If you reflexively blamed this insurer for its proposed anesthesia policy, you were right

Last Wednesday, amidst a national wave of animus toward health insurers, Americans turned their ire on a policy that Anthem Blue Cross Blue Shield announced last month concerning a new policy planned for three states that would deny claims for anesthesia for surgeries that went longer than a time limit set by Anthem. In addition to the groundswell of furor on social media platforms, New York Gov. Kathy Hochul, who leads one of the states where the policy was to be launched, slammed Anthem’s policy as “outrageous.” Connecticut was one of the other states, and Sen. Chris Murphy, D-Conn., called the planned policy change “appalling.”

Describing it as a miscommunication, Anthem soon announced it was abandoning its controversial new rule. Janey Kiryluik, staff vice president for corporate communications at Anthem’s parent company, Elevance Health, told The New York Times, “We realized, based on all the feedback we’ve been receiving the last 24 hours, that our communication about the policy was unclear, which is why we’re pulling back.”

The news of Anthem’s policy proposal helped provoke another round of a longstanding debate: Who is to blame for America’s health care woes? By and large the public — sick of sky-high deductibles, haggling over the phone to fight denials and of unexpected medical bills arriving by mail while still convalescing — has directed its outrage at insurers. Vox’s Eric Levitz, though, pointed a finger at doctors and argued that Anthem’s mistake was its retreat from what he called a prudent policy to reduce payments to well-paid specialists. Health care costs are primarily driven by “providers,” not insurers, Levitz argued. Thus, those providers are the reason, he said, “vital medical services are often unaffordable and inaccessible in the United States.”

But Levitz and writers such as Dylan Matthews and Matt Yglesias, who made similar points, are wrong. The details of this particular episode are beside the point. (Brookings Institution’s Loren Adler calls it a contract dispute between anesthesiologists and Anthem that might have had limited impacts on patients.) The public’s fear of getting stuck in the middle between what doctors charge and what insurers pay was justified. Our private health insurance-based system inflates costs and denies care, and in a well-designed universal system, this episode would not even be possible.

It is often noted that most health care spending ultimately goes to health care providers — to hospitals, nurses, doctors (like me), nursing homes and so forth — and not to health insurers. This is true, but it’s also all but a tautology. Obviously, most health care spending goes to health care provision, just as most education spending goes to schools and most defense spending to the military. The relevant question is how to realize savings while upgrading care for everyone, and the best answer is by eliminating the gargantuan waste that is our private insurance system.

The traditional, public Medicare program spends about 2% of its total revenue on administration. Private insurers, by contrast, take 10% (or more) of your premium for administration and profit. This fivefold difference accounts for the more than $400 billion in savings that the Congressional Budget Office projects could be saved annually from eliminating private insurance and moving to “Medicare for All.” Instead, we’re basically setting that money on fire. 

But what about the “unit prices” for care in the U.S. that are much higher than other nations? Those “prices” are also inflated by our complex private insurance system. They include providers’ costs of dealing with innumerable insurance plans, each with its own complex payment systems and rules. Hospitals in the United States hire armies of billers and coders to bill and haggle with insurers and spend twice the share of their budgets on administration than Canadian hospitals do. Similarly, we spend more than $80,000 per physician in the U.S. just to cover the costs of their interactions with insurers, four times more than what’s spent in Canada. This is yet another price we pay for the profits of insurance companies — even though it appears on the “provider” side of the ledger.

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No doubt there are also bad behaviors from some providers, particularly with the accelerating corporate takeover of care, including vampiric private-equity firms that strip-mine their acquisitions for profit before dumping them (whatever the consequences for patients). Private-equity-owned emergency physician staffing companies were, notably, responsible for an outbreak of devastating “surprise medical” bills. One study found that Wisconsin hospitals commonly and increasingly sue patients for unpaid medical bills, half the time garnishing their wages.

News reports from other parts of the country have described harrowing stories of patients aggressively targeted by hospital debt collection, which has included putting liens on homes and putting some patients in poverty. None of these behaviors should be countenanced. But they are, again, only possible because of a private health insurance system that leaves some uncovered, others with copays and deductibles, and others “out of network.”

In contrast, under a Medicare for All system, patients would be entirely protected from the process of care payment, eliminating the very possibility of medical debt or falling between the cracks — or of waking up from surgery with an unexpected anesthesia bill. 

Still, on an even more basic level, when it comes to health care reform, there’s a fundamental difference between “providers” — our nurses, doctors, hospitals, social workers, respiratory therapists, clinics and so on — and insurance companies. We need providers, including the anesthesiologists who ensure that we survive sometimes dauntingly complex operations. But we don’t need insurers.

The public recognizes this and tends to apportion blame accordingly.