The Business of Health Insurance and “Obamacare”: What Can We Expect?

By Robert Prasch, Professor of Economics at Middlebury College. Cross posted from New Economic Perspectives

Over the past couple of years there has been considerable back-and-forth over what has been accomplished by the Patient Protection and Affordable Care Act of 2010 (PPACA). While a short post cannot survey the entirety of this multifaceted law, several elementary confusions have been repeated in public discussions and should be addressed in the interest of clarification. The most urgent of these is to point out that, despite the Act’s (deliberately misleading?) title, it addresses neither the practice of medicine nor its cost. At most a government-sponsored institute has been authorized to find and make suggestions. The Act, then, is not about making health care affordable, but an effort to make health-care insurance affordable – a related but separate topic. To understand the implications of this, we must consider the business of health insurance.

Private Health Insurance is a Business

The health insurance business is–it cannot be overemphasized–a business. While its advertising may suggest otherwise, we would do well to remember that business differs from charity in ways that matter. Being private for-profit businesses, health insurance companies are engaged in the pursuit of profit. If the health insurer is a corporation, and many of them are, their profits are expected to show steady growth over time so as to satisfy “Wall Street expectations.” This is not always easy, and firms must be vigilant if they are to achieve these targets. As is the case for any and all businesses, revenues must be greater than expenses if health insurance companies are to show a profit. Without profits they will soon cease to exist. But before this occurs, senior management will be fired. As they understand this, we should expect these managers to make every effort to avoid this outcome. None of this, it should be noted, implies that health insurers are more or less moral than other firms. Business is business. With that point cleared up, let us turn to specifics.

The revenues of health insurers come from customer premiums and the returns on their portfolio of earlier premiums that have been invested. Their usual portfolio can vary, but it generally consists of government and corporate bonds (about 65%), corporate stock (about 10%), mortgages (including some mortgage-backed securities), cash and other liquid items, and other assets. Expenses can be broken down into essentially three components. The first includes all marketing costs, paperwork, and related overheads. The second is wages for workers and bonuses for bosses. The third, and by far the largest expense, is the payment of claims.

From the above list it is evident that insurance company profits can rise in one of four ways: (1) revenues from current premiums or past investments can rise (which may imply higher premiums and/or riskier investments), (2) marketing, paperwork and overhead costs can be reduced, (3) wages and bonuses can be reduced, or (4) payments for claims can be reduced (or at least rise more slowly than revenues).

Given that the payment of claims are, by far, an insurance company’s largest single expense, it is reasonable to suppose that they will work diligently to control or even reduce them. To this end, they hire staff to negotiate with hospitals and others over the appropriate charges for services provided. Similarly, they employ a staff to direct customers into lower cost options, assert that the “normal and standard cost” for a given procedure is lower than the bill presented (which means that the patient must shoulder a disproportionate share of the payment even if their insurance contract suggests that they always pay a fixed percentage), or find some grounds to decline care altogether which in the past has included finding grounds for cancelling the policy.

For patients and their families, these cost-reducing decisions can be, as innumerable stories and research has shown, medically and financially devastating. It is clear to everyone with a beating heart that these – essentially business decisions — are fraught with moral implications. Yet, of necessity, insurance companies must think of them as part of their normal business operations. One is reminded of the cliché line uttered by mafia movie assassins, “Sorry man, it ain’t personal, its just business.”

This difference in perspective raises a crucial observation. Every society must decide, by some process, how goods and services are to be distributed amongst the population. Most of us would agree that some items, such as ice cream or the vagaries of current fashions in clothing, are best left to markets. The difficulty, and this is the largely unmentioned issue, is that most of us also believe that decisions fraught with profound moral implications – such as life and death — should not be left to the vagaries of the market.

If this supposition is correct, then the problem with privately-provided health insurance is less with the specific performance of the firms involved than with the fact that many, if not most, of us consider basic health care to be closer to a right than a commodity to be distributed according to the contingencies of price and income. As such, we find the normal business decisions of health insurance firms, decisions that are necessary and essential to their business operations, to be at best amoral if not immoral. That people are awarded bonuses for denying care to people they have not met, and on the basis of little more than a cursory look at a chart and some statistics based on national averages, strikes most people as wrong. Again, if this were the market for ice cream or fashionable clothing, our response to the cost control efforts of for-profit health insurance companies would be very different. But it is evident that firms are routinely making decisions that are fraught with the deepest moral significance.

Obamacare: What Does It Do?

As mentioned, when reading popular discussions, blogs, and more than a few newspapers, one is left with the impression that many people are confused about the distinction between health care and health insurance. Stated simply, the PPACA does not grant anyone, anywhere, a guarantee of adequate health care. The Patient-Centered Outcomes Research Institute that has been founded as part of the Act may, at best, fund investigations designed to uncover and publicize inefficiencies in the delivery and cost of health care. But they cannot mandate changed practices. At best, these revelations can be accompanied by exhortatory language. Someone, somewhere, somehow, is then supposed to do something.

What PPACA does do is require that every American find a way to acquire health insurance. Most likely, as in Massachusetts, this will be enforced through the tax code. This suggests that those without health insurance will have to pay for insurance out of pocket and then await compensation in the form of a tax rebate. If this is indeed the plan, it should raise important questions concerning the liquidity or credit-worthiness of America’s poorer households and the many well-known issues surrounding predatory lending that were not addressed in the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010.

Perhaps it is obvious, but it also needs to be stated, that on its own the health insurance mandate modifies neither the incentives nor the profit motives of private health insurers. That said, some useful changes are embodied in the Act. For example, in exchange for the law’s producing just under 50 million new health insurance customers through its mandate, health insurance companies will be required to spend 80-85% of the premiums they receive (depending upon the firm’s size) paying for health care and, additionally, to cease terminating contracts after the disclosure or revelation of “pre-existing conditions.” Now, with the additional revenues anticipated from millions of new customers, the first of these requirements may or may not prove to be an imposition. I would, however, caution everyone to be wary of the accounting rules used in calculating what is known in the industry as the Medical Loss Ratio. It is often, and correctly, said that the devil is in the details (this is especially the case when an industry can employ legions of lobbyists).

As to the second requirement, it speaks only to the grounds by which a proposed course of care may be refused. Let us consider the problem logically and from the perspective of a profit-seeking firm. If there are potentially grounds, from A to Z, by which to deny or modify a proposed course of care, and grounds A are excluded, that still leaves grounds B to Z. Perhaps none will be found applicable and the care in question will be duly authorized. But perhaps alternative grounds can be identified, and it should be evident that the incentive to find such grounds remains. Maybe the insurance company will find the course of care proposed by a patient’s doctor to be “overly experimental” or “unlikely to be effective” in light of statistics based on national averages that they may have on hand but whose source or author they will refuse to disclosure (believe me, I have tried). Alternatively, they may declare that the “normal and standard cost” of the course of care proposed is one-half of what the hospital charges, thereby forcing a family to “chose” between a course of care and penury. These problems can be expected to remain.

According to the American Journal of Medicine, 62% of all the people who declared bankruptcy in the year prior to the financial crisis, 2007, were ruined by an illness they could not afford. Worse, the majority of those who declared bankruptcy that year were covered by heath insurance. Stated simply, health insurance, even assuming that it actually becomes affordable to everyone, will not end of the dread of financial ruin in the event of a severe illness.

This brings us to the matter of the how much assistance will be provided to help families meet the mandate. We are told that everyone up to 400% of the poverty level will be eligible for a subsidy (based on a sliding scale). Given the current political environment, with its bi-partisan vogue in favor of austerity, I will leave it to the reader to speculate whether or not these subsidies will remain adequate as health costs and thereby health insurance premiums continue to rise. We can be certain, however, that the mandate will remain in place long after the subsidies become inadequate. And, what of the days when American families had to chose between adequate care and penury? Such dire choices will remain a part of our reality the day after the PPACA has become fully operative and every day thereafter.

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  1. Crazy Horse

    Health care expenditures in the US = 150% of the second most expensive country.

    Health care ranking by the World Health Organization: #41

    Worse than every other developed nation and a number of third world countries. Case in point, the so-called narco state of Colombia ranks #7!

    If a system of medical care distribution by private insurance death panels (profit maximizing corporate officers) is broken, dismantle it completely and replace it by a system modeled after ones proven to work by more humane societies.

    1. Westcoastliberal

      What we actually have in the U.S. is “the organization formerly known as The Mafia” in charge of health insurance companies and many other of our key industries.
      While this can never be admitted to by any politician who wants to keep breathing, it is, nevertheless, the truth.
      This is why single-payer (the solution in so many other thoughtful countries) and even a public option is no longer even in the discourse. The 1% have no desire to “lose money” by enhancing the level of care and compassion in the U.S.
      This is also why the “war on drugs” continues; too many 1% are making way too much money by drugs being illegal so the sales funnel into their organizations.

      1. Jefemt

        Carte blanche that will match or exceed the military-industrial complex. Will we, fifty years hence, see the health cost expenses also construed on par with the military, as either, ‘essential’ or ‘discretionary’? I am not sure when that happened with the military budget becoming inviolate. If it weren’t such a farkin’ trainwreck I would laugh at the gall…

        from the oil patch

    2. George

      What a shock when all the health companies in the U.S. only care about making money. They’re money oriented, not health oriented, so why do people keep acting surprised to see how bad we are in terms of overall healthcare quality and costs?

  2. Middle Seaman

    As the article states, Obamacare doesn’t change health care or its cost. It originally intended to cover as many people as possible under the existing health care system. In other words, it doesn’t even attempt to address the outrangeous cost of health care that will likely continue to rise.

    It does remove insurance imposed obstacles such as pre-existing condition and extends childhood health care to 26.

    In summary, we are still in the hole and probably a deeper one.

    1. Aquifer

      Ah, yes, “as many people as possible”- well if that were true, wouldn’t you think he would have gone for a system that would have covered everybody?

      Oh, but it isn’t possible to cover EVERYBODY! Why the hell not? Well because our current “American” system requires profit from healthcare (like every bloody other thing here) and we can’t cover “everybody” and still make a profit. So, given a choice, sigh, sigh – we’ll just have to throw some folk under the bus (but don’t worry, it’ll be a Natural Gas bus, and then if there’s anything left, we’ll take ’em to the ER, for which services, if they are unfortunate enough to survive, they will be paying through their trach tubes for the rest of their lives … oops sorry, too much detail …)

    2. run75441


      Not true, as their are many initiatives within the PPACA which will be used to combat rising costs in both Medicare and Medicaid. Obma has pledged to turn Medicare lose in negotiating it costs with the various healthcare companies. While commercial healthcare insurance and hospitals costs have been rising at ~8%, Medicare has been rising at 2.4%. I would suggest you read Maggie Mahar over at the Health Beat Blog to get a better understanding of the PPACA.

      It is true the PPACA is not the best we could have in place; but, it is better than nothing and the author appears to be shy on solutions to it.

      1. Waking Up

        The PPACA is NOT better than nothing. It further enriches the health insurance industry and pharmaceutical companies without REAL cost controls AND it will provide them with even greater profits so they can increase the lobbying and “campaign contributions” to their favorite politicians. That may be good for politicians, but not good for the citizens of this country.

        A Single Payer System for Everyone is a solution.

        1. run75441


          No one will argue that single payor or universal healthcare is better; but, what you ask for is a dream. The PPACA has many good qualities to it which are enumerated within its text and is avalable for you to read other than watch TV and read sniplets of information hear and there. I suggest you read it instead of providing supposition and conjecture of what it may or may not have. Even the author has glossed over much and has confused the MLR portion also besides the advancement of subsidies.

          1. scraping_by

            I’ll skip over the Freudian slip in your first sentence. I will note, however, that accepting corruption is being part of corruption. Continuing to fight is at the least principled.

            Also, echoing Barry’s sniveling is to become a groveller yourself.

            The polls for single payer are somewhere north of 75%, except those paid for by the insurance industry. If that can’t translate into action, then this dreamless reality is the end of democracy.

          2. Nathanael

            Given that it’s an issue of life or death, and when it isn’t, it’s an issue of poverty and starvation vs. a decent life…

            …I think if the choice was Single Payer vs. (our excuse for) Democracy, most people would take a Single Payer system (which damned near everyone wants) in preference to Democracy.

            Government’s first job is to provide people with a decent standard of living — one decent enough to prevent rioting. This comes *before* democracy and is more important, as kings and emperors throughout the ancient world knew well. Failing to provide that standard of living is a big, big mistake.

          3. run75441


            There is no freudin slip, I saw what reality would state. You are posting a non sequitor and offer nothing but such. If you wish to address facts, I can answer them. Read the PPACA and I will be happy to discuss it with you. For now, you really have not said much. The polls only express what people do not understand, including you.

          4. run75441


            Besides the non sequitor remark you have just posted, what does it take for a family of 4 to get by today? Can you give me a $ amount?

            The topic was the PPACA.

      2. Carla

        Well, let’s do rally ’round this signal achievement of the Obama administration: Hear! Hear! Let’s all cheer for: BETTER THAN NOTHING!

      3. Aquifer

        Many initiatives? Care to elaborate? “Obama has pledged” – oh rather like when he pledged to vote against telecom immunity, before he voted for it, like when he said he’d close Guantanamo, before he didn’t, like when he was for Single Payer, “everybody in, nobody out ” before he took it “off the table” – that sort of “pledge”?

        Add his catfood commission recs into the mix – and the idea is to cap what the Gov’t will spend on medical care at a specified % of GDP, regardless of how high medical costs to patients actually are – a rather clear indication, ISTM, of the approach the Gov’t will take with it’s insurance vouchers – assuming it doesn’t pull the plug altogether to “balance the budget ” so that we don’t “burden the next generation” that will have enough problems as it is, just trying to pay for their healthcare …

        Yeah, he will “control costs”, costs to the government that is ,,,, Costs to you, me and Grandma? That’s another story …

        But that’s just a thought …

      4. Geojos


        Please specify the cost containment measures you glibly noted. True one such attemptis to deal with the fee for services model and a (weak) attempt to promote the fee for outcome model. But is doesn’t appear to be a mandate of any sort, rather a carrot and stick approach. How realistic and effective is the bill’s strategy on transitioning to a fee for outcomes model?

        A single payer approach cuts down adminstrative cost and allows the government to negotiate on the cost of drugs, as in Canada. This bill will not reduce admisntrative cost aand prohibits the government from negotiaing the cost of drugs.

        So, please prey tell how the bill will contain health care cost when adminstrative cost and the high cost of drugs are some of the culprits to the high cost of health care. If the fee for outcome deos not become a reality, we are back to ground zero. In order to get a bill, Obama may have given away the store to the insurance and drug industry, and what we are left with is some PR flim flam crap about coverage for all.

        1. Aquifer

          As I have said elsewhere – watch out for that “fee for outcome” routine – will incentivize providers to reject treating “riskier” patients …

          1. Geojos

            Good point, and I wonder how they will define postive outcomes. Some proviers could go broke, so there will be loopholes and the like

  3. chris

    Indeed… it should be called the “Already Unaffordable and Inadequate Health Insurance Act” or


    It’s a more accurate description and approximates the sound you’ll make when you get the bill.

  4. Aquifer

    Thank you – that says it all …

    As i have been saying for some time – this was never about healthcare. It was a twofer – reduce a threat to the insurance industry by heading single payer off at the pass, padding the bottom line of Phrma/Insur companies at the same time – and, as an added benefit (ooh a threefer!)splitting “lefties” – peeling off the “realists” into the bogus “public option camp” … – downright brilliant, but, considering how transparent, sad that too many folk swallowed this HS …

    1. Aquifer

      Oh yeah, btw – wait until ’14 and it comes time to appropriate funds to subsidize the policies – “aw gee, we really wanted to, but with the economy the way is and our need to balance the budget, we just can’t afford to – so sorry!”

      1. Aquifer

        another one of those “unfunded mandates” you are mandated to buy it, but you don’t have the funds …

    2. bluntobj

      I agree with aquifer. The transfer payments from the fedgov (and hence the taxpayer/T-bond buyer) to the sickcare cartels is one of the last best remaining bubbles out there to milk.

      Obamacare has to be one of the best peices of scam legislation that will buffer balance sheets and boost income statements in the insurance and sickcare cartels for decades to come.

      The cash cost of medical care is going to skyrocket, as there will be a sea of dollars chasing a limited supply of care. If 80% of premiums must be spent on care, what will happen to that young persons $200 premium when they don’t need care? It’s going to be swallowed up by higher charges for every aspect of healthcare, from aspirin to MRIs.

      Pre-existing conditions will be welcomed under such a scenario, as “medical case management” consulting by insurers will be considered “medical costs” that fall into the 80% allowable costs range, and will ultimately be transferred to their bottom line.

      Sorry, that’s the evil accountant in me thinking up nefarious ways to milk Obamacare, and I’m not even giving it any effort. Just think of what all those lobbyists will come up with…

      1. Aquifer

        Well, “evil accountant”, your’re off to a good start.

        I don’t know much (heh-heh, any) about accounting but I figured it was a foregone conclusion that if gaming the system increased the profit margin, they would game it any way they could. I think Wendell Potter has also addressed the issue of how the insurance co could redefine “medical expense” to include administrative costs … ka ching!

        1. Carol Sterritt

          Here is one scam (oops! work around!) that the Big Health Insurers and Hospitals are using –
          Remember how the Obama supporters touted that Obama was giving over some twenty billions of dollars to hospitals so they could start doing computerized health records of the patients and clients?

          Well, the thing is, most hospitals these days are part of a franchise. For instance, one of the top franchises relating to hospitals in California is the Sutter chain. Now, each hospital tells each community that they “need” some Three Hundred Thousand dollars or so upfront, so they can hire computer progammers to put together the code for the digitizing of patient records. But stop to think about it – if Sutter has dozens of hospitals in this state, why does it need to re-invent the wheel at each hospital.
          They bilk either the Obama government or else each separate community to pay this Three Hundred Thousand dollars, but in actuality, each hospital is getting the software from the Sutter corporation. So each hospital is pocketing that money, or else someone at the top of the Sutter food chain is. But it is a scam, and should be something that the Obama Administration investigated and brought down, instead of subsidized!

  5. briansays

    ultimately other countries not a part of the first world will develop a first world medical care system free of the private insurance cabal and people will retire there

  6. LAS

    I think private insurance takes money out of the health care system and with the AFCA we can see exactly how much each year and compounded over time, 15-20%. Efficiencies that private insurance identifies do not mean more funds to spend on healthcare research or another person’s healthcare, but profits extracted for financial firms.

    When a person is older and most likely to need health care, they are in the Medicare, Medicaid or state insurance systems. Consequently, private insurance pays for only about one-third of all medical procedures performed in the USA, even though it covers more than half the population.

    There should be a single payer, government or hospital run system. Else we are paying for procedures twice: 1)to private insurance firms for procedures that don’t get performed when we are young and healthy; and 2) to the medicare/medicaid/state systems through taxes for procedures we need when we are elderly and in the public system. We pay twice, and surprise, surprise, medical care is roughly twice as expensive in the USA as any other industrialized country with no better healthcare outcome.

    The real fight over the AFCA is between large money interests over the money pie; that is, between financial firms selling insurance and the big hospital systems that are used to getting blocks of funding now being diverted to insurance companies. This is not population based medicine by any means, as you so rightly point up.

    1. Ms G

      “Efficiencies that private insurance identifies do not mean more funds to spend on healthcare research or another person’s healthcare, but profits extracted for financial firms.”

      Yes. The question that needs to break through the phony public debates is “EFFICIENCY FOR WHO, EXACTLY?” Similar to Lambert’s question: “Whose economy?”

    2. Carla

      Private insurance is heavily involved in Medicare through Supplemental, Advantage, and Part D prescription drug plans. In fact, private insurance is milking Medicare and ruining it. But what should one expect from a criminal industry?

      Well, we might expect public officials that would regulate it and put the most agregious criminals operators in prison. But as we see over and over again, in finance, in energy, in health care, that never happens. And apparently, Americans are not yet ready to demand that it does.

  7. Hayek's Heelbiter

    For those interested in comparing the evil socialized NHS to “the best health care system in the world,” I offer some illustrative examples from my own experience. When I tell British friends about the American health care matrix, they believe I’m fantasizing a system as phantasmagorical as fire-breathing dragons that devour sailors who sail too close to the edge of the world.

    Under the NHS
    DIAGNOSIS: A rare form of cancer discovered at A&E (Accident and Emergency) this summer. Two weeks later, fast tracked to see one of the top oncologists in the U.K. Three weeks later began chemo and radiotherapy. Everybody is incredibly health and as cheerful as they can be under the circumstances.
    COST OF TRANSPORTATION TO HOSPITAL: GBP30/week ($45) which would be reimbursed if we wanted to claim for it.

    DIAGNOSIS: Fell on the subway steps at Baker Street Tube Station and broke her wrist. Taken to St. Mary’s Paddington.
    OUTCOME: Arm x-rayed, cast applied, painkillers prescribed.
    (Can you imagine what would happened to a foreigner who broke his wrist at Union Square, especially now that St. Vincent’s has closed?)


    DIAGNOSIS: Shortness of breath, dizziness.
    “Why don’t you see a doctor?”
    “I’ve had a heart murmur since I was a kid; cardiac problems aren’t covered under my insurance policy.”
    OUTCOME: Dropped dead of cardiac arrest while playing board game.

    Diagnosis: Persistent cough.
    “Why don’t you see a doctor?”
    “I’m an artist. I don’t have any income. How can afford to see a doctor, much less pay for insurance?”
    OUTCOME: Died a painful death from lung cancer three months later.

    DIAGNOSIS: Persistent cough.
    “Why don’t you see a doctor?”
    “I’m going to let my insurance company handle it.”
    “I thought you were too poor to afford insurance.”
    OUTCOME: His insurance policy was his Homeowner’s Policy, which was insured by Smith & Wesson. At least he didn’t suffer as painful a death as did Michael M.

    DIAGNOSIS: Lump in breast.
    Valerie was a temporary worker at the bank where I worked. There was a six-month probationary period before she could convert to permanent status with medical insurance. As soon as she went permanent with insurance, she immediately went to her doctor. Her condition was advanced breast cancer. “You should have come to us six months earlier, we would might have been able to have done more.”
    OUTCOME: Nine months later, after massively debilitating chemotherapy, surgery, radiation, etc., Valerie died.

    DIAGNOSIS: Cough she couldn’t shake.
    “Why don’t you go see a doctor?”
    “I can’t afford to see a doctor.”
    OUTCOME: When she was so ill she couldn’t resist, her friends dragged her to the hospital, where surgery was required on her lungs. A week or so in the ICU and several weeks recovery, and her bill came to USD250,000, which could have been prevented by USD20 worth antibiotics. She came within a hair’sbreadth of losing her house, but was able to finesse it, I’m not sure how.

    DIAGNOIS: Metastasized esophageal cancer.
    OUTCOME: Massive intervention, most of which was covered by his insurance, but he is still liable for thousands of dollars of ancillary and unexpected (and often inexplicable) claims.

    1. Aquifer

      This is very good (as in good examples, not good outcomes …) are all these true stories of real folks?

      1. Hayek's Heelbiter

        All true stories (including cost of partner’s treatment) about people who are (or mostly were) dear friends, exccept for Janet J., who is the wife of a dear friend.

        1. Stratos

          And Cameron and Co. are working hard to snatch the NHS rug from under the feet of British citizens. Neoliberal nuttiness is just as popular with his crowd as with the Yank political lackeys of the One Percent.

    2. Carol Sterritt

      Those examples that you relate are very painful to read about. My household was one of those which ended up in bankruptcy due to a mis-diagnosed illness. We had insurance through an HMO at the time. That HMO carefully deleted any records relating to the visit s that were made during the time of the diagnosis. So we couldn’t even sue for malpractice. It ahs taken us years to get back on our feet economically speaking, but since we cannot afford to pay over 1K a month for the both of us to be covered, we could at any time undergo the same indignity. The Insurance Exchange that Obama brags about is an absolute horror – In California, it would cost $ 557 a piece for health care premiums (Times two, per month), plus a significant co-pay, plus a 2,500 deductible per person. This means we have to spend $ 17K a year before the “Insurance Exchange” kicks in, with any payments. Hopefully the two of us will sail on through until we reach the retirement age of 67 – but if I was a betting person, our odds of reaching that age are diminished due to the fact that we are not insured. Well, at lest the Noblesse Oblige will have two less “Needless Eaters” to feed, I imagine. And Jolly Good for them.

      1. Hayek's Heelbiter

        Dear Carol,

        Very sorry to hear about your situation and hope you skate through life as healthily as possible. For better or worse, you are well-informed and articulate. I often wonder about the milllions who have less understanding and even lesser voice.

    3. M.InTheCity

      That tally’s with my experience with the NHS. And it is so true about the British reaction to an actual description of the US health system. They look like they are going to pass out. Even Tories I know don’t really want to get rid of the NHS when I tell them about the US.

      For my story of the NHS – my husband was very ill with food poisoning. I forced him to go to the hospital (he’s American, so it’s not the first thought for someone like him). They saw him in the A&E within the hour since he was so ill. The A&E staff were amazing and took so much good care of him. The hospital couldn’t figure out what exactly was going on right away (since I didn’t get sick yet we ate the same things), but they ended up putting him into a private room since they didn’t know if he was contageous. Cost: ZERO. He just said his name and his address. They kept him for 3 days, just to make sure. That would have been shockingly expensive in the US – even with health insurance.

      The kicker? We’re both so used to US hospitals that when it came time for him to leave, we were expecting to have to sign all this paperwork and have a whole production with him leaving. The nurses just looked at us and said – you can leave now. And that was that! He just walked out with me.

      1. banger

        Yours is a story that Obama and his supporters refused to tell (or were just ignorant of) during the so-called health-care “debate” some years back. Had the facts been front and center about health-care in other parts of the world we would not have ended up with this bizarre bill that is, for all the sound and fury over it, practically worthless as many here have commented on. I blame the corporate press in the U.S. for refusing to do their jobs and, instead, deliberately moved the conversation in any other direction than one based on science and rationality.

    4. banger

      At other periods in history we had to worry about wolves and predators in the woods or famine. Today, we have to worry about wolves in the corporate board rooms. This is very serious–these people are the ogres and evil witches and wizards of the fairy stories. These are the people we were warned against. Interestingly, as individuals these people are not necessarily “bad” but are on the road to becoming monsters if they persist in working in these industries. In my view, it is better to get sick and die than be a member of these privileged elites who live a profoundly dishonorable life.

  8. Observer

    Obamacare is an 8 oz glass of water tossed onto a raging house fire. The problem is out of control and the political will to stop it does not exist. I’m afraid the house will have to burn the rest of the way down before any meaningful change can happen.

      1. Mark P.


        Projecting the figures out before Obamacare was passed indicated that around 2020 the health-industrial complex as currently constituted was going to break. Obamacare — by compelling everyone by law to purchase that complex’s crappy overpriced product — has saved that system of profit at further ruinous expense to the rest of us.

    1. Ms G

      Obama’s ACA is a giant claw designed to rake every last cent of change left in the threadbare pockets of Americans.

  9. Don Levit

    I am concerned about the 80% medical loss ratio per person that is reqiured, as I understand the law.
    This may be necessary when premiums are as high as they are, but the better scenario would be to return to relatively inexpensive plans, on which you hope not to collect at all, much less 80% of the benefit.
    We got back the final numbers from Milliman, an actuarial firm, last week, and are now working on our presentation to interested for-profit life insurers to form a 501(c)(4) subsidiary.
    Under our design, the fewer the claims, the more paid-up coverage builds, the more the deductible rises as the paid-up coverage increases.
    In 36-50 months, due to the increased, funded deductible, his premium drops 60-80%.
    The problem is the medical loss ratio. He has not met this in any year, for he has had no claims.
    Yet, his premium savings is 60-80%. And, the insurance is doing what many people desire: cutting costs so drastically, that, as in the good old days, they hope to never to have a claim.
    Don Levit

    1. run75441


      I got $176 back in Michigan from my old insurance company. A friend in MA received $900 dollars back.

      After $2000, the insurance pays 100% in network. I just incurred $28,000 in a hospital and surgery bill. One doctor billed $3100 and received $900. Another billed the same and receieved $150. There is a huge markup in charges which the PPACA does have incentives in it to reduce those costs.

      1. Aquifer

        Hmmm, sounds like “rebates” that occur periodically when private insurance companies screw their customers, are sued and lose …

        And this bargaining with providers is SOP since the beginning of insurance …

        1. run75441


          There is no screwing around on the rebates. If you stay healthy, you will get a rebate provide the insurance companies charged too much. Younger insurees are more likely to get rebates. I will not have a rebate next year because of my surgery. If I am unemployed I also expect to pay three times what a younger insuree will pay and twice as much as a smoker(why that is such baffles me).

          Previously insurance companies kept the surplus not paid for claims.

  10. JB McMunn

    The article didn’t mention the new conflict of interest that ObamaCare gebnerates: Accountable Care Organizations. This is basically the old capitated HMO arrangement wearing a fake beard and glasses.

    Whereas at present the conflict is between the insurer’s financial self-interest and the patient’s well-being, ACOs will pit the doctor’s financial interest against the patient’s well-being.

    Under an ACO, as with capitation, the physician group will be paid a flat fee for each patient and that group will have to provide all the health services for a fixed price. What do you think will happen? The less care provided, the more profit for the ACO. They get paid the same whether they see you 4 times or 1 time. The insurers basically transfer the insurance risk to the physicians.

    In addition, there will be some form of “pay for performance”. How you figure out a doctor’s performance escapes me because (1) it’s biology, not engineering and (2) the doctor doesn’t have complete control.

    Suppose you want to see how well doctors do treating diabetes. You decide you’ll track how well the doctor keeps the HbA1c levels in the acceptable range. If the numbers are good the doctor gets a bonus.

    Now, the doctor can only prescribe the medicine, diet, and advice. He can’t sit at your house and make sure you take the medicine, follow the diet, and stop smoking. So if you’re a noncompliant patient you ruin his “numbers”. You are not going to be welcome at that office because by messing up the performance numbers you cost that doctor money.

    You want medicine to run like Southwest Airlines? It’s coming but you’re not going to like it.

    1. Waking Up

      “In addition, there will be some form of “pay for performance”…. “Now, the doctor can only prescribe the medicine, diet, and advice. He can’t sit at your house and make sure you take the medicine, follow the diet, and stop smoking. So if you’re a noncompliant patient you ruin his “numbers”. You are not going to be welcome at that office because by messing up the performance numbers you cost that doctor money”

      Isn’t that a similar system to what is being pushed on teachers in public education?

  11. Crazy Horse

    I just spent a night in the hospital as a result of a mis-diagnosed illness. The bill: $8,500.

    Actually if you have a major health problem that isn’t immediately life-threatening there is a less expensive alternative to being treated in the USA and trying to collect from your private health insurance policy. Buy a plane ticket to Bogota and pay for the operation with cash. It will probably cost you less than the co-payment portion you will be stuck with from your US health insurance ‘provider” for things like $10 Kleenex tissues and $40 band aids.

    1. Nathanael

      You can get better medical results for reasonable prices in Mexico City, Bangkok, and many MANY other places.

      Including Canada, of course.

  12. david j michel jr

    please don’t let brad delong see this .it will pull away the curtain,and then obama will say” pay no attention to the man behind the curtain.I am the great and powerful oz,I mean obama!

  13. emptyfull

    I am sure I will get a lot of grief for this, but I still see Obamacare as a step forward towards a better healthcare system. By getting federal legislation passed that puts in place a system that (theoretically) covers everyone – even me in my shiny blue wheelchair – we’ve laid the ground for using politics to change the system more, improve upon unpopular insurance company behavior, and even push them towards acting less as ruthless for-profit companies and more as a quasi-governmental agencies. This is, I believe, how it works in some European nations that provide health insurance through “private” companies.

    Maybe I’m overly optimistic, but I’m guessing the US increasingly is going to snap back against the most nightmarish aspects of neoliberalism over the next 20 years.

    1. Aquifer

      Oh dear, i do so wish you were right (as in correct) but it doesn’t even theoretically cover everybody – even Obama admitted that, and though it IS a wonderful example of using politics, it is also a good example of what politics is used for – guaranteed customers for the moneyed interests, without guaranteed service from them …

      1. run75441


        The PPACA covers 30 million more people. How is this so bad? The balance of the coverage was decided by a Congress who wrote the bill and caved to various interests including themselves. The Senator from Aetna (Leiberan had a large hand in this. Is it the best? No; but, it is far better than nothing.

        You can askquestions and I will answer as best as I can.

          1. run75441


            If you lack healthcare insurance, you will be expected to go on the state exchanges for it and choose between Bronze, Silver, Gold, or Platinum plans. More questions?

    2. Carol Sterritt

      The problem as I see it is: This is a lousy paln. And the reason it is so lousy is because the Big Players (ie, the executives at the Biggest Health Insurance Companies) got a seat at the table in the basement of the WH, where Rahm Emanuel helped hammer out the deal. (In exchangefor his “help”, Rahm probably got a lot of PAC money to help him achieve the mayorial chair in Chicago)
      Now one thing the plan does is to make sure the Health Care Insurance Companies make even more profit. Most health insurers have raised their rates. And they are allowed to charge the elderly and those with prior conditions any exorbitant fees they want. In considering all of this, as they could see to it during the summer of 2009, that we got nowhere near to Universal Single Payer HC as our reform plan, in fact the executives made sure we didn’t even get a “public option,” just how can we expect them to grant us anything else ever? They now are guaranteed even more money – so how will there ever be a return to a more sensible situation?

    3. Waking Up

      This legislation won’t push the insurance/pharmaceutical companies to act LESS ruthless. Just the opposite. The millions of additional “customers” gives them even more in profits with which they can further “buy off” our polititians. Perhaps you should watch Frontline – “Obama’s Deal” to learn about the back room deals Obama made with the insurance/pharmaceutical companies in order to make them even stronger (even this Frontline show failed to acknowledge a “single payer system”).

      You stated, “we’ve laid the ground for using politics to change the system more, improve upon unpopular insurance company behavior”. Really? Which politicians “bought off” by the insurance/pharmaceutical companies will be doing that???

      1. run75441


        Actually it does deal with the healthcare industry by allowing Medicare and Medicaid to negotiate costs with the healthcare industry. It forces hospitals to bundle payments, forces them to be responsible for mistakes, lowers subsidies for treating the numbers of low income patients as many will be insured, etc. There is much more to it and I would turn off the TV and start reading more than sniplets of blog info which are stilted to raise the hairs on the back of your neck.

        1. Aquifer

          Hmmm, Med/med set their own rates, “bargaining might actually increase them and the “responsibility for mistakes” i do believe was outside the APPACA – but maybe you could site a source ….

          1. run75441


            If a hospital screws up, they will be responsible upon readmittance. The PPACA has the guidelines for this.

            I went to the hospital on a Friday with severe abdominal pain. After anti-nausea meds added to my drip, I was sent home. Saturday and Sunday, I slept and had two whole wheat pancakes to eat and a bagel. Monday, I have chiken and rice soup. At 4PM, I was back in the hospital with the same pain. Two operations later and $28,000; I was cured. I am challenging the first ER visit as they should have caught it then. My liver enyzmes and bilirubin were elevated.

            Under the PPACA, the hospital would be responsible for the first ER visit.

    4. Susan the other

      This will only be true to the extent the insurance companies are pressured and forced to comply, to be ethical as well. Our “health” industry is a disgrace. It needs some radical surgery. The very premise of turning health over to an industry that skims a profit from gambling against health care is so strange.

    5. banger

      Don’t agree at all. Chiefly because the act leaves in place most of the incentives that drive costs and limit care. Our political system is very different than the one in Europe. You’re quite right in noting that most Euro countries have a regulated public/private system that works very well because the population long ago decided that health-care is a public utility and not a strictly for-profit endeavor. We Americans distrust each other and don’t want to help those that may need help–and that’s just the way it is. I don’t believe this act will evolve in the government providing a public utility approach to health-care because the profits of this sector are just too great to be resisted and Americans too deliberately ignorant and, on the whole, nasty and selfish to reform the system in the direction you indicate.

      1. run75441


        The PPACA does not leave the cost drivers in plce as it sets in place many initiatives to drive the cost of commercial insurance down which the author does not elaborate on in his message. Such things as bundling bills through hospitals for medical care, holding hospitals liable for mistakes, initiatives to negotiatehealthcare costs such as pharma and procedure, more moey to primary care and lesser to specialists, etc. There is more to be had.

        As I have said, this is not the best and most perect acy; but, it is a start.

  14. ChrisPacific

    Health care is the single biggest reason why I would be reluctant to ever move back to the USA.

    Obamacare is simply a capitulation to the health insurance industry. As the article states, health insurance as currrently practiced doesn’t reliably protect against catastrophic medical problems. My experience was that people were increasingly deciding to opt out on the (quite reasonable) grounds that in the event of a major medical problem you’re likely to be screwed anyway, so you might as well save the money and find a better use for it. What Obamacare does is make it illegal for them to do so. Some concessions were extracted in return but they were very minor in return for legally requiring consumers to buy their worthless product.

      1. robert157

        Because the “insurance” that you’ve been forced to buy does not provide anything close to adequate coverage in the event of serious illness, that’s why.

        1. run75441


          How doesn’t it provide what is needed for care? Is it any worst than the system today? No and it goes beyond what was in place. There is no limit. You can choose amongst plans with low deductibles if you are older or high deductibles if youngers. There is a limit as to what you have to pay if under 400% of poverty.

          You have to be more specific as you are too general in your criticisms.

    1. John F. Opie

      Same here. I live in Germany, my wife has MS (stable for the last 6 years) and before ObamaCare, we could have moved to the US when we retire and taken out an insurance policy that would have excluded the MS, accepting the personal risk if she would deteriorate. Now we would have to acquire insurance that would include the MS and, while coverage can’t be denied because it is a prior condition, it doesn’t mean that we can get inexpensive coverage: it requires us to buy. I priced around and we’d be facing expenses of around $26k with a fairly high deductible for the two of us.

      Hence: we retire here. Not worth the hassle and aggravation. While the German system is far from perfect, it simply works for two reasons: 1) pool effects and 2) the German legal system does not allow juries to award massive damages that drive doctor’s insurance fees to absurd levels.

      The latter is really a major part of the problem: it is a significant part of operating expenses that are passed on to the insurance companies. Liability reform is desperately needed to reduce liability insurance costs which, in many medical fields, can be as much as the doctor’s annual salary for their employer (anaesthesiologists, for instance, or diagnostic specialists). My doctor here, an internist, pays only about $2000/year for his comprehensive liability insurance: that is less than what my brother, a diagnostic specialist, is charged per month for his liability insurance. At the end of the day, patients pay for excessive liability settlements, not the doctors, as these costs are passed on.

      Without a serious and concerted attempt to get costs under control, no health insurance reform is going to actually lower costs. Period. Anything else is a pipe dream, and unfortunately lots of folks are smoking…

  15. ScottW

    With 50 million new private health insurance customers, you can kiss goodbye finding a doctor who takes medicare. Doctors are reluctant to take new medicare patients, and with 50 million new insureds coming their way, they will opt for the higher paying private insurance patients. Medicare will either raise their rates bankrupting the aged and government more quickly, or become an archaic system. Unable to find doctors, people will want to get rid of medicare. Obama’s healthcare “reform” accomplishes what Romney/Ryan could only dream of doing. Vouchers for all, but call it a subsidy.

    1. Carol Sterritt

      The fact that the household will have an advance from Treasury sounds good, and I hope it will be as you suggest. However, there is some consideration to what I post in a longer response (foudn below this one) – that the “subsidies” will not be made to just any old economically struggling household, but only to certain households. Read my longer post and weep.

    2. Aquifer

      Well methinks there won’t be 50 million new insured, but I also think you are right, Medicare will be undermined, which IS the point, ain’t it?

      The only way to save it is make it bigger and the only game in town (single payer) – but, as you say, the more it is weakened, the fewer advocates ….

      What is really sad is that if we let it die, it WILL have to be reinvented, after a whole lot more folks fall through the cracks ….

    3. livinontheedge

      I am 70 years old and see about 5 different doctors. Of the 5, I have had 3 tell me that because of the reduced compensation to doctors, they will be eliminating or reducing their acceptance of Medicare patients. Now if very many doctors follow this excample, good luck finding a doctor.

  16. curlydan

    “This suggests that those without health insurance will have to pay for insurance out of pocket and then await compensation in the form of a tax rebate.”

    Wrong! This is a big point, so you should do the research. The feds will front the money and send to the insurance company. There will be times, though, when the feds sends too much or too little money, and there will be need to settle up at tax time. Most people will not need to settle up. I’m not trying to say PPACA is great, but they at least thought of this need.

    “Since many moderate-income families may not have sufficient cash on hand to pay the full premium upfront, an advance payment of the premium tax credit will be made by the Department of the Treasury directly to the insurance company.”

    1. run75441


      You are correct. The subsidies will be advanced which can be found on the Kaiser site also.

  17. Carol Sterritt

    One mroe thing to point out – while many citizens in the USA think that there will be “help” and “subsidies” a plenty to help them with the cost of the health care insurance, they shouldn’t count on it. A new study came out two months back, and in it, it was divulged that among the thousands of pages of the ACA, is the provision that subsidies will be granted to a household based on the ability of the person providing the health insurance to cover themselves. So if you are the only person in the family working, and your employer offered health care costs you a certain amount, which you can afford, but then you have a spouse with a pre-existing condition, or you have a child with such, and their premiums make the situation impossible in terms of affording it, that is not to be taken into consideration!
    The people who may be helped are those making under 20K, but anyone in the 20K to 40K bracket is probably going to find themselves shelling out the $ 700 a year penalty for not paying the “tax” on their income. Abnd hopefully they will ahve a way to come up with that $700 – the prison industry, increasingly privatized, is itching for new warm bodies.

    1. run75441


      There are subsidies are based upon the numbers of people within the household. A family of 4 within the US (not Hawai or Alaskawhich is more) would be eligible for subsidy for income up to ~$88,000 of annual income. Their total payment is not to exceed 8% of income. See Page 4 here:

      I have not read the report you cite. Please post a website.

    2. Nathanael

      More important question: are the “indentured servitude” student loan payments considered when considering affordability?

      I would expect not, which makes the affordability measurement useless.

      1. run75441


        Are your credit loans and debt considered when you took out the student loans? No. You income is hat is the deciding factor; however, you still can choose a less costly plan.

    1. El Guapo

      Where else are you going to go? Its fucked up everywhere and its going to get worse. Capitalism can only result in one outcome.

    2. Carla

      “God we are so fucked in this country. Why am I still here??”

      Well, Canada charges a lot to get in. The older you are, the more it costs. One can hardly blame them with a population 10 times their size that may soon be streaming across the border.

      Costa Rica? Great VERY low cost health insurance and care for ex-pats, but the trouble is, so many Americans have moved there, building gated communities and bringing lots of GUNS, that peaceful little Costa Rica just isn’t the same as it used to be.

      I don’t know what other countries are willing to take American refugees, and under what terms, but it does bear investigation.

  18. Brooklin Bridge

    Excellent article!

    One of the first things that will change with O-F–kedCare Obama Care is that the insurance behemoths will insist on greater tax penalties for those who don’t pay, who opt out. Within half a generation, they will be successfully lobbying for outright debtor’s prisons and the media will make Leprosy seem like winning the social lottery by comparison. And the beauty of it, the elegance, is that we will be the ones who pay for our government to act as a collection agency – through even more taxes. The Mafia, our government, comes over to break our leg for failing to pay back a loan (that was doubled and then trebled without our even knowing about it) and then asks us where to send the bill for the leg job.

    The second thing is that the insurance giants will want complete and progressive immunity (as if they didn’t already have it) for non compliance with any of the few restrictions that might actually benefit the consumer. Refusal of insurance to those with preexisting conditions, for instance, will not only be rampant, it will barely be hidden. There is no Federal funding for enforcement of the few rules there are. Not only that, who can sue these political cash cows or even take them to court? Probably about the same number of people who had their day in court after being thrown out of their homes due to illegal foreclosures. And that was about the same as the number of corrupt bankers that went to jail for trashing the economy and the very definition of ownership over the last 4 years.

  19. Ms G

    Single Payer (or & Medicare For All).

    Period. End of Story.

    The only issue now is removing all elected officials who persist in allowing insurance companies to loot and kill Americans under the guise of providing “health care.”

    It’s simple: They (elected officials) are either With us or Against Us.

      1. Ms G

        “They sure ain’t with us.”

        Correct. That’s why they need to be uprooted and sent out to pasture. There’s no need to “first” dismantle campaign finance and corporate personhood if Americans, in increasing numbers and increasingly loud and consistent voices simply demand the system that they want. Also I am not naive. The moment of reckoning when elected officials or potential candidates are faced with a sufficiently critical mass across America (a People’s Referendum) demanding Single Payer will be an interesting one.

        1. Aquifer

          Absolutely agree – we do not need to first dismantle the current campaign finance fiasco … We just need, in the poll booths, to pull the lever that correspond to what we want – a referendum by any other name is still a choice –

  20. Rich

    This article is an excellent example of the human mind vs. the sociopathic (no empathy, it’s just business) mind. It does not happen just with health issues but also with the environment, women, racism, war, democracy, justice, liberty, on and on and on. We will either stand up to these bullies or we will deserve what we get. It is just that our children will not deserve what they don’t get. I believe it to be just that simple.

  21. Dandelion

    the aca is a backdoor bailout of the insurance companies, who truly make their money on Wall Street. the tell is that after tarp passed, after obama was inaugurated, the insurance companies came to him and told him they needed a bailout too. obama told them that was a bridge too far, he could never get that passed. and right after that healthcare reform became the administration’s number one priority, even over job creation.

  22. PQS

    Matt Taibbi in his excellent book, “Griftopia” has a chapter detailing the truly awful sellout that is the ACA. Essentially, the HI Industry is so big, so powerful, and has bought off so much of the political class that not one person even discussed getting rid of the Anti Trust Exemption for the insurance industry. Not seriously. It is “Idea Non Grata” and every side of the political class has sold themselves out to the insurance greedheads. And it is why insurance companies can charge outrageous prices with no fear of repercussions. Here’s a quick overview from his blog:

    I think the thing to do is to make more people aware of this – just as all the discussions around the ACA made more Americans aware of how much insurance costs (other people), how little it covers, and how badly we’re getting ripped off all around. Most Americans have little idea about the insurance industry unless they have to buy individual policies or have a pre existing condition or a major medical incident. THEN the education is painful and abrupt. Most Americans are also painfully ignorant about how anything else works in the rest of the world, which is why they think the UK looks like Soviet Russia WRT health care.

    The Insurance industry ISN’T all powerful – if everybody refused to buy, they would have to adjust. (I’ve thought for quite some time that they were, before the ACA, heading towards a death spiral, since they keep charging more and more and covering less and less.) If everybody stood up and said, “Get Rid of the Anti Trust Exemption and Make Insurers REALLY COMPETE” then things might change.

    I know, I’m feeling optimistic today.

    1. banger

      The problem is not the whole mess of groups that profit from health-care in this country, but the American people who actively avoid informing themselves about the issue and refuse to think rationally about health-care or anything else other than the narrow things they have to do each day to maintain their lives. The ACA and the system we have now are both wasteful and irrational but that is what the people seem to want just as they want war after war after war. Yes, I know public opinion survey tell a different story but I don’t put any store in opinion–I’m a pragmatist and am interested in action. When push comes to shove Americans vote their fears of the “other” however you want to define it–there are complex reasons for this but that fear always trumps everything and it does so more each year.

      The issue itself is a symptom of the decay and dissolution of American society at all levels, economic, political and cultural. We are clearly headed into a kind of dark age of neo-feudalism and we had better plan for it and make the best of it because there are no institutions or movements in the U.S. that intend to do anything other than pursue their own interests and viciously bite anyone who challenges them. Decency will never go away in the lives of individuals but it will, largely, be a thing of the past when it comes to corporations and gov’t.

  23. Joan

    Hospital in Esphehan, Iran a year ago charged me $230 for x-ray, two orthopedic consults, cast for broken leg. Most
    most of it was for the cast. Superb care.

    And yes, the government provides Iranians with health care insurance on a co-pay basis. The hospital I was at was owned by a group of physicians.

  24. different clue

    I have read recently that a couple of big fast-food chains are going to experiment with making their entire workforce consist of people working less than 30 hours per week. Apparently 30 hours per week or more is the cutoff at which an employEE of a many-employees-bussiness must be covered by an employER healthplan or otherwise a fine or a fee must be paid by the employER for not having coverage plans for the employEES. Apparently some big low-wage employERS have discovered that interesting cutoff and will make everyone in their workforce work less than 30 hours per week, thereby dodging the choice of “plan or fee”.

    It is almost as if that little provision had been written into the law just for those companies to find, like a hidden easter egg.

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