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Nomi Prins
Nomi Prins / Op-Ed
Published: Sunday 11 November 2012
“Investment bankers are roaming the world to exploit this hot new opportunity.”

Real Danger of “Obamacare”: Insurance Company Takeover of Health Care

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Election rhetoric shuns the big picture in favor of the bigger platitude. Now that The Show is over, we are left with the equivalent of a Sunday morning hangover following a binge of promises and lies. We leave the theatre of political spectacle on steroids for the real world of unstable economy, a globally and publicly subsidized financial sector, and increased costs of living on everything from food to education to health-care; outpacing declining median incomes. The average cost for health insurance for a family is $15,745 per year vs. a median income of $50,502, or about half post-tax take-home pay.

“Obamacare” is the name commonly used for the Patient Protection and Affordable Care Act (PPACA) of 2010. The very moniker is indicative of how name-and-image-centric our world has become; Medicare was never called “Johnsoncare” when President Johnson signed it into law in 1965 and Johnson was not exactly a man of small-personality. At any rate, Obamacare or the PPACA ranks as one of the most misrepresented issues from the campaign, by both sides of the ever-slimming aisle.

The Tea-Party Conservative types get it embarrassingly wrong when they call it a “government takeover of health care.” Likewise, Progressive Obama-supporters are deluded in accepting it as the most sweeping healthcare reform since Medicare. (Side note: I wish the word ‘sweeping’ could be retired from politics until it actually means -sweeping.)

Here’s why. The PPACA does nothing to restructure the health insurance industry, anymore than the Dodd-Frank Act restructures the banking industry. This means everything else it attempts to do, positive or negative, will be vastly overshadowed by an industry accelerating to morph itself into a acquisition machine in order to circumvent anything that even smells like a restriction, including laws that exist and ones to come.

How? By doing the same thing energy and telecom companies did after they were deregulated in 1996, and that banks did after they were summarily deregulated (after moving that way for decades) in 1999. They are merging, consolidating, eliminating competitors, and controlling their domain. They are manufacturing power.

Investment bankers are roaming the world to exploit this hot new opportunity. That’s one reason insurance companies don’t even call themselves that anymore. Now, they are ‘managed health care’ companies. Call yourself a managed health care company, and you can buy everything from other insurance companies to hospitals to clinics to doctors. The more consolidation, the more fees bankers rake in, and the more premiums and medical reimbursements and health care procedures, each company can control.

The result of 1996 energy deregulation was a glut of crime-spawned bankruptcies like Enron. Likewise WorldCom led a pack of telecom degenerates in the production of tens of billions of dollars worth of accounting fraud. The final repeal of Glass-Steagall ignited a merge-fest of investment and commercial banks, their linkages ensuring that taxpayers, whose deposits have been protected since the New Deal, provide a safety-net upon which they can mint toxic assets loosely based on over-leveraged home mortgages, and engage in risky, speculative activity; big banks don’t go bankrupt when they fabricate values or lose big on stupid bets, they get federally subsidized in all sorts of ways.

You know who else is similarly too big to fail? The insurance industry. UnitedHealth Group, the nation’s largest health insurer covers 50% of the insurable population in over 30 states. Blue Cross-Blue Shield, covers 100 million people through a constellation of 38 sub-companies. They, and other insurance companies are growing in breadth. When companies consolidate, the result is less transparency, less competition, and more possibility for fraud and shady behavior. Every. Single. Time.

Obamacare and Accounting Fraud

By January 2014, the PPACA will require insurance companies to list their prices on competitive exchanges. In Obama-theory, this is supposed to reduce premiums via competition. But what if, say, only three companies control nearly all of the premiums? Consider the fact that it costs the same $3 to extract your money from a Chase, Bank of America or Citigroup ATM (if you don’t get it directly from the firm you bank at.) They constitute a monopoly that defies anti-trust inspection (thank you, Department of Justice.) What incentive would any of them have to charge less? None. That’s why they don’t.

Managed Health Care companies don’t just administer private, but government health insurance policies as well. The website says that under the PPACA, the life of the Medicare Trust Fund will be extended to 2024 as a result of reducing waste, fraud, abuse, and slowing cost growth. President Obama promised to reduce Medicare fraud 50% by 2012 according to the site – but if he did, he forgot to mention it during the campaign period. 

To supposedly combat price hikes, the PPACA calls for a new Rate Review program, wherein insurance companies must justify premium hikes of more than 10% to a state or federal review program. Given that banks aren’t supposed to hold more than 10% of the nation’s deposits in any one institution, and three do, this isn’t a comforting constraint.

While it is positive that the PPACA requires coverage of people with pre-existing conditions and prohibits lifetime caps, it can’t control what people pay for insurance, because it doesn’t limit actual premiums, which have risen 13% on average since the Act was passed.

The medical cost ratio limitation the PPACA instills; that 80% of premiums must be used for medical care in the case of individuals and small groups, and 85% in the case of large groups) to supposedly ensure companies operate on a more efficient premium in vs. premium out basis, is a joke. Its punch line is accounting manipulation.  Call everything a medical cost; even buying another company, and the ratio is meaningless.

WellPoint got the Joke

WellPoint got that joke immediately. The largest for-profit “managed health care” company in the Blue Cross and Blue Shield Association, it began trading publicly on December 1, 2004. Depending on the state, it operates under Blue Cross and Blue Shield, Blue Cross or Anthem. 

After the PPACA was passed, in March 2010, WellPoint allegedly reclassified certain administrative costs as medical care costs in order to meet the law’s new medical loss ratio requirements (which requires insurers spend at least 80% or 85% of premiums on health care services, depending on the type of plan, individual or group respectively.)

A month earlier, WellPoint announced its Anthem Blue Cross unit would raise insurance rates for some individual policies in California up to 39%. Federal and California regulators are still investigating this, but the premium hikes remained.

WellPoint is also one of Wall Street’s favorite “managed health care” companies; cause it keeps getting bigger through acquisitions that pay hefty fees to the bankers involved. On October 23rd, WellPoint got approval from Amerigroup’s shareholders to acquire Amerigroup, a Medicaid-focused health insurer, in a $4.9 billion cash deal. The deal makes WellPoint the nation’s largest Medicaid insurer, and provides it greater access to Medicaid patients who also qualify for Medicare.

It was the largest cash deal ever, and the largest premium paid for a company in the managed health care realm. As a result, Goldman Sachs (who advised Amerigroup) and Credit Suisse (who advised WellPoint) retained their top positions in the global healthcare deal advisory league table.

The value of Amerigroup, as a company, dropped 34% within two weeks of that agreement, in stark shades of what happened when Bank of America took over Merrill Lynch in the fall of 2008.

This summer, Amerigroup and Goldman Sachs faced a shareholder lawsuit filed by the city of Monroe Employees Retirement System and Louisiana Municipal Police Employees Retirement System. It alleged that Goldman advised Amerigroup to accept WellPoint’s offer quickly, rather than seek other bids, because the bank had structured a complex, and fee-heavy derivatives transaction on the back of the deal. The insurers resolved the suit by tweaking the deal parameters. All parties denied ‘any wrongdoing.’ But where there’s smoke in complex derivatives land, there is fire.

Other Mergers

After the Supreme Court upheld the PPACA, a spate of mergers rippled through the managed health care realm, to ostensibly cope with smaller profit margins and  ‘compliance costs.’  But really, it’s because each firm wants to corner as much as possible of the market, in as many states as it can, to garner more premiums and control more disbursements and prices at the upcoming insurance ‘exchanges.’

In late August, the third largest insurance company in the US, Aetna announced it was buying Coventry Health Care for $5.7 billion. Coventry provides Medicare and Medicaid services, thus the takeover expands Aetna’s Medicare and Medicaid business. Being part of Aetna enables Coventry to grab more consumers on more state-run health insurance exchanges, reducing competition in the process. The Department of Justice is examining anti-trust issues surrounding the deal, but it’s still expected to close in mid-2013.

On October 17th, UnitedHealth Group issued $2.5 billion of bonds as part of its $4.9 billion acquisition of Brazil’s Amil Participacoes. Bank of America Merrill Lynch, Goldman Sachs, J.P. Morgan Chase & Co., Morgan Stanley, UBS and Wells Fargo Securities were lead underwriters on the deal.

They are not buying international companies in order to increase accounting transparency. Like other multinationals, they are doing so to move profits around and circumvent restrictions and tax laws. They are using cash, or raising extra debt, to do so, rather than to reduce premiums or increase disbursements to medical professionals.

And if you’re keeping score – billion of dollars are flowing from insurance companies – NOT to reduce premiums to patients and NOT to reimburse doctors and NOT to enhance the quality of care, but to simply expand nationally and globally. Meanwhile, their CEOs are doing quite well from all that non-health care related movement.

Total compensation for the bulk of health care company CEOs rose by 14.7% in 2011 by 14.7%, or $11.1 million, to $87 million. Cigna’s CEO David Cordani made $19.1 million.UnitedHealth Group's CEO, Stephen J. Hemsley bagged $49 million in salary, stock options, and other compensation last year. The highest-paid CEO made 94 times the average compensation level of primary care physicians. And none of them had to pick up a single scalpel in the process.

Doctors as profit centers

Not just patients, but physicians have been bled steadily from the current state of insurance company controlled health care through diminishing insurance reimbursements, electronic medical records mandates whereby they spend as much time complying with Kafkaesque controls over their decisions on performing surgeries and providing care, and debt. New doctors are graduating with an average of $250,000 in debt, which, combined with diminishing disbursement and soaring costs, will keep many, underwater. Forever.

According to Dr. Michael H. Heggeness, President of the North American Spine Society, a group of 6500 global spinal and orthopedic surgeons (at which I delivered a speech last month), “The last people, that most of the population feels sorry for are doctors, yet they are in an economic crisis of their own. In 2002, 80% were in private practice, now 70% are in hospitals because they can’t afford to make a private practice work.”

Meanwhile the more hospitals are viewed as profit centers, the more their Chairmen will cut costs to maximize returns, and not care quality. They will seeks ways to sell underperforming assets, programs or services and reduce the number of nonessential employees, burdening those that remain. No doubt the private equity community will be getting more into this game, as insurance companies buy more hospitals, doctors, clinics, and perhaps drug companies, or vice versa, and ‘restructuring’ accelerates.

And if insurance companies can manage doctors directly, they can control not just costs, but treatment – our treatment. It’s not an imaginary government takeover anyone should fear; but a very real, here-and-now insurance company takeover, to which no one in Washington is paying attention.

Owning a caravan provides you

Owning a caravan provides you with a place to stay and somewhere whenever you want it. Like trailers, mobile homes and other vacation places, static caravans are properties that need to be protected.

Wow. Terrific case for a

Wow. Terrific case for a single-payer system.

Health costs spiraling out of

Health costs spiraling out of control. Merchants of Sickness making out like bandits (Reason Medical Care stocks are best investment in Wall St. and greedy health providers, insurance, and pharmacompanies hate Obamacare). US Health most expensive, but only 37th best (or worst) in the world. Gridlock politicians do nothing as they enjoy excellent health plans in Congress. Government (it’s its job) has to step in to save the country’ Health from collapse. The outcry vs Universal Care apes outcries in Canada, UK, Germany and other countries where Universal Care’s established. Merchants of Sickness spending millions to brainwash the Average Joe against Obamacare. Per Kaiser Family Foundation, Romneycare would have added more out of pocket expense nationwide to seniors, $200/mo in Florida (AP 10/16/12).

Can't states still strive for

Can't states still strive for a single payer system?

Did the door just open for

Did the door just open for Universal Care with the SCOTUS ruling?

Obama is bought and paid for

Obama is bought and paid for just like every other GD politician. I can take control over my own life by opting out of bank usary debt/ interest, trying to stay healthy, save my money to hedge against the Fed money printing etc. BUT if I need an operation...Heaven forbid, in America thanks to the TOTAL TAKE OVER OF THE INSURANCE INDUSTRY and no reigning in of health care costs and NO not for profit system...I will no doubt go bankrupt or have no retirement. So, put all your assets into trusts people or put them in your kids name. The only way to work this convoluted system is to pretend to be a pauper so the system doesn't actually make you one!
Eye opening article from Ms.Prins!

??and NO not for profit

??and NO not for profit system...?? Having read the article we can all see how seemingly impossible not for profit plans to show up in exchanges and even if one does show up it would likely be a disguised plan from a for profit "managed care" juggernaut

State of California has an opportunity Heck seems primed and pumped to take a strong lead on a single payer system, true?

What's stopping us from

What's stopping us from creating a cooperative healthcare system, like co-op supermarkets? It doesn't need to generate a profit.

We should also do this with power distribution companies.



Insurance company takeover of

Insurance company takeover of healthcare is the purpose of ObamaCare!

This bears repeating: Here’s

This bears repeating:

Here’s a short account of my experiences this year with the U.S. “Sick Care” Money Machine and the Cuban Universal Health Care System.

At the E.R. and hospital in the U.S. system I was treated like a slab of meat to be "fixed" by a crew of doctor/accountants/technicians whose every move and action was often a duplication of effort, resulted in extra pain and suffering with apparently little therapeutic benefit and were ALL studiously logged and resulted in HUGE charges added to a bill that totaled over a QUARTER MILLION DOLLARS for a two day stay and one “procedure” (at "retail").

I am still enraged at the treatment I was subjected to for the first 9 hours at the E.R. and hospital. First was 20 minutes filling out innumerable papers at a desk by a clerk with an insulting attitude before I was allowed to get "treated" (and I have “insurance”). Then said “treatment” included being left, ignored and shivering in a cold, cold “treatment” room on a torture chair (couldn’t sit, couldn’t sleep) from midnight until past 7am before finally being transported to a hospital room where I was awakened a half dozen times over the next 2 hours to be poked and prodded (at great profit to the hospital).

In the Cuban E.R., I was treated from beginning to end like a member of a team dedicated to restoring me to Health (you know, Health Care – ever heard of it?). Since the Cuban Emergency Room is NOT PRIMARY CARE (they have neighborhood clinics with a doctor and nurse in residence 24/7 for every 120 families for that) I was discussing my symptoms with a kind, caring, knowledgeable DOCTOR within 5 minutes. In another 10 minutes I was on a comfortable bed with an IV in place to restore my fluids and electrolytes. There was NO paperwork since the Cuban System is concerned with Health Care first, last and middle and NOT with making sure everything was “accounted and paid for”.

U.S. For-Profit Sick Care is primarily a CORPORATE enterprise. It’s all about MONEY FIRST! As such, its basic orientation is 180% opposite from Healing. There are many dedicated, caring individuals involved in “health care” in the U.S. but the entire structure of the U.S. Sick Care for Profit System mitigates against them being allowed to be the Healers they wish to be and THEY DON'T KNOW ANY BETTER!

From the paternalistic priesthood of physicians in the medical “schools” and hospitals, to the MBA factories and law schools that churn out the bean counters who run things, from the corporate medical towers with the only doctors in town clustered around them to the extortionists of Big PhRMA, the corporate model of U.S. Sick Care “delivery” is a setup from the beginning to the end (in all too many cases the END being the bankruptcy of the patient) to provide profit for the stockholders of the health insurance and hospital corporations and the drug industry and to detract from Healing for the many, as a recent NPR survey of people who actually USED their “health insurance” showed!

EVERY other industrialized nation on Earth has rejected the For-Profit model of Health Care. In fact, only in the U.S. is health care still considered a commodity instead of a human right. As a result, EVERY other industrialized nation on Earth has a healthier population at far lower cost than in here in the U.S.

Isn't it PAST time to examine the rest of the world's successes, craft a Universal, Effective Health Care System that works from their examples and is sustainable and affordable and dump the failed For-Profit Sick Care System that is making us more ill while bankrupting us individually and as a nation?

And we could have it ... with a one page bill that removes the words "over 65",
pays for 100% of part A and B and Part D drug coverage and adds the power to
seriously negotiate charges and drug prices to the Medicare enabling legislation

Improved and Enhanced Medicare for All – already proven efficient, popular and Constitutional!

As you so adequately

As you so adequately describe, Obamacare will morph shortly onto for- profit Gopcare even though the neocons lost in the the illusionary democratic process of voting. They simply fall back to their secondary front of manipulating the laws and enforcing agencies.

In case you you hadn't

In case you you hadn't noticed, the "neo-cons" did win, some of them just call themselves Dems now. Obamacare won't "morph" into anything - it will remain what it started out as and what it was intended to be - a bailout for the insurance companies and an attempt to head single payer, for which support was gaining momentum, off at the pass by making it look as though Obama, gave a damn and was "trying" to fix this increasing failure of a healthcare "system" ... This was clear to anyone who was paying any attention ...

All of what you say is, I'm

All of what you say is, I'm sure, quite correct but not new. Anyone who has been paying attention is aware of this growing problem. It is, I suspect, even more sinister than you have portrayed. But it is the result of the Congressional obstruction program to deny the president any victory if possible. So long as Republicans in Congress have the ability block the passage of legislation which might actually correct a situation, they will do so. The vested interests have gained sufficient power to cause members of congress to vote in support of those interests. It is no secret that a "Single payer, Medicare for all" healthcare system would be far superior to the PPACA, yet it remains hidden in obscurity only seeing the light of day among "progressives" in private circles. The same holds true for financial reform, immigration reform, and "The War on Drugs."
The advent of the "Citizens United" ruling and the lack of interest in reforming campaign financing are the root of our inability to correct these problems. I hold out little hope of change occuring anytime soon.

If you want change you have

If you want change you have to vote for it and that means no more D/Rs ...

Even if Congress was 100%

Even if Congress was 100% dem, Obama would stumble all over himself, to give us the worst deal possible but great for the greedy corporates.

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