Charlie Allo has a column in the Carolina Beach Island Gazette that is worth your time. The topic is health care reform, and Allo presents some important statistics to keep in mind:
The claim that the healthcare industry is making an outrageous profit does not hold up.
The average profit margin for six large healthcare insurance companies range from 2.40 percent to 7.15 percent. With today’s economy an 8 percent gain would be considered respectable, but one really needs to look at what it takes to calculate a businesses’ needs before the fact.
The healthcare insurance provider has to calculate the cost of hospitalization, doctors, medication, additional procedures, and administration functions. In 2008 all six of these healthcare insurers underestimated the rise in cost related to hospitals, doctors, and medication, consequently the highest profit margin was 4.5 percent and the lowest was 1.5 percent.
This figure is far below what an economist would call respectable, but the administration wants to treat them like they are a bunch of money grabbers.
I’m no fan of the health insurance industry as currently constituted, but the problem lies with the government tax and regulatory policies that have distorted the concept of health insurance. It doesn’t stem from market competition or the existence of a profit motive. JLF’s Joe Coletti and others explain more here and here:
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