Health care is too important to the well being of the American people to entrust it to for-profit corporations.

A 2004 report by the Institute of Medicine noted the amazingly ironic fact that, although the United States leads the world in spending on health care, it is the only wealthy country in the world that does not offer universal health care to its citizens. The report noted 18,000 unnecessary American deaths every year resulting from lack of access to health care. There are currently 47 million Americans without any health insurance, and the health insurance carried by a large portion of the more than a quarter billion Americans who are insured is woefully inadequate.

To understand why our country’s mostly privately run health care system is so inadequate, let’s start by looking at the issue of health care fraud.


A brief look at health care fraud in “fee for service” systems in the United States

An excellent discussion of health care fraud in the United States is provided by Malcolm Sparrow’s 1996 book, “License to Steal – Why Fraud Plagues America’s Health Care System”. Though somewhat outdated, the good majority of principles discussed in Sparrow’s book are as valid today as they were then. On the scope of the problem, Sparrow has this to say:

The proportion of the nation’s health care budget lost to fraud and abuse remains unknown. Conventional wisdom, crystallized in a 1992 Government Accounting Office (GAO) report, puts it at 10%. But the 10% figure has no basis in fact. The GAO report merely says, “Estimates vary widely on the losses resulting from fraud and abuse but the most common is 10%... of our total health care spending…”


None of that has changed in the 11 years since Sparrow wrote it. There has still been no systematic measurement of the fraud problem, in spite of a multitude of evidence that it is massive.


Why is there so much health care fraud

Sparrow spends several chapters detailing the many reasons for health care fraud, and those details are beyond the scope of this post. The general principle can be gleaned by asking yourself if you would ever leave your wallet containing several hundred dollars unattended in public. Regardless of how positive a view we have of our fellow citizens, few people would answer yes to that question. It simply would present too tempting of a target.

Our health care system can be looked at in the same way. It presents too tempting of a target to individuals or corporations whose main purpose for existence is to make as large of a profit as possible. I don’t know what percent of corporations are honest. But any system as complex and non-transparent as health care requires great vigilance in order to prevent fraud. Unless that vigilance is routinely exerted (which has never been the case) the system provides an open invitation to fraud.

The so-called “free-market” principles that right wing ideologues believe always are fair and work to benefit everyone simply do not apply to health care. In order for free-market principles to be fair, among other factors, people have to understand what they’re buying. Health care is way too complicated for that. If you buy a car and it breaks down a month later, it’s a pretty good bet that the car was defective. The same cannot be said about health care because there are way too many other factors that influence people’s health. Nobody can understand the value of the health care (or health care insurance) that they purchase unless they are highly intelligent and spend tremendous amounts of time analyzing it. Few people have that much time. We need a federally run Food and Drug Administration because ordinary people do not have the capacity or time to evaluate the safety of every food and drug that they need. The same thing can be said about health care.


Health care fraud in “managed care” capitation systems

When Sparrow wrote his book our country was in the initial process of turning towards “managed care” capitation systems for health care. This change was driven largely by the awareness of health care fraud.

Under managed care capitation systems, money (premiums) is paid up front to the corporation, which is then responsible for supplying medical care to the customer, as needed. Thus, the corporation serves as an insurance carrier, and at the same time it is also a provider of health care – though the health care may be sub-contracted out to others. Since the money is paid up front at the beginning, the need for billing separately for each service or drug is largely or totally eliminated. Since a major type of health care fraud under “fee for service” systems had been billing for services that were not needed or not even provided, it was recognized that capitation systems would eliminate that type of fraud. Thus, it was widely believed that capitation systems would eliminate the great majority of health care fraud.

But such a belief was very naïve. It is of course true that under capitation systems corporations cannot commit fraud by billing for services that are not needed or not provided, since the corporations do not bill for services under these systems. But rather than eliminate health care fraud, capitation systems merely change the way that it’s perpetrated. Instead of billing for services that they don’t provide, fraudulent managed care systems merely refuse to provide services that have already been paid for up front. They have all sorts of tricks for doing that, and it’s extremely difficult when it happens to prove that it’s fraud, rather than mere incompetence or “clerical error”.

Therefore, whereas fraud under “fee for service” systems manifested as additional costs (for taxpayers or individual patients), fraud under capitation systems is manifested as the withholding of needed medical care. Sparrow saw all this coming before it happened:



My personal experiences with health care fraud

I relate my personal experiences here just to give an example of how it’s done and how widespread health care fraud is. Anyone who saw Michael Moore’s great documentary, Sicko, will recognize this type of situation. Sicko revealed in much detail how some insurance companies utilize processes such as rejecting all claims above a certain amount of money, in order to increase their profits. Here’s a recent example. There doesn’t have to be any basis in reality for rejecting the claims, other than the corporation’s desire to make large profits. The insurance company might even routinely cave in easily in certain types of cases to customers who complain. But there will always be those who don’t complain, so the potential for profit can be tremendous. And there is no penalty to the insurance company for initially rejecting valid claims, unless it can be proven in court that they committed fraud – which is extremely difficult to do.

In the early 1990s I had health insurance through the state of Pennsylvania (which contracted with private insurance companies), which was supposed to be pretty good, relatively speaking. Yet a great many, if not the majority of my valid insurance claims were initially rejected.

One rule my insurance company appeared to have was that whenever medical care was received from a provider who was not an “approved provider” the claim would be rejected unless it was a medical emergency. I had two occasions to test that rule with respect to my children, whom I had to take to emergency rooms on one occasion each. On one occasion I took my son in for treatment for a migraine headache, and on another occasion I took my daughter in for evaluation of symptoms that were indistinguishable from appendicitis.

Both migraine headache and appendicitis are medical emergencies – there can be no question about that. Migraine headache is a medical emergency mainly because the pain is typically so severe that it is tantamount to torture. And appendicitis is a medical emergency because if untreated the appendix can rupture and lead to a fatal infection. Yet my insurance claims in both of these instances were rejected, on the basis of my insurance company’s assertion that they did not represent medical emergencies.

The claim that the migraine headache was not a medical emergency was patently ridiculous, since the emergency room physician documented “migraine headache” in my son’s emergency room medical chart. Furthermore, my son was having unbearable pain, so even without a diagnosis of a condition known to constitute a medical emergency, the pain alone should have been considered a medical emergency. In the case of my daughter’s suspected appendicitis, it turned out after blood tests were drawn and after extended observation that she didn’t have appendicitis after all. However, on the basis of what I knew when I took her to the emergency room, she was having a medical emergency. Therefore, it was a medical emergency. Her symptoms were identical to those of appendicitis.

I immediately recognized the fraudulent nature my insurance company’s assertions that these two instances did not constitute medical emergencies, since I am a physician. Consequently I wrote lengthy letters of outrage in both cases, appealing the insurance company’s decision to reject my claims. In both cases they must have recognized that they wouldn’t have a leg to stand on if they were taken to court, and they quickly reversed their decision and paid up. But how would most people who aren’t medical professionals respond to an insurance company’s assertion that a medical emergency was not a medical emergency? I imagine that many or most people would simply reason, “Oh, I guess my insurance company knows what a medical emergency is”.

And that’s how many insurance companies make much of their profit. How many? Nobody knows.


The case for universal federal government sponsored health care

18,000 unnecessary deaths per year in our country due to lack of access to needed medical care speaks of a dire need for a health care system that provides access to care for all Americans.

One of the most ridiculous objections that the right wing ideologues / wealthy conservative elites frequently bring up with respect to government sponsored health insurance is cost. Certainly these people must be aware that market-driven health care is far more expensive than government provided health care, due to all the bureaucratic administrative costs required for any multi-player system. It has been estimated that one third of health care spending in our country goes towards administrative costs. Nobody knows how much of that is lost in fraud or efforts to control fraud, but it’s undoubtedly quite a bit.

But in a health care system provided by the federal government the motive and opportunity for fraud is greatly reduced (unless we have a Bush/Cheney type of Executive Branch that refuses to comply with Congressional subpoenas AND Congress lacks the will to respond appropriately to executive tyranny). Without the involvement of corporations, the profit motive, and hence the driving force for fraud, is absent. Civil service health care professionals who work in government are generally trained and indoctrinated to provide high quality health care, rather than to produce profits for their employer. Their whole approach towards the issue is different than what we see with much corporate health care.

Thus, any rise in taxes to pay for a government sponsored health care system will be more than compensated for by the money that people will save by not having to pay out-of-pocket expenditures for health care.

Another objection we often hear from the right wing ideologues is that government provided health care is “socialized medicine”. Spreading the fear of “socialized” anything is always good for fighting the passage of programs that benefit ordinary people, such as Medicare or Social Security, or any of the multitude of New Deal programs that FDR used to lift so many people out of poverty.

But hey. If Congress dislikes “socialized medicine” so much, why do all of our Congresspersons receive it?


Closing comments

Though the United States spends 53% more per capita on health care than the next highest country, its health care is ranked only 37th among the world’s nations by the World Health Organization. That is just plain sick, and signifies an urgent need for radical changes in our health care system, especially with regard to improving access to care.

Dennis Kucinich, alone among 2008 presidential candidates, has drawn up plans for a single payer universal health system. There is no reason at all why we shouldn’t adopt such a system – except that our corporate media will be sure to parrot right wing talking points if it looks like it might be enacted into law. Although John Edwards’ health care plan doesn’t go as far as Kucinich’s towards eliminating unnecessary corporate for-profit components from our health care system, he does propose a universal health care plan, along with a surefire way to get Congress to pass it: If Congress refuses to enact a health care plan that will ensure universal access to health care for the American people, he promises to take away their federally funded health care program from them.

Edwards and Kucinich have the right idea. In today’s corporate for-profit U.S. health care system, fraud doesn’t just cost us a lot of money. It prevents thousands of people from getting the medical care that they need to live or remain healthy. Getting that fraud under control is a monumental task which has never been attained and isn’t likely to be attained any time in the foreseeable future unless the problem is attacked at its roots. By far the best option for doing so is to simply remove the root cause of that fraud – provision of medical care by corporations whose main goal is to make huge profits – from our health care system.