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Thursday, October 29, 2009

How long should we put up with the inherent conflict-of-interest in for-profit health insurance?

This is an excellent succinct history of for-profit health insurance. I never really grasped how recent it is -- that before Reagan, when the non-profit model of Blue Cross-Blue Shield prevailed, before many of the state organizations were bought out and transformed by profit-making enterprises like the notorious Wellpoint, only 12% of the marketplace was held by for-profit plans.

I especially like this simple description of the essence of the for-profit system for health insurance:

The health insurance model we live with now is patently absurd. They actually increase their profits by NOT providing services. In what way does that not stand capitalism on its head?
Think about it this way...
Imagine your brother-in-law came to you and said, "Send me $18,000 per year, and I'll keep it for you. Whenever you need money to spend, just come to me, and I'll pay the bill for you, as long as I approve of the item you plan to buy. Then, at the end of the year, whatever you haven't spent, I get to keep."
Would you take that deal, or would you laugh at him and suggest to your wife that he be committed?
The above example [is] almost exactly how health insurance works now. Our current health care financing system is wrong, and it will cripple our economy if we continue with it.

That seems to capture it in a simple way that shows how ridiculous in concept it is. Profits are great for wide swaths of an economy, such as generating new products and services. For making life-and-death decisions, not so much. The conflict-of-interest is palpable; whether it can ever be consistent with such decisions is questionable. It's not unlike the old private, for-profit fire-fighting companies. How did that work out, anyway?

Perhaps we could improve the model somewhat if health insurance companies had to build unbreachable walls between the finance and claims divisions of the company, such that regularity of relatively modest profits rather than go-go profit maximization were made the attraction for investors. No more super stock options to "align executive compensation with enhancing shareholder value." And how about adding this to the mix: the health insurance companies and their executives, as medical decision-makers, were required by law to subscribe in full to the Hippocratic Oath -- with complete (yes, uncapped) liability for injury arising from failure to adhere to the oath? Hmmmm.


Blogger Dan said...

This for-profit travesty sneaked up on me while I wasn't paying attention. I agree that it's not even "good" capitalism. I don't know why Democratic lawmakers have have accepted it as the norm. Oh yes, it must be because they sre also living off the spoils of immoral profits. Would that the millions of dollars in lobbying payoffs went to pay claims for sick people instead.

4:02 PM  

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