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Friday, February 16, 2007

Why health care in this country MUST be removed from the for-profit model
Posted by Jill | 7:17 AM

Is the health insurance business a racket? Yes, literally — or so say two New York hospitals, which have filed a racketeering lawsuit against UnitedHealth Group and several of its affiliates.

I don’t know how the case will turn out. But whatever happens in court, the lawsuit illustrates perfectly the dysfunctional nature of our health insurance system, a system in which resources that could have been used to pay for medical care are instead wasted in a zero-sum struggle over who ends up with the bill.

The two hospitals accuse UnitedHealth of operating a “rogue business plan” designed to avoid paying clients’ medical bills. For example, the suit alleges that patients were falsely told that Flushing Hospital was “not a network provider” so UnitedHealth did not pay the full network rate. UnitedHealth has already settled charges of misleading clients about providers’ status brought by New York’s attorney general: the company paid restitution to plan members, while attributing the problem to computer errors.

The legal outcome will presumably turn on whether there was deception as well as denial — on whether it can be proved that UnitedHealth deliberately misled plan members. But it’s a fact that insurers spend a lot of money looking for ways to reject insurance claims. And health care providers, in turn, spend billions on “denial management,” employing specialist firms — including Ingenix, a subsidiary of, yes, UnitedHealth — to fight the insurers.


Incidentally, while insurers are very good at saying no to doctors, hospitals and patients, they’re not very good at saying no to more powerful players. Drug companies, in particular, charge much higher prices in the United States than they do in countries like Canada, where the government health care system does the bargaining. McKinsey estimates that the United States pays $66 billion a year in excess drug costs, and overpays for medical devices like knee and hip implants, too.

To put these numbers in perspective: McKinsey estimates the cost of providing full medical care to all of America’s uninsured at $77 billion a year. Either eliminating the excess administrative costs of private health insurers, or paying what the rest of the world pays for drugs and medical devices, would by itself more or less pay the cost of covering all the uninsured. And that doesn’t count the many other costs imposed by the fragmentation of our health care system.

Which brings us back to the racketeering lawsuit. If UnitedHealth can be shown to have broken the law — and let’s just say that this company, which is America’s second-largest health insurer, has a reputation for playing even rougher than its competitors — by all means, let’s see justice done. But the larger problem isn’t the behavior of any individual company. It’s the ugly incentives provided by a system in which giving care is punished, while denying it is rewarded.

And that's the problem. The for-profit, capitalist model is simply incompatible with the providing of health care. If you need care, you need it, and "market forces" don't apply, especially when on the other side is a so-called insurance company that is in the business of denying coverage to those who most need it and denying claims for care already provided.

A very dear friend of mine recently embarked on one of those paths of ever-escalating tests that in most cases only results in bad news. First there was "something on the mammogram" -- performed in an out-of-network facility for which she had to pay 50% of the cost. Then there was another mammogram. Then there was a visit to a breast surgeon, also out of network because he came highly recommended by someone who had had breast cancer. Then there was a stereotactic breast biopsy. My friend is lucky in that the growth is benign, but now there is surgery in the offing. I can tell you that the LAST thing on her mind has been what the bills for the uncovered part of the expenses for these tests has been.

Does anyone honestly believe that a person going through this kind of barrage of tests is going to do "comparison shopping" for physicians and facilities? And given the wall that still exists between a "We know best and don't question us" medical profession and a public ill-equipped under the best of circumstances to research alternatives and separate the wheat from the chaff, how are consumers of health care supposed to make "educated decisions" among the expensive, the preposterously expensive, and the Oh My God How Am I Ever Going To Pay For This?

Heath care is really not that much different from roads, schools, or any other part of the infrastructure. This is one area where the economies of scale apply. It's time to take the profit motive out of holding people's lives in the hands of corporations that pay their executives hundreds of millions of dollars while denying the coverage they profess to provide to people who diligently pay their premiums and yet seem to have no right to expect coverage in return.
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