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The word “profit” comes from the Latin, to make progress. 

Profit is the difference between the price something sells for and the cost of bringing to market whatever is sold, be it a product or service. 

Within the healthcare debate, we’re told profit is bad, it is a dirty word, it must be eliminated from our healthcare system so that we can deliver quality healthcare to all Americans.

The problem is one of semantics; any business endeavor, whether it is classifed as “for-profit” or “non-profit,” must generate enough revenue to meet its financial obligations like operating expenses and salaries. 

In the for-profit business model, revenues that exceed the cost of doing business are “profits”, whereas the same excess in the non-profit sector is termed “surplus”. 

No matter what you call it, it’s the same thing, more money in than money going out. 

The damning of profit however is an extremely effective way to terminate any discussion of alternatives or options to the current system we have because no one from within the healthcare system is going to step up and say “but profits are good” or anything related to money.

It’s manipulation pure and simple – carefully crafted and designed, then repeatedly executed well, by those who wish to keep the focus on establishing a single-payer universal healthcare system in the United States.

How can anyone have a meaningful discussion of the state of our healthcare system if you don’t talk money?

There is indeed much discussion on the demand side of the equation, that is the cost to those who need healthcare and virtually no discussion about the supply side of the equation, the costs to those delivering healthcare.

We absolutely must open the discussion up, take it beyond its cost to patients, and look at all sides if we are going to fix the areas in our healthcare system that need fixing and address the issues that are important to us all – the quality of our healthcare, how and where to better manage costs, and how to reach out to and provide affordable coverage to those uninsured among us.

Share your thoughts on this matter in the comments!

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The framing of the debate about private health insurance is that it is too costly because it exists as a for-profit business model.  Insurance companies, we’re told make huge profits and pay exorbitant executive salaries; worse, they waste money on overhead, marketing and administrative expenses!

For example, an article on the Physicians for a National Health Program, Upgrading To National Health Insurance (Medicare 2.0), has us consider the following:

The private insurance industry spends about 20 percent of its revenue on administration, marketing, and profits. Further, this industry imposes on physicians and hospitals an administrative burden in billing and insurance-related functions that consumes another 12 percent of insurance premiums. Thus, about one-third of private insurance premiums are absorbed in administrative services that could be drastically reduced if we were to finance health care through a single non-profit or public fund.

The first question must be, is this true? 

How about we take another look, from another source?

Two years ago, the Council for Affordable Health Care issued a paper detailing Medicare administrative costs, many which are not accounted for or paid by employers or other government agencies.

Just because the government doesn’t reflect all of the various costs of doing business in its official estimates of Medicare administrative costs, that doesn’t mean they don’t exist. Or that taxpayers don’t pay those costs. They do. A hidden cost is still a cost, even if taxpayers don’t know they are paying it.

The CAHC found that “Medicare’s method of calculation makes administrative costs, albeit unintentionally, appear to be lower than they really are.”

On the laundry list of unaccounted for, or hidden administrative costs, we find:

1. The “cost of capital” isn’t included; that capital comes from the government on an as needed basis

2. Cost of developing policy is not included, but Congress, that sets those policies costs taxpayers money

3.  The salaries of those professionals at the Centers for Medicare and Medicaid Services (CMS), are excluded from Medicare’s administrative cost estimates

4. The cost of the buildings that house that part of the leadership team are not included

5. The cost of collecting payroll taxes is not included because it’s part of the administrative costs paid by employers and the IRS

6. The cost of marketing various programs, like Medicare Part D, are excluded from the tally

7. The cost of collecting premiums from seniors is not included, but is part of the administrative costs of the Social Security Administration which deducts those premiums from social security checks

8. The cost of signing up for Medicare is borne by the social security administration since they handle the paperwork when a senior is eligible

9. In the case of fraud, enforcement costs are paid by the Department of Health and Human Services

10. Premium taxes are paid by businesses in each state, by employers who include health insurance as part of their benefits package; Medicare system has no equivalent expense on its bottomline.

The above help to highlight the insurance industry’s administrative costs are not because the private sector is inefficient or wasteful – instead government is taxing it and imposing regulations and unfunded mandates (that is, it tells the private sector to do something, but doesn’t reimburse its costs – like collect payroll taxes for us).

There is something a little disingenuous about imposing unwanted taxes and regulations on an industry and then criticizing it because its administrative costs are higher than the untaxed government program.

But this isn’t really about having an open and honest discussion about how to fix our current system to really do better. 

As the Physicians for a National Health Program article says,

In sum, we will not be able to control health care costs until we reform our method of financing health care. We simply have to give up the fantasy that the private insurance industry can provide us with comprehensive coverage when this requires premiums that average-income individuals cannot afford. Instead, the U.S. already has a successful program that covers more than forty million people, gives free choice of doctors and hospitals, and has only three percent administrative expense. It is Medicare, and an expanded and improved Medicare for All (Medicare 2.0) program would cover everyone comprehensively within our current expenditures and eliminate the need for private insurance. This is the direction we must go.

Medicare for all?

Share your thoughts in the comments!