Obviously there has been debate about health care reform in the United States, particularly about the “public option”. Republicans hate the idea. It’s socialized medicine. And we all know that socialism is evil. It is a public takeover of the health insurance “industry” by government, because the public option will put the insurance companies out of business.
The theory of capitalism is that free, competitive markets are more efficient and are self regulating. If I invent a better widget at a better price, the world will beat a path to my doorstep. While proponents of capitalism and “entrepreneurism” chant this mantra, there are many counter examples. In the realm of personal computers, the MacIntosh computers were arguably better than the IBM-PC; but the former never gained more than a niche market while the later (and its clones) dominated the market. Within a few years of the appearance of the PC, there were better operating systems than MSDOS. Today there are better and less expensive operating systems than Windows. But none of these overtook Microsoft.
Government run enterprises are inherently inefficent, have bloated bureaucracies and cannot compete in the open marketplaces. Why, just look at the U. S. Postal Service. Or Amtrak. They–like all government enterprises–are inherently inefficient and must, as indeed they do, operate at horrendous loses. Surely publicly owned corporations can compete because they are more efficient. And indeed they do. Just ask the folks at United Parcel Service or FedEx; they run circles around USPS in the parcel business and are even competing in the bulk mail business. (Imagine my surprise when the FedEx man rang my doorbell and delivered a catolog for business cards–I don’t have a business and the few personal calling cards I use are printed on my ink jet printer at home.)
But the argument is that a “public option” will drive health insurance companies out of business. Yes, sure. Just like the USPS drove UPS and FedEx out of business. According to the capitalist theory, competition makes for a more efficient system. Probably a public option would make the health insurance industry more efficent. The health insurance business is monumentally inefficient. And we can make a direct comparision.
We have a “public option” for senior citizens. It’s called “Medicare”. Most of us seniors have had health insurance policies with one or more insurance companies. We may not have been aware of the full cost of those policies, as our employers picked up a large percentage of the preimium costs–and if our employer had many people under the plan, the rates were discounted. Those policies
- dictated what doctors, hospitals and labs we could use,
- dictated to the doctors what treatments could be given and what drugs could be prescribed,
- set annual and lifetime maximums on benefits,
- if we were unemployed we lost our insurance or, for a sort period of time, could take out a very expensive COBRA policies,
- if we had insurance, it might be cancelled if we got sick,
- if we did not have insurance but did have a pre-existing condition we could not get insurance, and
- getting some problem with the insurance corrected was a major hassle.
Most of us seniors have found Medicare far better.
But get this–the administrative costs of Medicare are significantly less than the administrative costs of health insurance. A CNN report indicated that the Medicare administrative costs were 4% and health insurance 16%. A little research indicates that it is more like 5.2% versus more than 8% (excluding, of all things, sales commissions). The administrative costs are soaring, too.
“Private Health Insurance Administrative Costs per Person Covered, 1986-2003 The cost per enrollee for private health insurance expenses not related to direct care services (such as administrative costs and profits) continued to rise, from $85 in 1986 to $421 in 2003. The most rapid growth occurred in the 4-year period from 1987 to 1990, when these administrative costs rose 125%. For the six-year period from 1998 to 2003, administrative costs per enrollee nearly doubled (+95%).”
See Trends and Indicators in the Changing Health Care Market Place See also.
Might we ask why the administrative costs of private insurance is greater than Medicare? Here are a couple of examples:
Cigna CEO
Salary: $1.06 million
Bonus: $3.00 million
Other : $8.32 million
Stock Gains: $16.45 million
http://www.forbes.com/lists/2006/12/0BHA.html
Contrast this to the salary of the head of Medicare
Executive Level IV: $149,000
http://www.excellenceintransition.org/prune/prunedetail.cfm?ItemNumber=10550
http://www.opm.gov/oca/08tables/html/ex.asp
There’s also this little item…
Cigna Lobby expense – 1st Quarter 2009
$450,000
http://www.usatoday.com/money/industries/health/2009-06-11-lobby_N.htm
Composed October 3rd, 2009
