October 4, 2010

The Health Racket Bailout


In September 2009 Obama declared, regarding the private health insurance rackets, “I believe it makes more sense to build on what works and fix what doesn’t, rather than try to build an entirely new system from scratch.” What kind of coded message is this? Since the system of paying for health care by forcing payments through this racket has long been a complete disaster from any rational or moral point of view, since in other words nothing works about this system except for the profit extractions on the part of unproductive gangsters, we have to assume it’s the good of these criminals which is what Obama meant by “what works”, and any threat to this extorted revenue stream is what doesn’t work.
(This can go as a general rule for any neoliberal policy. Since all of neoliberalism and trickle down has profoundly and definitively failed as far as the good of the people goes, it’s a given that ANY politician, advocate, or wonk, conservative or liberal, who still calls for corporatist policy is consciously and treasonously seeking the good of corporate criminals at the expense and harm of the American people.)
What was this health racket debacle all about? How did what sounded like a worthy endeavor – health care reform – end in such disaster? Why was the only real reform, single payer, excluded? It’s an axiom that anyone who truly wanted reform demanded single payer. This is true by definition for anyone familiar with the issue, as were all the politicians and advocates who swarmed over the corpse of it starting in spring of 2009. Yet it was never for a moment even considered by the political structure. Obama unilaterally declared it “off the table” before the alleged negotiation even began.
This proves that they never even considered actually reforming anything. They never intended to reform anything. It’s absurd on its face that a sincere reformer would’ve given up single payer without putting up a fierce fight for it. This applies to Obama, this applies to the Democratic establishment in Congress, this applies to all “progressive” advocacy groups, professional bloggers, etc. This applies to everyone who conspired in the “public option” bait-and-switch. Whatever they all meant by the term “reform”, they did not mean reform. So what did they intend?
Look at the process, at the deals Obama struck with the insurance and drug rackets before the “negotiation” even began, the deals which were further worked to the rackets’ advantage throughout the process as the Democrats and liberal hacks steadily sold out every position, replaced every previous lie with an even more threadbare, empty lie. If we look at this and at the end result, we see that Obama and the Democrats/liberals’ real goal was this:
1. Further entrench and empower the insurance rackets.
2. Increase the rackets’ extractions (profits) from the economy.
3. Empower the rackets to use force to directly rob the unwilling people.
This will be done through a mandate to buy expensive but worthless “insurance” which can never be used. A mafia hoodlum sticking up the neighborhood grocery for his weekly protection money might as a joke hand back a Neighborhood Watch decal which would serve the same purpose. That’s all this “insurance policy” is – a worthless piece of paper the mafia thug gives you as he mugs you.
Why did Obama and the Democrats do this? Exactly for the same reason Republicans and Democrats came together to bail out Wall Street in 2008. Just like the Wall Street banks, the health insuracne companies are unproductive parasites. Just as the Wall Street banks are insolvent, so the insurance rackets face insolvency. Just like Wall Street they needed to be bailed out.
The difference is that instead of fashioning a health insurance TARP to cover them, the neoliberals came up with this mandate. But if we picture, instead of using the TARP and Fed facilities to convey taxpayer loot to the banks, the government simply forced all of us purchase some extremely expensive worthless “service” from the banks, it would be the same thing.
Everything the health insurance companies do is counterproductive, socially destructive, and worthless. As Luke Mitchell put it in his excellent Harper’s investigation,

The private insurance industry, as currently constituted, would collapse if the government allowed real competition. The companies offer no real value and so instead must create a regulatory system that virtually mandates their existence and will soon actually do so.

Health “insurance” make no sense even as a concept. In practice it’s an undifferentiated commodity. In principle anyone with a computer can provide this service. But regulatory barriers to entry plus the insurance rackets’ explicit 1945 exemption from antitrust laws have enabled them to set up legally enforced oligopolies and monopolies all over America. In many places there’s only one company dominating the marketplace, in many more two collude. In the great majority of markets there are no more than two “competitors” who don’t compete. What happens when something is of little value but is subject to extortionate monopoly pricing? The consumer rationally chooses not to buy it.
As Randall Wray put it:

Here is what the whole “reform” was all about: health insurers were losing premiums because employers were dropping coverage (in part because they could not compete since no comparable country uses private insurance to provide health care); healthy individuals were dropping because no reasonable calculation could show insurance to be good value for the money. And it is not just the healthy young people who were dropping coverage. If you are single and have no chronic conditions, you are far better to pay out-of-pocket (UNLESS your employer pays most of the premiums and will not give you wages instead). 80% of healthcare costs are due to the 20% of the population that is unhealthy and perhaps unlucky. If you can make it to age 65 without chronic conditions (you don’t smoke, are not obese, were not born with too many preexisting conditions, and so on) it is quite rational to avoid health insurance. And if you get extremely unlucky, you do not have to have health insurance to get some kind of health care. Sure it is probably going to be inferior—but it could well be adequate. And in any case, you might not have that much faith in traditional medical approaches, anyway.

So while the insurance rackets can lounge in their monopoly fortress safe from all marketplace competition, they can’t compete with rational non-participation on the part of the consumer. So from the advent of the health “reform” notion, they’ve sought some kind of neoliberal arrangement. The basic concept, from Hillarycare to the far more vicious Obamacare*, is the same: the insurers will nominally “cover” everyone, and the government will act as enforcer, to destroy the non-participation option. The consumer will be strong-armed into the monopoly “market”.
[*Obamacare is actually almost identical to the Heritage Foundation-written Republican counter-proposal to Hillarycare.]

But the insurers were terrified. They could see the writing on the wall–they were losing the healthiest members from their pool, forced to raise rates, and that pushed more healthy people out in a vicious cycle. Hence, they went after Hillary Clinton and later Obama to get a HIBOB to force healthy people back into the pools so they would pay premiums. Yes, insurers knew there would be a trade-off because they’d have to take some unhealthy people. But giving them insurance IS NOT THE SAME THING AS paying for their care. So insurers agreed to accept some pre-existing conditions but never agreed to actually pay for treatments for those conditions. And they won’t.

The Obama bill will have the added virtue of helping further entrench this monopoly. As we’re already seeing, many smaller insurers are getting out of the business because they see themselves as unable to compete under the new rules, which were intentionally calibrated to be easily gamed by the big rackets but be very difficult for the smaller ones.

More insurers are likely to follow Principal’s lead, especially as they try to meet the new rules that require plans to spend at least 80 cents of every dollar they collect in premiums on the welfare of their customers. Many of the big insurers have been lobbying federal officials to forestall or drastically alter those rules.

“It’s just going to drive the little guys out,” said Robert Laszewski, a health policy consultant in Alexandria, Va. Smaller players like Principal in states like Iowa, Missouri and elsewhere will not be able to compete because they do not have the resources and economies of scale of players like UnitedHealth, which is among the nation’s largest health insurers.

Mr. Laszewski is worried that the ensuing concentration is likely to lead to higher prices because large players will no longer face the competition from the smaller plans. “It’s just the UnitedHealthcare full employment act,” he said.

Sound familiar? It’s just like with Wall Street, where Paulson explicitly stated that one of the goals of the Bailout was to enforce further concentration via M&A’s. It’s also exactly like the slew of food tyranny bills which all have the same intent of setting up one-size-fits-all barriers which are speed-bumps at worst for the big producers, insurmountable cliffs for small ones. In every such case this is the legislative intent. We see the criminal malice of policy-makers.
Here’s another take from the Harper’s piece:

[This] is one reason why the insurers themselves have always favored the central elements of the Democratic plan. As long ago as 1992, when Hillary Clinton was formulating her own approach to reform, the Health Insurance Association of America (now America’s Health Insurance Plans, or AHIP) announced that insurers would agree to sell insurance to everyone, regardless of medical condition (guaranteed issue) if the government required every American to buy that insurance, and used tax dollars to subsidize those who could not afford to do so (universal mandate). Carl Schramm, the president of the association, said this was the “only way you preserve the private health-insurance industry. It’s plain-out enlightened self–interest.” The deal collapsed nonetheless, in part because Congress wanted to introduce a “community rating” system that would have put an end to underwriting by making insurers sell insurance to everybody in a given community for the same price. Insurers wanted to maintain the profitable ability to charge different prices to different people.

Last December, though, AHIP said it would support community rating as well….The insurance companies would agree to sell their undifferentiated commodity to all people, no matter how sick, if the government agreed to require all people, no matter how healthy, to buy their undifferentiated commodity. Sick people who need insurance get insurance and healthy people who don’t need insurance cover the cost. A universal mandate would include the 47 million uninsured—47 million new customers.

The Democratic plan looks to be a huge windfall for the insurance companies. How big is not known, but as BusinessWeek reported in August, “No matter what specifics emerge in the voluminous bill Congress may send to President Obama this fall, the insurance industry will emerge more profitable.” The magazine quoted an unnamed aide to the Senate Finance Committee who said, “The bottom line is that health reform would lead to increased revenues and profits.”

So the insurers propose to get out of the fraudulent “insurance” (which was never insurance) business completely and instead to simply administer the community rating pool, even though this involves no actual work which could justify a profit. They simply steal from the pool, and this is justified and enabled by their co-conspirators, the criminal politicians and public opinion leaders. They justify it by privatization ideology (in no way can such leeching be called “capitalism” – it’s simply privatization for its own sake, no matter how inefficient, no matter how unproductive). But it’s really simple corruption. Simple crime.
In return for this great favor the insurance rackets are doing for their political flunkeys, they demand the extortion mandate.
So to recap, the insurance rackets are pure parasites. They provide no worthwhile service. On the contrary they only generate needless cost and complexity. They shouldn’t exist at all. For most people “health insurance” is a bad buy. More and more people understand this and are rationally opting out. This is a mortal danger to the insurance rackets. So they’ve bought politicians and pundits from both Washington gangs. These corrupt policy-makers see their task as to bail out the rackets’ position. (This fits in with their neoliberal corporate ideology, according to which the very purpose of a society is to serve as a resource for corporate racket extractions.) The basic idea is to create one vast social pool. All Americans will be forced into it. The monopoly rackets will have total power over it – to “administer” it, but really to simply squeeze as much blood as possible out of it. Not only will the government not protect the people against these vicious gangster assaults, it will serve as the hired thug. The result, by design, will be that although more people will be nominally “insured”, far fewer will have access to affordable care. The plan is systematic plunder. With this bill the insurance rackets are to be officially one of the favored, “senior tranche” looters on the corporatist totem pole, just below the banks and the weapons racket.
The key to this is the mandate. the key to fighting back is resisting the mandate. My basic idea is as follows:
1. We won’t be able to pay the mandate even if we were willing to knuckle under and crawl (but no citizen would be willing). We’re entering the terminal Second Great Depression.
2. The IRS as insurance goon will be assailing us for this penalty. (Not to mention other modes of social control the bill will seek to use the IRS to enforce.)
3. So if we want to resist we’ll have to do it in part by resorting more to the informal economy.
4. The Depression and high permanent unemployment will be forcing us into the informal economy anyway.
5. These two forcings will be in the same direction as what we should already feel as our democratic and economic imperative toward political and economic decentralization and relocalization. This is our affirmative imperative.
6. So we should make a virtue of necessity and combine self-defense with affirmation.
7. So educating people about the mandate – about how it’s a political and moral obscenity, and how it’s nothing but a robbery they cannot afford – can be the lead-in and accompaniment to a more general, affirmative education campaign about decentralization and relocalization.
Is see many possible lead-ins to this. The great push to represent the health racket mandate as our Stamp Act should be a primary one. But all roads lead to the same end – we the people must take back our political and economic self-determination, or die.


  1. I agree with almost everything in this post. The idea of using neurons to invest in the alternative, informal economy as you call it. The insurance industry (not just health insurance, now…) as a major drawback, holding us back from where we need to be going, because ANY insurance ATTITUDE fosters beliefs and practices of ZERO RISK, and human beings need risk in their DAILY lives in order to feel fully alive, and NOT mass produced walking and talking “living” dead. I have been attacking INSURANCE for quite some time now on Sudden Debt as a BIG PART of our problem.
    On single payer health care… Thai, may he rest in peace.. and I agreed. Single payer is.. CONCENTRATING POWER and DECISIONS in the hands of ONE entity. Great for saving money, and streamlining, but LAST TIME I CHECKED, you were a fundamentalist opponent of the monarchy… So.. on those grounds, how do you manage to justify single payer ? In France which has the reputation of being a socialist country (my eye, as we say here..) single payer was NOT the way things were organized. Things when they were REALLY working were organized in a collegial fashion… AND THE GOVERNMENT WAS NOT IN THE DRIVING SEAT AT ALL. Now, of course.. the government wants TOTAL CONTROL. Will.. “the people” be better served if/when the GOVERNMENT has total control ??
    YOU know the answer to that one.

    Comment by Debra — October 4, 2010 @ 3:16 am

    • 1. Just because I’m an anarchist doesn’t mean I can’t judge reform-within-the-system according to its own premise.

      2. Given that this system does still exist, I do have preferences within it. This isn’t whatever gradually evolved in France. This is a gangster cesspool. Single-payer is definitely the best way of organizing things given the existing system.

      3. I’ve consistently said that the top heavy structures of this system are all ultimately unsustainable. I’ve explicitly included even the better concepts like single payer.

      I’ve called for those as bridges to the post-oil world of lower energy consumption. I’ve said that even something like single-payer is not ultimately sustainable but could, if established now, do much to alleviate the pain of the transition in the mid-run.

      So I’ve been consistent on every level. Different lines of argumentation for different contexts, and I don’t feel the need to re-stipulate A, B, and C every time I mention D.

      Your notion that I’m some kind of monolithic fanatic is purely your fantasy.

      Comment by Russ — October 4, 2010 @ 5:39 am

      • I don’t REALLY think that you are a monolithic fanatic, now. BUT… you must admit that you have very WIDE NOTIONS of what “elitist” means…
        Besides, I wrote elsewhere that being totally consistent on EVERYTHING would make you a machine, and THAT’S NOT GOOD NOW, is it ?
        I don’t think so…

        Comment by Debra — October 4, 2010 @ 12:01 pm

      • My definition of an elitist is precise.

        It’s anyone who thinks the producers can’t (or at any rate shouldn’t) manage and rule themselves, and dispose of 100% of the wealth they themselves produce.

        Comment by Russ — October 4, 2010 @ 12:07 pm

  2. > [*Obamacare is actually almost identical to the Heritage Foundation-written Republican counter-proposal to Hillarycare.]

    Could you provide some follow up and/or links on this? Maybe it’s common knowledge, but I don’t remember hearing about it.

    Comment by john — October 4, 2010 @ 11:17 am

    • Sure, John. Maybe it’s not common knowledge. (I didn’t know it myself until not long ago.)

      In that case we can help make it so.

      Here’s two links, one from a liberal blog and one from a conservative.


      The new health care law championed by Obama is strikingly similar to the Republican alternative to Clinton’s health care plan put forward by Sen. John Chafee (R-RI), and has basically the same structure as the Heritage Foundation plan from the same time.


      Those on the right who are promoting RomneyCare, including the Heritage Foundation, ought to think again. Their support of Romney’s government planning undermines their conservative principles. More from Cannon:

      …[T]he aspect of RomneyCare that most resembles HillaryCare is its very centerpiece, which Romney borrowed from the conservative Heritage Foundation: the health insurance “Connector.”

      Cohn is essentially correct. The objective of the “Connector” bureaucracy, as described by Heritage Foundation scholars, reads like an exercise in government planning. The “Connector” is supposed to “reorganize[e]…a large part of the state’s private insurance system into a ‘single market’ structure with uniform rules and a central ‘clearinghouse’ for administering coverage.”

      That second one’s from 2007, attacking Romneycare, the demonstration project for Obamacare.

      I’ll be writing a post soon on just how well Romneycare has worked out in Massachusetts. How well what we can call Obama’s Promises have worked out there.

      Comment by Russ — October 4, 2010 @ 12:02 pm

  3. A very informative post. Well done. I like the notion that this hideous bit of perfidy should be seen as a modern day proxy for The Stamp Act.

    Comment by Edwardo — October 4, 2010 @ 6:11 pm

  4. Great post. It would open the eyes of a lot of people over at Angry Bear who have resigned themselves to accepting “HCR” as another necessary evil on the road to real reform. Suckers.

    It all boils down to the fact that the liberal and conservative tribes, the Democrat and Republican tribes, are convenient fictions provided to distract the masses from the true narrative: the ruling elite tribe versus the masses tribe. I’d argue, Russ, that the ruling elite is a tiny minority of those who fit your definition of “elite.” The trick is how to engage the masses who think they are elites without causing them to get defensive.

    Comment by Tao Jonesing — October 5, 2010 @ 2:40 am

    • You’re right, that’s always the toughest thing. You would think elitist attitudes and being part of the elite would be concurrent, but no. We have those who identify with the elites even though they’re among the peasants themselves. Especially in America, which has had the “American Dream”/”ownership society” propaganda campaign for so long, and especially because the system did temporarily allow a mass middle class to arise.

      Now most people think that middle class status is something everyone can still aspire to (and of course they consider it implicitly the “best” way of living).

      So anyone challenging this system is up against that ideological and informational barrier. I suspect that breaching the latter must be prior to causing the former to crumble.

      But in the meantime, it’s tough to convey the truth without provoking emotional responses based on that ideology. People get defensive about many of the facts, as you say.

      One of the many problems we have to solve…

      Comment by Russ — October 5, 2010 @ 4:06 am

  5. Very curious about this. I see some things in the descriptions here, but would love to dig into the record deeper:


    Comment by john — October 5, 2010 @ 9:06 am

    • Argh…that was meant for the discussion upthread about Republican counter proposals in ’93-94.

      Comment by john — October 5, 2010 @ 9:07 am

    • Thanks for that, John.

      The Chafee plan sure does read like a close relative of the Obama Plan. It’s the only one with the individual mandate, and it has the same vague, bogus “cost control” promises.

      I don’t remember the Clinton plan very well, but according to that it focuses on insurance-through-the-employer.

      By contrast the Republican plans, just like Obamacare, are anxious to let the employer off the hook.

      I of course don’t want “insurance” by any vector. Health insurance in itself doesn’t make any sense, and profiteering health insurance is an obscenity.

      It’s an automatic “market failure”, to use their term, and single payer is the only rational and moral payment mechanism.

      Comment by Russ — October 5, 2010 @ 11:28 am

  6. Glenn Greenwald had something today about the White House HCR negotiations:


    Comment by Tao Jonesing — October 5, 2010 @ 11:12 pm

    • It sure is disgusting.

      This Daschle quote is a perfect example of why whenever I hear the word “stakeholder” I reach for my revolver.

      That premise was, you had to have the stakeholders in the room and at the table. Lessons learned in past efforts is that without the stakeholders’ active support rather than active opposition, it’s almost impossible to get this job done. They wanted to keep those stakeholders in the room and this was the price some thought they had to pay.

      “Stakeholder” is one of the most vicious, offensive Orwellian terms going. I’ve never seen it used except in totalitarian code. Invariably it really means, “the robbers have to figure out how best to rob the producers and divvy up the loot.”

      I’d just purge as a criminal anyone who uses the term. That’s an objective criterion. There’s no constructive use of that word, and it’s really not part of the English language, is it? Did it ever have a non-criminal usage?

      On the other hand, pragmatic is, or used to be, a word in English. But it too has been hijacked for Orwellian purposes.

      Greenwald being One-Step-Forward-Two-Steps-Back Greenwald, he just can’t help this:

      One can reasonably argue that entering into secret, backroom deals to please industry interests was a “pragmatic” thing to do, notwithstanding how often Obama railed against exactly such transactions during his campaign (remember the I’ll-put-all-health-care-negotiations-on-C-SPAN pledge?).

      No, one can’t reasonably argue that. (Although Greenwald put the word in quotation marks, the context clearly indicates that he thinks maybe they really did have to do that.) Not if one is a democrat (do I always have to point out the small “d”?), and not if one truly seeks the good of the people and understands the politics of it.

      We know that demanding single payer was not only the only thing to do from the point of view of principle and policy, but was also politically the smartest thing. Those who did it would be heroes to the people. But Obama and the corporate liberals want to be “heroes” only to rich thugs.

      (Of course those thugs rightfully have nothing but contempt for them.)

      What will Obama and the Democrat/Liberal establishment get for their treason? The rackets are already tacking to the Republicans. So they’ll be driven out of power at the least.

      And once fascism comes to power they’ll get what they really deserve.

      One can also argue that the public option would never have gotten 60 votes even if Obama and the White House had pushed for it.

      Greenwald sure has a mental impairment where it comes to this sort of thing. He just got done writing that they used and therefore were willing to use reconciliation.

      Once again we have to ask Glenn Greenwald, Did you read your own post?

      Comment by Russ — October 6, 2010 @ 5:55 am

  7. NYT blurb for a Leonhardt piece:

    “Soon Americans won’t have to pick between bad insurance or none.”

    Right. They won’t be allowed to pick none.

    Comment by Russ — October 6, 2010 @ 6:49 am

  8. […] […]

    Pingback by Kangaroo Court in Action: The Health Racket Mandate « Volatility — October 10, 2010 @ 7:55 am

  9. […] Obamacare is meant to be a bailout for the health insurance rackets and an austerity bill wrapped up in one. Its design is fundamentally simple: Redistribute wealth […]

    Pingback by The Austerity Mechanism of the Health Racket Bailout « Volatility — September 20, 2011 @ 3:18 am

  10. […] created by Congress. On its face that’s a clear fact. The bill’s very purpose is to bail out the rackets who, even though they have an anti-trust exemption (another creation of Congress), and can […]

    Pingback by Kangaroo Courts and the Health Racket Mandate (Reprise) « Volatility — April 8, 2012 @ 2:59 am

RSS feed for comments on this post.

Sorry, the comment form is closed at this time.

%d bloggers like this: