Today, HHS secretary Kathleen Sebelius met with the heads of the different private health insurance companies. The bigwigs had a message for the Obama Administration: Stop blaming the insurance companies for the high cost of health care. Ironically, in making their case, they delivered a powerful argument that a private health insurance system like ours simply can’t control costs. From Aetna Chairman and CEO Ronald A. William’s remarks today:

Many experts in health care agree that the leading legislative proposals do not bend the health care cost curve in the right direction. Just last week Warren Buffett said, let me quote: “Insurance isn’t the problem, the problem is at the point of care” … That [insurance] isn’t the reason that health care is at 17 percent of GDP.” … “The reason is that we’re doing an awful lot of things we don’t need to do… we have payment for procedures and not payments for results.”

Who’s fault is it that the private insurance companies are paying for things they believe “we don’t need?” That would be the private insurance industry. . . which is paying for these things. Who’s fault is it that private insurance companies “have payment for procedures and not payments for results?” Again, it is the fault of the private insurance companies, who’s main job is to negotiate with provider a payment reimbursement structure. William goes on:

We agree with Warren [Buffett] and hope that reform will do more to address these issues.

With this one line, the president of Aetna is basically saying only the government is capable of fixing what even his own industry knows is wrong with their business model. If the insurance industry knows this is a problem, why haven’t they already fixed it? Even though the private insurance companies know they should, and they control the purse strings and could switch to a system of payment for results, they are basically admitting they are powerless to solve their own problems.

Insurance rates are too high for too many, but that’s because the underlying costs are rising at double-digit rates that are unsustainable.

I agree with William on this point. A big part of our health care costs are tied to the actual cost of drugs, equipment, procedures, and hospital stays, and those are way to high and going higher. But, again, as controllers of the purse, it is the job of the insurance providers to negotiate with providers for lower prices. Medicare has a proven track record of doing a much better job, using its size to get providers to reduce their charges. So, the failure at cost control still rests heavy on the shoulders of our system of private insurers.

In his closing, probably without realizing the honesty in his sarcasm, William delivers a surprisingly strong justification for single payer or, at least, all-payer:

We are as concerned as you are about premium rate increases. But if you want to control our prices, then you have to control those prices being charged by suppliers, hospitals, pharmaceutical companies, doctors and others as well.

This is 100% spot on. If we really want rein in the insurance premium increases the government can only do that by using universal standardized insurance policies and a centralized provider reimbursement negotiator, and, preferably, that would be the government. The best way to do that is with a government-run, single-payer system, like Medicare for all. Barring that, the next-best solution is a heavily regulated all-payer system, similar to the ones in Germany, Japan, or Belgium. Such a setup would basically turn insurance companies into nothing more than a communal bank account combined with a boring, extremely low-margin administrative processing service.

You heard it straight from Aetna’s CEO: The private insurance industry has completely failed to use its power of the purse to hold down cost. It knows it needs to reform its broken, inefficient business model, and then basically admits that only the government can fix what is wrong. And, finally, if the government really wants to stop massive insurance premium increases, it needs to control costs by adopting a single-payer or all-payer system.

Why, after reading this, anyone thinks the solution to our health care crisis is to force Americans to buy health insurance from the same private industry that admits it is incapable of fixing its own problems is beyond me.