In a Letter to the New York Times, Burton C. D’Lugoff & James Hawthorne note that "The United States is the only developed country that allows for-profit companies to eat up 20 cents of every premium dollar to provide insurance for basic health care." Favoring no specific solution, they instead urge, " The important thing is to get the profit motive out of health care (financing)."
Thus far, Congress has balked at health care reform due to the projected costs, about $1 trillion over the next ten years. In contrast, the Fed has been most aggressive in supporting the market for mortgage-backed securities ... purchasing about $905 billion worth of government-guaranteed mortgage-backed securities through mid-September (about 80 to 85 percent of the market).
Referring to these purchases, George Miller, executive director for the American Securitization Forum declared, “This is public support ... the mortgage risk is held by the taxpayer.”
Viewed solely on the basis of its cost, health care reform does seem expensive. But, when viewed relative to other initiatives of similar cost (and less certain benefit) the investment in health care reform is good value.
Here's Milton Friedman on Self-Interest and the Profit Motive.
ReplyDeleteAlso, here's the WSJ Guide to Obamacare.
Cheers!
from anonymous:
ReplyDeleteIt is difficult to ascertain what you are advocating.
D’Lugoff and Hawthorne frame their views concerning the starting point for healthcare reform as the elimination of the profit incentive built into the American healthcare system. They focus their letter on the issue of removing the profit incentive for the insurers in the industry. No mention is made of profit incentives to other sectors of the industry such as pharma, biotech, physicians, or hospitals. You appear to want to argue against their view that the profit incentive be removed by attempting to lend legitimacy to the concept of profit incentives.
While that may be a reasonable perspective, your argument is weakened by the “us too” analogy or comparison to the exorbitant bail-out efforts of the federal government in the midst of an economic crisis. Indeed examined purely from a numbers perspective, your point that investing in healthcare as good value may be a good starting point (I will not get into a discussion regarding the “value” aspect of the investment). But your view is not on point with the arguments raised by the authors.
D’Lugoff and Hawthorne are not making the argument that government investment in healthcare is a bad choice. Rather, they start from the premise that the cost of healthcare contains waste. They imply that the profit incentive in the insurer sector of the industry contains significant waste which might serve as a starting point for engaging in healthcare reform. They imply that perhaps the problem with rising healthcare costs is in large part the fault of greedy insurers who are profit-driven.
One might wonder if removing insurers’ profit incentive might have an effect on other behaviors (including profit-seeking endeavors by other industry players) which might lower the cost of healthcare. It remains to be seen whether or not curtailing the profit incentives of insurers will have a trickle down effect in diminishing profit-seeking behavior in other sectors. Suffice it to say that save the insurance industry, there is no other stakeholder in the industry that would argue vociferously about any virtue in the insurer industry. At best, they are a necessary evil.
It seems to me that their suggestion is a good starting point. Of course it will be necessary to study the reform measures undertaken in the Swiss healthcare reform, specifically examining administrative costs and their justification. Somehow, I can still see the healthcare insurance executives gouging out their exorbitant compensation packages.
As for profit incentives in other sectors of healthcare, I’m afraid the difficult problem is in deciding how much incentive do we want to allow in maintaining this country’s competitive edge in advances in healthcare. If this is not a priority, then cut out the profit incentives and make the goals of the American healthcare system to provide merely good healthcare to its citizens.
we support removing the profit in health care financing.
ReplyDeleteprofit for the provider sector, especially to incentivize innovation, could provide value and sustainability to the system.
unfortunately, these incentives are provided for rather weakly - only in 'pilot projects' under current proposals.
BD writes:
ReplyDeletethese guys are right in one respect; the MLR (now euphemized by AHIP to "Medical COST ratios) extract to much profit out of the Health Care dollar. Some for profit HMO's at their worst had MLR's of 60 percent!
They missed a small part of HR-3200 which would allow the Secy of HHS to set a lower limit.( Meaning higher $ levels spent on patients and allow higher Physician fees copmpared to a percent of medicare as well as lower premiums).
We all know that HC premiums have risen greater than 90% while salaries inreased only 20 %. Many NFP HMO's and Ins Cos have a MLR of 90 percent with 8 % for admin & 2% for reserves. I would love this passed. Physicians now are on a Utility pricing model for the most part, so why not the third party insurers??
I am sure AHIP is lobbying hard on this, & it may not pass the House floor or the Senate-House Conference com. There is no similar piece in either the Senate Finance com or the HELP bill, but I hear that staff has added (this) to the Bill without the HELP com (yet) seeing it.
BD