Who Is Making the Biggest Profits From U.S. Healthcare? You Might Be Surprised . . .

Healthcare –and healthcare reform—is complicated, in part because so much of what we think we know about American medicine turns out to be untrue. For instance, one would assume that more expensive care would be better. But the Dartmouth research has taught us that isn’t the case. Most people also assume that for-profit insurers are making a fat profit; after all, look at how high insurance premiums are! 

But as Rick Newman points out in the most recent issue of U.S. News & World Report , “blaming insurance firms for runaway healthcare costs is a weak argument, because the insurance industry isn't all that profitable to start with."

Over the past year, “the profit margin for health insurance companies was a modest 3.4 percent,” Newman points out, quoting data provided by Morningstar, a company that rates mutual funds. Morningstar would have no reason to low-ball the insurance industry’s profits; its readers are looking for highly profitable sectors of the economy where they can invest.  But the health plan industry is not one of those sectors: insurers ranks 87th out of 215 industries.

“The most profitable industry over the past year has been beverages, with a 25.9 percent profit margin,” Newman reports, “Right behind that were healthcare real-estate trusts (firms that are basically the landlords for hospitals and healthcare facilities) and application-software (think Windows).  The average for the oil and gas industry overall was 10.2 percent, three times the margin in the health insurance industry. And that's nothing compared with high-fliers like Google—which had a 20.6 percent margin—and Microsoft, at 24.9 percent.

“Profit margins basically reflect the percentage of revenue left over after paying salaries, expenses, taxes and lots of other things,” Newman explains. When it comes to insurers, “revenue” equals all of the premiums that they receive. Those premiums are so high—and have been climbing so rapidly, in large part because the amount of money that insurers have been paying out in reimbursements to doctors, hospitals, nursing homes and patients has been rising by roughly 8% a year, each and every year, for the past ten years. Insurers have been doing their best to pass those costs on to you and me, but they haven’t been able to make huge profits. While the cost of care spirals, the number of customers who can afford to buy health insurance has been shrinking—which has meant tough times for insurers.

“Among the large, for-profit health insurers” Newman adds, “profit margins line up with the industry as a whole. UnitedHealthGroup, the biggest health insurer, had a 4.1 percent profit margin over the past 12 months. WellPoint, the next biggest, had a 4 percent profit margin. Aetna, Cigna, and Humana came in below that.”

But this isn’t to suggest that no one in our for-profit health care industry is making money. “Pharmaceutical companies have a profit margin of 16.4 percent,” Newman reports, “seventh highest of the 215 industries that Morningstar tracks.”

This is why I’m skeptical when drug-makers say that they couldn’t possibly afford to lower prices on drugs—or that if they did, they wouldn’t be able to do research. The fact is that if drug-makers, and their shareholders, could be satisfied with margins of, say 8% or 9% they could, in fact, slice prices. And since roughly 16 percent of the $2.6 trillion that we spend on healthcare goes to the pharmaceutical industry, we are talking about significant savings. (Commentators frequently say that drugs account for “just” 10% to 11% of the nation’s total health care bill. But that’s because they are only looking at the dollars you and I spend, retail, buying prescription drugs in a pharmacy. When you add in the cost of drugs administered in a hospital, a nursing home, or in a doctor’s office --plus the cost of the many medical devices that drug-makers now sell—you find that their share of the $2.6 trillion pie rises to 16%. And if anything, those devices—ranging from stents to artificial knees—are even more over-priced than the drugs.)

Prescription-drug makers are not the only companies turning a nice profit on our health care, other industries with profit margins well above the 2.2 percent median  for all U.S. industries include:  healthcare information (9.4 percent), home healthcare firms (8.5 percent), medical labs (8.2 percent), and generic drug-makers (6.5 percent).

To give a clearer picture of which healthcare firms are earning the most, Newman has compiled some data from Capital IQ, a division of Standard & Poor’s,  showing net profit margins over the past 12 months for a number of well-known companies. “The following list includes the three largest firms in each of five different sectors: biotechnology, drug manufacturers, healthcare plans, healthcare services, and medical equipment. Some of these numbers are sure to be off-putting to Americans who are making sacrifices to pay for healthcare or can't afford it at all. Yet industries like pharma and biotech remain strong job creators that have held up well during the recession, and they represent parts of the global economy where America still enjoys a leading position.”

•    Amgen (biotechnology): Profit margin, 30.6 percent
•    Gilead Sciences (biotechnology): 37.6 percent
•    Celgene Corp. (biotechnology): 11.9 percent
•    Johnson & Johnson (drug manufacturer): 20.8 percent
•    Pfizer (drug manufacturer): 16.3 percent
•    GlaxoSmithKline (drug manufacturer): 17.4 percent
•    Unitedhealth Group (healthcare plans): 4.1 percent
•    WellPoint (healthcare plans): 4 percent
•    Aetna (healthcare plans): 3.9 percent
•    MedcoHealth Solutions (healthcare services): 2.1 percent
•    Express Scripts (healthcare services): 3.7 percent
•    Quest Diagnostics (healthcare services): 8.7 percent
•    Medtronic (medical equipment): 14.9 percent
•    Baxter International (medical equipment): 17.5 percent
•    Covidien (medical equipment): 12.3 percent

Sources: Morningstar; Capital IQ . Similar data on the most recently quarterly profit margins for a number of industries and firms are available on the Web at the Yahoo Finance Industry Center

“The big money,” Newman concludes “isn't in the insurance industry.”

Let me add: this doesn’t mean that the health insurance industry doesn’t need reform and regulation. It does. But the problem is not that it has been pocketing a large share of our premiums in the form of profits. No doubt, insurers spend more than they need to on lobbying and executive salaries, marketing and  advertising; the industry could be more efficient. But that is not where the big bucks are wasted.

Billions are squandered because, in recent years, insurers have tended to pay whatever hospitals, the best-paid specialists, drug-makers, device-makers and others choose to charge for their services and products, without asking: “is the patient benefiting?”  We know that one-third of our healthcare dollars are wasted on unnecessary tests, ineffective often unproven procedures and cutting edge drugs and devices that, too often, are no better than older safer products.

In the 1990s, for-profit insurers tried to “manage care,” but rather than comparing the effectiveness of various treatments, they tended to compare prices, and say “no” to the most costly procedures even when, in some cases these were the treatments patients needed. By contrast, both the VA (the government insurance plan for veterans), and non-profit insurers like Kaiser have made good use of internal outcomes data to sort through which treatments work best for which patients when making up their formularies (lists of the products and services that they cover. Note: these lists are not carved in stone; at the VA and Kaiser doctors can go outside the formulary if they believe a particular patient needs a different treatment.)

Because the VA, Kaiser and Mayo worry about which treatments are most effective for patients –as well as patient safety—all three stopped prescribing the pain-killer Vioxx for most patients more than a year before the government forced the drug-maker to take Vioxx offer the market.  These three insurers saw that Vioxx was no more effective than older, cheaper drugs for the vast majority of patients—and they were concerned about evidence that Vioxx was causing heart attacks and strokes.

For-profit insurers, on the other hand, continued to cover Vioxx because they were worried that, if they didn’t, customers would switch to a different insurance plan, and they would lose market share. The drive to maximize profits for their shareholders drove their decision.

Under health care reform, insurers will be expected to pay more attention to the quality of care that their patients are receiving. But this could be difficult to regulate.  This is why we need a public sector insurance option to set high standards.

The healthcare reform bill in the House creates a public-sector plan and calls for Medicare reform. It proposes that Medicare change the way it sets fees, paying more for higher quality care, while discouraging unnecessary, unproven and potentially hazardous treatments.  The public sector plan for patients under 65 would incorporate Medicare’s reforms. And since for-profit insurers would have to compete with that public-sector plan, they too would have to focus on providing enrollees with higher quality, safer care at a lower price.
   

Comments

[Maggie Mahar]

Barry--

Healthcare in Mass. is so expensive, not because they have non-profit insurers, but because, according to more than two decades of Dartmouth reserach, there is more over-treatment in Mass.
than in any other spot on the globe.

I think you know this. I have written about this fact, at length, in the past. You have been reading this blog for a long time. and I have pointed out the facts and cited the evidence many times.

I'm delighted to repest info and evidence for new readers, but just don't have the time to repeat the same evidence, over and over, for someone who has been reading for a couple of years.

In writing to me, you have reocmmended conservative think tank conferences on health care. (Cato, Heritage, aetc.)

I understand that this is where you are coming from--and that's fine.

But this ideological fix on healthcare makes it very difficult for you to take in the evidence about better outocmes at Group Health (see Dartmouth reserach) and much greater patient satisfaction.

Finally, while I like to
try to respond to all readers, I really just can't respond over and over to a reader who makes the same point over and over.

I am sorry; it's just a matter of time.

[Barry Carol]

Maggie,

I’m not trying to “knock” Kaiser or defend for profit insurers. I think all participants in any business or market have a strong incentive to please customers if they want to grow or at least sustain their business model. With regard to Harvard Pilgrim, while I have a very high regard for them, I note that over 95% of the Massachusetts market is controlled by non-profit insurers yet healthcare costs there are higher than just about anyplace else.

When it comes to healthcare, I’m more skeptical of patient satisfaction surveys than I am of customer satisfaction scores for, say car or appliance manufacturers because there are several factors that can drive claimed patient satisfaction that have little to do with the quality of care provided. These criteria include the following: (1) the doctor has a very pleasant personality and good bedside manner. We get along very well. (2) I was able to get an appointment quickly and, when I arrived for my appointment, I didn’t have to wait very long in the waiting room. The waiting room was also bright, clean and had plenty of reading matter. (3) The doctor ordered lots of tests which must mean he or she is extremely thorough. More care is better care, isn’t it? (4) When I was in the hospital, the nurses were very pleasant and attentive and the food was good too. You get the picture.

If a given plan could demonstrate, for example, that its members lived longer or had lower infant mortality than members of other plans after adjusting for age, gender, socioeconomic status, regional differences in practice patterns, etc., I think it could advertise that fact effectively. Or, if the plan’s providers did such a good job of keeping their members healthy that there were meaningfully fewer inpatient bed days per thousand members, that could be effectively advertised as well, at least to employers if not to individuals. Non-profit does not mean no profit. Presumably, growth and increased market share, if they could manage them effectively, should be good things.

[Maggie Mahar]

Barry--

You write as if health care is a business and the goal of that business is to "expand market share"

The goal of health care is to improve the health of patients.

This month, Consumer Reports released a survey of customer satisfaction with HMOs and PPOs. Here are the results:

"Among HMOs, Group Health Cooperative and Health Alliance Plan topped the list and were also in the top 10 in Consumer Reports' 2007 survey. Members of these plans reported fewer problems getting the care they needed, and HAP members were more satisfied with their choice of doctors and the care they received."

PLEASE NOTE --the #2 plan, Health Alliance, is also Non-Profit.

Rounding out the top rated for HMOs were several Kaiser Permanente plans around the country; Preferred Care; Harvard Pilgrim Health Care; and Independent Health.

(PLEASE NOTE -- These top-rated HMOS are all Non-profits.)

At the bottom of the HMO list, Oxford Health Plan and Aetna Health HMO members gave the plans lower ratings for choice of providers. (PLEASE NOTE -- BOTH FOR-PROFITS) Oxford members also reported more problems getting the care they needed, while Aetna plan members reported more problems getting access to doctors."
See www.ConsumerReportsHealth.org.

Group Health is also on Dartmouth's honor roll based on quality of care and efficiency(excellent outcomes while avoiding over-treatment).

If you look at primary care, chronic disease management and outcomes, Group Health provides significantly higher quality care than the vast majority of health care center across the nation-- and it does it at a slightly lower cost than its regional competitors.

That's how one measures the success of a health care organization-- outcomes divided by costs = value.

(I would also note that in 2008, premiums for Group Health's standard option under the Federal Employee Health Plan fell by 18%.)

If it were a for-profit organization, shareholders would be intersted in "growth" of market share and more profits.

Group Health is a non-profit and so it takes its surpluses and, rather than distirbuting them to sharehodlers, plows them back into the system. That's why it has such excellent electronic medical records.

In the U.S. for-profit corporations have been hooked on the idea of "growth" since the 1980s--this has led to many problems ranging from over-extending themselves (lending--sub-prime mortgages) to cooking the books (exaggerating growth to meet Wall Street's expections--Enron).

For Group Health Cooperative, quality, not size, is the goal.

When it comes to cotrolling costs, Group Health's Patient-Centered Medical Home pilot has been extremely successful. When compared to controls,
In one year, Group Health

" Broke even on its primary care staffing investment through reduced downstream utilization costs. Emergency room/urgent care visits were 29 percent less and inpatient hospital stays for patients with conditions including diabetes, chronic obstructive pulmonary disease, congestive heart failure, and asthma were 11 percent less.

" Improved indicators of quality of care. Overall improvements were 1.6 times greater across 22 measures than in controls. In seven out of 22 measures, the proportion of people meeting their target went up by more than 5 percent over one year. One example is cholesterol management (LDL less than 100mg/dl) for people with heart disease.

" Enhanced patients’ experience, including better bonding between patients and their physicians and care teams as well as better care coordination.

" Improved care teams’ work satisfaction and reduced their emotional burnout."

Earlier this year, a A Commonwealth Fund case study spotlighted Group Health Cooperative reporting that it "is structured with incentives aligned to launch innovations and organize services in ways that make the most sense operationally and clinically."

Btw, the professor on the Lehrer report who criticized Group Health
distorted the facts.

He pointed out that health insurance in the state of Washington is more expensive than in Texas--
and neglected to mention that this is because in Texas so many sick and poor people are not in the insurance pool.

This is one way to keep premiums low.

See this table of uninsured by state and compare Texas to Washington.
http://www.statehealthfacts.org/comparebar.jsp?ind=125&cat=3

Barry, you have repeated tried to knock Kaiser and other non-profits in comments on this blog.

You provide no evidence, except to say "If it were that good, it would be bigger."

I hope all of this evidence about customer satisfaction and quality will convince you that when it comes to providing good healthcare, Kaiser,
Group Health Co-operative, etc. are at the top of the list.

[Barry Carol]

“Many non-profit private sector insurers do add value--they've created accountable care organizations that lift the quality of care while reigning in costs. I'm thinking of Kaiser Permanente in Northern Cal., Geisinger in PA, Community Co-operative in the state of Washington.”

Last Friday evening, “The News Hour With Jim Lehrer” did a segment on Group Health of Puget Sound reported by Betty Ann Bowser. The segment highlighted the fact that the doctors are on salary, the system uses electronic records which patients can access from home, and patient satisfaction is generally good. Group Health has been in business since 1947; it has 600,000 members and is the 3rd largest health plan in Washington State. Its premiums are essentially in line with its competitors or, at best, only marginally lower. In the most recent year, it raised premiums by 13%. In other words, it does not seem to be controlling costs any better than any of its private sector competitors, whether for profit or non-profit and it has not been increasing its market share.

One critic, a Washington area professor, made the point that if Group Health and those with similar business models (the health plan is both the insurer and the care provider) like Kaiser and Gesinger were really doing a much better job than their competitors, they would all be increasing their market shares and the basic model would spread like wildfire across the country. It hasn’t. Kaiser has roundly 8 million members, Group Health, as I noted, has 600,000 and Geisinger has something over 300,000. That’s 8.9 million members for the three of them combined or about 5% of the private health insurance market. None have increased overall market share or expanded into completely new geographies in recent years. If these three organizations are doing such a great job adding value while their competitors aren’t, why haven’t they been rewarded by individuals and employers with significant market share growth?

[Maggie Mahar]

Ed, Loren

Ed-- Evidence for your statement? We have reams of reserach showing better outcomes and higher quality care from non-profits.

loren-

"No matter what facts . .??""

If we're going to have rational discussions, we need facts and evidence.

Otherwise we're just spouting uninformed opinions--this is how misinformation begins to circulate.

[Loren Million]

No matter the facts you present I still feel most of the blame falls at the feet of the insurance companies and their drive for profit. All one has to do is look at what the hospitals were like before The 1980's de-regulation and how other countries make do with nationalized health. The sooner we do away with all of the insurance companies and nationalize the hospitals the better. Loren million

[Ed]

I dont know ... some of the non-profits are worse offenders than the for-profits. The non-profits can hide much better.

[Maggie Mahar]

Gregg Masters, Dave Koch, Fred, iyamwutiam, Kristi, Gregory,Carl, Benedict,

Gregg Masters--
You ask the crucial question: just how much value are for-profit insurers adding to our health care system? The answer, I'm afraid is "not much."
Many non-profit private sector insurers do add value--they've created accountable care organizations that lift the quality of care while reigning in costs. I'm thinking of Kaiser Permanente in Northern Cal., Geisinger in PA, Community Co-operative in the state of Washington.
But for-profit insurers haven't done these things. So, while their profits are not high--the fact that they are not adding value is the real problem.

Dave--The truth is that almost all large U.S. corporations pay executives exorbitant salaries.
This includes the 86 industries that are more profitable than health insurance companies.
Also, if you look at their total spending, exec salaries are a drop in the bucket compared to lobbying, marketing, advertising . . .

Fred--
You write that we need to restructure healthcare to pay for the most effective treatments-- and
so that if " providers are encouraged to distinguish what works from what doesn't, and have little incentive to offer the latter. In that case, the insurers wouldn't need to cover it, and the drugs for it wouldn't sell."

Yes . . . . but unless for-profit insuers have to compete with a strong public plan, they are likely to continue to make deals with drug-makers to cover over-priced, under-tested drugs--in exchange for discounts on other drugs.
And drug-makers are going to continue to pay doctors to "educate" other doctors about their newest, most
expensive drugs.

If we had a strong public plan it, like the VA, it would ignore the bribes (by law VA docs can't take money from anyone--perhaps this could be extended to docs in public plan networks) and the VA doesn't make deals with drug companies. It just negotiates for discounts.

iyamwutiam --
With your example of the lack of interest in TB programs, you illustrate the lack of interest in public health in this country.
This is a major reason why our overall population is less healthy than populations in other countires.
We put all of our emphasis on acute care for the relatively affluent--and don't put enough emphasis on public health programs that would help our sickest citizens--the poor.

Kristi- I agree that the patient should have the choice of a public plan. That's the right way to introduce a public plan--by letting the public vote with their feet.

Gregory- you are right,state medical boards should do a much better job of weeding out that small group of doctors who really are guilt of malpractice--usually repeatedly.

Moreover, we have to be very careful that tort reform doesn't become somethign that makes it very hard for the average person to sue--even if he truly is the victim of malpractice.
If the entity he is suing is a powerful hospital, and the case is complicated, it's likely the plaintiff will have a very hard time finding an attorney willing to spend the many hours it woud take to reserach it and take it to trial-not when there is a cap on the award (and so a cap on how much the lawyer can earn, which is usually a percentage of the award.)

Carl-- I completely agree with most of what you say--except for this part: "To me the first threshold of healthcare reform is that the roughly 48 million uninsured and 24 million underinsured obtain coverage that is roughly equivalent to Medicare and that they get it fairly quickly . . ."

We can't afford to insure the uninsured and udnerinsured unless we simultaneously begin to elminate the waste in the system.

We have more than two decades of reserach from Dartmouth showing that right now, 1/3 of our heatlhcare dollars are squandered on unncessary tests, ineffective, often unproven treatments, unnecessary hospitalizations and over-priced not fully-tested drugs and devices that are no better than the older, less expensive products that they are trying to replace."

This is a waste of money, and it's also hazardous waste that exposes patients to risk without benefit.

If we try to cover everyone without reining in the over-spending, taxpayers won't be able to afford the subsidies that patients will need to cover very high premiums.

Some people think that if we cover the uninsured that, in and of itself, will save money because they will get preventive care and so won't wind up in the hostpial.

But the truth is that uninsured people die earlier than the rest of us. As a restul we actually save money--they don't live long enough to
fall victim to diseases like Alzheimers, or the many cancers that are more common among older people.

If everyone in the U.S.had been insured over the past 10 years, our total health care bills--and our premiums--would be much higher than they are now.

That's why the current heatlh reform legislation doesn't try to roll out health care reform, with subsidies and a mandate that everyone have insurance until 2013.

That gives us some time to
begin reforming Medicare--changing the way we pay for care--to reward quality, not volume of treatments--and to change the way health care is devliered (in a more co-ordinated, efficient way.)

Just dumping the unisnured and underinsured into your current broken system would lead to disaster.

Benedict--
You over-estimate the importance of private insurers in our health care system.

They pay only a little over a third of our $2.6 trillion in health care bills. (The government (taxpayers) pay more than half. Patients pay 14% out of pocket.)

Becuase they are not the dominant payer, insurers' profits and administrative costs account for only about 6% of the $2.6 trillion that we are spending on health care this care.

IF they paid 100% of the bills, thier adinistrative costs nad profits woudl accoutn for 20% of the $2.6 trilion--but they don't.

Finally, the actual cost of care--the amount that insurers pay out in reimbursements to doctors, hosptials, and patients--has been spiralling by 8% a year--every year-- for the last 20 years.

That's the major reason why their profits are so low.

And, with the cost of care rising by 8% a year, even if we did away with the private insurance industry, what we saved by eliminating their profits and administrative expenses woudl be wiped out by less than one year of health care inflation.

[tschleder]

Insurance co. profits are one thing, but salaries and bonuses are another.

The hundreds of millions in health insurance CEO pay is criminal money - most of it it goes directly to patient care under government-backed systems like Medicare.

[Gregg Masters]

Maggie:

The piece struck a nerve!

Rather than ordinal ranking of net profit margins, my question for the health plan community is not whether they are disproportionately profitable (clearly, they are not), but do they add or subtract value?

Minimally it's an open question. We may see what could amount to a national referendum on that question when Kuccinich hosts the hearings I'm calling 'Tobacco 2.0', when he swears in health plan execs later this month.

From my POV, the burden of proof is on the health plans to demonstrate that they do in fact provide value in the health care food chain.

[iyamwutiam]

This (^) health-care provider needs to expand his vision. This is the problem with specialization -they forget the basic tenets/foundations of education.

"1) Why raise premiums across the board? Why are the healthy carrying the burden of the sick? Why are we not rewarding the healthy with lower premiums and the punishing the sick with higher premiums so that they would change their unhealthy behaviors? Of course the exception to this would be for genetic diseases and cancers, which have nothing to do with risky behaviors."

Duh- well-because the POINT of insurance is to distribute risk! What can I say -yet another uneducated provider 'sure' that he 'knows'!

"2) Don't lump all the uninsured into one category. Some are qualify for state aid that may not know it. There are small business owners or independent contractors who choose not pay for medical care. And of course, we lump ~12 million illegal immigrants into the pot, too. So the number may not be as large as it is made out to be."

Again-health-care provider 'forgets' that 90% of physicians DO NOT offer their employees health insurance. So I can SEE WHY this health-care provider is UPSET- with the call for universal health care-and OF COURSE- brings up a paltry (but hugely magnified (and so meaningless number of 12M illegals-it's called the red herring folks). Why paltry (12/320) will let you know -we haven't even crossed 5 percent!! Why are we ALWAYS focusing on the margin and not the meat- that's like buying a fillet Mignon for the edge of the meat (or bones) and not the fillet itself.

3."4) This is a happy "sue me" nation. Doctors are afraid of being sued for malpractice, so they would order unnecessary tests to cover themselves. We should have have reasonable cap on the award judgements."

Well-first of all- maybe no one would sue doctors if it didn't cost the average person 900 bux for an Axillary Nerve block (a weeks salary- for many) or some other outrageous price ! In short-Doctors are way over-paid for being in a 'noble' profession.

Pretty soon -we will have priest's/police/teachers/doctors/politicians -ALL-thinking they are 'entitled' to mercedes/5000 sq. foot houses etc- because they 'serve' the public.

This is assinine but wrse -it's like having a million whip worms in your ass. They suck everything out of you, irritate the shit out of you, and continually multiply till they kill the host. After all the cost of them are like whip worms(I should know -I taught medicine and nursing)-unchecked paraitism -ALWAYS -always -eads to death of the host (which is WE).

I can continue to destroy point by point a lot of conjecture/mis-education and worse jusrt poor moral foundation. But- I do think -I have written enough for people to doubt both the author and the probably the paid poisoners of our health -so that these parasites continue to live beyond their means, practice beyond their competence, et paid beyond their sincerity and definitely get waaaaaaaay more credit than their devotion.

What a job -no wonder -all the cowards flovk to medicine.

It is the 'safest' profession to get into where you can be facile intellect (poseur) and on that premise ask for salaries of over 200K !! Cause you went to school and then became basically a whining mechanic/stooge of drug/hospital/insurance companies etc.

Please- ALL the health-care providers -stop your whining. Trust me -most American's know you are waaaaaaaay too overpaid and under sincere to deserve any of that wealth.

Which is why - I strongly feel -we need to cut down the numbers of doctors and nurses. I don't understand -why when a doctor says "It's a business"- we do not take our business elsewhere.

Anyway -to all the parasitic infestations on our children and family members (formerly known as physicians/nurses/etc)- get a life- and remember if your in medicine for the money -puhleae-pweety please- KILL YO self :)

Trust me -America as a nation and a people will thank you in a century or so.

[Benedict@Large]

In a word, nonsense. The medical loss ratio has gone from .90 to .80 in ten years. (Aetna went from .92 to .77 !!!) If that 10% didn't turn into profit, where the hell did it go?

The bottom line is we, the public, don't give a damn what insurance company shareholders take home. We care about how much of our premiums actually end up paying for our medical services. What overhead does the insurance industry place on our system? And frankly, that is too much. And that's why they have to go.

[Carl Halpern]

For me the first threshold of healthcare reform is that the roughly 48 million uninsured and 24 million underinsured obtain coverage that is roughly equivalent to Medicare and that they get it fairly quickly. In order for the plan to be as cost effective as possible, providers should be reimbursed at current Medicare rates and the government should be able to negotiate drug prices. Once that threshold is passed, the question of improving outcomes and cost through effective coordination of care should be addressed.

[Dave Koch]

The problem with calculating the profits of companies like United is that the penalties and huge salsaries they pay impact the profits. If you turn that back the profits are significant.

[Maggie Mahar]

Susan, jd, Rebecca, Gregory, Fred, A.J. John Murphy

Susan-- Yes, I have read the bills. Insurers will not be able to charge more for pre-existing conditions--or deny care becaue of pre-existing conditions.
And the insurance companies themselvs have agreed to this provision. I believe it will kick in next year.

The only way this would change is if they change the legislation and do away with the mandate that requires everyone to have insurance.

If there is no mandate, but insurers were not allowed to change more for pre-existing conditions, then a great many people would wait until they became sick to sign up for insurance, safe in the knowledge that insurers would have to accept them, and couldn't charge them more.

This is why the president can't give up the mandate.

j.d.- Interesting insight into how it took insurers a while to realize that medical insurance is different from fire insurance.
And you are right, they do want to insure sick people--as long as those costs are covered.
The key, as I noted in my response to Susan above, is that we have an individual mandate.

Rebecca--

In other countries, there are guidelines --created by medical researchers-- that most doctors follow most of the time.

In this country the way U.S. doctors practice medicine varies widely-- even when you compare top academic medical centers.

American doctors like to do their own thing--many resist guidelines.

This then can lead to malpractice suits where lawyeres argue over what "best practice" would be.

The "comparative effectiveness reserach" that is part of health care reform should lead to guidelines that will make things much clearer here.

If the doctor follows the guidelines, he's safe. We'll need some legislation, but this can all be addressed--once we being using comparative effectiveness research.

Gregory--
I agree, of course, that
we need comparative effectiveness reserach on cancer treatments.

And we have way too many teatments out there --many minimally effective--though they might help a small group of people if we knew more about them.

Fred-- Yes, the CBO report is useful on malpractice--thanks.

A.J.

Actually, I have read quite a few plans. While
writing my two books I was self-employed for 7 years, and bought my own insurance.

I bought expensive plans that covered virtually everything. Sometimes the co-pay for a drug was higher, but these were comprehensive plans that covered acupunture, 50 physical therapy sessions a year, 100% of hospital costs, doctors visits with a $15 co-pay, any test any doctor ever offered. no life-time cap, no annual cap.

Did they cover "experimental treatments"? I don't know. I would have no interst in "experimental treatments" unless I were part of a carefully controlled clnical trial in which someone might learn something useful.

Now I have insurance through the Century Foudnation which also seems to cover virtually everything.

Again, this is a very expensive plan. As j.D. explains in his comment--insurers will cover anything---including sick people-- if the premiums are high enough to cover their costs.

You write: "Why is there so much flack out there about people dying after being denied treatments?'

First, there was a lot of flack out there in the 1990s--when insurers were trying to manage care--and did deny many treatments.

That pretty much ended in 1999 when insurers threw in the towel on managed care, and began covering virtually everything that the FDA approves and that Medicare covers.

You can see the sea-change if you look at the chart on p.2 of this report.
http://www.tcf.org/Publications/Healthcare/Maggie%20Agenda.pdf

As you'll note, from 1999 onward, the amount that insurers paid out in reimbursements spiraled by about over 8% a year, year after year, . .

That's because they began approving almost all treatments.

From 1992 to 1999, when they were "saying no" far more often, their reimbursements were growing at a much slower rate.

Of course since 1999 they have been passing the cost of saying "yes" along in teh form of higher treatments--which is why your premiums sky-rocketed.

These days, you still hear flack about patients dying after "treatment denied" but this is largely because a great many people simply can't accept death. It must be a mistake. Someone-- the doctor the hospital, the insurer must have done something wrong.
Today, when treatment is denied it is usually because it would do no good.
And since most large employers self-insuer (taking financial responsibility for losses incurred) the employer makes the decision. The insurance company simply
handles the administrative work.

And yes,, I am well-aware that most "block-buster" drugs are me-too drugs. Though the most expensive drugs on the market --which now gobble up an enormous amount of the money we spend on drugs--are cancer drugs.

Drug-makers decide which drugs we take by bribing doctors (a story about this in the Times this week) to "educate" other doctors about new drugs.
They also decide which drugs we take by running DTC ads, and by controlling what we do adn don't knwo about varoius drugs.

Finally, they control what we know by resisting head-to-head comparisons of alternative treatments.

With the newly funded comparative effectivenes research, that will change.

John Murphy-- where are these numbers coming from?
First, if you look at the financials of any insurance company, you will find that, while they're obscene, CEO salaries are a drop in the bucket in the context of overall spending.

The big ticket items are marketing, advertising, underwriting (denying people with pre-existing conditions or deciding how much more to charge them if they are sick) and lobbying.

Secondly, insurers keep 15% to 20% of premiums to cover their overhead and profits.

Finally, because private insurers only pay about 1/3 of our health care bills (taxpyers pay more than 50%, 15% is paid by patients out of pocket)
the private insurers profits and admnistrative expenses account for only 6% of the $2.6 trillion that we, as a nation, spend on health care.

[Gregory D. Pawelski]

Rebecca

Why is tort reform even on the national agenda yet, at a time when insurance industry profits are booming, tort filings are declining, only 2 percent of injured people sue for compensation, punitive damages are rarely awarded, liability insurance costs for businesses are minuscule, medical malpractice insurance and claims are both less than 1 percent of all health care costs in America, and premium-gouging underwriting practices of the insurance industry have been widely exposed?

As I've stated on this forum before, why tort reform will not work is that the doctors are the insurance companies. According to the Physician Insurers Association of America, a trade group of about 50 doctor-owned malpractice insurers, they cover about 60% of U.S. doctors in private practice and hospitals.

Limits on the rights of people hurt by medical malpractice will victimize them and their families further while helping neither patients nor doctors. The real beneficiaries will be insurance companies, including the doctor-owned malpractice insurers.

The real malpractice crisis is the fraction of doctors who commit most of the negligence and medical errors. Just 5.3% of doctors are responsible for 56% of medical malpractice payouts nationally, according to the NPDB. Doctors who get sued this often are the bad doctors. Of those bad doctors, only 7.6% have ever been disciplined by state medical boards.

The only people who benefit by medical malpractice reform are the doctors and hospitals who commit the malpractice in the first place. Why should innocent victim's rights to seek compensation be limited? That just rewards the wrongdoers. To help eliminate medical malpractice, state Medical boards have to do a better job of weeding out the bad doctors who cause most of the harm.

[Rebecca Kane, RPA-C]

Fred-
Thanks for that well out information. I will process it for some days now. Food for thought. Thanks for the time and effort. I'm always happy to see all of the sides of all of the issues.

Gregory-

I think you are looking at a "glass half empty "scenario of tort reform but we already have a "g;lass half empty scenario" with tort out of control.

If the rest of the world doesn't depend on spending half of their population spening half of their lives in the court system trying to win the lottery for some spurious case or another why does our culture encourage this?

I am not commenting on the legitimate cases out there. But imagine how wonderful it would be for them if the system wasn't clogged with the other cases.

OK. I am opening a Pandora's box here that you all are welcome to ignore if you so chose. It is off subject and won't help the health care initiative for now.

[Gregory D. Pawelski]

Tort reform isn't about fixing a broken justice system; it's about protecting the public image and bottom lines of the biggest and most powerful companies in the world. Tort reform isn't about protecting doctors from high insurance premiums; it's about protecting their insurers from having to pay large judgments. Tort reform isn't about keeping greedy lawyers from filing frivolous lawsuits; it's about keeping those who are severely injured out of the court system and away from the public eye.

[John Murphy]

Profit is not the only cost of health insurance. Once you add CEO salaries ($102,000 an hour) and other salaries, as well as massive paperwork, used to ration care for profit, you wind up with 35% of premiums currently going to insurance overhead, soon to become 41% of premiums going to insurance overhead.

[Kristi Davis]

Very interesting article concerning malpractice premiums. The tort reform that needs to be examined is the increased numbers of lawsuits without merit that drive up the costs of premiums

[Fred Moolten]

Rebecca - Here is a link to a CBO analysis of the costs associated with malpractice - both premiums and "defensive medicine" -
http://www.cbo.gov/doc.cfm?index=4968&type=0

The following is a quotation from that analysis:

"A 2003 study that examined state data from 1993 to 2002 found that two restrictions--a cap on noneconomic damages and a ban on punitive damages--would together reduce premiums by more than one-third (all other things being equal).(11) And based on its own research on the effects of tort restrictions, the Congressional Budget Office (CBO) estimated that the provisions of the Help Efficient, Accessible, Low-cost, Timely Healthcare (HEALTH) Act of 2003 (H.R. 5) would lower premiums nationwide by an average of 25 percent to 30 percent from the levels likely to occur under current law. (The savings in each state would depend in part on the restrictions already in effect there.)

Savings of that magnitude would not have a significant impact on total health care costs, however. Malpractice costs amounted to an estimated $24 billion in 2002, but that figure represents less than 2 percent of overall health care spending.(12) Thus, even a reduction of 25 percent to 30 percent in malpractice costs would lower health care costs by only about 0.4 percent to 0.5 percent, and the likely effect on health insurance premiums would be comparably small.(13)

Effects on Defensive Medicine
Proponents of limiting malpractice liability have argued that much greater savings in health care costs would be possible through reductions in the practice of defensive medicine. However, some so-called defensive medicine may be motivated less by liability concerns than by the income it generates for physicians or by the positive (albeit small) benefits to patients. On the basis of existing studies and its own research, CBO believes that savings from reducing defensive medicine would be very small."

[Rebecca Kane, RPA-C]

Fred-
Thanks so much for addressing the issue of malpractice liability. I have not seen that information before and can now practice defensively knowing I am not a part of the problem.

When you are in the trenches, though, and see people who can not afford to pay for their prescription that you know is absolutely necessary but expensive, it is hard not to think about all those dollars going to defensive tests that could be covering that prescription.

And it's also hard to justify when your hospital is operating in the red. If you are saying that, in the big picture, when universal coverage exists tort law won't matter, I hope you are right. (It certainly mattered to McDonalds and that fateful cup of hot coffee- even though the judge awarded the plaintiff essentially nothing .)

In actuality we are having difficulty with on call coverage of essential specialist services in the ER. Other specialties, especially OB-GYN's, are leaving NY State because of the high malpractice rates.

These are costs that may not be have been taken into account when calculating the true cost benefit of tort reform. Do you know if they were considered?

Thanks so much for your comments.

[Kristi Davis]

Managed care and insurance plans dictate the choices that the consumer makes; options are limited concerning place and provider. Would the consumer not be the ultimate voice in choosing the best plan if a public option was made available? The profits made ultimately reflect what is in the patient's wallet. Consumers should be able to choose how they want to spend their health care dollars; unfortunately the choice does not belong to them.

[Fred Moolten]

Just a few comments from the sidelines on the discussion between Maggie and A.J. Lester.

First, I think it's true that insurers aim to constrain costs at times by refusing to cover the rare and expensive "experimental procedure", and by tailoring their drug coverages to encourage less expensive choices among comparable alternatives. What they fail to do, however, is reward medical practices based on value rather than quantity. There is no need, for example, to prescribe antibiotics (even inexpensive ones) for ordinary viral infections. There is no need, in the case of a patient who has suffered a fainting spell, to uniformly include complicated tests including CT scans or Holter monitoring, when a physical exam, an EKG, and the measurement of supine and standing blood pressure might suffice. Deciding what is necessary, and what is unnecessary or even potentially harmful among estabished medical procedures is a task for comparative effectiveness research, but insurers don't push providers to go in that direction, because an insurer who refuses to cover "established" procedures loses out to a competitor who covers them.

A similar principle applies to drug costs. Insurers do try to limit what they pay, but not enough, and for the same reasons. If the choice is between drug A and the more expensive drug B, the insurer may limit coverage to the less expensive one. But if the best choice is no drug at all, the insurer can't take the risk of enforcing that choice for a condition in which either A or B is routinely administered. The result is a pharmaceutical industry that, despite a few limitations, makes enormous profits, and incurs hugh marketing, sales, and advertising expenses, often for developing "me too" drugs that add little to patient welfare. Somebody has to pay for those profits and expenses, and it is mainly the public, via insurers.

In my view, healthcare reform could benefit from a reform of insurance practices per se, and a reform of the drug development and marketing practices of the pharmaceutical industry, but even more, it requires a restructuring of healthcare itself, so that providers are encouraged to distinguish what works from what doesn't, and have little incentive to offer the latter. In that case, the insurers wouldn't need to cover it, and the drugs for it wouldn't sell.

Fred Moolten

[iyamwutiam]

I have been in the medical field for at least 10 years in the US and and another 10 years abroad.
I can safely say that amongst other entities -it is yet another example of government supported inefficiency. Can someone honestly say that with out the subsidization of research by NOH/Universities/hospitals and FMG training the US healthcare system could purport itself to be anything more than a disastrous exhorbitant failure -when measured by public health outcomes to $/GDP per capita be any worse!!

Take an example of TB. I have run this program in the US at the county and state level. I urge the author to do a study in the simplest, oldest and documented most curable disease in the PH sector today.

Study the state/local/federal (CDC/Block grants/grants) etc. You shall see that the goal of the system is not erudite, logical and sincere application of known treatment and investigative modalities-established since the 1980s. But rather an insidious and ubiquitous 'urge' to slow down, impede, impair the destruction/cure/abolishment of this disease in the US -because then -the many trained seals ad the too many parasitic infestations to the healthcare systems (predominantly a secure job in return for feigned competence-but in reality a silent conspiracy to continue the trickle of cases to justify over-paid/under-worked and most importantly non-committed workers hat survive by yet another disguised form of welfare for certain demographic and institutional interests). Hence the cure rates rarely ever exceed 90% in a year -although 80 percent of cases can be cured in 6 months!!

I have chieved close to 100 percent cure rates in certain jurisdictions. But it takes the gall to take on 'invested' interests -hospitals, overpaid louts (Doctors/nurses/CDC personnel. etc), and of course the ever whining majority based employee who feels that this is a waste of expenditure on 'other' people.

I strongly urge te author to investigate the TB branch of the CDC/PHS in the US to see the tremendous incompetency, hemorrhaging of public funds that must incur for many incompetents and worse knowingly incompetent employees subsidized by the US government in this nefarious web of ensuring that 'health care' can only be achieved by exorbitant prices/costs/etc needed -so that a few thousand people can make egregious profits on the ill/dis-eased/troubled/infected but easily cured/ diabetic but can be (yes cured) by insight. caring/ a proper history and the three golden Es of primary care 1.engage your patient
2.Enroll your patient in the modality needed by being sincere
3.Enlist your patient to help themselves and others by application of sincere and genuie actions.

This does not occur. What occurs is the empty chorus of -the "patients' have to "take" responsibility for themselves.

How does an individual patient take 'responsibility' for the corporate/government nexus of causation for Lead poisoning/asbestos/Tobacco/drug-resistant bacteria!!

Stop the madness- I ask all concerned americans fed up with their (give me your taxes and get nothing in return" system to withdraw all savings/money on election day.

With out our savings as collateral to increase their debt ratio -they are stuck. And FORCED to actually work for a living like most of us. No longer must we tolerate institutionalized vampirism -which is now epitomized as corporatism.

I also agree that one must be careful in attempting to objectively analysing any industry. Due to corporate 'tricks' like bad debt (which is hardly ever audited), out and out medicare/medicaid fraud (not a single insurance company has NOT been found guilty -but it is beeyootiful- steal 6 Billion and pay a 'penalty' of 600M - damn -I would steal EVERY DAY. Do we really believe these proven liars about how much profit- they really make? I mean the ovious evidence to the contrary -expansion/ multi-million dollar bonuses, plasma screen TVs(?)/security guards dressed in suits (in short -the conversion of a place of sickness into the new paradigm of hotel management).

Anyway - I have seen too uch as an insider -to have any sympathy for many colleagues -who lie thru their teeth about how much money they deserve -when they have not done the due diligence of continual education and devotion to their field of expertise.

We know this to be true for Lawyers/Politicians (who don't read the bills they encumber on public tax resources) and of course -doctors.

In a world of sycophancy and parasitic growth via the public trough -the cure can only be the death of the parasites -lest like cancer -the irrepressible appetite for 'growth' ultimately destroys the host that has been kind enough or stoopid enough to tolerate this. But at some point -like cancer -when the host and the parasite are many times indistinguishable - one must- if necessary -excise the cancer to save the the body (society).