Rabid Wolves

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It seemed like a reasonable plan.

I was having trouble keeping track of my chickens – they kept somehow escaping from their coop.  So I figured that I would set guards to make sure none of them got out any more.  I got some rabid wolves and put them outside of the coop, figuring that they would scare the chickens enough to stay in their place.

But here\’s the problem: these rabid wolves are eating my chickens! Can you believe it??  You would think they\’d have the moral decency to respect the fact that I hired them to guard my chickens, but now they try to bite me whenever I go out there!  It\’s amazing to me that these wolves would act in such a way.  What\’s the world coming to when you can\’t trust rabid wolves to guard your chickens??

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What?  You think I\’m crazy?  Take a look at our healthcare system!  This is exactly what we are doing with our healthcare dollars.

In a recent article, Ezra Klein (coincidentally mentioned in two consecutive posts) discussed Wendell Potter, a disillusioned insurance executive who shared why he left the industry.  Potter explained that the for-profit insurance industry (Cigna in this case) uses the following tactics to maximize profits:

The industry, Potter says, is driven by \”two key figures: earnings per share and the medical-loss ratio, or medical-benefit ratio, as the industry now terms it. That is the ratio between what the company actually pays out in claims and what it has left over to cover sales, marketing, underwriting and other administrative expenses and, of course, profits.\”

So it seems that a for-profit company is in it for the profit.  Disgusting.  Klein goes on:

The best way to drive down \”medical-loss,\” explains Potter, is to stop insuring unhealthy people. You won\’t, after all, have to spend very much of a healthy person\’s dollar on medical care because he or she won\’t need much medical care. And the insurance industry accomplishes this through two main policies. \”One is policy rescission,\” says Potter. \”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.\”

So the insurance industry is \”cherry-picking\” healthy people to insure – people they won\’t have to pay much on – and dumping unhealthy people.  How can this happen?  How can the insurance industry be taking money from the system and using it for their own profits?

But who is actually the problem here?  Are the Wolves evil for eating my chickens?  No, they are just acting like wolves.  I am the fool for trusting them to watch my chickens without getting taking advantage of their position.  Putting for-profit insurance companies in charge of huge sums of money is just as foolish.  As Klein states:

The issue isn\’t that insurance companies are evil. It\’s that they need to be profitable. They have a fiduciary responsibility to maximize profit for shareholders. And as Potter explains, he\’s watched an insurer\’s stock price fall by more than 20 percent in a single day because the first-quarter medical-loss ratio had increased from 77.9 percent to 79.4 percent.

Actually, I think Mr. Klein understates it a touch.  It isn\’t that the insurance companies need to be profitable; they are under huge pressures from shareholders to maximize their profits.  They are being pressured to milk as much money from the system as possible.  Maggie Mahar underlines this fact:

Potter is right.  Disappointed shareholders can be brutal. And it doesn’t take much to disappoint them. In this case investors sent the share price plummeting because the insurer had the poor judgment to increase the amount that it paid out to doctors, hospitals and patients by 1.5 percent.

Even if an intelligent CEO wanted to do the right thing, take the long-term view, and provide labor intensive chronic disease management so that, over the long term, customers would be healthier—the CEO of a large publicly-traded insurance company probably wouldn’t keep his job long enough to find out whether or not his ideas worked. This helps explain why for-profit insurers have not followed the example of non-profit insurers and created “accountable care organizations” like Geisinger or InterMountain.

Those who have followed this blog have heard me say it before: the system won\’t change until we stop trusting for-profit insurance companies to guard the money.  Those who are morally indignant over the fact that these companies would milk the system as they do are blustering in the wrong direction.  You don\’t blame wolves for acting like wolves, and you don\’t blame for-profit publicly-held companies for trying to maximize profit.  They are just being themselves.  We are the idiots – assuming they could be trusted in this position.

Obviously, the best solution is to put the politicians and lobbyists in charge.  Surely they are trustworthy.

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16 thoughts on “Rabid Wolves”

  1. Absolutely on point.
    However, I will say that some insurance companies can be very good. I have had horror story upon horror story with the hospitals and doctors that I have seen for the treatment of a complex disorder. I have had financial nightmares resolving doctors’ bills — I probably spend a day a week fixings messed up doctor billings. Who has consistently stuck with me to help me find a solution, and not messed up a single solitary bill, with no complaints about the bills, all while being unfailingly polite? My insurer Guardian. If they ran the national insurance fund, I would be thrilled. The quality of service from them has far exceeded the quality of service I have received from any other participant in my health care.

  2. Absolutely on point.
    However, I will say that some insurance companies can be very good. I have had horror story upon horror story with the hospitals and doctors that I have seen for the treatment of a complex disorder. I have had financial nightmares resolving doctors’ bills — I probably spend a day a week fixings messed up doctor billings. Who has consistently stuck with me to help me find a solution, and not messed up a single solitary bill, with no complaints about the bills, all while being unfailingly polite? My insurer Guardian. If they ran the national insurance fund, I would be thrilled. The quality of service from them has far exceeded the quality of service I have received from any other participant in my health care.

  3. Regarding the last two sentences, I think we have to say that the politicians and lobbyists are already in charge of health care. The reason wolves are guarding the hen house and eating chickens is that the wolf lobby convinced the Department of Agriculture to make up rules saying wolves can guard the hen house and eat all the chickens they want.
    The point of the public plan isn’t to put politicians in charge; it’s to take them out of the equation. The “public” in “public plan” is us – the public. A public plan done right would give us chicken farmers the tools we need to take care of our own flocks.

  4. Regarding the last two sentences, I think we have to say that the politicians and lobbyists are already in charge of health care. The reason wolves are guarding the hen house and eating chickens is that the wolf lobby convinced the Department of Agriculture to make up rules saying wolves can guard the hen house and eat all the chickens they want.
    The point of the public plan isn’t to put politicians in charge; it’s to take them out of the equation. The “public” in “public plan” is us – the public. A public plan done right would give us chicken farmers the tools we need to take care of our own flocks.

  5. If the public plan were truly public, I’d agree. The problem is that, as I said before, those sitting at the table are not necessarily the wisest and most informed. When I read about the lobbyists and stupid politicos, I think that the public plan will be more like the “political plan.” I hope you are right, but it is deeply ingrained in me to mistrust the government almost as much as I do the greed of the corporations.
    The point of the last lines was to say that half of our job is to get rid of the stupid system we have now. The other half is to not let another stupid system to take its place.

  6. If the public plan were truly public, I’d agree. The problem is that, as I said before, those sitting at the table are not necessarily the wisest and most informed. When I read about the lobbyists and stupid politicos, I think that the public plan will be more like the “political plan.” I hope you are right, but it is deeply ingrained in me to mistrust the government almost as much as I do the greed of the corporations.
    The point of the last lines was to say that half of our job is to get rid of the stupid system we have now. The other half is to not let another stupid system to take its place.

  7. I think we should transfer some of the insurance risk to the physicians (global payments, capitation, whatever we’re calling it now.) Then they can start cherry picking the patients too.

  8. I think we should transfer some of the insurance risk to the physicians (global payments, capitation, whatever we’re calling it now.) Then they can start cherry picking the patients too.

  9. Wow. That is brilliant. I do kind of feel sorry for the insurance companies in how much risk they take. Docs really should bail them out. It’s the nice thing to do.

  10. Wow. That is brilliant. I do kind of feel sorry for the insurance companies in how much risk they take. Docs really should bail them out. It’s the nice thing to do.

  11. Frankly my health insurance plan is the biggest consumer ripoff I can think of.My wife and I are in our 60s. We are self employed. So we go out on the open market to look for insurance and here’s the best we can find.
    With Blue Shield’s PPO 4000/8000 plan my wife an I pay 10,000 dollars a year in after tax dollars
    For that we get a plan with an $8000 deductible. That’s right. In order for both my wife and I to start getting a dime of help from our insurance company we first have to pay $10000 in yearly premiums plus $8000 in deductibles.
    $18,000 a year!!!!
    So if I want the insurance company to pay for a single X ray or allergy medications, I’ve got to pony up $18000

    With benefits like that we say “to hell” with the American medical system.
    No way am I about to pay that kind of money for so little in return.

    So we bite the bullet and pay the insurance company …just like a small shopkeeper in Sicily pays the mafia for protection.

    But instead of spending $8000 in out of pocket medical expenses, we save up all our aches, pains and just hop on a plane each November and head to the hospitals of Thailand….where the service is wonderful….at 1/10th the cost they charge .
    in the US.

    If something doesn’t happen to health care in America you can kiss this country goodbye. We’ll soon be spending more on health care than all the entire federal government a few years from now.

  12. Frankly my health insurance plan is the biggest consumer ripoff I can think of.My wife and I are in our 60s. We are self employed. So we go out on the open market to look for insurance and here’s the best we can find.
    With Blue Shield’s PPO 4000/8000 plan my wife an I pay 10,000 dollars a year in after tax dollars
    For that we get a plan with an $8000 deductible. That’s right. In order for both my wife and I to start getting a dime of help from our insurance company we first have to pay $10000 in yearly premiums plus $8000 in deductibles.
    $18,000 a year!!!!
    So if I want the insurance company to pay for a single X ray or allergy medications, I’ve got to pony up $18000

    With benefits like that we say “to hell” with the American medical system.
    No way am I about to pay that kind of money for so little in return.

    So we bite the bullet and pay the insurance company …just like a small shopkeeper in Sicily pays the mafia for protection.

    But instead of spending $8000 in out of pocket medical expenses, we save up all our aches, pains and just hop on a plane each November and head to the hospitals of Thailand….where the service is wonderful….at 1/10th the cost they charge .
    in the US.

    If something doesn’t happen to health care in America you can kiss this country goodbye. We’ll soon be spending more on health care than all the entire federal government a few years from now.

  13. I would be more afraid of a business that runs huge deficits year after year than I am of a business that runs huge profits. Huge deficits (99 trillion dollars worth) eventually means the business goes bankrupt.
    In the case of our government, the only way to survive huge deficits is either to continue to print money (inflation which will make your 10K premiums look like monopoly money) or stop paying for your care, which would defeat the purpose so many seek.

    Neither option will end nicely.

  14. I would be more afraid of a business that runs huge deficits year after year than I am of a business that runs huge profits. Huge deficits (99 trillion dollars worth) eventually means the business goes bankrupt.
    In the case of our government, the only way to survive huge deficits is either to continue to print money (inflation which will make your 10K premiums look like monopoly money) or stop paying for your care, which would defeat the purpose so many seek.

    Neither option will end nicely.

  15. Or do something to slash costs. After all, apparently the USA has the highest percentage GDP spent on healthcare by a factor of something like 2 to 1, and only has the 37th best healthcare system.

  16. Or do something to slash costs. After all, apparently the USA has the highest percentage GDP spent on healthcare by a factor of something like 2 to 1, and only has the 37th best healthcare system.

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