government employers for singles — versus 73% paid for family coverage. Private-sector employers paid 80% toward single plans and 70% for families.
  • 15 million people buy coverage outside of the workplace (They buy individual policies.).
  • 202 million people are covered by private insurance.

PEOPLE WHO ARE SICK

  • 70 percent of all health-care spending goes toward the diseases likely to kill us — heart disease, cancer, stroke, diabetes and obesity. They are often preventable through diet, exercise, not smoking, and minimal alcohol consumption.
  • Aging: In 1900, the average U.S. life expectancy was 47.3 years. In 2008 it reached 78. By 2020, it will be 82 years.
  • Aging: The risk of being diagnosed with cancer doubles from age 50 to 60.
  • chronic: Long-term diseases (chronic diseases) are frequently only manageable. They aren’t curable. Treatment is expensive.
  • chronic: Nearly half of Americans suffer from one or more chronic (long-lasting) diseases.
  • chronic: The management of diabetes requires expensive monitoring and drugs for the life of the patient. One-third of children born in 2000 will develop diabetes.
  • Exclude homicides and auto accidents, and Americans live as long on average as anyone in the industrial world. They have better chances of surviving longer with heart disease and cancer.
  • fat figures: 200 million Americans are overweight. 100 million are obese.
  • fat figures: 67 percent of Americans are officially obese — with an alarming increase in children and teenagers.
  • fat figures: 9 percent of our nation’s health care bill pays for care of the obese.
  • fat figures: Obesity encourages chronic diseases such as heart disease, stroke, diabetes and renal failure.
  • fat figures: Obesity’s doubling is responsible for about one-third of the rise in health care costs since the mid-1980s.
  • fat figures: Over the last several months Cleveland Clinic employees have lost 100,000 pounds.

PEOPLE WHO DON’T HAVE INSURANCE

  • “They (the uninsured) are likely to benefit most (under the Senate / Baucus bill of September 2009). People without access to affordable coverage on the job would be able to buy health insurance through new state-run exchanges that must offer plans with minimum levels of benefits.” The Sentate Bill Gives and Takes for Most Groups. Wall Street Joural. 9/26/09. Janet Adamy.
  • 46 million Americans are uninsured.
  • 46 million are uninsured, but that number includes 9.7 million people who are not U.S. citizens, 17.6 million who have annual incomes greater than
  • $50,000, some number of whom have chosen not to purchase insurance, and 14 million who qualify for Medicaid. Subtracting out those groups, about five million people are truly uncovered out of a population of 307 million.14,000 people are losing their health insurance every day because of job cuts.
  • 18,000 Americans die prematurely every year due to the lack of health insurance.
  • 1.5 million persons lose homes due to “unaffordable medical costs”.
  • Americans are far more likely than others to forgo treatment because they can’t afford it.
  • If you lose your job, switch jobs, start a business, move, or get sick, you can lose your health insurance.
  • Insurance companies can deny coverage based on a pre-existing condition.
  • 10 percent of U.S. adults say they have no health care coverage.
  • 15 percent of Americans have no health insurance.
  • 33 percent of Americans were deterred by cost from seeing a doctor when sick or from getting recommended tests or follow-up.
  • 40 percent of the Americans surveyed failed to fill a prescription because of cost.
  • 41 percent of nonelderly American adults with incomes between $20,000 and $40,000 a year were without health insurance for all or part of 2005 — up from 28 percent in 2001.
  • 50 percent of bankruptcy filings are partly blamed on medical costs.

PEOPLE’S OPINION

  • 54 percent support a smaller government with fewer services rather than a larger government with more services.
  • 55 percent of Americans rate their health care system as “only fair” or “poor.”
  • 56 percent of the elderly oppose the Obama plan versus 39 percent who support it.
  • 60 percent view private health insurance companies’ job performance as negative.
  • 62 percent of Americans support the choice of a public insurance option. If the public option would drive private insurers out of business and reduce consumer choice, the numbers flip, with 58 percent opposing it.
  • 70 percent of Americans are satisfied with their current health-care arrangements.
  • 75 percent of Americans are satisfied with their health-care services.
  • 76 percent of American said it was important to have a choice between a public and private health-insurance plan.
  • 80 percent to 90 percent are happy with the whole U.S. health-care system.
  • 85 percent said they wanted major health-care reforms.
  • 86 percent of Americans are satisfied with their own health care plan.
  • A majority of Americans said they will pay higher taxes to insure everyone.
  • A solid majority of Americans do not want a more expansive role for government.
  • Americans would still rather trust their health care to private over public plans.

POLITICAL BATTLE

  • 3,300 lobbyists are working on medical reform.
  • Drug makers spent $134.5 million for lobbying in the first six months of 2009, 64 percent more than the next biggest spenders — oil and gas companies.
  • Every interest group in Washington will spare no expense to get its treatment, medical technology, or pharmaceutical product included in the laundry list of benefits that insurers will be required to offer.
  • Medical interest groups spent $263.4 million on lobbying during the first six months of 2009.
  • The drug industry plans to spend $150 million advertising support for the Obama plan.
  • The health care fight is a proxy for a larger partisan debate over the role of government.
  • The tangled web: can it be unwound? The war of powerful interests in medical reform will decide the rules for hospitals, roughly 1000 insurance companies, 50 state agencies which regulate the 50 state markets, all doctors, all nurses, the groups they belong too, corporations who buy insurance, and 305 million Americans consumers.
  • White House senior adviser and chief campaign strategist David Axelrod’s former public relations firm, AKPD Message and Media, has taken in $24 million in ad contracts supporting the Obama plan – along with another p.r. firm, GMMB, run by other Obama strategists.
  • Nancy Pelosi, who leads the Democratic effort for medical reform in the House of Representatives, has a nationwide approval rating of 25%.
  • The Obama plan will cost $948 billion over the next 10 years. The administration pays $622 billion with cuts to Medicare and Medicaid.
  • The latest Pew poll (August 20-27) found that 30% of seniors supported health-care reform while 54% were opposed.
  • “For many Americans, (the failure to pursue) legal reform has become proof that President Obama is more interested in an ideological triumph than his stated goal of lowering health costs. … The estimated dollar benefits of (legal) reform range from a conservative $65 billion a year to perhaps $200 billion. In context, Mr. Obama’s plan would cost about $100 billion annually. … The legal industry was the top contributor to the Democratic Party in the 2008 cycle, stumping up $47 million.” Kimberly Strassel. The President’s Tort Two-Step. 9/11/09. WSJ.

senate bill on medical reform_exposure_resize

PROMISES ARE FREE

  • “Off-the-books federal debt, including Medicare and Social Security, is $107 trillion. This is not a made-up number; this is the money we should have in the bank, according to the federal government’s own accountants, to pay for our current promises to our retirees and future retirees, and this doesn’t include unfunded obligations that we have to the pensions and benefits promised to federal workers and veterans. Nor does it include huge unfunded pension and benefit obligations for other public employees at levels below the federal government.” Mike Whalen. 8/11/09. The Washington Times. We Broke the Bank.
  • Governmental bodies regulate the prices, coverage, and benefits in Medicare, but the program has incurred a $38 trillion liability.
  • Medicare and Medicaid will use 20 percent of GDP in 2050 if costs maintain their growth rate. They now consume 5 percent of GDP.
The cost escalation described in this graph would, if it comes to pass, wreck or hobble our economy.

The cost escalation described in this graph would, if it comes to pass, wreck or hobble our economy.

  • Medicare is in the hole by about $40 trillion on a discounted present-value basis over the next 40 or 50 years.
  • Medicare’s cost as estimated by a congressional committee in 1967 understated the liability due in 1990 by a factor of ten.
  • Our off-the-books federal debt, including Medicare and Social Security, is $107 trillion.
  • Our on-the-books national debt is $11.6 trillion.
  • The federal government spends almost 10 percent of GDP on three major programs — Social Security, Medicare and Medicaid. Round it out and say one of $10 is spent here.
  • “Our $56 trillion in unfunded obligations (for Medicare and Social Security) amount to $483,000 per household. That’s 10 times the median household income—so it’s as if everyone had a second or third mortgage on a house equal to 10 times their income but no house they can lay claim to.” David Walker. “Warning: The Deficits are Coming”. WSJ 9/4/09.

Note from the author: I read more than 200 news stories to put this list together. I didn’t verify any of the factual assertions, but organized them so that they might provide a “big picture” view of matters for debate. I found little obvious discrepancy on facts, although there is a serious question about what is the correct number of people who are not covered (Is it 5 million or 47 million?).

Michael David White is a mortgage banker in Chicago.

22 Comments
  1. EDEL ALONSO MUNOZ permalink
    December 6, 2010 7:38 pm

    I agree with one of your previous readers, tagging certain parts of the discussion does not enhance the interaction; however, it damages your credibility with no need. Your info and arguments can hold up by itself, so next time, keep the discussion interesting and objective.

  2. Scott W permalink
    October 26, 2009 10:08 pm

    Until our Military Veterans and Active Duty Military have the absolute finest medical care at absolutely no cost to them, then NO ONE else in the United States “deserves free medical care.” The reason France, Germany, Canada, Great Britian and all the rest of your examples can afford to “give free medical care” to their citizens is because those countries DO NOT have to spend vast amounts of their national treasure on national defense…BECAUSE it was AMERICANS who have paid for that luxury with the blood of our military in TWO World Wars and a financially debilitating COLD WAR. As far as I’m concerned Russia can have Afghanistan and Iran and all their resources. Your examples, as cited, conveniently leave out that CHINA, our current banker, doesn’t have a national healthcare system and the workers in that paradise are exposed to toxic materials and paid just above slave wages in sweatshops. That we continue to allow their imports into our country to subsidize their immoral system is a disgrace. Our military deserves a better, less self centered, public to defend.

  3. Tyrone of the Streets permalink
    September 11, 2009 6:48 pm

    [Q]While I was in Canada I was involved in a bad car accident which put me in the hospital for a week – my cost was $None, all paid for by Canada.

    Two years ago my wife had an operation for cancer. Blue Cross / Blue Shield would only pay $1,890 of the $29,836 one half day out patient hospital bill. Her bills approached $100k. [/Q]

    I’m always frustrated by comments like these. All that’s really being said is that they’re glad someone else picked up the tab for them. Who doesn’t like that.

    The reality is that there is no free lunch. Someone is always paying. The solution to health care is to find an equitable way to spread the risk across a large group. This is what insurance is. Part of this involves reducing costs, part of it includes increased personal responsibility, and part of it includes universal access to care.

    These things are nearly impossible to achieve together in a system in which the primary consumer of the product is separated from the cost of providing it – either through insurance or single payer systems.

    • September 11, 2009 7:45 pm

      it may appear that our system is a failure because the “consumer of the product is separated from the cost of providing it”. i believe the monopoly pricing powers of insurance providers is the key failure and the key to reform. there is a dumbness in our system now perhaps because those with good coverage think care is free. but stupid monopolistic players in all of the 50 states are the prime drivers and enforcers in an expensive system which excludes far too many.

      check out the graphs on market concentration. what we have now is very similar to a series of 50 statewide public options.

      if “monopoly” isn’t the first word out of your mouth describing our system’s failure, then you have missed the boat.

      thanks for your note. mdw

      • Tyrone of the Streets permalink
        September 14, 2009 10:45 am

        While I’ll agree to some extent a monopolies are in general bad for economic activity, natural monopolies are inevitable when it comes to healthcare. The network of hospitals, providers, and insurers is not broad enough to support adequate competition in all but a few large cities. Typically in the “success stories” above the monopoly is the government. To address the issue of choice we need to promote alternatives such as primary care facilities, increases in physician’s assistants, and small specialty centers as alternatives to big network hospitals.

        We need to get back to the basics of insurance. Insurance was designed to protect against catastrophic events, not pay for every procedure with a small co-pay. High deductible insurance coupled with savings promotes a lot of healthy behaviors. It reduces risk and prevents bankruptcy, promotes smarter choices, and promotes competition through price and convenience factors.

        To promote lower prices, price transparency has to exist. People need the ability to shop around. Modern technology makes this far easier than ever. There should never be any surprises when it comes to how much something costs. Couple this with a reduction in malpractice suits, defensive medicine, and caps on doctor liability and we have the beginning of a better system.

      • September 14, 2009 1:22 pm

        i believe the markets can and will do an outstanding job in medical insurance if we give them a big level playing field. a market of $2.4 trillion of revenue is a mammoth market. we have turned that $2.4 trillion market into a trick bag by dividing it into 50 subgroups — aka the 50 states. make 50 markets into one market, and you will have a revolution.

  4. PolishKnight permalink
    September 11, 2009 1:01 pm

    David, there’s the solution… why not have your wife fly/drive to Germany and Canada and get operations there? We buy German and Japanese cars so why should health care be any different?

    The answer is obvious: Because in the cases you mention where foreigners got free healthcare, these countries would crack down in a moment if Americans started to do this regularly and deliberately. They certainly couldn’t afford to accomodate millions of Hispanic illegals.

    In regards to the point 1 “jump off the bridge because everyone else does it” thinking “Every wealthy country except the United States already has some form of universal care.” Er, the USA does have a form of universal care: Medicare/Medicaid. Oh, wait, that’s going broke and that’s what Obamacare is modeled after. Oops!

    Other than that, good going.

    Regarding Bible clutchers. Matt, you shouldn’t say such bad things about Jeremiah Wright’s congregation…

    • September 11, 2009 1:32 pm

      you may consider our system universal coverage, but nobody would argue we have the best system. and we should have the best system. thanks for the note.

  5. September 11, 2009 10:34 am

    Lot’s of good information, but you lost me at “Obamacare.” Everything else became noise after that. Using stupid buzzwords like that immediately destroys your credibility and makes everything you say suspect.

    • September 11, 2009 1:30 pm

      i will be more careful about that. i didn’t know it was negative. thanks for the note.

  6. David L permalink
    September 11, 2009 9:23 am

    I live in California.

    While I was in Canada I was involved in a bad car accident which put me in the hospital for a week – my cost was $None, all paid for by Canada.

    Two years ago my wife had an operation for cancer. Blue Cross / Blue Shield would only pay $1,890 of the $29,836 one half day out patient hospital bill. Her bills approached $100k.

    My friend went with his wife to Germany – on the trip she had a heart attack and was in the hospital. In order to be discharged they required her to fly back to the US with RN along to monitor her. This was provided at no charge. She never got a bill for the hospital stay.

    Just get sick in the US and you will experience first hand our ‘great society’.

  7. Matt permalink
    September 11, 2009 7:20 am

    You’re dealing with 100 million + dumb people who are clutching their Bible’s thinking/hoping that Obama is the hitler/antichrist.

  8. Susan permalink
    September 11, 2009 6:20 am

    Good job Mike! Your data seems pretty objective. As for Obama and his gang on capial hill, it’s another story. Their biggest mistake is letting the public get involved in this debate. The reason why is because 90% of the population receives reimbursement from some 3rd party, which leaves them clueless as to what’s actually happening.
    What government should do is just reallocate the the money currently being over used for medicare and medicaid to the entire population. Granted, the elderly and the poor will take a hit, but the truth is they are consuming 850 billion per year now or 10% of the GDP. 10% of the GDP has worked for all of our neighboring country’s universal care and it can work here too.

    • September 11, 2009 1:27 pm

      it would be great if we could get everybody covered for 10% of gdp. thanks for your note.

      • Susan permalink
        September 13, 2009 12:17 am

        It can be done with 5% of the GDP if they would eliminate reimbursement for everything that doesn’t save lives or make people less sick. Most of the healthcare in the U.S. is B.S.

      • September 13, 2009 1:50 pm

        what part of our medicine is not useful?

      • Susan permalink
        September 13, 2009 7:12 pm

        Pretty much everything except for trauma in the ER or maternity care.
        Nothing else reduces mortality or makes people less sick.

      • September 14, 2009 1:26 pm

        are you saying that cancer treatment, for example, is ineffective?

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