Saturday, July 11, 2009

What goes on behind the doors of insurance companies?

An interview with an ex PR-head of Cigna, describing what goes on behind the doors of insurance companies and why healthcare should not be a business driven by profit.

Healthcare is a sensitive and complicated problem, and I don't claim to know the answer to the grave situations that America (and the world) is in, but one thing I know for sure is that healthcare cannot be left in the hands of for-profit business. Here is why:

- Insurance companies and rich, powerful interest groups like the American Medical Association (AMA) claim that status quo is best, that free market is efficient. This is untrue, because, apart from the fact that barely any industry in this world is truly free, fair and efficient, you will see in any basic economics book that fair and efficient free market requires that the following conditions be met:

1. Consumers make rational decision - when it comes to life and death, I think we all know that any kind of rationale goes out the window. How do we even begin to calculate how much our loved ones' lives are worth accurately? Sometimes allowing a comatose, frail elderly to die would seem sensible, but how do we make that decision when the vegetative elderly is our grandmother?

2. Free flow of information - there certainly is not. Apart from the fact that incumbent powerful groups actively try to prevent flow of information, it is almost impossible to expect patients to understand the healthcare they are getting or what insurance companies provide in a package. Even most doctors, people who supposedly know healthcare the best, get headaches thinking about insurance and cannot begin to figure out what insurance plans cover. Getting a surgery is nothing like buying a cereal - you can't try it a few times until you find the brand you like, you can't taste it before you buy it, there are no pictures to show you what it looks like. Healthcare is a black box of cereal without any kind of commercial or free samples for it, and you only get one box.

3. No barriers to entry - either for competitors or consumers. As outlined clearly in the above interview, insurances companies are geniuses at establishing oligopoly and eliminating competitors. Barriers for consumers go way beyond pre-existing conditions and dumping employers from the rolls, to name a few.

4. Many buyers/sellers - so that competition exists which leads to efficiency. As mentioned in 3, the insurance companies are actively trying to eliminate sellers and problematic buyers

5. Homogeneous products - so that consumers can choose the most efficient supplier who can produce at the lowest cost. Healthcare products found in each hospital and offered by each insurance companies are drastically variable - there is nothing homogeneous about it.

Based on the points above, healthcare industry is far from free, fair or efficient. Now one may argue that we allow many industries in America which are neither fair nor efficient to exist, what makes healthcare so special?

As outlined in the interview, healthcare industry deals with human lives - your neighbors down the road, your wife, your son, and not the corn that is made into cereal or trees that are made into tissue paper. The ramification of what we allow in insurance companies or hospitals affect human beings, and for important services that involve human lives, like the fire department or the police, most countries rely on the government to provide these services to make sure that there is a safety net for everyone and that these services are not cut short or distorted by private profits and corporate greed. If we are ok with the government-run fire department, which is efficient and has not failed to prove itself in the times of crisis (remember 911?), why would it be so disastrous to have the public option and put just part of healthcare into the hands of the government?

To help alleviate the fear, these are facts, as delineated by Senator Kucinich in this video

In Canada, a single-payer, government-run, universal insurance health care system which supposedly ration health care:

- Wait time for procedures and diagnostic imaging is much shorter than in the US
- Much lower incidence of medical bankruptcies
- Fewer people go without health care due to the inability to pay
- Canadians are much happier and more satisfied with their health care system. Walk down the streets of America and ask people if they are satisfied with their health system, I think it is pretty obvious that Canada wins by far.

So as the debate for healthcare reform unfolds in the coming months, please do not let lies and lobbyists fool you. Go out there and look for facts, listen to witnesses, make an informed decision on which kind of healthcare you want to have.

And fight for it.

1 comment:

  1. Nice and interesting article. I enjoyed reading all the facts that you have mentioned about insurance companies and how they actually work. This post taught me so many good things that I will always remember. Thanks for posting.
    commercial liability insurance