July 1, 2009

The Health Care Oligopoly and the Real Weight of the AMA

As the health insurance reform debate continues to simmer, there are a couple of important issues that have received scant attention. Specifically, any sort of in-depth examination of physician opinions on the various options for health care coverage; and the true level of market-based competitiveness that exists in today's private system.

In regard to the first, much was made of the fact that President Obama traveled to speak to a gathering of the American Medical Association (AMA) in Chicago, and headlines were grabbed when the AMA announced that, while its members recognized a need for reform, they would oppose any sort of publicly-funded health insurance program. The organization released the following statement:
The AMA does not believe that creating a public health insurance option for non-disabled individuals under age 65 is the best way to expand health insurance coverage and lower costs. The introduction of a new public plan threatens to restrict patient choice by driving out private insurers, which currently provide coverage for nearly 70 percent of Americans.
At first blush - at least if one ignores the fact that the argument should be about the best way to provide health insurance to all Americans, rather than how best to preserve an industry that has failed to meet the needs of the public - this would seem to be a significant strike against any effort to advance a public option. After all, the American Medical Association represents the majority of U.S. doctors, does it not?

Actually, not even close. While the AMA claimed fully three quarters of all physicians in the United States on its membership roles in 1960, its share of representation has steadily dwindled, and today, it speaks for only 20% of America's doctors. With 250,000 members, it is still the largest single association for the medical profession in the U.S., but a number of other physicians' groups that do not align with the American Medical Association have gained strength in recent years.

The National Physicians Alliance (NPA), for instance, claims 20,000 doctors in its ranks, and supports a public health plan. The Physicians for a National Health Program (PNHP), with 16,000 members, wears its support for a public option on its sleeve. And the American Medical Student Association (AMSA) - which broke from the AMA over support for the launch of Medicare 50 years ago - has 62,000 members who are not only the next generation of doctors, but explicit supporters of a public health insurance option and, ultimately, a single-payer system.

Last year, the Annals of American Medicine updated a survey they first conducted in 2003 entitled Support for National Health Insurance Among U.S. Physicians [Note: PDF file]. In the 2008 edition, results indicated that support for a public plan has grown significantly among doctors, and that fully 59% backed some type of comprehensive, national, public option. This is not to say that the AMA's opinion is inconsequential, but it is important to recognize that equating the official opinion of the American Medical Association - which increasingly appears to represent higher-paid specialists - with that of the medical community as a whole, does our current debate a great disservice.

But what of the AMA's concern for the private health insurance industry? Should we be concerned about a public plan that causes people to abandon private insurers for a public plan? Perhaps the simplest answer to that question is another question (or more properly, two): If the private sector can provide service that is superior to that offered by the government - or at a minimum, the same service at a lower price - won't that problem solve itself? And if it can't, why do we need private insurers?

Beyond that basic query, however, lies an important truth. Namely this: the idea that the private health insurance industry is a vibrant, market-driven battleground is a complete sham. Health Care for America Now! (HCAN) released a report in May that uses data provided by the American Medical Association to demonstrate that 94% - more than 9 out of 10 - of the country's insurance markets meet the Justice Department definition of "highly concentrated," in relation to the potential for anti-trust action. So extreme is the level of consolidation, that HCAN has sent a letter [Note: PDF file] to the Justice Department's Antitrust Division, asking it to investigate the state of the health insurance marketplace.

The rest of the reports findings are every bit as striking:
  • In the past 13 years, more than 400 corporate mergers have involved health insurers, and the small number of companies that now dominate local markets haven’t delivered on promises of increased efficiency.
  • Shrinking competition has allowed remaining firms to charge higher fees, and premiums have gone up more than 87 percent, on average, over the past six years.
  • Meanwhile, profits at 10 of the country’s largest publicly traded health insurance companies rose 428% from 2000 to 2007, from $2.4 billion to $12.9 billion.
  • Consolidation of market share among a smaller number of insurers disproportionately disadvantages rural and lower population states. In Hawaii, Rhode Island, Alaska, Vermont, Alabama, Maine, Montana, Wyoming, Arkansas, and Iowa, the two largest health insurers control at least 80 percent of the statewide market.
  • The private health insurance industry invests more in buying back its own stock and rewarding its shareholders than it does in improving operations and service.
All of this would be bad enough if health insurers hadn't earned themselves a reputation for dishonesty and callousness that was confirmed to be well-deserved at a recent Senate hearing. There, a former senior executive for insurer Cigna named Wendell Potter made some very stark and very disturbing statements when he spoke before the Senate Committee on Commerce, Science, and Transportation:
[T]hey [health insurance companies] confuse their customers and dump the sick, all so they can satisfy their Wall Street investors... They look carefully to see if a sick policyholder may have omitted a minor illness, a pre-existing condition, when applying for coverage, and then they use that as justification to cancel the policy, even if the enrollee has never missed a premium payment... Dumping a small number of enrollees can have a big effect on the bottom line.
[...]
All it takes is one illness or accident among employees at a small business to prompt an insurance company to hike the next year's premiums so high that the employer has to cut benefits, shop for another carrier, or stop offering coverage altogether.
[...]
Insurers know that policyholders are so baffled by those [explanation of benefit] notices they usually just ignore them or throw them away. And that's exactly the point. If they were more understandable, more consumers might realize that they are being ripped off.
[...]
My comments are directed toward an industry that is really going in the wrong direction and taking this country in the wrong direction.
To be clear, there is nothing wrong with anyone making a buck by legal means, but this isn't - or shouldn't be - just about the almighty dollar, and if what Mr. Potter says is true, then insurers are treading in the realm of the unethical, if not the explicitly unlawful.

Private health insurance firms are thriving in what is anything but a dynamic marketplace, raking in enormous profits and enjoying the fruits of an anti-competitive oligopoly. Without significant change - a public health care coverage option - the number of uninsured Americans, which currently stands at 46 million, will only continue grow, and at an accelerating pace.

13 comments:

American Medical Association said...

Your post is simply wrong regarding the AMA’s position on health-system reform. The AMA is committed to health reform this year that provides all Americans with affordable, high-quality health coverage. Over the last few years we have invested more than $15 million in our Voice for the Uninsured campaign to call attention to the uninsured crisis and lay the groundwork for health reform that gets all Americans covered.

The term “public plan” has so many different meanings that it confuses more than informs the debate. As the nation’s largest physician organization, we have made it perfectly clear that we welcome and will thoughtfully consider all proposals consistent with the principles of pluralism, freedom of choice, freedom of practice, and universal access for patients.

Recently, the White House released a statement saying: ‘the AMA agrees with the President that enacting reform that drives down costs and expands choice and coverage is an urgent priority. We look forward to working with them as the process moves forward.’

-American Medical Association

PBI said...

AMA,

Wait, let me get this straight: Your contention is that, in directly quoting a statement from the American Medical Association, it was I who got it wrong? Are you seriously trying to make the case that I was incorrect in citing this statement from the AMA?:

The AMA does not believe that creating a public health insurance option for non-disabled individuals under age 65 is the best way to expand health insurance coverage and lower costs. The introduction of a new public plan threatens to restrict patient choice by driving out private insurers, which currently provide coverage for nearly 70 percent of Americans.

Your comment is little more than one big strawman, rife with the tried and true technique of addressing something I never actually said. For example, you quoted a White House statement that reads:

... the AMA agrees with the President that enacting reform that drives down costs and expands choice and coverage is an urgent priority. We look forward to working with them as the process moves forward.

This substanceless dreck clearly falls into the category of "Uh-huh. And?" and in no way addresses the contents of my post. Further, you may have "made it clear" that you will entertain all sorts of proposals, but per my quote above from YOUR ORGANIZATION, you have also made it clear you oppose a public option.

I work hard to maintain a civil tone and have intelligent and calm conversation on this site, but holy shit, your post is absolutely insulting in its craven, mealy-mouthed dishonesty. Whoever you are, feel free to engage with substance in a manner that actually speaks to what I wrote. Alternatively, if your sole intent is to cut and paste corporate PR statements into my comments section, go piss up a rope.

PBI

John said...

Thanks for posting. Well done.

William Owen said...

Absolutely fantastic post. Aside from the increasing disparity between the overall wealth of the health industry and the United States' ever decreasing rank in overall care among industrialized nations, the call out to the nearly effective monopolies the industry has forged is the signal that change is so urgently needed.

The last thing health care should ever become is a monopoly. hell, you can't even buy a hospital in the board game.

Scott said...

Okay, here's a substantive question for you.

If a government agency enters a field to "compete" with existing private companies, can there be a level playing field?

A private insurer has only the premiums paid by customers, plus whatever it can gain from investing a portion of those premiums in stocks and bonds, to meet its payment obligations. If it comes up short, and can't borrow enough to cover a temporary shortfall, it goes bankrupt.

When a government "enterprise," on the other hand, can always dip into the government treasury. The way Amtrak, or the Postal Service, or Fannie May or Freddie Mac do. So a government insurer's clients may think they're getting a better deal by paying lower premiums, but have no way of knowing that for every premium dollar they're paying another through their taxes.

Competing against a government agency is like playing baseball with your ankles manacled together. No matter how good you are, you're going to lose.

PBI said...

Hi John,

Thanks for stopping by - and for the kind words.

PBI

PBI said...

William,

Thank you - I appreciate the feedback!

PBI

PBI said...

Scott,

Thanks for stopping by. I think you ask some fair questions, but ones that perhaps miss a couple of key points.

1. The goal - at least for me and many other people - is to get quality coverage for everyone as cost-effectively as we can. I understand there will be fallout in the insurance industry if a government program drives private competitors out, but by my calculus, that is far more acceptable than anything the private companies have come up with, or the status quo. Fundamentally, I think it comes down to - and I don't mean this harshly, although it may come across that way - whether one believes health care is a right or a privilege, and whether health care should only be available to those who can afford it. Personally, I come down on the side that says health care is a right.

2. Private insurers could have kept the government out of the equation altogether if they had better met the needs of their clients and the country as a whole. Instead, they have delivered poor service, cut sick clients out of their plans, fought to deny claims, excluded those with "pre-existing conditions" and sold people inadequate coverage, all while raking in enormous profits. Today, the cost to businesses and individuals has reached a point of (hopefull) no return. If the health insurance companies were smart, they would have seen the writing on the wall after the failure of the Clinton reform effort, realizing this wasn't going away anytime soon, and yy sympathy for the supposedly restricted cash flow of the health insurance companies is pretty limited.

3. I think there is a place for private health insurance, even if the bulk of insurance purchased by Americans ends up going through a public plan. Just like UPS and FedEx compete with the Post Office, and private banks compete with Fannie Mae and Freddie Mac, private insurers could compete by offering a higher level of service than the "base" public plan.

Finally, I think that your analogy about playing baseball manacled is a bit overbroad. There are ways to keep the manacles off (e.g. delivering quality service at a fair price BEFORE the government gets involved), and there are also other games to play (ultra-premium health insurance on top of a base public option).

Cheers,
PBI

PBI said...

Scott,

I think this article at AlterNet kind of boils down the issue you raise and encapsulates my position...

Best,
PBI

Scott said...

PBI,
The point I was trying to make, and I suppose not making it very well, is that a "public option" may not in fact lower the actual cost of insurance, but only obscure the costs behind a wall of tax subsidy. So, those chosing a "public option" may see the premium they pay go down, but wonder why the cost of everything else they buy goes up, and blame the wrong people.

And generally, I think the "right" versus "privilege" argument ignores the basic fact that health care is a service that must be provided through someone's labor. To claim a "right" to have that service without compensation is to claim a "right" to someone else's labor, without compensation. (Or, by extension, to force someone via the government's guns else to pay for a service you enjoy for free.) I don't see what's so high-minded about this.

But I guess what annoys me most about these debates is that the high and always-increasing costs of providing health care are assumed as given or natural, and the argument is only about who should pay those costs. If the cost of an x-ray were only $30 rather than $300, would we even be having this argument?

Connecticut Man1 said...

Fact is that the last time the AMA membership was polled they supported single payer:

"A recent nationwide poll of physicians published in the Annals of Internal Medicine utilizing the AMA physician database demonstrated that 60 percent of doctors support a single-payer national health plan based on the most efficient and effective Medicare system."

http://www.pnhp.org/news/2008/september/doctors_support_sing.php


Who does the AMA leadership really represent? Because it isn't their members.

Much in the same way that most small businesses want a government plan BUT the chamber of commerce sticks to right wing talking points that do not represent their members real views.

PBI said...

Scott,

A public option will almost CERTAINLY lower the cost of health care, no matter in what "account" (private premiums versus public taxes, for instance) the expense is tallied. To find support for that contention, one need only look at the percent of GDP expended on health care (here) versus the quality of health care systems (here.) The U.S. pays a greater percentage of it's GPD and gets less in return in terms of health care quality and availability than pretty much any other developed nation on the planet.

I understand your argument with regard to claiming the right to someone else's labor, but I don't find it convincing. There are many rights - the right to be secure in our homes, for instance - that make a claim on someone else's labor. (In that case, the police.)

Further, no one is talking about not providing compensation - reform is about getting everyone covered and driving the costs of health care down; not stiffing doctors and nurses. In point of fact, one of the greatest societal costs associated with the current health care system is that incurred by caring for the uninsured, who have to resort to emergency room visits if they seek help at all, and wait until they are seriously ill when they do finally go, making treatment longer and more costly. Further, a recent study by the Annals of American Medicine found that 62% of ALL bankruptcies in the United States can be traced directly to medical bills (here). Add to that the costs associated with chasing people unable to pay their bills and the strain this puts on medical facilities, and if one takes a second to do the math, one realizes we are ALREADY paying for people without insurance; we're just doing it really, really inefficiently as health care providers appportion uncollected expenses to those who pay, driving up the cost of everything, including - as you note - X-rays.

Even if you don't buy the "high-minded" argument, the economic one for a public option is compelling enough on its own. Overhead expenses for Medicare currently run at about 3%, for instance, while those of private insurers are generally between 15% and 25%. And in your last paragraph, I think you hit the nail on the head: the cost of health care itself - not just insurance - has ballooned. This is, actually, one more argument in favor of a public option; a government insurance program would have enough volume to negotiate serious price concessions on everything from pharmaceuticals to equipment, and as mentioned above, universal coverage helps mitigate the absorption of unpayed medical bills from the uninsured.

PBI

PBI said...

CM1,

Thanks for visiting. I think you raise an excellent point about the disconnection between leadership and membership. Kind of helps explain the fact that the AMA now only represents 20% of American physicians, down from 50% in 1960!

Cheers,
PBI