Wikipedia says “An oft-cited study by Harvard Medical School and the Canadian Institute for Health Information determined that some 31% of U.S. health care dollars, or more than $1,000 per person per year, went to health care administrative costs, nearly double the administrative overhead in Canada, on a percentage basis.[124]”
So there.
The information is a couple of years old, but the average profit margin is just under 6%. Health insurance is not a high profit industry.
It is good to have some profits, as the companies need to have money in reserve in case of things like flu epidemics, or a bad year the following year(s) where payouts exceed revenues. After all, they’re not like the government and can’t print up funny money to cover costs of a sudden surge in claims.
My point was that, based on the steepness of the US curve as compared to the curves of other countries with UHC, it would appear that UHC does indeed have a positive impact on reducing the long-term increase of health care costs. This was in response to your OP, in which you said:
My interpretation of this is that you were asserting that UHC had no impact on health care spending. Clearly, though, (based on the graph you provided) it does.
I specifically indicated the year for that data - 2006, so don’t act like I’m trying to pull a fast one.
Forget percentages. Look at the raw numbers:
10,318,000,000 dollars in profit. And that’s just for the top 12 insurers. That’s money that people like you and your employer paid for health care insurance but instead went to pay for insurance company executive beach homes.
10,318,000,000 dollars.
Which study is in fact cited in the OP, if you bothered to read it.
Except for that, like I said, several nations have gone from non-UHC to UHC in that graph without any reduction nor visible change in the slope of spending.
6% profits would only add another $400 or so per year, still leaving $1600 to $1900 left unexplained.
The thing is, different nations implemented national UHC at different times, and all still kept medical costs at $2000-4000 per person, and about 8-11% of GDP while the US shot up radically to 16% of GDP and nearly $7000 per capita.
For example, the NHS in Britian was started in the late 1940s. Australias nationwide system was introduced in the 70s. The netherlands didn’t have UHC until a few years ago. Israel’s UHC system didn’t start until the 1990s. But all have far lower health care costs than we do both in per capita and as a % of GDP. So it didn’t matter when every country other than the US implemented UHC (the 40s, 70s, 90s, etc), they still spend far less on health care than we do.
There are unbelievable wastes out there in hospitals often due to shortsighted cost cutting and political maneuvering. One example: When I worked at a hospital we had racks and racks of modems talking to terminals which were being replaced slowly by other systems or moved. The connections to the terminals were through phone lines which were billed, not internal networks. Instead of having enough people to actually manage the documentation along with the removal and keep track so the phone line could be canceled, they reduced tier 1 support to a skeleton crew. They also could have hired a couple of temps, explained how to track down what modems were in use and which were not, and covered their cost in the first week of reduced phone bills. They did not do it partially because to do so would admit they did not have enough people to keep up before cutting the support staff. Also, they had to pay overtime because they did not retain enough people to cover adequately. I worked over a years worth of hours in 8 months, and I had only been working overtime in the last 5 months. They could have had an extra person for all the money they wasted in overtime.
Reducing support staff meant that it was no longer possible to actually clean the machines on schedule, which lead to fires which ruined the equipment. Twice I had to call someone asking if their terminal was still on fire when I came on shift. Once the Pentium I was using to write a report on caught fire due to dust in the case. Hospitals are very dusty places with all the linens being changed everyday and cleaning IT equipment periodically is necessary, more so than in most business environments.
I could attribute the waste I saw often with particular individuals trying to gain political advantage. I hear that it is pretty typical. I don’t know that any health care reform will address this, but it is one place health care dollars go needlessly.
So why did you ask for a cite from me?
In the OP you made it seem as if you were only including administrative costs of insurance companies in your total.
Well, I wasn’t trying to be snarky; I was thinking that those figures were pre-recession. I think the average profit projection is more like 2.2%, according to an article I skimmed in Forbes while waiting for the dentist.
If 20 million people get H1N1 and half of them, or 10 million, seek treatment that costs $1000 each – not an unreasonable figure – that’s $10 billion right there. Either way, the executive still gets a beach home because it’s illegal to not pay employees their agreed-upon salaries, but the company itself must have some cash reserves for worst case scenarios.
Generally speaking, health insurance itself is not a high profit business.
Perhaps one solution would be to make all the health insurance companies private, taking them off the stock market. Then they don’t have to spend time, money, and effort pleasing shareholders or trying to lure new buyers.
I see what you’re saying, but whether or not health insurance is a high profit or a low profit industry is kind of dodging the issue: 100% of zero is still 0, and 1% of a trillion dollars is still 10,000,000,000.
Whatever profits are being made via payments for health insurance, is money that I consider better spent on health care. But I could be wrong.
Well, I understand what you’re saying, but there are quite a few factors to consider.
Right now the government does not pay claims itself (it delegates that work to private insurers), it does not have an infrastructure for doing so, and it doesn’t have to underwrite risk and comply with 50 different sets of requirements from 50 different states. Insurers in NYS have to report to 239 separate regulating agencies at both the federal and state level. That takes people, and those folks don’t work for free.
Abolishing health insurance companies would also remove a lot of taxes, both corporate and payroll, from the system. Those companies have to pay corporate taxes. They also pay local property taxes where they physically reside. Their employees have to pay federal, state, local, and Medicare taxes. That’s a lot of money to take out of the system.
Just trying to be practical here and consider various angles that you don’t often hear about.
There certainly are reforms that need to be made. I agree with that. We just have to make sure those reforms don’t come back to bite us. 
Because I was ignoring the actual text of any posts that didn’t include a cite. This thread is about discovery of reality, not perceptions nor things “I have heard”. For that to happen, there has to be cited evidence. It was more worth my time to tell people to get citing than argue about a bunch of posts that had nothing of substance in them.
Insurance Company Must Pay $10 Million For Revoking Policy Of Teen With HIV | HuffPost Latest News Here’s where some of the money goes. it goes to law suits for rescinding care on made up pre -existing conditions. The insurance companies are driven by profits only, not trying to provide health care.
Cite?
A friend of mine works for a major UK health insurer. He has told me that they actually run at a slight loss based on pure premiums. They make their money on interest and other investment income from premiums.
That’s probably true in the UK. Upthread, US insurance company profits were pegged at 6%. Profits plus overhead is nearly 20%.
I would imagine that this is lumped under “overhead” among insurance companies, which has already been quantified several times in this thread. Unless you’re contending that this explains the missing $2000 PPPY ($700,000,000,000 total), it’s not really relevant to our discussion. I severely doubt that, since it would mean that insurance companies would be paying double to four times the amount on law suits as they pay to employ their entire work force and not noticing that this wasn’t terribly profitable.
Alright so I finally felt like doing some more research, and this item seemed like the one which could be proven or disproven most easily.
Here are spending figures as broken down by age for the US, Japan, Canada, and New Zealand respectively:
http://healthcare.ncpa.org/images/figure10.jpg
http://secure.cihi.ca/cihiweb/products/nhex_2008_en.pdf (PDF)
http://www.treasury.govt.nz/publications/research-policy/ppp/2006/06-01/tpp06-01-037.gif
America spends about $2000 PPPY for this age group. I’m sorry I couldn’t find a better graph or data set than this. (There’s this one from 1995 and this more official data which separates things into age groups so wide as to be meaningless.)
The Japanese graph appears to break things down into 5 year groups and states the total spending for that five year period. The 25-29 age group takes Y500,000 or about $5000US. Per year, that’s $1000US PPPY for people aged 25-29 on average.
Canada appears to spend about $3,800CA which is probably for the full 5 years so it’s about $760CA or about $700US.
New Zealand appears to spend about $1000NZ or about $700US.
Now, if life support was a significant factor of health spending, we would expect to see two things:
Health spending in the US for young people with no particular need of health care would cost no or little more than other nations.
The quotient of spending between those who would be on life support (i.e. the elderly) and the young would be greater in the US than other nations.
Item #1 has already been shown to be false, so it looks like there isn’t too much point in looking at #2. Moreover, I can’t seem to figure out how to convert between one graph and another. But either way my estimation would be that this is a myth as well. I doubt that life support is playing any significant factor in our overall spending.
http://content.healthaffairs.org/cgi/content/full/22/3/89
So, where does the money go?
