Need Competition? Try the American Health Plan
The Los Angeles Times report today—about patients getting caught in the middle when doctors and insurers fight over who should pay medical bills—raises some interesting issues that we have been talking about for years about lack of competition in the health care "market" and corresponding inefficiency and high costs. Case in point:
* 20 years ago 10 insurers covered about 27% of all insured Americans. Today, just four companies—WellPoint Inc., UnitedHealth Group, Aetna Inc. and Cigna Corp.—provide coverage to about half of Americans with insurance.
* One health insurer controls at least 50% of the market in two-thirds of the nation's metrolitan areas. Here in my hometown of Los Angeles, we've got two insurance behemoths to choose from—Kaiser Permanente and Anthem Blue Cross. Yippee. That's not a real choice: Kaiser and Blue Cross's rates are about the same (even though Kaiser is a "non-profit") and both engage in the most egregious anti-consumer practices including retroactive cancellations of coverage when enrollees get sick and actually need to use their health care.
That dramatic consolidation has led to dramatic inefficiency. Simply, without competition, there is no incentive to be lean: At least 30 cents of every dollar spent on healthcare, about $630 billion this year, goes to overhead.
What's this all mean? Well, for those still convinced that a "single payer" system will kill American health care, their right. Except the single-payer system here in the U.S. is one controlled by a handful of insurance companies whose thirst for profit knows no bounds. In comparison, countries like Canada that have excluded health insurers from health care spend half of what we spend on overhead.
That's why we should inject real competition into the health care marketplace through an American Health Plan. Under that approach, every American would have the choice of joining a public insurance pool like Medicare that bypasses health insurance companies and pays doctors and hospitals directly. Or they could keep their traditional insurance plan. By giving Americans the choice of a low-overhead alternative, insurance companies would have to crack down on their administrative waste in order to compete.