Health Care Payment System Discussion

Recently I posted a list of 10 Things Every American should Know About Health Care Reform from moveon.org. I included this note:

This is a good start to true reform. Does anyone remember that health insurance companies used to operate under a cap on profits? If I recall, that went away in the late 80s early 90s. Insurers went from paying 95% of every premium dollar to direct services to paying 81% of premium dollars to direct services. (http:/.../dangerousintersection.org/2009/12/13/cap-the-profits-of-health-care-insurers/
) Guess where the other 14% is going? Kaiser EDU states that 2.3 trillion dollars a year are spent on health care. Using very rough math, if even half of that 2.3 trillion comes from insurance premiums paid out that means that more than 15 BILLION dollars a year go to straight into the pockets of investors. Sounds more like wealth care to me. (http://www.kaiseredu.org/topics_im.asp?imID=1&parentID=61&id=358)

Carl Wilson responded:
I don't agree that it all goes to investors at all. Insurance companies need large stockpiles of money to pay for catastophic events. In the case of healthcare that could be an emerging disease like AIDs, Swine flue, or any number of predicted emerging plagues.
I'm not saying the Ins co's are angels, far from it. I'm just saying don't malign them ... See morefor having large profits ... thats how they pay the big bills when they arrive.
Also when a stock price goes up because the earnings per share is higher its the investing market wishing to buy that stock from another investor that is footing the bill. The company is not forking out a dime unless they are buying stock back for strategic reasons.
Only when there are dividends paid is the co paying out the bucks.

To Which I responded:
you make some interesting points Carl. I always thought profits were what was left over after business operating expenses were accounted for, and I would assume reserves would be considered an operating expense, at least that's what I learned in HS accounting. Also, the jump from 5% to 19% not-for-direct-services happened after the caps were ... See morelifted on health insurance profits. So I do assume that insurance companies had reserves when they were operating at 95% for-services. But mainly the point I'm poorly making here is that I think health care for profit is immoral. And IMHO it's an unacceptable conflict of interest for a health care provider to also answer to investors who expect profit. We are each and every one of us investing in our health care system when we pay premiums (or when our employers pay premiums on our behalf), but we don't get to share in the profits. I support a single payer system, even if that payer is a private not-for-profit. I am happy to see any change to our sad system that provides more health services to people who formerly didn't have access to it.

To Which Carl Responded:

Just in the last hour on NPR they had a rep from CIGNA that said their profit margin was only 2%. That said he said the reserves would only pay for a few days of the health Insurance annual claims. CIGNA provides the Health Care for NPR. Dial in and give a listen. What he says mirrors what I have heard other Ins Co reps and CEO's state.
I think where many people get misled is that they think a billion dollar profit is a big thing. If they looked at the whole accounting of the system they would see it is perhaps not all that much.
I don't like Health Care for profit either but 2% is hardly profit in my opinion. If I don't bring in at least 10-15% profit on my jobs I would be let go, and its the retained earnings on that profit that quite literally have kept me employed the last few months while the construction industry digs out of that other mess.
Even in a not for profit scenario they would still be working to achieve retained earnings and carrying them over from year to year if they are so lucky. If they didn't have retained earnings, and that would go for a single payer plan also, the end result could likely be either higher premiums or higher taxes.
In other words there is no free lunch......... See more
Thanks for the feedback Caren....

At which point Julia P. jumped in:

Hey how about forcing insurance companies to be non profit so consumers are their first priority. For profits have to keep their shareholders as first priority. And the only way to make profits on insurance is to take in more premiums than you pay out in benefits. US is the only industrialized country that allows health insurance companies to be for profit.

And I had to answer as well:
Carl, I get what you say about your own job and the construction industry. I don't think they are comparable industries, however. I just don't think our health-care payment system should be private for-profit. Health care, like education, fire protection, and law enforcement, is essential to a healthy thriving society.

I would expect an insurance company rep or CEO to defend their status as a for-profit entity. And I have read and heard a lot of those same stories. I am leery of taking their word for it that the system they benefit from works all that well for us. The WHO rates us at 36th, behind pretty much every other developed country, for health care.

A multitude of sins can be hidden in statistics. Just ask the Enron employees. What mystifies me the most is that the fiscally conservative lawmakers don't seem to realize that the billions of dollars that go to investors pockets could pay for so many much needed services nationally. Wouldn't the truly conservative approach would be to apply those dollars to services instead of distributing them to shareholders? It seems very wasteful to me.... See more

I can't reconcile the financial reality of for-profit health insurance with my political convictions. They are just incompatible.

Thanks for giving me the opportunity to rant some more.

Carl adds a little something:
I just remembered another chat on NPR yesterday where the person bei ng interviewed was a Brit that had been living herre with his family and his son was diagnosed with Type1 Diabetes. He said that while the cost here was high his son had access to state of the art technology. When they later went back to the UK he said the cost was lower but they ... See moreno longer had access to to the technology (his insulin pump specifically).
There was a direct correlation in his opinion to access to newer technologies in for profit systems versus not for profit/single payer systems.
Something to think about...perhaps research some more. There may be unintended consequences we don't understand enough to see with changing a system so abruptly.
I am clearly a change in moderation person. I would have been thrilled to have them address the anti-trust issue and pre-existing conditions to start with, see the outcomes, and then take on some more.

To which I reply:
Again, I am skeptical of arguments about other systems' failure to meet the health needs of the majority just because they are not always getting state-of-the-art technology. Anyone with a chronic disease is at risk and deserves the best treatment available. But are we supposed to settle for a system that completely excludes millions of people ... See morejust so a few can have the best? We have an opportunity NOW to make a payment system that is both affordable and includes everyone. Our system doesn't have to be a duplicate of any other country's system. We have the ability to create our own system that allows access for everyone AND state of the art insulin pumps AND doesn't waste money on dividends to shareholders. Is that so preposterous? We are the richest freaking nation on the planet! I think the problem comes down to pure greed and selfishness. "I've got mine, it's up to you to get yours" is the underlying message I'm hearing all the time in the media. I think that's a fine business model, but an extremely poor model for health care delivery. Maybe what we need is a good old fashioned class war.