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brian johnson
Huge Administrative Waste Makes Clear For-Profit Insurance Is 'Actually Very Bad': Analysis
"It is totally fair for people to identify private insurers as the key bad actor in our current system," writes Matt Bruenig of the People's Policy Project. "The quicker we nationalize health insurance, the better."
Dec 10, 2024
Last week's murder of UnitedHealthcare CEO Brian Thompson brought to the surface a seething hatred of the nation's for-profit insurance system—anger rooted in the industry's profiteering, high costs, and mass care denials.
But that response has led some pundits to defend private insurance companies and claim that, in fact, healthcare providers such as hospitals and doctors are the real drivers of outlandish U.S. healthcare costs.
In an analysis published Tuesday, Matt Bruenig of the People's Policy Project argued that defenders of private insurers are relying on "factual misunderstandings and very questionable analysis" and that it is reasonable to conclude that the for-profit insurance system is "actually very bad."
"From a design perspective, the main problem with our private health insurance system is that it is extremely wasteful," Bruenig wrote, estimating based on existing research that excess administrative expenses amount to $528 billion per year—or 1.8% of U.S. gross domestic product.
"All healthcare systems require administration, which costs money, but a private multi-payer system requires massively more than other approaches, especially the single-payer system favored by the American left," Bruenig observed, emphasizing that excess administrative expenses of both the insurance companies and healthcare providers stem from "the multi-payer private health insurance system that we have."
He continued:
To get your head around why this is, think for a second about what happens to every $100 you give to a private insurance company. According to the most exhaustive study on this question in the U.S.—the CBO single-payer study from 2020—the first thing that happens is that $16 of those dollars are taken by the insurance company. From there, the insurer gives the remaining $84 to a hospital to reimburse them for services. That hospital then takesanother $15.96 (19% of its revenue) for administration, meaning that only $68.04 of the original $100 actually goes to providing care.
In a single-payer system, the path of that $100 looks a lot different. Rather than take $16 for insurance administration, the public insurer would only take $1.60. And rather than take $15.96 of the remaining money for hospital administration, the hospital would only take $11.80 (12% of its revenue), meaning that $86.60 of the original $100 actually goes to providing care.
High provider payments, which some analysts have suggested are the key culprit in exorbitant healthcare costs, are also attributable to the nation's for-profit insurance system, Bruenig argued.
"Medicaid and Medicare are able to negotiate much lower rates than private insurance, just as the public health insurer under a single-payer system would be able to. It is only within the private insurance segment of the system that providers have been able to jack up rates to such an extreme extent," he wrote. "Given all of this, I think it is totally fair for people to identify private insurers as the key bad actor in our current system. They are directly responsible for over half a trillion dollars of administrative waste and (at the very least) indirectly responsible for the provider rents that are bleeding Americans dry."
"The quicker we nationalize health insurance," he concluded, "the better."
Bruenig's analysis comports with research showing that a single-payer system such as the Medicare for All program proposed by Sen. Bernie Sanders (I-Vt.), Rep. Pramila Jayapal (D-Wash.), and other progressives in Congress could produce massive savings by eliminating bureaucratic costs associated with the private insurance system.
One study published in the Annals of Internal Medicine in January 2020 estimated that Medicare for All could save the U.S. more than $600 billion per year in healthcare-related administrative costs.
"The average American is paying more than $2,000 a year for useless bureaucracy," said Dr. David Himmelstein, lead author of the study, said at the time. "That money could be spent for care if we had a Medicare for All program."
Deep-seated anger at the systemic and harmful flaws of the for-profit U.S. insurance system could help explain why the percentage of the public that believes it's the federal government's responsibility to ensure all Americans have healthcare coverage is at its highest level in more than a decade, according to Gallup polling released Monday.
"There's a day of reckoning that is happening right now," former insurance industry executive Wendell Potter, president of the Center for Health and Democracy, said in an MSNBCappearance on Monday. "Whether we're talking about employers, patients, doctors—just about everybody despises health insurance companies in ways that I've never seen before."
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The 'Silent Violence' of Corporate Greed and Power
Year after year, the deadly toll goes up, not down, and the horrors continue.
Dec 08, 2024
For decades consumer groups have been sounding clarion calls for action against the “silent violence” causing massive casualties that arise from the unbridled power of corporate greed, criminal negligence, or indifference. They cite statistical and case studies that the media and lawmakers mostly ignored or relegated to low levels of enforcement.
Corporate bosses just have their corporate lawyers and public relations hacks brush away such warnings and pleas. One day stories they knew would not have legs if they just kept quiet or mumbled some general words of regret, promising some vague improvements to their products and services.
But year after year, the deadly toll goes up, not down, and the horrors continue. For example, at least 5000 people A WEEK die in hospitals in the U.S. due to “preventable problems,” concluded a peer-reviewed study by Johns Hopkins University School of Medicine physicians in 2016. This is just one of numerous such studies of hospital-induced infections, overuse of antibiotics, medical malpractice or what is called “medical error,” prescribing bundles of drugs that backfire, “accidents,” deskilling and understaffing.
There has been no mass mobilization by either government officials or industry executives to address this staggering toll of at least 250,000 fatalities a year!
Behind these figures are real people with families, friends, and coworkers shocked, incensed, or despondent over avoidable losses of life and preventable harms. Some of them undoubtedly knew the specific causes and demanded correction and compensation, to no avail.
"Just under the surface is a seething whirlpool of resentment, anger, frustration, and bitterness about corporate abuses."
Avoidable casualties also arise from the sweeping denial of insurance coverage for ill or injured patients by greedy unregulated or underregulated health insurance companies maximizing profits and bonuses for CEOs. Many insurance companies are now using AI to help wear down consumers.
About two thousand Americans a week lose their lives because they cannot afford health insurance to cover prompt diagnosis and treatment costs. System-driven patterns of denial of benefits by health insurers also cause deaths and injuries. The companies have algorithms that automatically delay or deny needed procedures without even seeing a patient’s medical records or speaking with the patient’s physician.
Insurance policies are full of fine print deductibles, co-pays, waivers and exclusions that drive consumers and their doctors up the wall. Insurance premiums are paid by patients or employers ahead of time with advertised assurances.
In the past two months, consumers have been overwhelmed by a blizzard of television ads by giant insurers e.g., Aetna, Cigna, and Humana for their Medicare (dis)Advantage plans aimed at elderly beneficiaries. The ads are loaded with “freebies” that paint the companies as charities instead of cunning commercial marketers. In reality, denial of benefits is higher for these plans than for traditional Medicare. Moreover, these plans push patients into narrow networks of physicians and hospitals and subject them to dreadful over-use of “prior authorization.” The latter means some remote company doctor or medical professional decides whether a physician with a patient can be reimbursed for a specific treatment. This results in overwhelming paperwork for the doctors, immense profits for the companies, and degraded treatment for patients.
An October 31, 2023 NBC investigation titled “‘Deny, deny, deny’: By rejecting claims, Medicare Advantage plans threaten rural hospitals and patients,” by star reporter Gretchen Morgenson exposed another deadly impact of Medicare (dis)Advantage programs on rural hospitals in America.
These companies are so entrenched that they have become largely immune to exposés. They have gamed the system to straitjacket both patients and healthcare workers. The healthcare industry gets away with about $360 billion in computerized billing fraud and abuses every year. (https://scholar.harvard.edu/msparrow/license-to-steal). Prosecutions are minimal, and lawmakers are mostly indifferent as they count their campaign cash donations. Did you see any of the major party politicians in this year’s election campaigns even mention the devastating impact of the medical industry’s greed on innocent people or the taxpayers?
Just under the surface is a seething whirlpool of resentment, anger, frustration, and bitterness about corporate abuses. Such reactions are often most pronounced in poor areas or workplaces, where people are subjected to choking pollution or exposure to carcinogenic toxins leading to cancer, heart disease, and other organ ailments.
The corporate perpetrators, however, are remote from the impacts of their operations and policies. Their hugely overpaid bosses rule from elaborate suites and enjoy unimaginable luxuries. Very few people know the names, even of the CEOs of Fortune 500 companies like ExxonMobil, Aetna, Humana, Duke Energy, Bank of America, and so on. The lethality, the theft, the domination, and the escape from the rule of law are rendered impersonally by the corporatists who are now investing huge sums to go even more abstract and remote with tyrannical generative AI algorithms.
This week, a man, still on the run, made his anger very personal. Around 7:00 AM he singled out, in front of a busy midtown Manhattan hotel, the chief executive of the giant UnitedHealthcare, Brian Thompson, and shot him. The assassin fled on an electric bike. Police collected the bullet casings from his pistol. On these casings were the words, “deny,” “delay” and “depose.”
As news of this fatal shooting spread over social media, a torrent of angry or morbid comments flooded the Internet. The New York Times reported a few, to wit:
“I’m an ER nurse and the things I’ve seen dying patients get denied for by insurance makes me physically sick. I just can’t feel sympathy for him because of all of those patients and their families.”
“Thoughts and deductibles to the family,” read one observer underneath a video of a CNN picture. “Unfortunately, my condolences are out of network.”
Tragically, Mr. Thompson, according to a company employee, was one of the few executives who spoke of changing the culture of the company.
But corporate culture, marinated to the core with endless cravings for ever-growing easy profits, is very hard to change – especially when it is so easy to extract more and more premium dollars from powerless consumers who lack adequate regulatory protections.
And so, the social media explosion included this typical comment on TikTok: “I pay $1,300 a month for health insurance with an $8,000 deductible. ($23,000 yearly) When I finally reached that deductible, they denied my claims. He was making a million dollars a month.”
The New York Times described a “wrenching outpouring from patients and family members who posted horror stories of insurance claim reimbursement stagnation and denials.” The ugly reality will continue to exponentially pour out with volcanic fury as the media receives more public reactions.
One wonders about the reaction if this were to have happened four months before the November election. Could the uproar have transformed the slimy rhythms of the Harris campaign, orchestrated by the Democrats’ corporate-conflicted political consultants who manage the candidate messages and who definitely don’t listen to the warnings and popular proposals by Senator Bernie Sanders?
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