Healthcare Escape Trends: It’s Not the Health Insurers, Stupid!

After three years of our own government trying to undermine the Affordable Care Act (with the percent of uninsured now rising as a result), it’s refreshing to hear politicians talking about getting the U.S. closer to universal coverage. The debate among the Democratic Presidential candidates is not about the feasibility of universal coverage but about Medicare for All (which as ProPublica explained, is neither really Medicare nor necessarily for all) versus more incremental approaches.

The favorite whipping boy in our current healthcare system is the health insurance industry. Candidates like Bernie Sanders or Elizabeth Warren decry the industry’s profits, arguing that we’d be much better off abolishing private health insurance. That appeals to many people because, really, who among us — myself included — hasn’t seen larger deductibles, higher premiums, smaller networks, and perhaps some denied claims?

As easy as it is to blame the health insurance industry and its profits as the culprit for our system’s dysfunction, it’s not really fair. As I’ll elaborate:

  • its profits aren’t that big;
  • many healthcare organizations are making profits;
  • our public health coverage programs usually aren’t actually;
  • why healthcare?

Health insurance profits

When politicians point to the estimated $20b+ in health insurance annual profits, it sounds like a big number. It is a big number — except when you are dealing with an industry like healthcare, which has expenditures of over $3.5 trillion. $20b is barely a rounding error.

One can rightly criticize the health insurance industry for many things — its coverage is way too complicated, its decisions often too arbitrary, it has (historically) insulated us from the cost of services — but the profits per se are not really the issue. Take all its profits out, and we still don’t make a dent in spending. Instead of health insurance profits, we should be focusing on how to reduce the size of the industry and its administrative costs.

Even in a Sanders-style Medicare for all, some entities would be negotiating payment rates, doing utilization review, processing claims, handling customer service, doing provider relations, and marketing. Just like health insurers.

Healthcare profits

Many politicians also point out the profits in the pharmaceutical industry, which dwarf that of the health insurance industry. After all, the pharmaceutical industry has blundered its way into rivaling the health insurance industry as the sector’s villains, largely due to its habit of using America as its favorite piggy bank through its aggressive (and mysterious) pricing here.

But let’s be clear: it is not just health insurers or drug companies making money in healthcare. As Elizabeth Rosenthal recently pointed out, that beloved local institution, the hospital, is often making some pretty nice profits — whether they are “non-profit” or not. Even the supposed “non-profit hospitals can act in a very predatory manner, as Kaiser Health News has been exposing. We’re increasingly moving to local hospital monopolies, and those monopolies tend not to improve quality but, rather, increase costs.

Add in physicians, pharmacies, device manufacturers, dialysis centers, and a host of other health care organizations and professionals, and it’s pretty clear that there is a lot of money being made in healthcare.

Public health coverage programs

Proponents of Medicare For All seem to ignore the facts that our current Medicare program has about a third of its enrollees in a private Medicare Advantage program, all of its Part D enrollees in private plans, and most of the people in “traditional” Medicare opt to have private Medicare supplements in addition to Medicare.

Our other public health coverage programs, like Medicaid or TRICARE, now have most of their enrollees in private managed care programs. It is true that the VA has stayed public, and is the closest thing we have to the United Kingdom’s National Health Service as a true government-run system, but the biggest recent VA innovation has been to allow choice of private health care options.

Some Medicare for All proposals claim that there would be no need for private insurance, but history suggests staying purely public would be difficult.

Why healthcare?

Healthcare is important, often essential. We sometimes get too much of it, but it is hard to argue that most people would be better off without it, and many would be dead. But that’s true about many things in life.

We need to eat to live. Most of us would miss eating before we’d miss healthcare. To help ensure that people can afford to eat, we have SNAP (Supplemental Nutrition Assistance Program), which provides financial assistance to about 40 million people so they can purchase food.

What we do not do, though, is to suggest that groceries stores should not make profits. What we do not do is say the government should be in the grocery business. We’re quite happy to be the financier for lower income persons and to let others make their own food choices, no matter how badly they do it.

Similarly, most would say housing is an essential component of life, yet we have at least a half million people homeless everyday, with anywhere between six million to thirty million people in substandard/hazardous housing. A third of us pay more than 30% of our income on housing. We do offer public housing, but we support more people in private housing through Section 8. What we do not say is that no one should make money in housing, or that the government should provide all housing.

Even in education, where most students are public, private options remain important to many people, at all levels of education.

It’s hard to see the argument why healthcare is the only essential for which private options should not exist.

Profits in healthcare may be a visible sore point to many, but profits in a capitalistic society shouldn’t be a thing to be ashamed of. The problem is usually how those profits are made.

In health insurance — and in health care generally — profits have been problematic because they often don’t seem to be the result of making us healthy. We shouldn’t just be a conduit to making other people in healthcare richer; they should get richer if and only if they are actually helping us achieve healthier lives.

We just have a poor understanding of how to achieve that goal, and how to shop for the people, organizations, and services that we need to do so. If politicians, and everyone else involved in healthcare, would focus on those, we wouldn’t need to focus on profits.

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