US is raging about private health insurance trap. We shouldn’t fall into it

The concept of insurance is based on an attractive idea: you pay a small amount of money regularly, and if and when disaster strikes, you will receive protection from catastrophic expenses. But ask anyone who has experienced insurance as it operates today, especially health insurance managed by private companies, it is likely they will describe back-breaking ordeals to get that ‘protection’ despite what the company earnestly promises in ads. In the US, where commercial insurance dominates healthcare funding, these individual ordeals coalesced into an ocean of discontent earlier this month following UnitedHealthcare CEO Brian Thompson’s murder.

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It also catalysed a new wave of discussions and testimonies among ordinary Americans about the inhumane nature of a healthcare system based on private commercial insurance. I studied public health in a US graduate school with a sizable number of international students, and the one thing that most of us strongly agreed on was that America is a stupendous failure when it comes to health systems management and healthcare policymaking. While much ink has been spilled over how and why American healthcare is terrible, one simplified example will suffice here: current infant mortality (IMR) and maternal mortality (MMR) indicators for the US and Kerala, respectively, are 5.4 and 6 (IMR), and 23.8 and 19 (MMR). That is, despite ostensibly spending $4.5 trillion or 17.3% of its humongous GDP on healthcare, the US barely manages to outperform our very own state of Kerala, which is doing excellently on far less money.

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In America, experts and activists are indeed concerned about the poor state of healthcare, and one sees there an abundance of books, articles, university courses, and political rallying around the issue of healthcare reform. Nevertheless, US healthcare has been an attractive model for policymakers and their consultants globally. This might be because commercial insurance gives the outward appearance of financial ‘efficiency’, while helping company executives accumulate wealth and pass some of that on to friendly politicians. In 2023, the parent company of UnitedHealthcare posted $22 billion in profits, even as a survey reported that it had the highest claim denial rate (32%)—this often happens when an insurance company rules that a drug or procedure prescribed by your doctor is not “medically necessary” for you. An investigation in July exposed how “UnitedHealth harnesses its physician empire to squeeze profits out of patients”. In fact, the private insurance model is so lucrative for American business and political elites, that they have successfully propagated misleading ideas about its supposed benefits like avoiding ‘govt takeover’ of healthcare and offering ‘freedom of choice’ to patients.

The propaganda about the supposed public benefits of private insurance is what Amartya Sen and Jean Drèze allude to as the “private insurance trap” in their 2013 book ‘An Uncertain Glory: India and its Contradictions’. Drèze and Sen explain how a healthcare system dominated by private insurance carries serious flaws and suffers from an irreversibility issue: “the health insurance industry can easily become a powerful lobby and establish a strong hold on health policy, making it very difficult to move away from that model…” Citing the example of the US, they write how healthcare reform there has been next to impossible despite the country’s tremendous resources, “partly due to the power of the health insurance business, and partly due to deep-rooted political resistance to the idea of ‘socialised’ health care, which resistance has been much cultivated by private health insurance companies.”

On the other hand, successive govts in India, inspired by the idea of ‘social insurance’ among other things, have painstakingly built a largely socialised healthcare system and created such entities as the Central Government Health Scheme (CGHS), AIIMS, public medical colleges, military hospitals, rural primary health centers, and the ASHA workers network. There is still a lot we need to do better (for example, provide decent housing and clean water to communities, or ensure that people are not treated disrespectfully in govt health centers), but unfortunately, instead of working to further fine-tune and improve our existing socialised infrastructure, there are many in govt today who believe that we must just ‘nudge’ Indians into the profit-seeking spirals of corporate hospitals and insurance companies. Considering the increasing reliance of politicians across parties on insurance-based schemes like PMJAY, the nudge might well turn into a push in the near future.

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This  renewed global focus on America’s grand healthcare failures should alert us to the dangers of replicating the US model wherein commercial entities mould policy to prioritise private profits over public welfare, and create an exasperating, multi-layered bureaucracy of permissions and approvals between a patient and their care provider. For our policymakers, this is an opportunity for introspection and course correction.

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