Public Enemy #?

I am no big fan of managed care companies. As a physician I am constantly in an adversarial position with them. Besides, they continue to raise their rates each and every year to the point where it is making it impossible for anyone to afford. They are the easy enemy. In fact, they are public enemy #1. But are they so bad? Jeff Jacoby does a nice spread in the left-leaning Boston Globe that may open your eyes. He references the analysis by the Associated Press for much of his information. I will highlight it here:

• On the Fortune 500 list of top industries, health insurance companies ranked 35th in profitability in 2008; their overall profit margin was a mere 2.2 percent. They lagged far behind such industries as pharmaceuticals, which showed a profit margin of 19.3 percent, railroads (12.6 percent), and mining (11.5 percent).


• Among health insurers, the best performer last year was HealthSpring, which showed a profit of 5.4 percent and is a less profitable margin than was achieved by the makers of Tupperware, Clorox bleach, and Molson and Coors beers.


• For the most recent quarter of 2009, health-insurance plans earned profits of only 3.3 percent, ranking them 86th on the expanded Yahoo! Finance list of US industries. Makers of software applications, by contrast, are pulling in profits of nearly 22 percent.

He summarizes that:

The notion that health insurers “make more money than any other business in America today’’ is preposterous. Advocates of a public option may find it tactically expedient to paint insurers as insatiable predators, swollen with ill-gotten profits. The reality is otherwise.

He makes some very interesting points and the article is well worth your time. The problem with managed care companies is that they are dealing with human lives. People die as a result of their decisions (whether to cover or not to cover fellow human beings). I also think that the term "profit" is not so easy to understand. These companies are swollen with administrators making massive salaries. That is where the money is going and counts against net profit. These people create so many hurdles that hospitals have to replicate the tactic of hiring more and more administrators in order to get paid. This is where the bloat is. The bottom line is that the cost of health insurance is ludicrous and as Jacoby states, "The critics do have one thing right: More competition would bring down health care premiums." So let's find the right way to get those premiums down (ex. tort reform to stop defensive medicine, buying insurance across state lines, etc.). The whole "public option" is a distraction keeping our attention off what matters.