Is Health Insurance A Racket?

Stanley Feld M.D.,FACP,MACE

Paul Krugman (PK) wrote an article entitled “Is The Health Insurance Business A Racket?” Yes, literally — or so say two New York hospitals, which have filed a racketeering lawsuit against UnitedHealth Group and several of its affiliates.
I don’t know how the case will turn out. The two hospitals accuse UnitedHealth of operating a “rogue business plan” designed to avoid paying clients’ medical bills. For example, the suit alleges that patients were falsely told that Flushing Hospital was “not a network provider” so UnitedHealth did not pay the full network rate.

UnitedHealth has already settled charges of misleading clients about providers’ status brought by New York’s attorney general: the company paid restitution to plan members, while attributing the problem to computer errors.

But whatever happens in court, the lawsuit illustrates perfectly the dysfunctional nature of our health insurance system, a system in which resources that could have been used to pay for medical care is instead wasted in a zero-sum struggle over who ends up with the bill.”(PK)
Mr Krugman has said exactly what I have been saying in “Repairing the Healthcare System”. I believe this behavior occurs regularly with UnitedHealth.

I do not believe the people who run the insurance companies are bad people. It is simply that they will do many things to maximize their profit while destroying their cash cow, the healthcare system. Obviously, it is very short sighted on their part and very bad for the delivery of medical care. It seems they have no interest in improving the delivery of medical care.

“It is a fact that insurers spend a lot of money looking for ways to reject insurance claims. And health care providers, in turn, spend billions on “denial management,” employing specialist firms — including Ingenix, a subsidiary of, yes, UnitedHealth — to fight the insurers.”(PK)

You have heard all this before. However, I think it is important to repeat the obvious so people remain aware of what is going being done by facilitator stakeholders in the healthcare system.
One could say this is happening in every industry in America. They would be correct.

We can name many other industries where the same things are occurring. I have pointed out similar behavior of TXU and the Dirty Coal Burning Plants in Texas. Both industries seem to have a total disregard for the health and welfare of the common good as they price their way out of the market in order to maximize profits to the detriment of their customer, the American people. At the same time they are weakening the valuable American Healthcare System’s infrastructure. If the insurance industry and hospital were far sighted, we would not be in a healthcare delivery. Wouldn’t it be better for everyone to have all 46.7 million uninsured Americans’ have healthcare insurance in an environment that is competitive and provides constructive incentives to make the healthcare system better? Presently we have destructive incentives that make healthcare more costly and unaffordable.

“So it’s an arms race between insurers, who deploy software and manpower trying to find claims they can reject, and doctors and hospitals, who deploy their own forces in an effort to outsmart or challenge the insurers. And the cost of this arms race ends up being borne by the public, in the form of higher health care prices and higher insurance premiums.” (PK)

This arms race did not start yesterday. It started in the 1980’s when a distorted Medicare system caused industry to adjust to the price controls of the government. Everyone tried to figure out how to maximize profits at the expense of the patients, the healthcare system and the entire population. One compensating adjustment led to another distortion. The system became more and more dysfunctional.

“Of course, rejecting claims is a clumsy way to deny coverage. The best way for an insurer to avoid paying medical bills is to avoid selling insurance to people who really need it. An insurance company can accomplish this in two ways, through marketing that targets the healthy, and through underwriting: rejecting the sick or charging them higher premiums.”(PK)

Thus, the distortions that has lead to 46.7 million uninsured and an insurance industry that is paying its CEOs 2-10 million dollars a year, while the successful hospital CEO’s are busy justifying their $1 million plus salaries. The tragedy widens as Family Practitioners are barely making a living and the specialty of Internal Medicine is on the brink of extinction. The drivers of the healthcare system, the patients and the physicians, are in pain, while the life blood is being sucked out of the healthcare system by the insurance industry and hospitals.

“Which brings us back to the racketeering lawsuit brought against UnitedHealth by the hospitals. UnitedHealth is America’s second-largest health insurer, has a reputation for playing even rougher than its competitors.”(PK)

Even Mr. Krugman knows about UnitedHealth and the $1.8 billion payout to its former CEO. Ask any physician not working for UnitedHealth. They will tell you how rough UnitedHealth plays.

“ But the larger problem isn’t the behavior of any individual company. It’s the ugly incentives provided by a system in which giving care is punished, while denying it is rewarded.”(PK)
The same way People Power got the attention of the entire Texas population in the TXU case and TXU stock started to crash, People Power is the only thing that is going to turn this perverse Healthcare System mess around. You out there are the people!

Shel Isreal co author of Naked Conversations: How Blogs are Changing the Way Businesses Talk with Customers They say “we live in a time when most people don’t trust big companies. wrote a comment on January 20,2007 “Thanks for being so gracious. I enjoyed the conversation that it spawned between by email. repairing the medical system (Healthcare System) in America is a lofty goal and about 98 percent of the American people see the need. The rest work for insurance companies.”

I believe our democratic system works. The internet and blogosphere are democratizing organs. As soon as a critical mass of people are aware of the etiology of the problems in the healthcare system the Healthcare System will be Repaired with the consumer driving the change, not the government, or the insurance industry.