The purpose of this article is to demonstrate the differences between private insurance plans and public (social) insurance plans and how to use this information.
The structure of health insurance has been a topic debated since the early 20th century. The nature of health insurance and the financing of health care services are increasingly critical in view of the three challenges of cost, quality, and patient/community values. More recently, health insurance is utilized to control and reduce health care spending.
Patient, family, and community perspectives have primarily been focused on the indirect cost (lost earning and family life disruption) of sickness. The recent increasing medical care costs result in a focus of insuring against rising costs, and then become divorced from the social costs. The difference between patient perspective and private insurance company perspective is now defined.
Since 1970, the corporatization and commodification of health care results in the initiative to limit medical costs. This leads to a contrast of needs, those of the individual and government (public) vs. those of the corporate structures and organizations (private). The private vs. public financing issues to address include:
1) Health Care Insurance missions –
a) Private – to be a successful entity measured by growth of the entity, growth of the administrative body, and growth of profits.
b) Public – designed to improve health and improve quality at a reasonable cost.
2) Health Care Insurance administration –
a) Private – excesses are necessary in a fragmented market to manage risk, marketing, profits, and more. These costs average 16 – 18% of the health care costs. Furthermore, the provider administrative structure adds another 10 – 15% of the health care expenses.
b) Public – costs average 3 – 8% with a single payer system. The provider administration is minimal.
3) Health Care Insurance coverage –
a) Private – cost sharing is standard including deductibles, larger co-payments, and co-insurance (also benefit reductions, provider risk sharing, and more.)
b) Public – single payer is designed to provide comprehensive benefits with no added costs.
4) Health Care Insurance risk reduction –
a) Private – The traditional role of insurance companies was to pool risk. The new role of insurance companies is to avoid risk. Private insurance was willing include the elderly only after these services were federally funded.
b) Public – social insurance has become the repository of the high risk patients that the private insurance companies did not want to insure. A single risk pool for all residents is feasible in a public plan.
5) Health Care Insurance treats individual financial security
a) Private – insurance industry, employers, or providers care for the well-funded plans with minimal or decreased exposure to risk. Those with a greater need to access health care will be left without health security or financial security.
b) Public – will care for those that the private insurance industry refuses.
6) Health Care Insurance choice of providers
a) Private – limited access with defined panels of providers/hospitals
b) Public – free choice of providers
7) Health Care Insurance quality improvement programs
a) Private – limited by fragmentation of the market.
b) Public – a public single-payer data base allows a view of health care delivery without fragmentation.
8) And more . . .
So, how do we use this information? All plans should be evaluated with these criteria in mind. To differentiate public from private consider the mission, administrative cost, coverage, methods used to reduce risk, effect on individual financial security, choice of providers and quality improvement systems. Historic and successful models to transform health care services include universal health care services financed by a public, single payer system. Note that in Colorado a proposal, the Colorado Health Care Cooperative (CHCC), may be introduced to our legislature. It appears that this plan is a private plan. A question is asked of CHCC (Sen. Aguilar), “Wouldn’t single payer be simpler?” The answer is, “. . . we still need insurance companies because we need to figure out how to pay for health care”.
Conclusion: We believe that the private insurance companies, either for-profit or not-for-profit bring no value to health care services. It is a happy consequence of a public system that we also much more effectively address the social concerns of the patients and their families by addressing our fiscal crisis stemming from the profit-first motivations and our corporatization of health care. Real health care reform should be financed by a public single payer system.
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