Private equity, private profit, Medicare and your health: They are incompatible

When recently scheduling a procedure with a physician, he just shook his head and told me how lucky I was to have retired, and how difficult the practice of medicine is now. Before the outpatient procedure, he had wanted me to get a consultation from a physician in another specialty, but it turned out that that group no longer saw outpatients but only did hospital consultations because they no longer had the capacity. From his perspective, the problem is lack of people, especially doctors and nurses.

 But there are other big reasons, which I have discussed in previous blog posts. There are different aspects to them, but they essentially boil down to the transformation of American healthcare into another profit-driven industry. My doctor, and the doctors he wanted to consult, and the nurses and other staff with whom they work, are all interested in providing high-quality and effective care to people. The corporations for which they work (or are forced to work with, such as hospitals) are interested in making money.

This transformation, like most, is incomplete, but it seems to have passed an inflection point from which, if something major is not done, there is no turning back. The changes have been in process for a long time, documented in books such as the Health Policy Advisory Center (HealthPAC)’s 1971 “The American Health Empire” (Barbara Ehrenreich and others), and Paul Starr’s “The Social Transformation of American Medicine” published in 1982. They document the change from a cottage industry of independent doctors to one dominated by large institutional players. In the 1980s, Physicians for a National Health Program (PHNP) was created with the goal of, if not reversing this trend, at least harnessing the system to serve all of our people through the creation of a centrally-financed single-payer health insurance system. While every other wealthy (and many non-wealthy) countries in the world have such coverage, the US is the outlier. PNHP has advocated for decades for a coverage system more like that of Canada, where provincially-run financing plans cover everyone under a set of rules set by the federal government.

At that time, and today, a huge part of the problem was, and is health insurance companies. They are the obvious predators, drawing profit from ‘managing’, which often means restricting, your access to health care. Insurance in general makes money when it takes in more than it pays out, and as customers we “win” when we lose. That is, we collect when we have a car accident, or our house catches fire, or we die. We bet against ourselves, and hope we will not need the insurance. But health care is different, because we want to receive it. To be paid by insurance may have made sense in the early days, when it covered the hopefully-unneeded hospitalization or surgery (“major medical”, it was called) and we paid doctors out of our pockets or in chickens. But it makes no sense for routine and necessary health care.

The other big abuser back then was pharmaceutical companies, which made even more than insurance companies, marking up prices to whatever the market would bear, no matter how many people were left out and could not afford them. Sadly, the news is not that the character, behavior or profit taking by insurance or pharmaceutical companies has improved; now they are both even worse! What is sad, and terrible, is that the actual health care providers have become more predatory, and more often owned and controlled by companies whose primary business is making money, and only incidentally providing health care. I have written about this sort of abuse by hospitals and corporate-controlled physician groups, and it has just scratched the surface.

Recently, the Kaiser Family Foundation Health News reported on ‘Sick Profit: Investigating Private Equity’s Stealthy Takeover of Health Care Across Cities and Specialties’, exposing once again the way in which for-profit companies, and increasingly private equity, have bought up healthcare practices and limited access or worse in the name of making money. The article leads with the story of a 2-year old child in Yuma, AZ who died of complications of anesthesia while receiving extensive dental work that, his parents say in a lawsuit, was unnecessary (it almost certain was). They charge that the dentists were pressured by the private equity firm that owns the practice to do the maximum number of procedures on children with Medicaid to maximize revenue and profit. But that is just the lede; the article documents the increasing frequency of practices owned by for-profit companies abusing and sometimes killing people, either by over or under treatment. Which one depends on which will make the most money, not on whether folks need medical care or not.

Killing children in pursuit of profit is something most of us would frown upon, but while all practices owned by private equity or other profit-making entities may not behave so badly, it would be a mistake to call those that do “bad actors” and excuse the others. It is the entire concept that YOUR health should be a source of profit, and be attractive to the venture capitalists investing in these practices because they can make so much money. The money, whether paid by you directly, or indirectly through your insurance premiums, or by the government through your taxes, should be going toward your healthcare, not their private jets.

This practice complements the impending takeover of Medicare by for-profit Medicare “Advantage"”plans, and private-equity controlled ACO/REACH plans, just recently reported on in the New York Times, “Corporate Giants Buy Up Primary Care Practices at Rapid Pace”. The article begins by noting the shortage of primary care doctors, and that it is getting worse (also something I have written about often) because they get little respect and less money (than other specialists). It would be nice to think that this evidence of the impact of family doctors and other primary care clinicians on patients was a sign of respect, but it is just a sign of greed, especially through the programs that privatize your Medicare. This represents a huge potential profit center for these companies. “That’s the big pot of money everyone is aiming at.” Yup. It’s $400 billion!

This is why most of us who are paying attention agree that we now need to go much farther than simply national universal health insurance. While that is important and good, it could end up being another vehicle for profit-taking; remember the Yuma dentists were ripping off Medicaid, a government funded program. Thus, only a truly non-profit (unlike the ostensibly “not-for-profit” hospital sector than emulates for-profit competitors to maximize revenue) is acceptable. Steffi Woolhandler and David Himmelstein, founders of PNHP, call for such a national health service in a recent interview in Jacobin, and it makes sense.

The justification cited by these companies for their rapacity is that they increase efficiency. This is of course, BS. Efficiency in generation of more money for them, perhaps, by cutting back the number of doctors, nurses, and other staff, overworking those who remain, and making them all, along with their patients, miserable. That is not efficiency in production of healthcare, and is certainly not efficacy.

Doctors and nurses are being “sped up” as if they were on an assembly line, and are burning out and leaving in droves. The people who are the “products” are getting 7 minute visits, don’t have time to even talk about their problems not to mention get adequately treated. It is bad for everyone but those few earning the profit.

The Times article says “The companies say these new arrangements will bring better, more coordinated care for patients, but some experts warn the consolidation will lead to higher prices and systems driven by the quest for profits, not patients’ welfare.” Yup. That’s what they say. Not to put too fine a point on it, it is a self-serving lie.

We need one system, well-funded, to handle all of our needs, generously paid for without a cent going to private profit.

Yes, it's the insurance and drug companies, but it's the health systems also!

Much of the focus in discussions about the high (extremely high!) cost of the US healthcare system is on administrative costs (over 34%, per Annals of Internal Medicine article by Himmelstein, Campbell and Woolhandler)[i] and the profits taken by insurance companies and drug companies. This is totally right on, and are major reasons why a single-payer #Medicare4All system would save enough money to not only cover the tens of millions of Americans who currently do not have health insurance, but to provide decent, comprehensive coverage to the majority of Americans who have inadequate health insurance. This, of course, includes those who have marginal health insurance (like Blake Collie, an 8 year old boy with a cerebral aneurysm, whose parent bought a Christian insurance plan that was all they could afford, but would not pay for the treatment; the advice was “trust in God”), and those who have Medicaid, now aggressively being cut back, especially with new Trump Administration policies that allow states to slash it. And all the rest of us who pay large premiums but only find out what our insurance doesn’t cover and what our co-pays will be when we get sick. And then we get sicker.

In addition, we have Medicare Advantage (MA, also known as Medicare Part C) a deal which essentially can make a Medicare patient (for a little extra premium) an HMO patient.  For the patient this comes with the typical HMO advantages (such as vision and hearing and other coverages, and usually drug coverage so you don’t need a separate Part D insurance plan, and often little or no co-pay) and disadvantages (limited networks of doctors and hospitals, often poor out-of-area coverage), but it has real negative impact on the health system. MA programs get special treatment from the Center for Medicare and Medicaid Services (CMS), including a big increase in payments if they can demonstrate, with all the wizardry, bells-and-whistles, and large staff combing and padding the Electronic Health Record (EHR) that their patients are sicker. In fact, they are demonstrably less sick than traditional Medicare patients; indeed, the older and sicker MA patients are encouraged, subtly or not, to transfer to traditional Medicare. A recent article by Richard Kronick on the Health Affairs blog demonstrates that MA programs are being overpaid by $200 Billion. This is real money, and it is not by accident, as discussed by Don McCanne in his Quote of the Day.

But the less-discussed contributor to our high health costs are the hospitals and health systems that make big money. This is true even when those health systems are ostensibly not-for-profit. The for-profit hospitals and health systems are at least open about it, and they pay taxes. Non-profits do not pay shareholders, and also do not pay taxes. The presumed reason for this is because of the public service that they provide to their communities. But while this may be true of many small-town and rural hospitals, which are also in the most danger of closing and leaving their communities bereft of hospital care, it is often not at all the case for large urban health systems. They make money. For example, an interview on the NPR program “1A”, otherwise focused on the Peak Health System in Summit County, CO that has had some success in reducing costs in that rural tourist county, the Colorado insurance commissioner Michael Conway discusses the proposal for a “public option” in his state and notes that asking hospitals to give back a little is not too much for the urban hospitals making $2 billion a year (about 28 min in).

And, since they do not have shareholders to pay, the health systems reinvest most of the money they make into expanding hospital services or building new buildings. This could seem like a good thing, except that the choice of what services to expand is often (usually) based not on what services the community needs most, but what services will – make them more money! And, also, hopefully make them more desirable destinations for high-margin services than the other urban hospital systems with which they compete. So if, as is usually the case, cancer care and heart disease care and orthopedic care are big money-makers, they build fancy new cancer hospitals and heart hospitals and orthopedic hospitals to try to draw well-insured patients away from their competitors. Thus, we get redundancy and overcapacity in these high-end services in competitive cities, with each shiny new cancer center seeking to lure patients from the one that’s a few years older across town.

Meanwhile, these urban communities do have other, less lucrative, needs that are scarcely ever the target of major investment. In a rational system, the money made on those “profitable” services could be used to invest in and subsidize lower-profit (or in some cases money-losing) services that are in great demand in the community. These certainly include primary care, mental health/behavioral care, drug addiction treatment, and virtually any care delivered to poor or uninsured people. A reasonable health system would just subsidize this care, and not bill and dun people repeatedly for money that they do not have, and cannot and will not pay, ruining their credit, attaching their wages, and challenging their ability to pay for other things, like shelter, food, and clothing.

But privately-run health systems almost never work this way (even if “non-profit”) because their boards like them to make money. And reward them for making money. An article in GQ in April, 2019, reports that CEO salaries at our big health system are doing very well indeed; at the 62 largest, the 2018 salary averaged $18 million! The other “C-suite” executives (COO, CFO, CMO, etc.) are also very well paid; it would not be rare for a major hospital system to have 10 executives making over $1M a year. These CEOs are sometimes doctors, but often accountants or MBAs – basically they run their hospitals as a business, and often have no other context to relate to. When thinking about community benefit, they think of “community” as the “community of well-insured”, the “community of suburbanites”, and of course, especially the “community of potential donors” (cool that they can even get people to give them money and take a tax write-off!). They almost never think of the “community of need”. They are sometimes briefly interested as long as government will give them money for helping the needy, but return-on-investment (ROI) is always measured in dollars, not population health.

This is what happens when the private sector is given control of an industry; they pursue their own benefit. It is unconscionable that we do this in areas like health care which are needed by everyone. Virtually all decisions are made with their eyes on the bottom line. Is CMS going to pay for more residents? Let’s get more cardiology fellows to do procedures and make us money, not more family medicine residents who will go out and meet the needs of people, even if not in our hospital.

There are people who are concerned about government-run health care, and this spills over to their concern about government-financed health care, such as Medicare for All. The problem is that there is a status quo, and that status quo is destructive to the health of our people.

It needs to change.

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[i] Himmelstein DU, Campbell T, Woolhandler S, “Health Care Administrative Costs in the United States and Canada,

2017”, Ann Int Med, doi:10.7326/M19-2818, published online Jan 7, 2020.

Why can't the US have health coverage for everyone? We CAN!

Every other wealthy country in the world has long since figured out how to provide health coverage to its entire population. Every one. And yet this is still controversial in the United States, as continues to be illustrated by the recent Democratic debates.

Every one of those Organization for Economic Cooperation and Development (OECD) countries has better health outcomes than the US as result of covering everyone. The health outcomes are not always terrific, but better, as a population, than ours. There are two components to how healthcare is provided; one is how it is distributed (very inequitably in the US and much more equitably in the other countries) and how well it is funded. The second might depend upon a nation’s resources, the first upon its values. Some of these other countries should, and could, increase their health funding (e.g., Canada) but the fact remains that they are doing better because they distribute it better. And, even when well-funded, a national health plan costs less – far less, in every other country – than we spend in the US.

So we have the money, and we are ostensibly spending it on health care. Indeed, if we count not only the direct public expenditures by governments (federal, state, local) for their employees and for Medicare and Medicaid and S-CHIP and other programs, but also the income foregone by government because the health insurance premiums paid by employers (although not by employees) are tax-exempt, it is about 60% of our health expenditures. In other words the US spends more PUBLIC money than other countries spend altogether. Another way of thinking about it is that we are paying for a national health program but not getting it.

So why does this continue to be controversial? Why do the majority of Democratic presidential candidates not support it? Why do there continue to be questions from moderators at the last debate asking Sen. Sanders how much it would cost and how it would be paid for? One possible answer is that these candidates and questioners are ignorant of the facts, and ignore those repeated time and time again by both Sen. Sanders and Sen. Warren, explaining that we are already spending more than it would cost for Medicare for All. The other possibility is that it is part of a concerted campaign to obfuscate and lie about the issue to protect wealthy and powerful interests.

Let us start with the first. Maybe they are just ignorant of the facts, or maybe they are too stupid to understand them (I doubt that). Sanders responded to a questioner that the cost of a national health insurance system, Medicare for All, that covers everyone in the US for everything (including things that we don’t get now with most health insurances, like hearing aids and glasses ), with no out-of-pocket costs for co-pays or deductibles, will cost less than we are currently spending. This is made possible by re-directing those dollars currently being ostensibly spent on health care and actually spending them on health care, rather than on administrative costs and profit for health insurance companies, pharmaceutical companies, and some big health care providers. A new article in the Annals of Internal Medicine, “Health Care Administrative Costs in the United States and Canada,

2017” by Himmelstein, Campbell, and Woolhandler (Ann Intern Med. doi:10.7326/M19-2818, online publication January 7, 2020), shows that:

U.S. insurers and providers spent $812 billion on administration, amounting to $2497 per capita (34.2% of national health expenditures) versus $551 per capita (17.0%) in Canada: $844 versus $146 on insurers' overhead; $933 versus $196 for hospital administration; $255 versus $123 for nursing home, home care, and hospice administration; and $465 versus $87 for physicians' insurance-related costs.

This represents 31% of all US health care costs, twice the rate of administrative costs in Canada. Since they excluded some areas that are accounted for differently in Canada, it is likely an underestimate. They add that “Of the 3.2-percentage point increase in administration's share of U.S. health expenditures since 1999, 2.4 percentage points was due to growth in private insurers' overhead, mostly because of high overhead in their Medicare and Medicaid managed-care plans.” These are the Medicare (and Medicaid) managed-care plans that the Trump administration lauds as the best part of Medicare, as I noted in a quote from CMS administrator Seema Verma in “Scamming Medicare: It's the providers and insurers, not the patients!” on December 22, 2019. Another very recent piece, a systematic review of studies on the cost and financing of single-payer health care in the US, “Projected costs of single-payer healthcare financing in the United States: A systematic review of economic analyses” published in PLOS One by Cai, et al. “found a high degree of analytic consensus for the fiscal feasibility of a single-payer approach in the US.” (PLOS Medicine | https://doi.org/10.1371/journal.pmed.1003013 January 15, 2020).

So the other explanation, the more likely explanation since these people are not, in fact, stupid and probably not at this point ignorant, is willfully ignoring the facts because they threaten a status quo that is extremely lucrative for a lot of big companies, insurance companies and pharmaceutical companies especially, and a lot of big providers, hospitals and health systems. (This includes those that are ostensibly “non-profit”, which means that they don’t pay shareholders – and don’t pay taxes! – but doesn’t keep them from making lots of money which they invest back into the services that will make them more money – e.g., orthopedics, cardiology, cancer, ICUs -- rather than those the community as a whole really needs but are not money makers – e.g., mental health, primary care, etc. -- and paying their C-suite executives salaries in the millions!) These companies are absolutely not interested in losing this money, and they are big contributors to politicians.

This is abetted, indeed stimulated, by a tremendous disinformation campaign by insurance companies, following upon the model developed by car companies and cigarette manufacturers. The most obvious is the perversion of the language of “choice”, exposed by former health insurance executive Wendell Potter in the New York Times on January 14, 2020. When they say “choice” they mean choice of insurance plan. In addition to the fact that most Americans are limited to a choice between one or two plans that their employer offers, people don’t care about choosing their insurance company (“I’m an Aetna guy!” “I love CIGNA!”); they care about choosing their doctors and other providers and hospitals – the very things that the private health insurance industry restricts!

But could we not, somehow, keep private insurance as an option, as suggested by most of the Democratic candidates and pundits? A qualified yes. In countries that do this, say Switzerland, there are private insurance companies but they are highly regulated. ALL have to provide the SAME coverage and ALL have to charge the SAME price. How do they compete? Wait for it -- on customer service!! Are US insurance companies ready to do this?

To a disturbing degree, people are swayed by these lies. Sometimes you hear the myth that goes something like “Americans don’t have a sense of social responsibility like people in ‘X’ do”, but they do. As Cai points out, “Public support for provision of universal health coverage through a plan like Medicare for All is as high as 70%, but falls when costs are emphasized,” even though almost all Americans would pay less for much more – and critically, all Americans would be covered. What is unacceptable is that the “responsible” media and (hopefully, if we’re going to vote for them) “responsible” politicians, in the debates and in their coverage, repeat these lies.

We also sometimes hear the question “what will all those people who work for insurance companies do if they are closed down?” It is a legitimate one, and one for which the Medicare for All bills prescribe retraining, but the real issue is why is this asked only for this industry and never about workers who lose their jobs because companies relocate their manufacturing and services overseas? Why is the cost never an issue when we are talking about military expenditures (not for pay for personnel, no, but for incredibly expensive and profitable armaments), but only when we are talking about people’s health?

Americans as a whole pay a huge amount for health care, in premiums paid by individuals and their employers, in tax dollars for Medicare and Medicaid, and in out-of-pocket co-pays, deductibles, and huge drug costs. What we get are some people with good coverage, most people with mediocre coverage, and a lot of people with poor or no coverage. Every "scandal" about someone getting a $100,000 bill from an out-of-network doctor at an in-network hospital, about a $30,000 / month medication, about denial of necessary care, is not fluke but a built-in part of our crazy non-system.  Medicare for All, as in the Sanders Senate bill (S.1129) and the Jayapal House bill (HR.1384) will cover EVERYONE for EVERYTHING.

Let’s do it. Now. And let’s have our media and politicians stop repeating the insurance-company funded lies about it.