Healthcare

If you don’t believe me, believe the experts

In their quest to sell a government system, some politicians continue to mislead Americans about the role and impact of health insurance companies claiming excessive profits and greed.

It’s all bunk. As I have said many times, insurance company profits are insignificant in the scheme of health care costs and your premiums. In addition, most Americans are covered by a health plan that does not even use insurance.

I urge you to read the excerpt below and the full article as well.

You will also find that the conservative politician idea that price transparency and turning patients into cost conscious consumers will lower costs is bunk as well.

Excerpt from New York Time Opinion September 12, 2019

Four Key Things You Should Know About Health Care

Yes, it’s a complicated issue. But clarifying these fallacies will help voters understand it.

By Ezekiel J. Emanuel and Victor R. Fuchs

Mr. Emanuel is a vice provost at the University of Pennsylvania. Mr. Fuchs is an emeritus professor of economics at Stanford.

Fallacy No. 3: Insurance companies’ profits drive health care costs.

In the second Democratic presidential debate, Senator Bernie Sanders declared that the health care industry makes $100 billion in profits. He once railed against the insurance company Anthem for denying a claim while noting that it reported “fourth-quarter profits for 2017 had increased by 234 percent to $1.2 billion.”

Many Americans believe that profits have no place in health care. They see for-profit health insurance, like buying and selling kidneys and livers for transplantation, as what the Nobel Prize winner Alvin Roth termed a “repugnant industry” — something that should not be exchanged in the market.

That is an important moral stand, but it makes no difference to the claim that eliminating for-profit insurers will reduce high health care costs. The fact is, we could eliminate those profits and it would hardly matter to the cost of health care. You would not notice it in your premiums.

For the eight largest for-profit health insurance companies, in 2016, their cumulative revenue amounted to nearly $452.2 billion and profits were $22.1 billion, for a profit margin of about 5 percent. By contrast, technology companies, banks and major drug companies generally make more than 20 percent profit.

True, $22.1 billion is a lot of money — but it is 0.6 percent of health spending. And last year alone health care costs increased over $130 billion — six times insurance company profits. Health care spending would not be significantly cheaper if all insurance companies’ profits were zero.

There are far more savings to be had in other efforts — by cutting unnecessary patient services, for example, or by making physicians and hospitals more efficient — to deliver the same care at a lower cost.

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8 replies »

  1. Just a little “push-back” here, Mr. Quinn. But not much. I completely agree that neither insurance company profit amounts (relatively speaking) nor insurance company profit margins contribute greatly to health care costs in the U.S.

    But there are two inherent flaws in ANY third-party payer system – private insurance AND/OR any “Government”/single-payer/Universal system – that do elevate health care costs. I rarely see these even mentioned in discussions of U.S. health care and its costs.

    Flaw 1. Any and all third-party payer systems have a built-in DIS-incentive to reducing or even constraining delivered health care costs. Indeed, they have every incentive to allow and endorse medical care cost increases! With a fixed percentage of “profit margin” in the case of private insurers, and/or with a “limited budget” in the case of governmental systems, the ONLY mechanism for increasing “profit” OR “budget” is to increase payouts/reimbursements to actual health care providers. And we all know government bureaucrats just love to have their budgets increased, almost as much as insurance company execs like to see their “profits” increase.

    Flaw 2. Any and all third-party payer systems inherently propagate the ILLUSION that health care is “free”. There is so much attention and emphasis on creating and maintaining that ILLUSION in fact, that there is just about zero emphasis or even any attention paid to making the health care system in the U.S. efficient! You’ve noted this in previous posts here Mr. Quinn – “Nothing is free!” Health care will never be “free”, nor should it be. But it can be made vastly, vastly more efficient.

    These two flaws in third-party payer stems can NEVER be eliminated. They are inherent. But their detrimental effects can be minimized, if one is willing to challenge the “conventional wisdom” and “Think out of the Box”, metaphorically speaking. And to do that, one must start thinking in terms of any third-party payer as the payer-of-LAST-resort. NOT the payer-of-FIRST-resort (or only-resort) as it is now.

    I’ve got some suggestions with justifications, if you’re interested.

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    • You have valid points that have plagued the system since we began eliminating more and more cost sharing and hence concern for costs. When I started in the business there was only coverage for inpatient care and limited for lab work and x-rays

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  2. Relative to prior comments on wages, benefits and who pays for this stuff in an employment setting (employees pay all costs direct or indirectly, health coverage, social security, etc.), see the New York Times article, first conclusion on wages.

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  3. Never trust the opinion of a politician and/or college professor that hasn’t earned their living in private industry ….talk is cheap and so is no real world experience.

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