Tuesday, October 13, 2009

Ask the Neo-Con, Part X

UPDATE: below

Responding to Thursday's post on comparative health insurance claim denials, an anonymous commenter asks:
I wonder what percentage of total health care spending is accounted for by insurance company costs/profits. I suspect it is very low.
The question may have been prompted by recent assertions by President Obama ("record profits") and Speaker Pelosi ("obscene profits"), and by widespread wailing from lefties demonizing health insurance companies. What's the truth?Conclusion: Vice President Biden recently conceded he "want[s] insurance companies to make money." Biden may be the only Dem not determined to "gut them like trouts."

Private health insurance company profits averaging 3.3 percent aren't obviously an excessively high percentage of private healthcare spending. Still, Coyote Blog is right that, for progressives, the sole acceptable profit margin is zero. Like maxed-out Medicare, for example, which is nearly bankrupt.

Lefties imagine some magic wand can make universal health insurance cheap--without recognizing that the best approach to cost containment is increased private insurance competition and choice. Confirming that liberals "don't know much" about economics.


Even the Associated Press agrees:
Health insurance profit margins typically run about 6 percent, give or take a point or two. That's anemic compared with other forms of insurance and a broad array of industries, even some beleaguered ones.

Profits barely exceeded 2 percent of revenues in the latest annual measure. This partly explains why the credit ratings of some of the largest insurers were downgraded to negative from stable heading into this year, as investors were warned of a stagnant if not shrinking market for private plans.

An update from econ prof Mark Perry at Carpe Diem.

(via Right Wing News)


OBloodyHell said...

> "Look out everyone, if this industry is too profitable for this administration, then just about every industry in the country is too profitable."

...And what part of that statement do you question or doubt?


Anonymous said...

Thank you for responding to the question. I raised it because here in the Democratic Republic of Portland, Oregon there is a deep belief that insurance companies take a large pool of money out of the system and by eliminating them we will have plenty of money to pay for health care for all.

But if the medical loss ratio would only result in a 15% "savings" eliminating them would be daft.

Government will spike the system for at least 35% before the price increases and the rationing.

Mark Sherman

OBloodyHell said...

> Thank you for responding to the question.

Carl's good at that.



I have a "busti" word verification. Good to know.

@nooil4pacifists said...

You're welcome, Mark. I'm familiar the the DR of P, and I wish you luck there. And, by the way, I think the first two measures of profit more reliable than medical loss ratio, becasue the latter doesn't allow for taxes (which, after all, go back to government), and for administration (which government ever is increasing, and which mostly apply to government-run health insurers too).