Health Care, Profit vs. Non-Profit

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The lines are drawn in all manner of peculiar and gerrymandered shapes around the issue of health care. Seems nearly everyone talking about it is attempting to obfuscate the core issue at hand: For Profit vs. Not-For-Profit health care insurance in America. Incumbents are getting loads of promises, threats, and campaign money for their war chests on this issue.

The core issue: The government is a not-for-profit organization. Virtually all private health insurance providers in America are for-profit. Profits are passed on to consumers as part of the price of their policy premiums. Investors, boards of directors, and executives and managers of for-profit health insurance companies, who have reaped enormous rewards from the health insurance industry profits, are lined up to oppose Obama's not-for-profit health insurance plan. Some consumer groups (not including investor consumer groups), are lined up to support Obama's plan.

What profits are at stake? 14.2 million per year, average salaries for the top 7 private health insurer executives to begin with. Some claim health insurance profits have risen nearly a 1000 percent over the last decade. That's probably overstated, but, even a conservative 700% estimate in 10 years, speaks to gouging. Here is a list of health care profit increases since 2005. One fact is known, health insurance premiums have risen 5 times faster than wages since the year 2000. And that has consumers railing. They are literally going broke due to spiraling health insurance premiums.

The National Coalition on Health Care cites:

A recent study by Harvard University researchers found that the average out-of-pocket medical debt for those who filed for bankruptcy was $12,000. The study noted that 68 percent of those who filed for bankruptcy had health insurance. In addition, the study found that 50 percent of all bankruptcy filings were partly the result of medical expenses.9 Every 30 seconds in the United States someone files for bankruptcy in the aftermath of a serious health problem.

Even employer paid health insurance rates are hitting employees in the pocket book, since wage increases which would have been passed on to employee's have been spent instead on the dramatic increases in health insurance premiums paid by employers.

Everyone, conservatives and liberals alike, agree that something has to be done ASAP to halt the rising cost of health insurance. It is bankrupting the government, the States, and 10's of millions of Americans. The debate is over how.

The single most effective cut in health care insurance premiums would be to cut insurer's profits out of the loop. No other step could would result in greater cost savings in as short a time, as this one step. This is why the Obama administration is pushing for government sponsored health insurance with no profits being skimmed off the top of every health care transaction.

Doctors, nurses, hospitals and clinics would not see any change in their occupational incomes, but everyone's health insurance premiums would stop rising as fast as they have been these last 5 years. Consumers groups hail the measure. Investor's and insurers are scared to death of it.

The reason investors fear government sponsored health insurance is not primarily the loss of profits by health insurance companies. In the short term, those would not change dramatically, but would likely drop in the longer term. What they fear most is the model. Non-profit health insurance could be so successful in reducing the inflation of health care premiums, that they are certain such success would lead to a slippery slope whereon, the next step would be non-profit health care delivery, (hospitals, clinics, private practices, and limited liability partnerships).

In fact, a national slide toward a predominantly not-for-profit health care industry, in which the boards of directors of non-profit hospitals and clinics are not paid at all, or at most, a 10th of what for-profit boards are paid, and where there are no shareholders and investors skimming profits, is a scary prospect for investors. Executives would see compensation packages pressured downward as competition between non-profit health care deliverers promoted the most and best health care delivery per dollar, as part of their advertising and reputation promotion.

Incumbents however, are going to make out like bandits on this issue. Republican incumbents are raking in money for their reelection campaigns from the for-profit corporate special interests of all kinds, not just health insurers, who fear this proposed non-profit model. Liberal Democrat incumbents of course, are benefiting from consumer advocate lobbyists promising potentially unprecedented get out the vote campaigns in favor of Democrats. Some conservative Democrats are benefiting from both sides of this issue, consumer advocate lobbyist's favor, and corporate lobbyists seeking to sway their vote on the reform bill.

Regardless of which side of this issue a voter stands on, the battle is being fought by lobbyists on Capital Hill, and Congressional incumbents seeking reelection are the monkey's in the middle. Usually, in circumstances like these, the American people wind up with something so compromised as to be of less benefit in the long run than doing nothing at all. When a problem goes unaddressed, the pressure builds to take dramatic action. Time will tell if the pressure on the health care cost issue has built up sufficiently to generate a real beneficial change for the nation and its health care industry future.

Conservatives are right in saying there is a slippery slope here, as organizations like the Alliance for Advancing Non-Profit Health Care already exist and are lobbying Congress. Liberals are also right in saying that the shortest most effective route to lower health care costs is non-profit health care where shareholder, director, and executive administration profits and fees are removed from the entire cost cycle of health care.

However, folks at Vote Out Incumbents Democracy are also right in saying there may be enough Congressional incumbents putting their gerrymandered reelection priorities far out ahead of consumers and patients, as a whole, to jeopardize any reform effort put forth.

The people have given the federal government a mandate: create affordable, sustainable, and accessible health care in America for all who want it. In fact, a recent poll says 72% of Americans want a government sponsored health care insurance option. Republicans are opposed to it (apparently, trying to keep their 25% approval rating intact). Though the number has been dropping, about 9 conservative democrats, (Blue Dogs), are threatening to block the bill's passage on a simple majority vote. As I wrote here at WB both before, and after, Obama's election, this President's biggest hurdle will be Congressional Democrats, not Republicans. It is true now of the Health Care reform.

Will the American people and the Obama administration be able to twist the arms of those 9 or so, conservative D's, and force them to act on the bidding of nearly 3/4 of all Americans? At this moment in time, that is impossible to answer. It really could go either way at this point.

When incumbents put their gerrymandered constituents agenda ahead of the good of the nation and the majority will of the American people on so fundamental an issue as affordable health care, and feel secure in doing so, it is obvious that our political system is as broken as our health care system. Voting out such incumbents however, shall prove to be an even greater challenge than health care reform.


Missing from this article are figures that compare the premiums vs claims paid of for-profit insurers and Medicare. I have seen numbers in the past that indicate that the inefficiencies in government paid claims make the cost similar. As radical as it seems, the surest way to prevent over-utilization of health care resources (rationing) is to require the recipient to pay for it. Medical savings plans plus catastrophic coverage is one way to accomplish this goal. The money in your medical savings is yours to use for other things after reaching a certain level. "Do I go to the doctor for this
cold, or do I try the simple remedies that have always worked for me in the past, and save $100?"


My latest research demonstrates that the most efficient health care system in America is the V.A., the second most is Medicare, where overall quality is higher and cost inflation is lower than the private sector for the last 8 years.

It is a verifiable fact that inflation of health care cost is higher in the private sector than in the government sponsored health programs. No doubt due to the absence of the for-profit insurance administration costs and middlemen, but, also, quality of care is cited as slowing the costs increases in government sponsored health care, i.e. VA and Medicare.

These are inconvenient facts, for many, but facts they remain.

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This page contains a single entry by David R. Remer published on June 23, 2009 4:32 AM.

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