Ethics Health Politics Society

America's Health Insurance Cartels are the Problem

Two things that go oddly together: $20 and a quick physical. That’s what my daughter got yesterday so she could try out for the local high school volleyball team. The school recommended the doctor, who was fast, friendly, thorough and cheap. From watching the patients going in and out of the physician’s office, I observed that he provides a valuable service to San Diego’s uninsured.

The doctor’s visit got me to thinking, again, about what’s fundamentally wrong with America’s health-care system and why the Obama Administrations’ reform proposal can’t fix it. The problem and solution go oddly—and quite badly—together. Litigation, not legislation, is the solution.

America’s healthcare system operates like a government bureaucracy, but without any real checks or balances. Additionally, large healthcare bureaucracies operate as mini-monopolies that together form one giant cartel fixing prices, probably more because of the inertia of infrastructure than any deliberate collusion.

There aren’t enough market forces, that is competition, to make healthcare affordable. Granted, an increasing number of health care dollars go to the aged—those damn Baby Boomers and their parents—but all costs could lower by injecting real competition into the system. Capitalism works, but there is none here.

Most of America’s insured receive insurance from employers, who essentially choose providers based on the dictates of the cartels. Often, the insurance provider chooses the customer; businesses are rejected as customers or slapped with prohibitively high fees if there are too many medical claims (This is well-documented, so I won’t cite any examples here). That phenomenon is back-asswards for a capitalist economy. Competition is supposed to provide cheaper choices. Cartels don’t compete. They collude.

Health-care cartels control prices at both ends of the service: What employer customers are charged for insurance and what medical providers receive as payment. The latter price fixing is so obvious, I’m appalled by the lack of health-care reform debate about it. What medical providers are forced to charge raises health care fees, because insurers pay so little.

A personal example: I got some routine, but comprehensive, lab work done on April 30—the last day of insurance with my old employer. The lab billed the insurance company $454, of which was paid $34.23. My insurance statement labels $419.77 as “health plan discount.” Discount? The lab charged one price and the insurer fixed it more than 90 percent less.

Medical providers like this lab have few options. If they don’t participate in the insurance cartels’ programs, the majority of patients evaporate. Poof. Americans often choose physicians based on whether or not the medical practice accepts their employer’s insurance.

What little competition lies outside the insurance economy, like the doctor’s office that performed my daughter’s routine physical—or even my primary physician. The office charges $65 per office visit to the uninsured; it’s a reasonable price for quality of service and quite possibly more than the medical practice would get from the insurance company after discounts and costs of filing claims.

Health-care reform needn’t be a complex debate. It’s a matter of law. US law and legal precedents treat reasonable health care as a right—something that should be available to all. Something else, and with greater legal punch: Price fixing is illegal in America.

But there’s a problem: The McCarran-Ferguson Act of 1945 essentially protects health-care organizations from antitrust prosecution. This law must be repealed before the cartels can be prosecuted.

The Obama Administration should treat health-care reform as a matter of litigation rather than legislation. Isn’t the US Justice Department charged with the role of protecting America’s citizens from dangerous monopolies, cartels and price fixing?

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