The US is the world’s largest spender on health related services (17% of its GDP) yet it fails to provide its citizens with universal health care. In 2009, 46 million Americans almost a sixth of the population were uninsured. According to a Harvard research study, “lack of health insurance is associated with as many as 44,789 deaths per year in the United States." This equates to approximately 1 preventative death every 11 minutes. How can this be? Well, as we will see, the answer lies amongst America’s health-insurance moguls.
A lack of health insurance coverage was the problem the Obama administration set out to solve with passing the Affordable Care Act (ACA), also known as Obamacare, in 2010. The law targeted the majority of the uninsured Americans of low and moderate income backgrounds, and was designed to make coverage both affordable and qualitative. It also required insurance companies to accept all types of applicants regardless of their pre-existing conditions. Since then, the number of the uninsured has been steadily falling, reaching just below 12% (of the population) in 2015 with disparities amongst ethnic and racial groups having significantly decreased. Twenty three million more Americans have health insurance as a result.
From an economist’s perspective it would be important to note that the ACA has in fact created a market for health insurances. Customers are free to choose from a range of standardized health schemes put forth by competing insurance companies. Yet despite the administration’s effort to create a stable environment, there is no equilibrium; clients and companies seem unable to determine where they fit into the equation. In addition, new customers, in particular the healthy and young, are hesitant to enter and participate in these health exchanges. As premiums are speculated to rise and increase the overall price, customers are in fact inclined to drop out of the market. Unsurprisingly, insurance companies have proven to be the least eager to participate. The Kaiser Family Foundation estimates that as of 2017 31% of US counties will have only one insurer available, up from 7% the year before.
In addition to market failures, health-insurance companies have proven again how skilled they are in manipulating the system. In 2013 the largest 125 US health insurers collected $744bn in premiums alone, according to a US News & World Report. Health insurance companies manage to justify such profits by concealing their financial gains: they disguise their funds as financial reserves and gross their executives with large compensations. For instance, “non-for profit” insurer, Blue Shield of California, announced a net income of $162 million in 2014. Yet a confidential state audit revealed that in fact the company held $4.2 billion in reserves—approximately 1,500 % more than the amount necessary- and had augmented its executive compensation by $24 million in 2012. Does Blue Shield of California really aim to “help you be at your healthiest”, as it so claims? Or is it simply profiteering? With the biggest cause of bankruptcy in the United States being medical expenses, the latter is more likely.
Insurance companies have not only found new ways of discriminating against certain individuals (e.g. by imposing “step therapies” i.e. making patients buy older, less costly treatments) but they are now joining forces and “merging”. A notable case is when earlier this year the Obama administration filed two separate lawsuits to prevent Anthem from purchasing Cigna and Aetna from purchasing Humana. The Obama administration cannot allow any mergers because this would reduce the number of suppliers, drive up price and render all their past efforts to improve America’s health care system futile. “By reducing competition, this proposed merger [between Anthem and Cigna] has the potential to significantly increase the merged firm’s power in the marketplace, to the detriment of consumers [...] Employers will be left with fewer choices, and ultimately consumers could be saddled with higher premium costs, reduced access to providers, and lower-quality care” says E. Schneiderman, attorney general in New York. The danger in allowing companies to combine is that the American health care system will return to its initial money-grubbing state.
As if this were not enough, the Republican administration has now legitimate power to dismantle the ACA. The fact that they are 60 seats short of a 2/3 majority does not mean they cannot be effective. For example, tax-and-spending measures such as the reconciliation bill require a merely a majority in numbers. If signed by Donald Jr. Trump when he takes office, subsidies available to lower-income ACA buyers will be scrapped and the individual mandate that fines able Americans who refuse to buy insurance will no longer hold. Consequentially less healthy people will participate in the health exchange scheme and there is a risk that the individual market will die off. Republicans argue that deregulation will decrease premiums yet what is most probable is that such actions will turn out to benefit only the healthy.
In 2007 film producer Michael Moore released “Sicko”, an investigative documentary, targeted against America’s for-profit health insurance and pharmaceutical industries. The film was widely acclaimed as it unearthed much dirt surrounding the business and brought it to the public view. With 2016 coming to an end, it is nearly ten years later. Indeed, it would be doubtful to assert that the situation has improved.
Sources:
https://www.theguardian.com/money/2016/sep/03/obamacare-marketplaces-exchanges-insurers-subscribers-competition
https://www.theguardian.com/business/2016/jul/21/justice-lawsuit-health-insurance-merger-cigna-aetna
http://www.pnhp.org/news/2012/september/despite-slight-drop-in-uninsured-last-year%E2%80%99s-figure-points-to-48000-preventable-
http://www.pnhp.org/excessdeaths/health-insurance-and-mortality-in-US-adults.pdf
