Uncategorized · March 15, 2023 0

The Marketplace and Health Care: A Very Bad Combination

Marty Levine

March 16, 2023

A few months ago, after my wife broke her hip while we were hiking in Sequoia National Park, I began to consider what it meant when access to health services becomes just another commodity, governed by the rules of the marketplace. These conditions, as The Economist states, mean that “In a free market scenario where there are no regulations or restrictions imposed by the government, if someone charges less, the customer will buy from him. Therefore, you have to lower your price or offer something better than your competitor. Whenever enough people demand something, it will be supplied by the market and everyone will be happy. The seller ends up getting the price and the buyer will get better goods at the desired price.”

But, as I learned firsthand, the perfection of a theoretical model, one where buyers have the knowledge, time, and ability to search out the best supplier at the best price and suppliers are driven to provide the best product at the lowest price does not exist in the real world.  Those needing health care are in a marketplace dominated by large organizations that supply medical care, develop, and produce medications and sell private insurance policies which many of us rely on to offset the high cost of care.

Consider some data, courtesy of former Cigna Insurance Vice President Wendall Potter, on how badly our nation’s health care system is doing.

  • 42% saidthey had problems paying medical bills or were paying off medical debt.
  • Even as we spend about $4.5 trillion on health care a year, Americans are now dying younger than people in other wealthy countries. Life expectancy in the United States actually decreased by 2.8 years between 2014 and 2021, erasing all gains since 1996, according to the Centers for Disease Control and Prevention

When the inadequacies of the marketplace became too blatant to ignore, there was enough support to create Medicare, Medicaid, and the rules and regulations to try to deal with the failures of the marketplace. Millions of our neighbors have been provided health care services that would have been unavailable to them without the government intervening to protect the lives of those the marketplace seemed happy to ignore.   

As successful as these efforts have been, the political battle never seems to be over. Wherever possible conservative forces step forward and whittle down the public component of these programs and provide ways for them to be privatized. The rationale is always that things will be better and cheaper. The reality seems to be that they may not be better, and they may not be cheaper, but they will create profits at the public’s expense.

As one example, in 2003, Medicare Part D, what we now know as Medicare Advantage, opened a door for the privatization of Medicare.  Those choosing this option would receive plans with the same benefits of as those choosing the Original (government-run) Medicare in plans administered by private insurance companies. And the benefits of these market-based plans sound glorious. Here’s how Consumers Union put i: “Advantage plans (also called Part C)…provide the benefits of [traditional Medicare] usually for about the same amount, with lower copays, so there’s no need for Medigap (supplemental insurance needed to cover out of pocket costs). Some also offer benefits not in Original Medicare, such as fitness classes or some vision and dental care.”

In the 20 years that these plans have existed these heavily advertised benefits have made their mark. Today almost half of all those served by Medicare are getting their health care from these private market Advantage plans.

This comes on top of other parallel efforts to shift other elements of public health care systems to private management.

Who has benefited from this growing privatization?  According to a recent report published by Wendall Potter (as reported in Common Dreams) it has been big insurers that “are benefiting hugely from the accelerating privatization of Medicare and Medicaid…Over the past decade, Potter found, the seven top for-profit insurance companies in the U.S…have seen their combined revenues from taxpayer-backed programs soar by 500%, reaching $577 billion in 2022 compared to $116.3 billion in 2012.

“The big insurers now manage most states’ Medicaid programs—and make billions of dollars for shareholders doing so—but most of the insurers have found that selling their privately operated Medicare replacement plans is even more financially rewarding for their shareholders,” Potter wrote. “In addition to their focus on Medicare and Medicaid, the companies also profit from the generous subsidies the government pays insurers to reduce the premiums they charge individuals and families who do not qualify for either Medicare or Medicaid or who work for an employer that does not offer subsidized coverage.”

“Potter noted that the top insurance giants, a group he dubbed the Big Seven, now control more than 70% of the Medicare Advantage market, which has grown rapidly in recent years. According to the Kaiser Family Foundation, more than 28 million people were enrolled in a privately run Medicare Advantage plan last year—nearly half of the Medicare-eligible population.”

While the insurers profit from this privatization it is not clear cut that those receiving services are actually benefitting. Individually, everyone choosing or receiving privatized care rather than a public program faces some tradeoffs as Consumer Union noted in its comparative analysis of traditional Medicare and Medicare Advantage plans. “For many seniors, Medicare Advantage plans can work well. … if you have chronic conditions or significant health needs, you may want to think twice. For one thing, with Original Medicare, you can see any provider that accepts Medicare, which is most of them. But Medicare Advantage plans typically require that you get care from a more limited network of providers, and you may need pre-authorization to see specialists… which can also end up being more expensive. For example, a recent Kaiser study found that about half of all Medicare Advantage enrollees would end up paying more than those in traditional Medicare for a seven-day hospital stay. Medicare Advantage plans may be especially problematic for people in rural areas…”

What is not clear is whether the public, in spending its tax funds, is getting a value from outsourcing medical care to private businesses. This is a question that we will be hearing much more about in the coming days as the battle over the debt ceiling and the Biden budget comes into greater focus. Conservative voices will continue, I expect, to beat the drum of greater privatization and more limited government spending. They will be playing out the strategy described by Jeffrey Dorfman writing for Forbes, “based on three totally different factors: libertarian-style beliefs in property rights, the difficulty of keeping their own fiscal houses in order, and a belief in the inefficiency of governments.”

From my perspective, these are arguments that have already shown us, at least in the world of health care, that they fail. They do not ensure that we have a universal and efficient healthcare system even when they ensure that providers make huge profits.

So where do we go from this point forward?

First I think we must all take a harder look at the strengths and the weaknesses of both the Medicare and Medicare Advantage approaches to providing medical care. In the case of Medicare there are some obvious problems, Sen. Elizabeth Warren recently recommended,  “reforms to traditional Medicare that would expand coverage and lower out-of-pocket costs are badly needed, and Congress should act to strengthen the program.” That would make Medicare Advantage plans obsolete without disadvantaging any of its current participants and without further enriching the insurance industry.

And, we need to see this as just one example of a failed effort to privatize the efforts we have made to ensure that everyone has access to a level of medical care that we can be proud of. And, seeing that, we can move to reshape other aspects of our national healthcare system so that it serves all of us well and does not assume that private businesses have our best interests in mind.

At the bottom line, trusting that big businesses, guided by the mythological silent hand of a marketplace will meet our needs over that of their own self-interest is a step too far. It will neither get us a better healthcare system nor will it save us money. What will it do? Make a few people quite wealthy.