IEET > Rights > HealthLongevity > Economic > Staff > Mike Treder > Disability
For-profit health insurance is an obscenity
Mike Treder   Jun 10, 2009   Ethical Technology  

Do you think modern medicine is on the brink of eliminating disease forever? Not quite yet, it seems, which is why health insurance will remain a necessity for at least the next few decades. But just because we need insurance doesn’t mean we should allow corporations to steal from the healthy to cheat the unhealthy.

Any bets on how much longer we’ll have to worry about getting sick? Making a wager like that is exactly what buying health insurance is all about. If you knew for sure that you would never be injured or come down with a disease, you could safely and confidently skip buying insurance. Most of us, though, aren’t willing to take that chance. So we enter into a risk-sharing venture with other people, paying premiums and hoping we’ll never really need the benefits.

Now, should that kind of arrangement be subject to profit taking?

By its very nature, any for-profit business will try to maximize its bottom line. Nothing wrong with that. The company’s first responsibility is to its owners and/or shareholders. That’s how capitalism works, and in most cases, for most kinds of business, it works just fine.

If a company doesn’t focus effectively on making a profit, it will go out of business. (Or need a bailout - snark.) So the profit motive is generally a positive aspect of a capitalist society. It makes companies compete, work harder, try to please their customers, and excel at what they do. So far, so good.

But there are some kinds of services for which the for-profit model is clearly the wrong one. Take, for instance, policing. How well would it work if you had to rely on a group of competing local businesses to fight crime and provide public security? Would you like it if you knew that your neighbor would be better protected because s/he could afford to pay for more expensive policing than you? Obviously, we decided long ago that such matters are not the place for competition and profit making. Enlightened societies recognize that public safety is a common good—a human right—and that it doesn’t belong in the hands of protection rackets.

In my view, health insurance should be treated the same way: as a common good, a human right. The problem with for-profit medical insurance is that business imperatives are too often in direct conflict with those basic goods. To make more money, the company may need to reduce costs. That might require dropping customers who are costing too much—taking too much out of the system—in favor of those who are healthier and don’t need the benefits. It could mean deliberately denying service for people who are in need. Sometimes it results in misleading if not outright dishonest practices: misinformation, obfuscation, delay, complexity; anything to slow down payouts and cut down on claims.

Note that I’m not calling for insurance companies to act more humanely. As long as they are in the business of making a profit, worrying about the general welfare of society is not their job, and it shouldn’t be. But that is precisely why health insurance is the wrong kind of business to be left in the hands of for-profit companies.

The only logical—and ethical—solution is single-payer insurance in which we collectively share both risks and benefits. Of course, most countries already know this, and many practice it quite effectively. Consider this story:

In November 2007, Maggie Yount was rushed to the emergency room after a drunk driver crashed into her car on a Nova Scotia highway.

Yount awoke from a coma four days later. She had suffered a brain injury in the head-on collision. Thirteen bones were broken, from her leg to her cheek. The other driver was killed.

Yount, a Canadian citizen, spent three months in a Halifax hospital, receiving treatment and rehab that must have cost a small fortune.

“I have no idea how much it cost,” she said. “It’s not something I’ve ever needed to know.”

So who paid the bill?

“The government of Canada.”

The United States is the only industrialized democracy that doesn’t have a government-run insurance system. Under such systems, universal coverage is provided through tax revenue. There are no premiums, co-pays or deductibles.

It’s not a perfect system—people often end up waiting for nonessential treatment. But it won’t leave you destitute if things go bad. Basically, you’re covered. For everything.

It’s only here in the USA, the world’s richest country by far, that profit-making is still considered a legitimate enterprise for health insurance providers. That’s wrong, and it must change. (Read the rest of the linked article to learn about Maggie’s disastrous experiences with privatized insurance, American style.)

To reward their owners, to please their shareholders, to make a higher profit, it is in the bottom line interest of for-profit insurance companies to charge you the highest premiums they can get away with. And it is equally in their interest to deny, delay, suspend, or eliminate service to those in need of benefits, especially those whose needs are the greatest, for they will cost the most.

Just because we all need medical insurance doesn’t mean we should let corporations steal from the healthy to cheat the unhealthy. Allowing this to continue is obscene.

Mike Treder is a former Managing Director of the IEET.



COMMENTS

Mike, 

You seem to have independently discovered the same sociological theory as Alan Fiske which I mentioned in my previous comment!  (Three types of relationships, Guardian Principles = Authority-Based, Commercial Principles=Exchange Based,  Information Principles = Communitarian-Based)

I agree, Commercial Principles should only apply to *some* types of goods and services, and health is really part of the communitarian model. All natural resources should be part of the communitarian model also , see:

Georgism

So, socialize health and natural resources.  For land and minerals,  rather than being allowed to own them outright, the government ‘rents’ them to people instead,  and the rents can then be redistributed as the guaranteed minimum income (GMI)!

The wiki says that even libertarian economists think its great idea!  All income tax can be abolished, since the only tax is the ‘land tax’ on minerals/natural resources, and a full free market can then operate for all other goods and services that don’t fall into the communitarian or authoritarian models.

“Standard economic theory recognizes that a land value tax would be extremely efficient : unlike other taxes, it does not reduce economic productivity.”

When you really sit down and look at the facts objectively, it’s pretty clear that this model would work fantastically and make the world a far far better place for everyone.

Again, I must point out , this theory is not just pie in the sky;  Alaska, US, already works off a partial Georgist model, the practical results are just as good as predicted.

Yes, I completely agree! We definitely need a single-payer healthcare system. The Land Value Tax of Henry George would be the optimal way to pay for it. I’m very pleased that more people are talking about this.

The goals are very clear. The question is how do we get there?

This article offers a wonderful argument for single payer health insurance, which I will now incorporate into my continuing calls for health care reform to my US and NY government representatives.

Would we need to socialize doctoring if doctoring cost less? So, why does doctoring cost so much? Could some of the cost be brought down by competition? Competition with midwives, holistic practitioners? What about shortening the workweek to reduce stress (and reduce divorce—very stressful)? What about cleaning up the environment to halt the assault on the immune system? The issue of socializing doctoring would probably go away if we were to recover and share the commonweath (Georgism or geonomics), to re-direct all our spending on nature and privilege (e.g., corporate charters) into an Alaskanesque “rent” dividend to the citizenry. Having to pay it makes producers more careful, which cleans up the environment. Getting a share of the revenue, people can work less, play more, and enjoy good health. Score one for fundamental justice!

Mike, there really is a whole discipline called economics with analytical tools for considering these kinds of questions.  I suggest you either tool up enough to talk about these things intelligently or keep silent.

Robin,

I very much agreed with your proposals to simply spend less on healthcare generally, as well as to decentralize and municipalize it to the greatest extent possible. Reminded me of Kevin Carson’s proposal for Open Source Healthcare.

Of course not everything is possible to eliminate or municipalize, and furthermore there are millions of people who are screwed out of insurance through no fault of their own. I don’t believe in equality of outcomes, but we need some sort of safety net.

That said, I am a staunch advocate of a Basic Income, and the idea of single-payer healthcare seems to fit nicely into such a worldview, with the side benefit of allowing for collective bargaining to further lower costs. Heck, even Hayek supported socialized health insurance.

From http://www.fff.org/freedom/0994e.asp ... Does he think a system of social insurance is a harmful form of planning? Hayek: “Certainly not a system of social insurance as such, not even with the government helping to organize it. The only point where the problem can arise is how far to make it compulsory. . . .”

Why must it be all or nothing? Surely we can both lower costs and implement a single-payer system.

Robin, you know as well as I that there are many healthcare economists who have come to the same conclusion that Mike, myself, and more than half of Americans have: we can have higher quality health insurance for everyone, with better, more rational prioritizing of services, by eliminating the unnecessary 1500 private health insurance companies, and switching to a single payer. Unfortunately the power of the medical-industrial complex lobbyists has again stopped the administration from even considering that policy. So instead we are offered a marginally better system of a public option to compete alongside the privates. I hope the Republicans’ scaremongering that a public option will strangle private health insurance is correct. What I fear is that they will just continue to use pre-existing conditions to squeeze all the old and sick into the public system, which will then be cash starved by fiscal conservatives like Medicaid has been. In any case, gratuitous snarky comments about their being a discipline of economics do sound pretty bizarre in 2009—tell it to Wall Street.

Mike, where did you get the idea economists were in charge of US medicine? 

jhughes, yes one can intelligently argue for that conclusion, but that does not mean all arguments for it are intelligent.  Wall Street 2009 doesn’t remotely disprove that there is a discipline of economics.

Fantastic article and I agree with 99 percent of it. Where I differ is the statement that the U.S. is the richest country in the world, when in fact the U.S. is the largest debtor nation and is quite bankrupt. However, the U.S. will need a healthy educated citizenry to rebuild the country after it collapses.

Here’s a letter I wrote to a number of our so called public servants:

Why I support Universal Health Care:

I am an RN with 26 years of health care experience and know a little something about the industry. So please hear my words, because they are screaming at politicians, who don’t have a clue, and at lobbyists who scare the public, manipulate and payoff our representatives. I may be a RN but I’ve also been a patient to and can tell you from personal experience I’d much rather deal with the government than a greed stricken hospital administration, insurance companies that deny services and there share holder masters.

The U.S. has a collapsing health care industry. For profit hospitals, insurance companies, big pharma and wall street are about to take us over another cliff and it’s all about profits and bonuses, sound familiar. They look at the baby boom generation retiring and see nothing but gold. Unfortunately, we are an insolvent nation so the only thing we have is a healthy workforce, NOT!

To maintain a productive growing economy, we need healthy educated workers who can care for their children, their seniors and pay taxes.  So why do we treat the working demographic as third class citizens when it comes to health care accessibility? Our system has created a middle class of indentured servants. People afraid to move, switch jobs or take entrepreneurial risks out of fear of losing there health care benefits. Our children lack health care and our seniors choose between food, medications and utilities. Our system is backwards!

These fools that cry socialism forget about our military, public education, law enforcement, EMS, mass transportation, library system and hybrids like the USPS, utilities and our national freeway system. The transcontinental railroad wasn’t funded by big business. Most of the loans were from government bonds. Same thing with the Panama Canal and missions to the moon. Are these institutions and projects forms of socialism, yes they most certainly are. Sometimes capitalism needs some help, guidance, a boost and a medium to work in. An adept government with sagacity; can provide this, our founding fathers did!

If you know the history of the Panama Canal, then you know the French failed due partly to the poor health of the workers. When the U.S. took over an American railroad engineer, John Frank Stevens, appointed by President Theodore Roosevelt, built proper housing for canal workers and oversaw extensive sanitation and mosquito-control programs that eliminated yellow fever and other diseases from the Isthmus. Because they looked at the workers health as part of the equation, the Panama Canal project was a success.
My point here: Healthy workers can produce and perform amazing things for business and government; therefore, universal health care is needed to help maintain a productive and healthy nation.

I’ve worked with many Canadian nurses and they’ve always told me, our politicians don’t know what they’re talking about. So I challenge any member of congress to go to Canada and document these long lines into the Canadian ERs, clinics and pharmacies. I challenge our politicians to compare, the quality and efficiency of the two systems.

Politicians go on fact finding missions to Iraq and Afghanistan all the time; so why not go to Canada. They won’t have to worry about IED’s, mortar fire or bullets zipping past them and they could easily do it in a day. They’d probably be back in time for dinner and a movie. Unfortunately this hasn’t happened because our politicians and their lobbyist masters know the truth about the Canadian Health Care System, IT WORKS!

I challenge any member of congress to go to Canada and document these long lines into the Canadian ERs, clinics and pharmacies. I challenge our politicians to compare, the quality and efficiency of the two systems.

Robin,

You use the word “intelligent” a lot and in a way where it seems you want to point out what you perceive as others’ inferiority to you.  I know, that probably doesn’t sound intelligent.

At any rate, I’m not hearing much sound argument from you; just criticism. The health care system is not working, largely because of profit mongers with questionable ethics, regardless of economists’ role in the system.

Great, well-thought out arguments, Mike. And you present them professionally.

I am saddened by societies ignorance ... 60% of U.S. health insurance companies operate as a nonprofit entity ... when we understand that, it changes every argument.

Mark, that doesn’t change anything even if it were true (too lazy to vet your statement). There would still be a huge portion of the primary health insurance market that’s for-profit. And plenty of non-profit organizations still have greed at their heard…coughchurchescough.

I support what you wrote, lets make a group and revolt against this insurance system in USA. A revolt just like Egypt etc. Let me know if u need any help.

“And plenty of non-profit organizations still have greed at their heard…coughchurchescough.”

Churches very often dole out bad food as well. Plus their sermons can be the theological equivalent of empty calories.

 

BTW, Mr. Hansen doesn’t quite realize that though the discipline of economics does exist, it is rigged; no one is objective in economics, even those who try to be; everyone is grinding an axe. The following is slightly offtopic, or it may be nebulous: we don’t want to blame those at the top too much, though corruption (whatever one’s definition of corruption may be) is trickle down. Merely because many are at the bottom doesn’t mean there is anything decent about them, they may be bad seeds who are worsened by trickle-down corruption. Those at the bottom have to escape the seediness of their substrate, but they can’t eat what they want all the time, take any drink or dope, have unsafe sex with anyone they want, and expect to stay healthy. But #1 is for those at the top to set a better example, that is the first step to what the social contract is based on.

@postfuturist…just to continue this off-topic (but very interesting) discussion 😊 ........should we perhaps get rid of this “top-bottom” metaphor? It’s used a lot in organisations and bureaucracies, and to highlight its absurdity I tend these days to refer to it as the “gravitational metaphor”.

That being said, Karl Marx was right about one thing: power and wealth tend to concentrate. It’s a bit like gravitational clumping in the earlier universe (leading to the formation of galaxies, stars, planets, us…): a uniform distribution of power and wealth is just not stable. Those who have better access to resources tend to have both the resources (by definition) and the inventive to get more of them.

Opposing this tendency, however, is the basic social instinct and sense of fairness that have led us to come up with - and even implement to some extent! - crazy ideas like democracy and human rights. With such lofty principles (whoops I’m using the gravitational metaphor again) inevitably come their nemesis: corruption and hypocrisy.

I haven’t yet read Mike’s original post so I don’t know exactly what Robin Hansen was objecting to, but whatever the rights, wrongs and realities of healthcare in the US I think he has a point in objecting to the idea that “economists” are somehow responsible for the current situation.

With regard to your “grinding an axe” comment, I guess you can say that about anything: even natural scientists are not immune from it. But I do agree that it’s more of a temptation in the social scientists, because they deal with more personally interesting issues, and the “discipline of economics” suffers perhaps even more than others from a confusion between its (legitimate) nature as a social science - i.e. an attempt, using the scientific method, to understand the nature of social interactions involving money - and advocacy (i.e. axe-grinding). It would be great - if it’s not already happening - if a group of leading economists would taken an initiative to promote a much clearer distinction between the two than is currently the case.

Great essay! This, I think, is one of the core issues that emerging technologies need to address. If it can be done equitably, it is a Godsend; if not, it sows the seeds for a quite dangerous future.

@Hasan Genhau and postfuturist
“And plenty of non-profit organizations still have greed at their hear[t]...coughchurchescough. “
Many of the non-profit hospitals in the US and most of the hospitals in the rural developing countries are faith-based. Perhaps one of them could help you with your cough.

“I agree, Commercial Principles should only apply to *some* types of goods and services, and health is really part of the communitarian model. All natural resources should be part of the communitarian model also”
yes! This was the great failing in the valuation equations following WWII that led to what John Cobb Jr. referred to as economism. It helped to undermine the promise of democracy and free-markets.

Healthcare is part of an ecosystem. Fixing the insurance side alone is not enough. The R&D that goes into the creation of the emerging medical advances is huge and with approval through FDA as tenuous, very risky. I think we need to address not just insurance, but also approval and up front development costs. Could we, for example, create a cross between ebay and the stock market to fund specific R&D projects?
One issue is that for-profit insurance is always stacked in favor of youth. As we age, we age the risk/reward ratio changes but that doesn’t mean that access to insurance should change. Could we combine health insurance and retirement investments in some way? These are not true solution ideas but rather to show that we need different ways of thinking about it in the future.
But the point made in the essay is the dominant one and bottom line. Without it our chances for equal access as we move more and more toward genetic-based treatment will continue to dwindle until it becomes a relic of the past.

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