The New Altruists

Milton Fisk, Hoosiers for a Commonsense Health Plan,

All of a sudden, the most unlikely bunch has turned altruistic. Conservative businesses and politicians want health coverage for the uninsured. Schemes multiply about how to do it. Why the change of heart? Beware of those bearing gifts! For, this altruism is but poorly disguised self-interest.

Look at some apostles of this new altruism. Wal-Mart is an easy case: it hopes to use it to avoid paying any more for health benefits. Why Governor Schwarzenegger? He hopes to garner more dollars for powerful private insurers he needs. In Indiana, Governor Daniels also courts the private insurers with his health plan.

What are these schemes? Common to them is the use of public subsidies so the uninsured can buy private insurance. However, spreading private insurance worsens the problems it already creates.

The idea came from President Bush’s 2003 Medicare D drug program giving private insurers public subsidies. It’s unadulterated corporate welfare. The drug companies get $40 billion a year more since Medicare can’t bargain over what they charge. The insurers’ ads and profits cost the government $5 billion a year.

With Medicare D as inspiration, don’t expect much from our new altruists. Covering more people is an admirable goal. Getting it through private insurance will push inflation in health care through the roof. To modulate this inflation, we’d need public insurance Medicare (A and B) is an example extended to all.

In 2005, CEOs at five big insurers received together a total of $14 million plus stock options and grants for over two million shares. The aggregate profits in 2006 of their companies were $12 billion. Still, their premiums have nearly doubled in the past decade. But a public insurer seeks no profits. Its chieftains don’t become plutocrats.

Don’t stop here! There’s more to being an expensive parasite. Your premiums for private insurance go to marketing as well as health care: the TV ads, junk mail, public relations accounts, and hucksters signing on employers and hospitals. There’s little of this waste with public insurance.

Then there’s the cost of underwriting – trying to find who to charge a larger premium due to greater use, who to deny coverage for a pre-existing condition, and who to dump from the rolls. This cherry picking is absent with public insurance, with no extra charge or denial for bad luck or poor genes.

Schwarzenegger wants insurers in his state to devote at least 85% of premiums to health care. WellPoint says it devotes only 81%; as a California giant, its screams will get Arnold back on track. This bickering is juvenile when Medicare has overhead of 3%. Five times less than his benchmark!

Hang on for more! Add to private insurers’ overhead a ripple effect on providers. Doctors and hospitals must send bills to multiple insurers. With a single public payer, this inefficiency disappears. Instead of billing insurers, hospitals will operate under annual budgets negotiated with that single payer.

Shouldn’t the competition between multiple insurers save money? In 1946, they arranged exemptions from federal anti-monopoly legislation. With impunity, they can fix prices (upward), carve up territories, and standardize the plans they offer. As for many states, their legislators bow and scrape when insurers grace their chambers.

Free enterprise versus big government? Nah! That’s not the fight. It’s rather: Pay more or pay less? When a new altruist says he or she wants more people covered, ask, Do you want to expand business for private insurers or do you want to reduce inflation in health care costs by having a single public insurer?