Health Care Costs
01/23/2008
Why not a single-payor, national, universal health-care system?
The ten largest health care companies in the U.S. had a combined profit of $18.31 billion in fiscal year 2006 (according to a www.Forbes.com report of March 29, 2007). That’s profit, not revenue, expenses, etc. And it’s in addition to bloated six- and seven-figure CEO salaries and seven- and eight-figure severance packages. The kicker is that these companies have huge marketing budgets—in other words, they are taking part of the money we pay them and using it to try to entice us pay them more!
The top ten drug companies netted a combined profit of nearly $50 billion with an industry-wide net profit margin of 20.7%—anyone in the business world will tell you a 20% earnings after taxes (EAT) rate is incredible. But they have all that research and development to pay for, right? For the top ten drug companies, their profits were 31.6% higher than their R&D costs.
How can anyone say it would be more expensive to have a single-payor system than to pay excessive salaries, stock options, golden parachutes, profit dividends, management retreats, and marketing budgets?
Traditional “competition-based” market influences do not apply to health care, because the demand is almost perfectly inelastic; i.e., the demand remains the same despite fluctuations in price. People will pay all they can muster for their health and life. Therefore, the traditional winnowing effect of competition on price gougers in the free market does not apply.
I’m disappointed that even the Democrats are still including private health companies in their “universal health care” proposals. It’s time to pull the trigger, chase away the vultures from our dying health-care system, and create a single-payor universal system.
Mike W. said,
January 28, 2008 @ 4:47 pm
I just don’t understand why you think that the government can run an efficient health care system. Sure the bureaucrats that manage it will make less money that the CEOs (and the amount they make is criminal) but they won’t have an interest in making it run well. There would need to be levels upon levels of managers reporting to managers about the administrative process.
There are those who think that the best way to control health care costs is to make the market completely open and free. I don’t know that I buy into it, but hear me out. For any non-urgent, non-emergent treatment, the patient could seek out the provider that would do the work for the cheapest. If someone will take out my gallbladder for $1000 instead of $10,000 then I would chose that provider.
Two procedures (or classifications of procedures) that exemplify this are Lasic and plastic surgery. The cost of having these procedures done has plummeted over the years precisely because insurance doesn’t pay for the procedures.
Emergent surgery and trauma care would need to be covered in a government sponsored universal payor system. All other care would be placed on the free market and prices would precipitously drop. Chronic diseases are poorly treated in conventional (insurance-covered) medicine and my next point would hopefully provider better care and outcomes.
However, two other things would need to take place. Tort reform to lessen frivolous law suits and the elimination of the AMA’s monopoly on health care. Most OB/GYN’s don’t want midwives delivering babies because every time that happens, that’s a few thousand out of his/her wallet. It’s much more economical and a very safe alternative for many mothers-to-be. But with the AMA seeking to protect the institution of medicine, they will never allow for a free market of health care, but will continue to behave as a monopoly, keeping prices up and unreachable for the many without “establishment, institutionalized” insurance.
One last point: the pharmaceutical industry is one of the biggest scams in our country. Most of these companies are making money copying the medications that others invested the R&D for. Because they are all making incredible profit on these “me-too” drugs, there is no market pressure to develop new drugs that actually work in new ways and actually perform well instead of just adequately.
Centrist said,
January 29, 2008 @ 5:15 pm
I didn’t say I think the government can run an “efficient” healthcare system–it probably can’t (although it might). But efficiency, as defined in economics, eats its young. All the most brutal and inhumane rulers in history have been very efficient. I think compassion and humanity are more important than efficiency.
There are as many mid-level managers in the current healthcare system as there would be in a single-payor system.
The problem with shopping around for a deal on healthcare is that eventually the system distills into great services and doctors for those who can afford it versus substandard services, technology, and providers for those who can’t. It just puts us back in the same spot, good healthcare for the “haves” and mediocre or no healthcare for the “have-nots.” And (my medical knowledge isn’t extensive, but) won’t the gallbladder eventually become a big emergent problem if untreated because the patient can’t afford the $1,000?
Abou the drug companies, there’s a clip in the extra features of Sicko where Moore talks to former Editor-in-Chief of the New England Journal of Medicine and author of ‘The Truth About the Drug Companies,’ Marcia Angell, M.D. who says that most of the ground-breaking, innovative research is done by the NIH and universities. (I didn’t include it in my Sicko review because I thought people might think I was piling it on.)
Mike W. said,
January 29, 2008 @ 5:50 pm
Marcia Angell, M.D. rocks! She is bright and puts great data and information behind the arguments that Michael Moore makes. I had heard initially that the movie that ended up as Sicko! was going to be about the pharmaceutical industry and I was really looking forward to it. I still think he needs to make that movie.
I understand what you are saying, Dave. I hope that there will be a system that will provide for every individual and family that needs health care. If there were no insurance at all, costs would drop, physicians would be able to provide care without the paperwork demands created by Medicare and Medicaid. I guess that one of the big concerns I have, from a physician’s perspective, about a government-run system. I probably spend 1/4 of my time doing paper work. Much of that paper work is to justify to the government why I am doing what I am doing. If all my patients were to require proof in triplicate for why a certain service is needed it would further restrict the time available to provide care for the patient. The regulation that surrounds health care now is already large and I fear that if the entire system were such it would become insurmountable.
Just my concerns. I agree that something needs to fix the problem. I just don’t see government as the solution in this case.
Mike W. said,
January 29, 2008 @ 6:31 pm
One additional thought from Montesquieu: “A people having sovereign power should do for itself all it can do well, and what it cannot do well, it must do through its ministers.” The question, then, is whether we, as a sovereign people, are able to do health care well. You may argue we can’t. I would argue we aren’t willing to. Either way, maybe it is time for the government to take a crack at it.