Ending Insurance Company Profits Won’t Materially Impact Healthcare Costs

I knew this was true, but it is nice to see someone so close to the Obama Administration, namely Ezekiel Emanuel, say it.  Emanuel used to be the head bioethicist at the NIH and was one of President Obama’s primary advisers on healthcare issues. He is now a professor of bieothics at Penn.

In today’s NYT, Emanuel punctures some hopes—both liberal and conservative—about how to get control of healthcare spending.  He states quite unequivocally that even seizing all health insurance profits would have a very minimal imact.  From “Less than $26 Billion? Don’t Bother:”

According to many on the left, health insurance companies are sleazy and unethical, making obscene profits by charging high prices to sick people, giving physicians and patients the runaround to avoid paying bills, and rescinding policies just when people who paid in good faith get cancer, while their executives often walk away with millions in compensation. Last year, health insurance companies did rack up big profits, but it turns out that the combined profits of the country’s five largest for-profit health insurance companies — United, WellPoint, Aetna, Humana and Cigna — were $11.7 billion, only 0.5 percent of total health care spending. Even confiscating every penny of those profits would add up to less than half of the cost-saving threshold. And even not-for-profit insurance companies need to have an operating margin — a profit by another name. There just isn’t enough money there to make a dent in health care spending.

Exactly right. But isn’t it fun to hate them?  Occupy!

Frankly, I would like to see more non profit companies enter the marketplace, as I think that is a good model for this sector.  And I sure trust private sector management—whether for or non profit—more than public bureaucratic suffocation.

Emanuel also notes that tort reform to protect doctors from malpractice won’t cut that much either, in fact, about the same as confiscating health insurance profits.  I tend to oppose tort reform as a matter of principle.  But I can see some adjustments to protect doctors.  That being said, limiting non economic damages—aka pain and suffering—to a measly $250K is to deny just compensation.  That was the amount California instituted decades ago when a few hundred thousand dollars was real money.

Finally, Emanuel makes the ridiculous assertion that those who want to cut off expensive care are conservative:

Another conservative proposal — to restrict health care spending on exorbitantly expensive patients — would both save less money and cause more harm. The paradigmatic case seems to be infants who are born prematurely and end up in intensive care on breathing machines for months, before requiring feeding tubes, constant nursing care, multiple medications and follow-up procedures for kidneys, heart or other complications. If we just stopped paying for these “million dollar babies,” the argument goes, the health care system could save a fortune.

That’s known as health care rationing and Futile Care Theory—and liberals tend to be its biggest champions.  Think the New York Times’ stridently hard left editorial page.  In contrast, conservatives—at least social conservatives—oppose that kind of thinking out of hand.  Remember the Baby Joseph case?  Remember Terri Schiavo, who, many liberals said—and I know as I was hip deep in that fight—wasn’t worth the price of maintaining?

Emanuel says he’ll be back next week with ideas that could really work.  I am skeptical that it will be good news.  While I have liked his opposition to assisted suicide, I have noted also that he has suggested age and “quality of life” as potential entry points for rationing, not to mention arguing that we each have a moral duty to be willing to volunteer as human subjects in medical experiments. Beyond that, he is a big supporter of Obamacare.  Yikes!  In any event, I’ll check it out next Sunday and opine here about what he writes.