If you Understand how Electric Utilities Make Money, you can Understand how single-payer health care works. 

Both must balance the costs against the value achieved.

Public Utility Commissions (PUCs) or their equivalent in each state serve as an replacement for the competitive market. In exchange for granting the exclusive right to sell electricity in a given service territory, PUCs determine how much the utility is allowed to invest and in what, how much it can charge, and what its profit margin can be. This is called the “regulatory compact,” and it was first laid out in the Binghamton Bridge Supreme Court case of 1865.

The court stated, “if you will embark, with your time, money, and skill, in an enterprise which will accommodate the public necessities, we will grant to you, for a limited time period or in perpetuity, privileges that will justify the expenditure of your money, and the employment of your time and skill.”

Source: How Do Electric Utilities Make Money?

To clarify all this in simple terms, a public utility is allowed a profit based on its asset base. So, regulators set the allowed profit percentage and must approve new investments because the higher the investments, the higher the profit.

Let’s say a utility decides it needs to replace 5,000 aging utility poles at a cost of $50 million to improve reliability. The local public utility commission must decide if that is necessary because spending that money raises both the cost to the customer and the profit of the utility. It must balance the costs against the value achieved for the customer. Will electric delivery be more reliable, or safer, will demands for electricity be better met in the years to come?

How do we assure we find the right balance between quality and cost and affordability?

Now apply those standards to health care or do we say health care is a blank check?  Is there no balance between spending and outcomes (value received).

hands_pouring_out_pills_lg_nwmIn other countries they make judgements about the care provided, about drugs being paid for and about facilities that can be used. If you do not meet certain criteria, you may not receive a type of care. If your expected duration or improved quality of life is questionable, you may not receive that expensive surgery. If there is no significant additional value, that new drug may not be paid for. But who makes those decisions, who do we want making those decisions?

Now consider the positions and rhetoric of the political left and right. Do you hear any mention of the above, any hint of what is involved in making health care “affordable? In fact, do you ever hear affordable defined? Is it premiums and taxes, or is it what individuals and government pay out-of-pocket? Rather as I recently read by a proponent of Obamacare repeal that we need “lower priced options on the free market.”  The free market has nothing to do with lower prices; less coverage of medical care and who enrolls in those options does … and that’s 100% of the lower prices.

And what about quality? That word is thrown around as if we know what it is and it’s always linked to affordable.

Go ahead, I dare you, define quality, affordable health care.

And so the debate goes on; political extremes fight for their version of all this affordable/quality stuff and no one defines what they mean or knows what they mean. But that doesn’t stop them from misleading the American people whose concept of all this is that paying for health care is somebody else’s responsibility and don’t want such bills taking priority over spending on the fun stuff in life.


2 replies »

  1. And, then, each succeeding generation would be funding their benefits – sustainable over the same time frames – 5 years out, 10 years out, 20 years out, 25 years out 50 years out, 75 years out and indefinitely (for those in each generation who live past age 90 or so).

    This also means that the current workforce and beneficiaries have to increase funding to fill the gaps created in the past when Congress bought votes by improving benefits for current and past beneficiaries without commensurate taxes.


  2. Interesting. Of course, you know that the health insurance companies are viewed by Democrats and, to a lesser extent, Republicans, as public utilities already, right?!

    In terms of the value to be achieved, it is called votes. In terms of the costs, it is “at any price”, to someone else who won’t be voting for me anyway.

    Want to solve the challenge, have those who benefit pay the cost to fund the program. Simple, elegant, done! It is why I argue that we should leave Social Security benefits and rules unchanged then allocate the funding gap (what is needed to make it sustainable now, in 5 years, in 10 years, in 20 years, in 25 years, in 50 years, in 75 years and indefinitely) to both current beneficiaries and current taxpayers. Then, you want to change the benefits, only propose changes where current taxpayers fund the changes – see what they will agree to.


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