Health Insurance: the house always wins

By Jim Baird

A friend in the insurance business never tires, and even seems to relish, telling a story he learned during the course of his certification. The story is of the origins of Lloyd's of London, one of the first insurers, a sort of club, really, of investors who monitored reports of ships departing and arriving. They placed bets on whether this or that one would arrive home safely with a lucrative load. The era was the one of European conquest of “primitive” societies along with its rapacious exploitation of natural resources that were obtained, if not by trade, then by force. The friend goes on to describe all insurance as a gambling exercise wherein a policy buyer places bets against his own good health or good fortune. As in any casino, however, the aggregate betting outcome always favors “the house”. The friend’s tale is a summary and cynical description of insurance as a placement of chips on a casino wheel, a game on a tilted playing field, a transaction with a butcher whose big, broad apron hides his thumb on the scale. Why do vendors of medical insurance, vendors of risk, who are for profit operators, just like casinos, make the decisions about what procedures will be paid or not when it comes to an individual’s treatment? Decisions about treatment are made at whose behest? That of the insurer or that of the patient, whose well being, whose very survival, may depend on what treatment payments are approved? Top executives of some of the largest health insurers are said to “earn” annual compensations that amount to tens of millions of dollars. Are those the fruits of treatment decisions based on cost alone? Even in the arena of public insurance like Medicare, service delivery and payment can be something of a crap shoot for the public interest and its shareholders. Fraud on the part of Medicare service providers has long been documented, and a recent New Yorker story on privatized Medicare fraud (so-called Advantage private options) shows that service providers have routinely and methodically violated the terms of their contracts, and, having been hit by lawsuits over fraudulent billing, have deemed settlements, expressed in six and seven figured non-criminal agreements, as simply being the “costs of business”. A comprehensive public option for health coverage, offered by public entities that are not for-profit operators, and whose business does not have roots in common with those of casino operators and riverboat gamblers, will offer the private market real competition across the table. That competition might turn those companies more toward serving their customer base than maximizing share prices. A broader public offering of health coverage will also beef up review of charges by providers and remove those whose hands routinely get caught in the cookie jar.

Jim Baird resides in Comer