Healthcare Insurers and How to Possibly Corrupt a Wonk

So Ezra Klein wrote something at the Washington Post that puzzled me about health insurers:

Yet the problem with the Affordable Care Act isn’t the insurance industry. In fact, the main benefits of nationalized health care can be achieved in systems with hundreds, even thousands, of for-profit insurers.

“By 2017,” Moore writes, “we will be funneling over $100 billion annually to private insurance companies.” The insurers will use the bulk of that money, however, to pay hospitals and pharmaceutical companies and device manufacturers for medical care.

A clearer way to think about this is profits — and insurers aren’t where the big profits in the health-care system go. In 2009, Forbes ranked health insurance as the 35th most profitable industry, with an anemic 2.2 percent return on revenue. To understand why the U.S. health-care system is so expensive, you need to travel higher up the Forbes list. The pharmaceutical industry was in third place, with a 19.9 percent return, and the medical products and equipment industry was right behind it, with a 16.3 percent return. Meanwhile, doctors are more likely than members of any other profession to have incomes in the top 1 percent.

Note that last sentence about doctors. What’s interesting is that Klein switches from profits based on revenue (Pharma and medical devices are raking it in!) to individuals within an industry (doctors are paid too much! Clearly, Klein doesn’t have to visit doctors regularly…). When you look at return on revenue for hospitals, we find that the return on revenue is…about the same as insurance companies. At the same time, Klein neglects to mention the compensation for healthcare administrators. Pretty certain they do alright. And Klein himself admits that hospitals provide healthcare while insurers don’t (“Quick, get him to an insurance agency!”).

Admittedly, there are different ways of looking at this, so maybe this is just a difference of opinion? Well, as I noted last year, Klein was a keynote speaker at the “Selling Benefits Expo 2013″. His speaking agency at the time suggested a speaker’s fee of $10,000 – $25,000.

Do I think that some called him and said, “Kid, we’re cashing in.” No. But this is how industries gain influence (at very little cost). If we are going to accuse any biologist who has ever accepted any kind of industry grant (even if the granting arm is separate from the business) of being an industry shill, certain Klein’s behavior and op-ed are troubling. If nothing else, he should have been required to report this tie.

By the way, progressives might want to reconsider any tribal affiliations with Klein. Maybe he’s not your guy? Because you’re not paying his salary, are you?

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2 Responses to Healthcare Insurers and How to Possibly Corrupt a Wonk

  1. Hank Roberts says:

    > the medical products and equipment industry … with a 16.3 percent return.

    Did you notice how often “repeal of the medical equipment tax” got mentioned by the Republicans during that last attempt to throttle government funding? Looking at Google’s search history: http://www.google.com/trends/explore#q=medical%20equipment%20tax

    They got the tax cut in half some years back. But they want no taxes at all on medical equipment.

    So, they’re afraid the Democrats will tax Dick Cheney’s artificial heart?

  2. anthrosciguy says:

    Just googled up a post from 2010 talking about this, about how return on revenue makes for misleading PR, and gives comparisons on return on equity profits for healthcare insurance companies and a number of other types of companies. Healthcare insurers turn out to be in the same ballpark as some other healthcare companies, such as for-profit hospitals, and considerably higher than many others, only of course without providing comparable services.
    http://www.thenexthill.com/health-insurers-mislead-on-profit-margins.htm

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