Who's Afraid Of A Public Plan?
Story from the Chattanooga Times Free Press

A new report showing that health insurance premiums in Tennessee rose five times faster than workers’ earnings from 2000 to 2007 is deeply troubling, but it certainly is not surprising. Workers still lucky enough to have access to employer-provided insurance — less than 55 percent in Tennessee still do, as compared to 60 percent nationally and 70 percent a decade ago — are well aware that their premium costs have eaten up their wage gains in recent years, even as their coverage has declined and their out-of-pocket expenses have soared.

Such depressing and clearly unsustainable trends should be fueling national demand for health care reform and the creation of an alternative public insurance plan for voluntary, tax deductible purchase.

The medical industry’s control

The dynamic of the public dialogue on this critical issue, unfortunately, is controlled by the medical industry and its lobbyists. And they are doing everything in their power to kill the concept of a public plan that would help keep insurers, hospitals, pharmaceutical companies, high-end health care providers and medical device suppliers from over-charging — and that ultimately would help reduce spending on health care.

The new insurance cost figures were compiled by a coalition of Tennessee groups that advocate health care reform and creation of a public plan. A spokesman for one advocacy group attributed the sharp increases in insurance costs to the dominance of the state’s two largest insurance providers — Blue Cross Blue Shield of Tennessee, which covers 45 percent of Tennessee’s insurance market, and UnitedHealth Group Inc., which covers 16 percent. A combination of other companies carry the 39 percent balance.

Big insurers rule

Their dominance, he asserted, allows BCBST and UnitedHealth to “set the prices, ... make the rules and call the shots.” It also enables BCBST to boast reserve funds of $1.4 billion, and executives at UnitedHealth to capture obscenely high compensation packages.

A number of other factors, to be sure, contribute to excessively high health care costs. A short list is illustrative: Too little focus on preventive and wellness care, and too much on procedures; excessive use of expensive technology; defensive diagnostic procedures to protect against malpractice claims; excessive hospital and provider costs; needless administrative costs to combat excessive insurance denials; and needless complexity of insurance claims, diagnostic codes and bundled services.

The insurance industry cites many of these factors, but it rarely addresses its own excessive costs and profit margins, and the needless complexity of its pricing rules, claims procedures and denials.

Blue Cross officials here maintain that Tennessee ’s 62 percent increase in premium costs from 2000 to 2007 (vs. the 12 percent gain, to $25,639, in the same period for median wage workers) primarily reflects the growing cost of medical services and the more intensive use of services required by the demographic shift toward a larger aging population.

While the latter may be true, the former is not reflective of medical cost margins in all other highly industrialized countries — all of which offer universal health care under different models, advanced medical services equal to those in the United States, and typically better health indices, more doctors and more hospital beds per capita.

Other advanced countries offer all this while spending between 8-to-11 percent of gross domestic product on health care. America, by contrast, spends nearly 17 percent of GDP on health care — a level expected to reach 21 percent within 10 years — and still leaves 47 million citizens uninsured, and far more citizens under-insured and subject to medical bankruptcy in the event of a medical crisis.

Pharma’s a culprit, too

Prescription drug prices for the top 50 most-used drugs, as well, are two-to-three times higher in the United States than in every other advanced country — and they are rising fast, if not faster, than other insurance and provider costs. This is largely due to Big Pharma’s anticipation of government price negotiations and their urge to set price markers higher now.

Not surprisingly, BCBST spokesperson Mary Thompson told this newspaper’s Dave Flessner that a government-organized insurance plan, available on a voluntary basis to citizens not satisfied with private market and employer-organized plans, ultimately would crowd out private companies and dampen the very competition that reform advocates seek.

Let insurers compete

That’s a disingenuous argument. Such a public plan should spur competition. The proposal is for a public option plan modeled on plans federal workers receive and administered on a Medicare-style model, like those BCBST administers for a profitable administrative service organization (ASO) fee in a number of states. If private insurers can do better than government, they should be able to offer a better product, or a lower cost.

If they can’t or won’t take that challenge, then that would expose the fallacy of relying on high-profit insurance companies to help reduce the unsustainable curve of the medical industry’s profit taking, and the medical miseries it is producing for this nation’s increasingly under-insured and uninsured population.

Given the choice, most citizens, if they had their say, would take a good public plan and peace of mind. Employers, relieved of health insurance costs, would be more competitive in the face of global competition. And workers, liberated by portable coverage that wouldn’t go away if they changed jobs or careers, would find new freedom and bargaining power in their new mobility.