Getting Extreme Profits Out of Healthcare
With the choice of Representative Paul Ryan Healthcare and Medicare have been thrust back into the headlines, and rightfully so. Healthcare consumes 17 percent of our gross domestic product, about $7,100 per person. This is nearly twice as much money per capita on healthcare as other developed nations, yet the metrics show that Americans end up with worse care and poorer health.
The Affordable Care Act is a step in the right direction, but only a minor one. By the time it is fully implemented in 2014, it will have increased access to healthcare for millions of Americans, but it will have done little to rein in costs. In theory, cost controls should be a goal that Republicans and Democrats can agree on, yet it will be an even bigger political battle than the previous one over access. That’s because to rein in costs it will not be possible to tinker around the edges of a broken system, as the 2010 healthcare reform did. It will be necessary to fundamentally overhaul the system in ways that powerful special interests will fight.
What’s driving up the cost? Extreme profits. In virtually every other health system, health insurance companies are non-profits – they have no incentive to drive up costs – and they use negotiate standard fees for various procedures. As healthcare costs continue to spiral out of control, it’s clear that we can no longer stand to be the exception to the rule to protect the profits of a handful of individuals.
It’s difficult to fathom why insurance premiums continue to rise and coverage shrinks, while some CEOs take home many millions of dollars a year.
One glimmer of hope is the announcement by Blue Shield of California, a non-profit and one of the top ten health insurance providers. After public outcries about premiums and executive compensation, the organization promised to refund $167 million to customers and cap future profits.
Other insurance companies will be required to follow suit. The Affordable Care Act requires insurers to spend at least 80 percent of their revenue on medical care, leaving 20 percent for administrative costs, including salaries and profits. Insurers that don’t meet that target will be required to issue refunds to policyholders.
This is tiny piece of the puzzle, but one of the many pieces being lost in the current heated debate. It’s not easy debating complicated issues, but we as the American people need to be diligent about talking about what’s really at stake. Learn more about how other countries are getting it right and scalable solutions from Stephen Hill’s essay Getting Extreme Profits Out of Healthcare.