The medical insurance industry subsists on more government favors than any other industry. Between the requirement to purchase insurance, the requirement that companies offer the insurance industry’s product, and the $275 billion tax exemption to offer their product (four times the size of mortgage interest deductions!), the insurance cartel is essentially a government-sponsored entity or public utility. It has done nothing for society, but has destroyed the patient-doctor relationship, prevented medical innovation, and raised costs astronomically.
Now that same medical insurance industry is asking for a bailout.
The answer must be a resounding “No!”
Last week, the top six health insurance companies (UnitedHealth Group, Anthem, Aetna, Cigna, Humana, and Centene) reported $6 billion in combined adjusted profits for the second quarter of this year. According to CNBC, that’s up “29 percent from the same quarter a year ago — far outpacing the overall S&P 500 health care sector’s growth of 8.5 percent for the quarter, according to Thomson Reuters I/B/E/S data.”
As an unapologetic capitalist, I have no problem with the earning of record profits built off of free markets, innovation, and competition. Nobody begrudges the success of Apple and Amazon. But in medical insurance, prices are at a record high and the quality of the actual care is in the toilet — all thanks to venture socialism, not free markets. To quote Barack Obama and Elizabeth Warren, “You didn’t build that.”
What is the source of their profit? You got it: taxpayers and public debt!
“The core business, which is providing coverage to large and mid-sized employers… and the established government programs, Medicare Advantage and Medicaid managed care, have all done well.”
Many people forget that most of Medicare and Medicaid are not purely “public.” These programs are managed by “private” companies that line their pockets with unconstitutional government interventions and then use their rent-seeking status in the market to demand more subsidies lest they threaten higher prices. As CNBC explains:
Aetna now derives more than half of its revenue from government plans, and after abandoning its merger deal with Humana, the insurer is focused on growing its Medicare Advantage market share on its own in 2018 and 2019.
“The general trend is growing the portion of health care claims that are directly or indirectly paid by the federal government,” said health care ratings analyst Deep Banerjee, a director at S&P Global Ratings.
This is the literal meaning of venture socialism, when private companies earn their entire market share based on government capital, leaving the consumer in the lurch. They no longer need to compete for consumer satisfaction when government is the true consumer.
And let’s not forget the ill-conceived concept of employer-sponsored medical insurance, driven by $275 billion tax pork. Yes, $275 billion worth of lost wages — doing nothing but lining the pockets of the insurance cartel.
Imagine what would happen if the government mandated that everyone not only own a firearm, but purchase a specific type of firearm produced only by a few companies. Then employers would be required to purchase them for employees, and they’d get a collective $275 billion tax cut for doing so. In addition, the entire personal security for all the elderly and poor would be managed by those companies and their services, through $1.6 trillion in combined federal and state spending! They’d be pretty darn wealthy and have all the power in the world to lobby for endless subsidies. That, in a nutshell, is the exact situation in our critically ill health care system.
In addition, these same companies had the nerve to lobby for the insolvent Obamacare regulations and vociferously blocked any effort to repeal them. They are willing to go along with the regulations because 1) They keep new competitors from entering the market; 2) They have a vested interest in keeping the price of health care and insurance high; 3) They have a guaranteed flow of government subsidies to some consumers, states, and insurers to sugar-coat their price inflation; and 4) Unlike any other industry, they get to engage in price fixing — all enabled and sponsored by government tilting the playing field away from direct primary care and toward the insurance cartel.
In many respects, our system of venture socialism is worse than single-payer, because it combines socialism with the greed of capitalism. However, unlike capitalism, in venture socialism, government shields the private entities from market forces. It guarantees them an endless flow of public funds, consumer mandates, and regulatory favors (no anti-trust laws, but onerous coverage burdens to keep out new competitors) to remove any need to innovate and compete. Health care ratings analyst Deep Banerjee, as reported by CNBC, put it best:
“Even with a single payer in a public-private partnership, insurance companies are very involved in managing the costs, and actually running the program for the state or the federal government.”
The government has essentially handed the entire medical care field to the insurance and Big Health Care administration cartels. They would have never amassed their monopoly without government favors at every turn.
That is why the worst thing we can do is give into their tantrums and offer them more cost-sharing subsidies. We must move in the opposite direction entirely: Cut out insurance altogether from any special government favors and make insurance companies compete in the market like any other industry.
Even without fully or partially repealing Obamacare, there are a number of ways we can repair health care in this country and sever the stranglehold of the government-sponsored cartel on our health. We must place direct primary care and alternatives to insurance on an equal playing field. President Trump should explore the following reforms and put the insurance cartel on notice that he will no longer treat them as wards of the state:
Allow health-sharing associations to prosper and compete with insurance as a fully viable alternative. This model has proven extremely successful with health-sharing ministries. All we need to do is expand Section 5000A(d) of the ACA and exempt all new associations and non-religious sharing associations from the individual mandate penalty. Additionally, they should be afforded equal tax treatment through HSAs and the employer tax exclusion. This must be a centerpiece of any tax reform proposal. Watch the insurance cartel be forced to compete or die. (For more details, listen to podcast 130.)
Marshal true market forces by encouraging price transparency and ending price fixing. The reason health care is so expensive is because the insurance cartel is allowed to price-fix. Given that more than half of their revenue is from government and the other half is indirectly sponsored by government, there is no reason Congress could not prohibit any insurance contracts that inhibit providers from offering self-pay discounts to patients. Under current practice, given that the Medicaid and Medicare contracts are funneled through the insurance cartel, insurers prevent providers from offering discounts to those who self-pay. It is fundamentally unfair for the government programs to hurt private citizens who want to shop around like a regular market. Ending the price fixing would naturally lead to price transparency, which is the lynchpin of reducing charges and fostering competition. (For more details, listen to podcast 135.)
Cut out the cartel entirely from Medicaid and give the money directly to poor consumers in the form of regulated HSA accounts. This way we could provide them with better quality, more choices, and less stigma — all without self-perpetuating a death spiral of eye-popping debt and price increases that destroy the market for everyone else.
By enacting these true health care reforms, much of the debate over Obamacare and the repeal of Obamacare will become moot. We only have a health care problem because the federal government has elevated the insurance cartel to a status it would never have attained on its own. The Freedom Caucus should demand real health care reform in return for any debt ceiling increase, because the government focus on lining the pockets of the insurance cartel is the biggest driver of personal and national debt. Let’s level the playing field and see if a true free market would actually sustain the insurance companies’ Solyndra-style business model. (For more from the author of “Insurance Cartel Making RECORD Profit. WHY More Illegal Bailouts?” please click HERE)