Have you been somewhat confused as to what Hillary’s feud with Bernie is all about over Health Care?  I thought I might try to clear things up a bit, based in part on what I learned about the economics of Health Care in graduate school.

Ultimately, the choice between Hillary’s plan and Bernie’s plan is the choice between:

(A) Keeping for-profit Insurance Companies in charge of providing/financing health care services for the American people [Hillary’s]

(B) Putting The People’s government in charge of providing/financing health care services for the American people [Bernie’s]

The first question we might well ask is what is it that makes privately-owned Insurance Companies ideally suited to provide for America’s health care needs? 

The answer is: nothing.  Absolutely nothing.

The owners and decision-makers in health insurance companies are finance people; they are not individuals who have any kind of special expertise in the field of health care.

Like bankers, they find ways to optimize the yield they get from investing much of the money they obtain from their customers (premiums).

The key to the scheme they have worked out is making sure they keep a large amount of the money they get in premiums available (in cash or highly liquid investments) to pay out the claims of their customers.

The rest is theirs to channel into various profit-chasing investments or simply pay to themselves as distributed profits/bonuses/etc.  It has proven to be a very good racket indeed for all concerned, making most of them quite rich.

They hire the experts they need to crunch the numbers, to write up the contracts, to set up and run a labor-intensive billing operation, and to negotiate contracts with HC providers to provide their customers with certain services for a certain amount of money.

It is worth noting that there is nothing special about these hiring decisions, which can just as easily be made by government administrators in a publicly-operated health care system.

Indeed, there is actually nothing about the contributions of insurance executives within the Health Care Industry which adds any value to the health care services that the American people consume.

They are, in fact, a non-essential element whose existence within the health care industry serves only to drive up the cost of health care services to the American people.  One might actually compare them to leeches.

There are two basic reasons for this…

The first reason is that those who own/manage privately-owned health insurance companies have built-in incentives to:

(1) charge as much for premiums as they possibly can 

(2) pay out as little on the claims they receive as they can possibly get away with

Doing either/both of these increases the profitability of their operations, at the expense of their customers.

The second reason is that those who own/manage health insurance companies find themselves in an industry where individual health insurance companies do not compete with each other on price, but only on their ability to obfuscate the choices that are presenting to potential customers.

They do this by manipulating four different variables found in every one of their policy contracts: the premiums, the deductibles, the co-pays, and the percentage of the expense that is covered.  

When insurance companies manipulate these variables, it creates so much complexity that it becomes impossible for customers to make rational comparisons of the different policies offered by different insurers.

So while it is true that there are many markets wherein consumers do in fact benefit from the existence of many privately-owned firms competing with each other on price, that is not the kind of market we have in the private health insurance industry; no such competition exists.

The health insurance industry is therefore one of the great exceptions to the rule which says that private sector industries are always more efficient than government provided alternatives.  It is only true if/when there is actual price competition taking place.

So when we look at the incentives that insurance executives currently have to enrich themselves at their customers’ expense, it actually becomes quite reasonable for the majority of us to view them as our natural enemies.

Why indeed should we want to continue with a health care system that gives them any kind of role in it whatsoever, since their presence does nothing except increase our costs?

In light of these facts, it should be obvious that Hillary’s plan is essentially to delay any kind of effort to eliminate the waste and the perverse incentives of our current system, in order to pacify various ‘stakeholders’ (e.g., insurance company exec’s and their lobbyists and the politicians who receive big financial contributions from them).

Indeed, it is not difficult to imagine health insurer lobbyists complaining to Hillary: It would be so hard to carry out such a complicated transition!  It would cause chaos!  We just got through this nightmare of HC reform with ACA!  Let’s put it off for a while longer cuz it’s surely it will be easier to pull off later!)

Bernie’s plan, in contrast, is to boldly demand in the name of the people an elimination of the ‘middle man layer’ within our current system that is both unnecessary and primarily responsible for the huge increase in America’s health care costs over the past several decades.

It is simply impossible to justify either morally or economically a plan to put off doing the right thing with respect to the health care needs of the American people.