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.
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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.
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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.
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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.