How Broken Is the Health Insurance System?
The U.S. health insurance system is heading for catastrophe, and we interviewed an expert who’s worked on both sides of the aisle to find out why. Ron Howrigon, our expert guest, is an economist by training, previous executive for a health insurance company, and current advocate for doctors across the United States in their negotiations with managed care companies. Listen to the full podcast below, or scroll further to read two poignant quotes from the episode which are transcribed as a preview:
RH: “I’m an economist by training. When I graduated from my graduate program in economics, my advisor asked me what I was going to do. I was already working in the industry and I told him that I work in healthcare. He said, ‘That’s a shame, Ron. You’re a good economist. Why would you do that?’ and I asked him, ‘What do you mean by that?’ And he said, ‘It’s a broken economic market, you know that.’ What he was talking about is, in a normal marketplace, there are a number of factors that regulate cost and provide value. Most of those factors are completely broken in healthcare, the first being that the consumer is typically not the purchaser. When you think about it, the vast majority of healthcare is purchased either by an employer, paying the bulk of the premium, or the government. Well, one way that I tell people to think about this, assume for a minute that as a job benefit, you got a brand new car every two years and you had to pay the first $500. You had a $500 deductible, but then you could get a new car every two years. Would anyone go shopping at the Ford or Chevy dealership? No, we’d all be at the BMW or Ferrari or Mercedes dealership because we’re insolated from the cost realities of our decisions. That’s healthcare.”
To demonstrate some of the economic disparities in the industry, Dr. Sweeny uses one health insurance company CEO’s bloated salary as an example.
FS: “Let’s compare how Cordani (Cigna CEO) did, compared with physicians who perform the services for the contract, and for Cigna enrollees paying insurance premiums. Cordani had a 19.7% year-to-year increase…starting from a very fat CEO salary of $14.5 million. A 19.7% increase for the Cigna CEO, and a .1% increase for the physicians. Cordani got two hundred times the payraise of the doctors performing the services for Cigna. What consumers may balk at is that Cordani’s 19.7% increased salary, increased when the health insurance premiums for the consumer were increased in virtually every state, and in most states the increase was in double digits. Ron sites his example of a 32% increase in his insurance premiums in a single year. And what was the increase in income for the average American during the same period when Cordani’s CEO salary increased? Essentially zero. None. There was no increase. That 19.7% salary increase in the context of a consumer inflation rate of 1.6%, Cordani’s increase was twelve times the rate of consumer inflation. He did quite well.”
This is just the tip of the iceberg. For the full discussion, visit iTunes.