In 1973, Nixon did a personal favor for his friend and campaign financier, Edgar Kaiser, then president and chairman of Kaiser-Permanente. Nixon signed into law, the Health Maintenance Organization Act of 1973, in which medical insurance agencies, hospitals, clinics and even doctors, could begin functioning as for-profit business entities instead of the service organizations they were intended to be. And which insurance company got the first taste of federal subsidies to implement HMOA73 … *gasp* … why, it was Kaiser-Permanente! What are the odds? [see linked material below]
And to perfectly cement HMOA73 as the profiteering boondoggle that it actually was, the law Nixon mandated also included clauses that encouraged medical providers to not CURE afflictions, but to PROLONG them by only treating the symptoms. There’s no money to be made in CURING sickness. But the sky’s the limit when it comes to forcing people to endure repetitive doctor visits, endless (and often useless and redundant) tests, and … of course … let’s not forget the ever-increasing demand for American-made prescription drugs!
Have you noticed recently that the words “prolonged coma” and DEATH have wormed their way into the fast-spoken side-effects list of just about every new drug you see on television or hear on the radio? Death! From the medicine that’s supposed to cure you! You know what? I’ll take restless legs over DEATH.
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. 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. See the pattern?
Like denial management, however, marketing and underwriting cost a lot of money. McKinsey & Company, the consulting firm, recently released an important report dissecting the reasons America spends so much more on health care than other wealthy nations. One major factor is that we spend $128 Billion a year in excess administrative costs, with more than half of the total accounted for by marketing and underwriting – costs that don’t exist in single-payer systems.
And this is just part of the story. McKinsey’s estimate of excess administrative costs counts only the costs of insurers. It doesn’t, as the report concedes, include other “important consequences of the multi-payor system,” like the extra costs imposed on providers. The sums doctors pay to denial management specialists are just one example. But the larger problem isn’t the behavior of any individual company. It’s the ugly incentives provided by a rigged, and now federally backed scam system in which giving care is punished, while denying it is rewarded.
Kaiser Permanente was the first hospital to run “for profit”…
Imagine if our firefighters decided to run their fire stations “for profit”.
This is a transcript of the 1971 conversation between President Richard Nixon and John D. Ehrlichman that led to the HMO act of 1973:
John D. Ehrlichman: “On the … on the health business …”
President Nixon: “Yeah.”
Ehrlichman: “… we have now narrowed down the vice president’s problems on this thing to one issue and that is whether we should include these health maintenance organizations like Edgar Kaiser’s Permanente thing. The vice president just cannot see it. We tried 15 ways from Friday to explain it to him and then help him to understand it. He finally says, ‘Well, I don’t think they’ll work, but if the President thinks it’s a good idea, I’ll support him a hundred percent.’”
President Nixon: “Well, what’s … what’s the judgment?”
Ehrlichman: “Well, everybody else’s judgment very strongly is that we go with it.”
President Nixon: “All right.”
Ehrlichman: “And, uh, uh, he’s the one holdout that we have in the whole office.”
President Nixon: “Say that I … I … I’d tell him I have doubts about it, but I think that it’s, uh, now let me ask you, now you give me your judgment. You know I’m not to[o] keen on any of these damn medical programs.”
Ehrlichman: “This, uh, let me, let me tell you how I am …”
President Nixon: [Unclear.]
Ehrlichman: “This … this is a …”
President Nixon: “I don’t [unclear] …”
Ehrlichman: “… private enterprise one.”
President Nixon: “Well, that appeals to me.”
Ehrlichman: “Edgar Kaiser is running his Permanente deal for profit. And the reason that he can … the reason he can do it … I had Edgar Kaiser come in … talk to me about this and I went into it in some depth. All the incentives are toward less medical care, because …”
President Nixon: [Unclear.]
Ehrlichman: “… the less care they give them, the more money they make.”
President Nixon: “Fine.” [Unclear.]
Ehrlichman: [Unclear] “… and the incentives run the right way.”
President Nixon: “Not bad.”