Health Care Apples & Oranges: UPS and Fedex vs. the U.S. Postal Service
I winced the instant I heard Obama say it. Of all the ways to allay a citizen’s fear that “government-run” health care would drive the private, for-profit insurance industry out of business:
As long as they have a good product … private insurers should be able to compete with the government plan. They do it all the time…UPS and FedEx are doing just fine. . . . It’s the Post Office that’s always having problems.”
It’s not that Obama was wrong. It’s not that he’s right, either. It’s just that he’s talking apples and oranges. And debates over apples and oranges don’t lend themselves to being settled in screaming matches at town hall meetings. I wish Obama’d stuck to the script: using Medicare — or, better still, the Veterans Administration health care system — as a model for universal health care, explaining how private insurance does and could continue to compliment this system. But since he didn’t compare apples to apples, and since he did throw the debate onto the kitchen table, let’s do it. Let’s talk apples and oranges. Starting here:
What if, instead of health care, this debate was over private mail carriers vs. government mail carriers?
What if the U.S. Postal Service had never been born, so to speak? What if it cost $12 to mail a letter from Georgia to California? Or if mail delivery was only available to folks living in big cities?
And what if, in response, there were a bunch of mail service reformers pushing to enact a government-run mail delivery service to compete with the private, for-profit delivery service, so that everyone could afford to send letters to Grandma? And what if these reformers proposed that this new government-run mail service could deliver that $12 letter for a mere 44-cents to anywhere in the country? Would folks be taking to streets with guns strapped to their sides, yollering “Keep yer socialist goverment hands off my mailbox!” ?
I say this because we are currently involved in a remarkably similar debate: Pay $2,700 per year, out of pocket, for total medical care for a family of four, OR pay from $7,000 up to $100,000 (and upwards) out of pocket (depending on whether you’re part of an employee group plan or are going it alone), OR cross your fingers and hope you don’t get sick. Here are the details on your choices:
- If you’re among the 63% of non-elderly Americans who are lucky enough to receive medical insurance through your employer, you can continue paying an average of nearly $7,000 total out-of-pocket medical costs per year for a family of four. (The breakdown: $2,820 employee share of insurance premium + $4,004 deductibles, copays, etc. + $9,947 employer share of insurance premiums = $16,771 total medical expense outlay per year for a middle-income family of four). And if you’re lucky, you won’t be among the three-quarters of a million Americans WITH health insurance this year who will be forced into bankruptcy because of your medical bills.
- If you’re among the 23% of non-elderly Americans who are not lucky enough to receive medical insurance through their employers, nor through a government plan, you can can keep doing what they’re doing:
- Buy comparable insurance to your employee-covered counterparts at a much higher rate (well over $13,000 per year), OR buy “affordable” insurance with high deductible and co-pays.
- Continue neglecting or going without health care entirely
- Be among the projected total of nearly 1 million Americans this year who will be forced into bankruptcy due to medical bills.
- OR: Support a Medicare-for-all plan (also called H.R. 676, universal health care, the single-payer plan) for which you would pay $2,700 total out-of-pocket medical costs per year for a family of four. ( The breakdown: $2,700 insurance premium + $0 deductibles, copays, etc = $2,700 total medical cost per year for a middle-income family of four).
But let’s get back to those apples and oranges
Those opposed to health care reform have loved sinking their teeth into Obama’s Post Office analogy. And who could blame them? It’s an easy enough target — made all the more so by the fact that no one’s challenged them with dollars-and-cents realities of the Post Office debate. Since no one else bothered, I will.
Knowing how fond some folks are of choice — and how profoundly un-fond they are having the government’s hands all over their lives — I’m pleased to remind Americans everywhere that you DO have a choice. No one is forcing you to allow the government to get its socialist hands all over your lives. Take a stand against government intrusion!
Next month, don’t send your water bill through the Post Office. Send it via UPS or Fedex. And this Christmas, when you mail out your greeting cards, don’t send them through the Post Office. Send your holiday cards through UPS or Fedex. Americans, you DO have choices! Here they are:
- The U.S. Post Office will deliver 20 Christmas cards in 2 to 3 days for $8.80.
- UPS will deliver 20 Christmas cards in 2 to 3 days for $239.00
- Fedex will deliver 20 Christmas cards in 3 days for $235.20.
This isn’t to bash UPS and Fedex. It’s to underscore the fact that comparing these two private carriers to the U.S. Postal Service is like comparing apples to oranges. For one thing, they don’t even offer the same services. Unlike UPS and Fedex — the U.S. Postal Service maintains a daily delivery route covering nearly every home and business address in this country, to which they deliver mail 6 days per week. And their rates are affordable to the average Joe, like me, who wants to mail a letter to Grandma.
Yeah, yeah, I know: the Post Office has a monopoly on First Class mail — which has, for years, been a burr in the side of conservatives and libertarians, who believe this monopoly should be broken. “Give it to the free market!” they cry. But the fact is, no one else wants this job. Not unless they can, like the insurance industry, claim executive privledge to deny delivery to unprofitable cutomers. What would be the fate, then, of a 44-cent letter addressed to, say, Lost Springs, Wyoming?
Were private enterprise to take over First Class mail delivery, they’d right away skim off the cream — all the delivery routes in high density populations of cities and towns — and leave to the Postal Service, or to no one, the rural customers, who are nothing but a gross money suck to the profit margin. Then the government would either have to subsidize rural deliveries, or allow private enterprise to charge higher rates.
Choice is all well and good, see, so long as I’ve got mine. To hell with the rest of you.
Oranges vs. Oranges: UPS and Fedex vs. the Private Insurance Industry
UPS and Fedex are efficient, profitable businesses that deliver on time, every time, as promised. Not so with the insurance industry. These carriers are prone to dragging their heels — sometimes denying delivery entirely. We’ve heard enough horror stories to know that these are not exceptions, but the rule to running a profitable business.
According to a recent study by the California Nurses’ Association, claims denial rates by leading California insurers during the first six months of 2009 averaged 30%. Here’s the breakdown of denial rates, per insurance carrier:
- PacifiCare — 39.6 percent
- Cigna — 32.7 percent
- HealthNet — 30 percent
- Kaiser Permanente — 28.3 percent
- Blue Cross — 27.9 percent
- Aetna — 6.4 percent
The Post Office is the apple in this equation. Were the Post Office to run like the insurance industry, then mail workers could begin sorting letter according to profitability — throwing into the trash any 44-cent letter that was deemed too unprofitable to deliver.
Apples vs. Apples: Old and Disabled People vs. a 44-cent Letter to Lost Springs
As any insurance underwriter could tell you, Medicare currently covers some of the most costly patients on the market — folks that the insurance industry wouldn’t touch with a ten-foot pole — the elderly and the disabled.
But what if, into this Medicare system, were added a mix of college age kids, thirty-somethings, forth-somethings and fifty-somethings? By incorporating a pool of healthy, low-cost individuals into the system, Medicare would more closely approximate the business model of the private insurance industry, which — by spreading the risk — rakes in billions upon billions in profit each year.
Except that Medicare would not rake in billions in profit because (a) the premiums would be a fraction of that paid to private insurers, and (b) Medicare would use the premiums for the purpose they were intended — to provide medical care — rather than squandering it in advertising, lobbying and executive pay. (As an example of this squandering, UnitedHealth Group compensates just one of its top executives at a rate of $819,000 per day. That’s a almost $103,000 per hour paid to just one CEO at UnitedHealth Group!)
Medicare would not need to spend billions per year in advertising, lobbying and lining the pockets of those industries (pharmaceutical, medical supplies, hospitals, oil & energy, etc.) that lobby on their behalf. In 2008, for instance, the top lobbyist in the U.S. was the U.S. Chamber of Commerce, which spent nearly $92 million on lobbying, some of this on behalf of their friends in the insurance industry. Exxon, another friend to the insurance industry, was the 2nd top lobbyist, spending $29 million. AARP, another friend, was the 3rd top lobbyists at nearly $28 million. Go down the list of the top lobbyists of 2008, and you will be hard-pressed to find one that is in favor of true health care reform. These are the folks who fill the campaign coffers of our politicians. With friends like this, who needs constituents?
- US Chamber of Commerce $91,725,000
- Exxon Mobil $29,000,000
- AARP $27,900,000
- PG&E Corp $27,250,000
- Northrop Grumman $20,743,252
- American Medical Assn $20,555,000
- Pharmaceutical Rsrch & Mfrs of America $20,220,000
- American Hospital Assn $20,102,684
- Koch Industries $20,023,000
- General Electric $19,379,000
- Verizon Communications $18,020,000
- National Assn of Realtors $17,340,000
- Boeing Co $16,610,000
- Lockheed Martin $15,961,506
- Blue Cross/Blue Shield $15,560,165
- AT&T Inc $15,076,675
- National Cable & Telecommunications Assn $14,500,000
- Southern Co $14,080,000
- Altria Group $13,840,000
These numbers are following a similar path in 2009, except that there are a higher number of health care lobbyists in the mix, such as the AMA (the American Medical Association), which have stepped up the plate to fight health care reform, with the AMA spending $8.5 million on lobbying during in the first quarter of 2009.
Here, a reminder is in order: The American Medical Association is not a professional association of doctors — as is widely believed — but is, in fact, a concert of insurance and pharmaceutical lobbyists composed of paid doctors and other medical professionals. Which makes all the more reprehensible the repeated references to the AMA throughout the health care debates — as if the AMA were the voice of doctors and the medical profession. Nothing could be further from the truth. No, the majority of doctors are in favor of single-payer health care, which is why they were given police escorts out of the health care hearings this past May.
Add to these lobbyists the stockholders who drive the insurance industry agenda, with stock prices plummeting every time the least amoung of progress is made by health care reformers. Under our current system, it is the stockholders and insurance execs — not our doctors — who determine which patients do (and do not) receive medical care.
A Dirty Little Secret
There’s a reason the insurance and pharmaceutical industries and their stockholders feel threatened by health care reform. It’s because they know that a Medicare-for-all plan, such as H.R. 676, will not only support itself — easily being revenue neutral — but could do this while also providing all the services it promises. This is the dirty little secret that has so far been covered up by the insurance industry’s scare campaigns about death panels and socialist plots. Medicare-for-all is not a socialist plot, but a delivery system to provide comprehensive medical care services, most of which the private insurance industry wouldn’t touch with a ten-foot pole:
- Every resident of the US will be covered from birth to death.
- No more pre-existing conditions to be excluded from coverage.
- No more expensive deductibles or co-pays.
- All prescription medications will be covered.
- All dental and eye care will be included.
- Mental health and substance abuse care will be fully covered.
- Long term and nursing home services will be included.
- You will always choose your own doctors and hospitals.
- Costs of coverage will be assessed on a sliding scale basis.
- Tremendously simplified system of medical administration
- Total portability – your coverage not tied to any job or location.
- Existing Medicare benefits for those over 65 will remain the same or be vastly improved in many cases.
- No corporate bureaucrat will ever come between you and your doctor to deny your care
In other words, instead of Americans footing the bill for the insurance industry’s $1.5 million per day lobbying campaign and for $103,000 per hour CEO compensation, Americans would be paying into a Medicare plan that would foot the bill for their own damned health care.
Sure, the insurance industry could still turn a profit by delivering that 44-cent letter to Lost Springs, Wyoming. But could they turn an obscene profit? No. That’s why they’re content to let their customers lie and rot in the dead letter office.
The pity is that Medicare-for-all — which was the choice of 60 to 70% of Americans up until this June, when the insurance industry began its fearmongering, smear campaign in earnest — was never even on the table. Instead, backroom deals were cut between Capitol Hill and the insurance and pharmaceutical industries — two of the most lucrative contributors to our politicians’ campaign coffers. The single-payer, Medicare-for-all advocates were, in fact, barred from the table. The medical doctors who attended the health care reform hearings and demanded a seat at the table were given police-escorts out of the room and were arrested to the accompaniment of laughter and ridicule by the invited guests.
As someone who’s done a lot of shipping through my work, I can claim some authority on the topic of mailing and shipping. I offer no defense of the U.S. Postal Service. What began in Benjamin Franklin’s day as an effort to ensure the free exchange of information among the citizenry has grown into a semi-independent behemoth of a business/government agency.
On one hand, the Post Office spits out copious wads of junk mail into our mailboxes each day. On the other hand, they faithfully deliver letters 6 days a week for the everyday Joe, like me, for only 44¢ each. And, if you’re shipping a package that’s less than 10 lbs. and measures less than 1-foot x 1-foot x 1-foot, the Post Office is generally cheaper than UPS or Fedex. On the other hand, their tracking system is inferior to UPS and Fedex, whose packages can be tracked from California to Georgia with just a few clicks of the mouse.
Obama was incorrect when he said that the U.S. Postal Service is “always having problems.” Fact is, they’ve generally kept their heads above water. But they were hit hard beginning in 2007 — along with the rest of us — by the double-whammy of high fuel prices and our collapsing economy. So were Fedex and UPS and nearly every other business and agency in this country. Since then, the price of a stamp has risen by a nickel — from 39¢ to 44¢ — and the Post Office has also increased its shipping rates, as have Fedex and UPS, their increases ranging from 4.9% to 6.9% each year.
All three of these carriers, like most businesses, have seen declining profits over the past 2 years.
Not so for the insurance industry, which is still making gains on the 428% industry profit increase it realized from 2000 to 2007 (according to Standard and Poor’s), during which time the industry raised health care premiums by 87%. In 2008, they raised it by another 5%. The figures aren’t yet in for 2009, but with their current profits being deemed, “record profits,” it’s a safe bet they’re not slashing jobs, nor are the insurance CEOs feeling in any pain or any fear over their salaries/compensation. To be fair, not all insurance execs make $103,000 per hour (three-quarters of a billion per year). The average insurance industry CEO makes only $14.2 million per year.
By comparison, the total 2008 salary/compensation for the CEO at Fedex was $10.9 million. The total 2008 salary/compensation for the CEO at UPS was $5.6 million. Congressed raised the salary for the Postmaster General in 2007, to be more competitive with private industry. As such, in 2008 the Postmaster General received a total salary/compensation of $1.35 million ($235k salary + $800k in bonuses and deferred retirement benefits).
The Bellwethers of our U.S. Health
As the preferred shipper for small businesses, UPS (United Parcel Service) is extremely sensitive to changes in the economy. As such, this company is widely viewed as a bellwether for the U.S. economy, its profit margin serving as an indicator of the flow of commerce. It’s been a gloomy year so far, with UPS revenues down in both the 1st and 2nd quarters. The company’s 2nd quarter earnings fell by 49%, with per share earnings falling to 44-cents a share from 85-cents a share a year earlier. Their 2nd quarter revenue fell by 16.7% — to $10.83 billion from $13.00 billion a year earlier.
The picture’s been a bit rosier for the insurance industry. By contrast, the 2nd quarter earnings for Wellpoint, the nation’s largest health insurer, fell by a mere 0.7% — declining to $1.43 from $1.44 per share one year ago. Wellpoint’s 2nd quarter revenues fell by 1.6% from a year earlier — declining to $15.41 billion from $15.67 billion.
Wellpoint attributes this revenue decline to, primarily, a “lower commercial membership,” which they offset by raising premiums to their other customers. In plainspeak, this means that — despite that Wellpoint lost 1.1 million customers over the past year (that’s the number of folks who lost their insurance with Wellstone when they lost their jobs) — the company has suffered only a slight nick to their profit margin by raising premiums. Wellpoint projects another tiny nick by year’s end, by which time they expect to lose another 600,000 members. Nonetheless, analysts predict a revenue total $61.39 billion for fiscal 2009, just a touch less than their $61.58 billion revenue for fiscal 2008.
The picture is even rosier for UnitedHealth Group, the nation’s second largest insurer, whose 2nd quarter profit more than doubled from a year earlier, with per share earnings rising to 73-cents from 27-cents a year earlier. Their revenues increased to $21.66 billion for the second quarter — up 7% from a year earlier.
UnitedHealth acknowledges that their 2008 profits would have been greater, if not for the $895 million settlement paid out to the shareholders who filed a class action lawsuit against UnitedHealth for stock options backdating. Still, UnitedHealth is looking to the future, which is looking so bright in the wake of this summer’s health care wars, that insurance industry investors need sunglasses just to see.
“Trust me,” said one financial analyst. “It’s not fun to lose 895 million dollars in this way. But investors look forward. This is the past.”
This $895 million settlement is not to be confused with the two other class action lawsuit filed against UnitedHealth, which were settled earlier this year to the tune of $450 million in restitution to the physicians and policyholders that UnitedHealth spent a decade or more cheating — policyholders who were intentionally robbed through a billing system designed to covertly underpay their claims.
It is to these kings of industry that that our leaders on Capitol Hill have decided to entrust the health and well-being of the American citizenry.
The challenge to health care reform, according to President Obama, is to keep the kings honest. It’s not about offering Medicare-for-all, so that every single citizen can afford to go to the doctor. Nor is about explaining, once and for all, what exactly the words, “public option” mean — an option which, as it turns out, was never an option at all, just more political theater. No, the key to reform is keeping the kings honest. And the way to doing this is to give them more money, plus 50 million new customers. See, the government will help pay our premiums to the kings, since we can no longer afford to do so. And if the kings don’t treat us kindly after that, well then, by golly — next time around — heads will surely roll.
Apples to Oranges, Dust to Dust
In the same way that UPS serves as the bellwether for the economic health of our country, Wellpoint and United Health serve as bellwethers to the state of medical care in this country. As for our politicians? They’re the bellwethers of America’s moral pulse.
It’s thready, at best. After all, we’re a nation on life support. But the family is engaged in fullscale denial. They’re the ones standing outside in the hallway holding signs that read, “Keep yer goddamn hands off my health care!”
For these folk, the news is good, for now. No one’s going to put their hands on anyone’s health care. No one’s gonna force the poor folk and the middle income folk into having equal rights to see a doctor, the way the rich folk do. No one’s gonna stand in the way of the insurance industry while it systematically sucks every last dime out of every last pocket until, at last, the economy entirely collapses — by which time, unlike the fall of 2008, all the king’s horses and all the king’s men…. Well, you get the picture.
Remember this next time you bitch about the price of a 44-cent stamp. While there are plenty of folk in this country who can afford a $239 Christmas card list, there are plenty more who can’t. The alternative to the Post Office monopoly on 44-cent stamp is a fight like we’ve seen this summer, rife with gun-totin’ folk lovin’ on American and hatin’ on socialist plots. In the end, the government will still end up subsidizing someone, because ain’t no capitalist enterprise gonna pony up the money to hoof that 14-cent letter to Lost Springs, much less foot all the doctors bills they promise to pay. Not without a fight.
by Mantis Katz for the canarypapers