September 23rd, 2009
10:47 AM ET

The Healthcare Hostage Crisis: The failure of the insurance system

Editor's Note: This article continues our multi-part series excerpted from the "Healthcare Hostage Crisis" chapter of AC360° contributor David Gewirtz's upcoming book, How To Save Jobs, which will be available in October. To learn more about the book, follow David on Twitter at http://www.twitter.com/DavidGewirtz. Last week, we looked at the steps insurance companies take to avoid paying your medical bills. This week, we'll look at the problem with health insurance, overall - and what it means if you're an employee with health insurance and you're suddenly out of a job.

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David Gewirtz | BIO
AC360° Contributor
Editor-in-Chief, ZATZ Publishing

Clearly, the insurance system is a failure for vast numbers of Americans. That's why it's particularly disturbing that the Senate's new health care bill appears to be putting even more faith in the insurance companies.

Using the insurance industry's own numbers, about 13 percent of every medical dollar goes into the insurance industry, rather than the medical industry. So, of the $2.4 trillion dollars we overspend annually on health care, at least $312 billion feeds the insurance industry.

Here we have the insurance industry, sucking 13 percent off our already excessive costs for health care, and, according to The New York Times, making profits above $60 billion in 2006. Based on the American Journal of Medicine numbers, medically-related bankruptcies account for an annual loss to American citizens of about $6.3 billion.

Lose the job, lose the insurance. Lose the insurance and, suddenly, you're a statistic.

The industry makes $60 billion in profits, but is willing to bankrupt hundreds of thousands of Americans over an amount that's a mere 10 percent of its already astronomical profits.

To be fair, the fault isn't just with the insurance industry. Every industry has a right to make profits. Likewise, we, as consumers, have the right to choose to purchase from a business - or not. If we like the quality, service and value, we buy more and the company succeeds. If we don't like the quality, service, and value, we shop less and the business doesn't succeed.

Except the health insurance business. Here, we have very little choice.

The insurance industry has set itself up between those of us who are consumers and those providing medical care. In fact, there are so many layers and filters and barriers between the consumer and the product that it's virtually impossible to comparison shop for anything in the health care business.

According to the Kaiser Foundation:

Employer-sponsored insurance is the leading source of health insurance, covering about 158 million non-elderly people in America.

That means that about half of all people in America get their health insurance through their employers. Of course, as more and more people lose their jobs, more and more people are also losing their health insurance. According to researchers James Kvaal and Ben Furnas of the Center for American Progress, approximately 14,000 people are losing health insurance each day.

Our system of employer-provided health insurance is one of the big reasons for the health care-related bankruptcies discussed earlier. More than 37 percent of those suffering a medical-related bankruptcy were forced to quit their jobs or were fired due to their illness. According to The American Journal of Medicine study, more than half of American companies cancel coverage within a year of when an "employee suffers a disabling illness," and a quarter do so almost immediately.

So they get sick, which means they can't do their jobs - but it's the insurance provided through their jobs that's supposed to help them when they're sick. Lose the job, lose the insurance. Lose the insurance and, suddenly, you're a statistic.

Our insurance premiums went up an average of 119 percent in the last decade. But we're definitely not seeing more value. In fact, The American Journal of Medicine study also tells us:

Since 2001, the proportion of all bankruptcies attributable to medical problems has increased by 50%.

So our costs for the insurance that's supposed to protect us from bankruptcies more than doubled - and medically-related bankruptcies also went up, by a whopping 50 percent.

And that leads us to the topic of the day: health care reform. That's next and it'll wrap up our series.

But just in case you're starting to feel good about the American health care system, think about who we're putting in charge of reforming health care. That's right, it's the politicians. I'm not exactly sure why that worries me so much...

Follow David on Twitter at http://www.Twitter.com/DavidGewirtz.

Editor’s note: David Gewirtz is Editor-in-Chief, ZATZ Magazines, including OutlookPower Magazine. He is a leading Presidential scholar specializing in White House email. He is a member of FBI InfraGard, the Cyberterrorism Advisor for the International Association for Counterterrorism & Security Professionals, a columnist for The Journal of Counterterrorism and Homeland Security, and has been a guest commentator for the Nieman Watchdog of the Nieman Foundation for Journalism at Harvard University. He is a faculty member at the University of California, Berkeley extension, a recipient of the Sigma Xi Research Award in Engineering and was a candidate for the 2008 Pulitzer Prize in Letters.

Filed under: David Gewirtz • Health Care
soundoff (11 Responses)
  1. Rich Wallick

    Our health care system is an utter and complete success. It is a for profit system and, as such, creates huge profits for the health industry companies, their upper management and, their shareholders.

    Of course all this is at the expense of those needing care. Efficacy of treatments including drugs plays second fiddle to greater profits. Treatment needs are of importance only if they can generate greater profits which never occurs; all and any means are used to deny needed treatments so as not to interfere with profits.

    We do have an American solution - it's called Medicare. And, despite all the GOP has done in an attempt to destroy it, it still provides disabled and Americans over the age of 65 with the best health coverage available. (Ask any Medicare recipient if they would give up their coverage.) Let's give all Americans the choice of continuing their current coverage or switching to Medicare. Let's get the private sector out of Medicare and start negotiating with drug companies. Let's provide the knowledge to patients and doctors as to the efficacy of treatments so patients with their doctors can decide what is best for the patient.

    People need to remember that insurance was originally a means to pool risk and avoid calamity - not to make a profit The young need to realize that medical insurance payments under a Medicare for all plan is simply an easy payment plan for all those years when they are not young and will need medical care.

    September 24, 2009 at 10:37 am |
  2. Lawrence

    Americans, wake up! There are dozens of countries out there – our own allies and friends – who have national (public) health insurance AND IT WORKS! Stop listening to all the garbage lies from people who have a vested interest in taking your money, but not providing any real service for it. I'm an American living in Europe, and I've had employer-sponsored health insurance for my family of 3 in the US, and I've had national (public) health insurance that I pay for as a self-employed entrepreneur in Europe (again for my family of 3). I'll give you a comparison. For my employer-sponsored plan in the US, I was paying over $6,000 a year in premiums, and still had to pay co-pays and only get partial coverage for things. And God forbid someone should get hospitalized and we would hit our annual or lifetime limits! Oh, and then I lost my job of 20 years because of the recession and was left with NO INSURANCE. Now, in Europe, I pay about $3,000 a year in premiums for my family of 3 and have FULL COVERAGE. PERIOD. No caps, no co-pays. FULL COVERAGE, PERIOD. And I don't have to worry about what happens if I lose my job. Do I have to wait any longer to see a doctor than I did in the US? Rarely. And guess what? The doctors actually care about you and your problem, instead of being the paper-pushing, pill-pushing organs of the insurance and pharmaceutical industries that they've become in the US. So which would you rather have? For me, this is a total no-brainer. Unfortunately, from what I've seen in this debacle of a healthcare reform debate, we have a lot of "no-brainers" in the US of A.

    September 24, 2009 at 3:25 am |
  3. Susan

    I am self-employed. I make very little right now and may even have to close down my business all together. I have no insurance because I can't afford it. If my husband puts me on his insurance, it will cost us over $300 a month. That's outrageous. I have cancer on both sides of my family and can't even afford to go for a routine check-up. If I get seriously ill, I won't be able to afford treatment and will most likely not live long. How's that for fair? Most people I hear who don't want some sort of public option at least, or who complain about the government getting into it all, either have insurance, Medicare or are wealthy enough they don't have to worry about being able to pay medical bills. It's people like me who lose out in the end. But, I guess we don't really count.

    September 24, 2009 at 1:23 am |
  4. Adri

    This whole thing scares me. I don't like the idea of the government creating a system where the people who already have good health care may lose it, that's not fair. But there are currently people who have none, and that shouldn't be tolerated either. It would seem like universal health care would be the best way to go, but that would put insurance companies out in the cold, so to speak. And Canada might get mad if we copy them. I'm oh so concerned about that... Honestly I do not think it is going to work. Hooray health care reform! (sarcasm)

    September 23, 2009 at 2:25 pm |
  5. Mark

    Has there been a study of how much health care cost might be reduced if the current system were left in place but without the accruing of profits and pay outs to bonuses and stock dividend?

    September 23, 2009 at 12:37 pm |
  6. Michael C. McHugh

    This is exactly why progressives like me have always wanted to expand Medicare to everyone who wants it, and pay for it out of general revenue, since they frauds and failures of private insurance are well known. We would have gotten this passed long ago if the health care industry was throwing in so much money to block real reforms. That's another problem: how to stop all these private donations from big business interests that are killing democracy in this country.

    September 23, 2009 at 12:23 pm |
  7. Jim

    Lets look at this from another angle in the same industry- Auto Insurance.
    I have been driving since age 17, I'm 46 now, no ticketts, no accidents, Clean record. Yet I'm REQUIRED to pay for insurance $300.00 a year
    That I don't have because I'm Unemployed, My rate is Low because I drive a 1974 truck, & my driving record. Buit Woe unto me if I ever get in an accident.
    I expect the same thing will happen with Health Insurance. I will be REQUIRED to pay money for Health Insurance but if I get sick I will be Screwed.

    September 23, 2009 at 12:02 pm |
  8. Beatrice

    I don't understand why there is not more outraged against the Health Care insurances out there! The kind we saw in the town hall meetings. When I arrived in the US 18 years ago (I came to get knowledge of that a little later) I was amazed to know that a health care company could drop you if you had a preexisting condition. I mean when you need it the most you lose it!!!! ????American have twisted perception of the health care in Europe. I can talked about France (I grew up there). My family never had to choose from a list of doctors, they never lost their health care when they lost their job, the government never came in between them and the doctor... right now my parents are elderly and they are really well taken care of... nurses and their doctor go to their homes when it's needed.... It's amazing to me the kind of nonsense I heard on the side of the opposition and most of all the blindness of the American people who want to keep things the way they are.

    September 23, 2009 at 11:16 am |
  9. Melissa

    The new plan scares me. Its worse than it is now and benefits the insurance companies completely while screwing over everyone else.

    They need to go back to the drawing board.

    September 23, 2009 at 11:16 am |
  10. Conserve' in USA

    Let's be able to buy insurance from any company through out the Unites States. Competition itself lowers the cost. The problem with the government running health care, they don't care how much it costs. They lose money, they tax more or cut services. The difference between insurance companies and the government is, the government gains more power over you.

    September 23, 2009 at 11:06 am |
  11. Enough

    There's no doubt the system needs to be reformed. Insurance need to be available and affordable for everyone who wants it to purchase it. That's the direction the government needs to work on. The government should stay out trying to nationalize healthcare and provide free coverage for some while the rest of us pay for it. The government needs to stay out the healthcare end of it and work on reforming the insurance companies.

    September 23, 2009 at 10:55 am |