In continuation of a 12 part series dispelling the myths about US Health Care, I present to you part 2:
First of all, allow me to explain why this series isn’t actually meant to be a lecture. I grew up in Canada, which has had some form of UHC for my entire life. But this isn’t actually about whether or not Canadian health care is better than American. It is actually about a **culture of lies, deceit, and obfuscation **that permeates the health care debate. And no, this isn’t about whether Canadian politicians are better than American, or Republicans lie more than Democrats.
Two very obvious examples were the recent comments byBrock Lesnarabout Canada being a third world country, and Sarah Palin about death panels. But like I said, it’s not unique to Republicans or Americans. This issue bothers me so much because growing up I was lied to about health care. Canadian politics use the term “American Style Politics” to scare people. It is synonymous with death and despair. But it’s also a huge myth perpetuated by politicians to further their career advancement. Now having lived the US the past 4 years I’ve been able to see through the multitude of lies I’ve been told, and have become hyper-aware of the lies told to Americans. My goal is not to bring UHC to the US, but to dispel the ignorance that prevents the best system from being identified.
One of the worst myths push by the Left (pro-UHC) side is that of insurance company profits. And thanks to Mr Smashy I was reminded of how pervasive this little gem is. From his post he provided some fascinating stats, the most interesting was:
To add a bit to the debate, the profits are small in percentage, but on 2 trillion of the economy a few percent go a long way. Also the profit is after high overhead is paid, huge advertising budgets and CEO bonuses. In percentage I’m sure those numbers are fairly small, but they are all things that add to our overall health care situation.
It’s not how much they make, it’s the giant bureaucracy they build to make sure they can make a profit. Up to 30% of insurance payments go in overhead, which is profits plus bureaucracy, the cost of running the hmo, executive earnings etc. In Canada the overhead is as little as 1%, plus of course no profit margin. US Medicare overhead is 2 or 3%.
Without reading the spoiler, I’d guess that profits are probably fairly low…perhaps something in the 2-3% range, maybe as high as 5% (though I doubt that high). The fact that most Americans THINK that they are higher is unsurprising, considering decades of anti-Big Business propaganda from the left. Ask an American about how high the percentage of profits are for, say, Big Oil, and you are going to get similarly high figures…and they would be similarly and wildly wrong.
The problem with our current health care system, IMHO, is that it’s a kludged up hybrid…it’s neither a free market system NOR a UHC system, but some composite monster in-between. There are whole generations of layers of government ‘fixes’ put in that make the system more inefficient…and there are whole generations of companies gaming the system we DO have to their own advantage because those rules exist and it’s human nature to try and work around them.
This was bullshit when Hillary did it to demonize the oil companies, and it’s bullshit now. If Company A making 3% ($50,000,000) isn’t a problem, and Company B making 3% ($50,000,000) isn’t a problem, how do you justify getting up in arms because Companies A and B both make 3% ($100,000,000)? They’re making twice as much profit, but they’re also providing twice as many services and require twice as much capital to do so.
As I said, their profit percentage is small, but they deal with such huge amounts of money they make quite a bit.
But as better pointed out by DD above, the profit is *after *they spend a huge amount on overhead and highly paid staff. The amount of profit is of minimal import (although, saving 2% on health care would be nice). What is important is the amount they waste on overhead, both on the insurance side and the doctor side. That is where the real money gets wasted.
When I think about profits for a business, I mentally only include direct costs in my mental assessments of costs. That is, things like production costs, building rents, direct processing costs towards the end of providing the service - things like that. Executive bonuses and private jets and even advertising read like technically unnecessary expenses to me, so I mentally categorize them as part of the profit - what the profit is spent on. Inaccurate, I know, but there you have it.
I think I got to this point because a company that raked in huge amounts of money and gave it all to the president would techincally make zero profit - it’s all “wages”. Yeah, right, I think not. (What actually happens this this supposed 2-3% profit, anyway? It just sits around in bank accounts, or what?)
I personally have a problem because it was estimated that insuring the remaining 50million uninsured would cost $90billion (or $900billion depending who you ask).
Keep in mind that all of the profits come from inflated premiums paid by consumers, as opposed to magic, or mining natural resources.
So if, for example, the total of all those profits ends up to be $90billion:
People are already paying for that $90billion, it’s just a matter or re-allocating it in that magical socialist way, so that instead of the money going to profits, it goes to making sure everyone is is able to receive adequate medical coverage. And I will fully admit this is a socialist agenda, it is a redistribution of wealth, for the purpose of providing adequate medical coverage. People with means will be paying for those with needs.
If on the other hand the total amount of profits is closer to $9, the whole point is moot and we’re all going to die.
I’ve acknowledged before that crying about “huge health insurance company profits” was inaccurate as well as a red herring. Lobohan and Dick Dastardly are correct in pointing to the factors in private insurance that come into play before profit is calculated.
I would also add that primary care physicians bear an increased cost with this system as well, a cost that has nothing to do with whatever profit a private insurer makes. I understand that a doctor’s office in the States may have many employees whose sole task is to deal with paperwork from a multitude of insurance companies. I understand that on occasion, a doctor in the US has to contact an insurance company beforehand to see if a particular patients condition may be treated, or a particular drug prescribed. This sounds like an awful lot of extra work for the doctor, and would certainly increase the overall cost to the healthcare system.
In a UHC country, the primary care physician only has a single insurance provider to deal with, and she will know in advance about which treatments/drugs are covered, because the treatment options and payment schedules are all public knowledge and above board. They know beforehand what will be covered, and they usually have only a single staff person who handles bookings, scheduling, billing etc.
It’s going to be a complete, stone cold bitch to fix, no doubt about it. And it NEEDS fixing…of that, I also have no doubts. However, I frankly can’t see a way that it could be fixed, given our political system and how our health care system has developed in the post WWII period.
You are missing so much with that whole argument. We have a for profit health system. The insurance companies give their execs huge salaries, bonuses.and absurd retirements That is one way health care dollars are being spent in something other health care. Then ,stock holders get a big chunk of the money that goes into premiums. Do you not understand that that money is not shown as profits, although it is real and enormous.
If we eliminate the for profit contribution and make it like Medicare the savings are far more than the amount you are pretending. So don’t be so dismissive about the insurance company contribution to a screwed up system.
As I understand it, using profits as a measure of insurance companies is misleading, and more often is simply intentional obfuscation. I brought this up in response to a post by Airman Doors, USAF, but got no response/discussion. Partially quoting:
I’m glad there’s now an entire thread devoted to it. I do hope it helps me become better informed…
No, I didn’t miss any of those factors, in fact I mentioned them in a previous thread.
The problem is that in considering how I’ve been lied to about the profit margin is for these companies, I’m also suspicious of how large that secondary portion really is. Once burned, twice shy.
It’s just that debates about Canadian health care are so dreadfully boring. Once everyone is covered there just isn’t that much to discuss. Everyone agrees we need to get wait times down, that we need to encourage rural doctors, and we need to need more primary-care physicians.
Do you realize that while Americans butt heads relentlessly about UHC vs status quo the biggest story in Canada has been Harper proroguing government?! And it’s only a story because the word proroguing is so weird.
There was a Simpsons episode once a long time ago, where Homer gets a job with that Scorpio guy. Marge is in that perfect house that takes care of all her needs and she ends up being miserable.
It is called creative accounting. Money can be hidden in lots of semi-legal ways.
I have a doctor in my racketball group. he has like 6 women handling insurance claims. They spend their whole day squabbling with insurance companies over billing, and rejected claims. With Medicare he submits a claim. Job done. There is one billing number and they know how much every thing costs in advance. How much money is wasted by doctors and hospitals fighting with insurance companies? It is just too stupid and wasteful to justify.
Yea, honestly I never really understood why anyone would want to be in the Health Insurance biz. The profit margins aren’t great, the gov’t is going to constantly be changing the regulations around, basically the only way to make money is to try and find ways to deny sick people coverage, and your going to constantly be the villain. Try and cut costs and you’re coming between people and their doctors, don’t try and cut costs and you have to raise premiums and price a bunch of people out of being able to afford insurance.
I’d support Reform just to put the companies out of their misery.
We have had this from you before and you did not respond to my rebuttal then. The way companies pay their stockholders is through dividends. Dividends are paid out of after-tax profits, i.e. do not affect the declared profit whatsoever. Paying dividends is not a way to hide profits.
Secondly, health insurance companies pay very low dividends. For example, UHC pays only 0.1% yield as dividends; Aetna pays 0.1%; Humana pays nothing.
Percentage is what counts when investing or running a business. When I look into which accounts in which to put my money, I am not going to be impressed by a bank that says :“yes, our interest rates are low but if you invest a lot you will still make a bunch of money.”