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in 2009 there is no bigger issue

Profits are Good or Bad?

The underlying message in the campaign for more government control of healthcare is that profits are somehow to blame, are inherently bad, or are in a runaway stratus.   Pelosi in her interview on CBS said that the insurance companies are the villains here.  She went onto to say that the way that Obamacare would be paid for "by squeezing out $500B dollars out of Medicare."  One wonders why the government run program was not worried about inefficiency up to now, but never matter the details. 

As you can conclude from the various headings at left on doctors, hospitals, insurance that the issue is not run away profits, but rather a healthcare system that is poorly used, and without regard for cost at the decision point between doctor and patient and the treatment determination.   This would appear so simple is one was talking in the same manner about food insurance, that this would not work.  Imagine shoppers going to markets and having food insurance and not worrying about what they bought in terms of cost. 

Margins in healthcare are under some pressure, underscoring the observation made elsewhere on this website that the issue in costs is not excessive profits.

Profits are not bad.  It is a measure of success, or delivering something that someone wants at a price favorable to them and at a good cost to the producer.  This system of free enterprise is based on the idea that cost is a major factor in determining the buy decision.  In healthcare in the vast majority of decisions, it is not even discussed or disclosed. 

In a recent conversation, a person said but healthcare is different.  One has no time to determine the best price if you are facing a life or death situation.  It is therefore assumed that a market based approach could not deal with this circumstance.  In fact it is a good market opportunity, taken on within a market driven industry, rather than an argument against the market solution.   Imagine a service or insurance that was tailored to this circumstance, and was able to provide innovative solutions well before the need arose.  

It seems very apparent that a market approach would be much more proficient than a government driven solution.  Is UPS more proficient than the Postal Service and actually makes a profit?  The Postal Service is running currently at $2.4B deficit each quarter.  So where is the existence proof that government care is better?

Adding further insight, Anthony Randazzo from Reason wrote:

This issue of greed isn't one that's talked about a lot in the mainstream, but it is underlying a lot of attitudes towards the health system, driving other arguments. If you believe the drug companies are evil, greedy SOBs then you are more like to favor the attitude of HHS Secretary Sebelius: "There will be a competitor to private insurers. That's really the essential part, is you don't turn over the whole new marketplace to private insurance companies and trust them to do the right thing."

The thing is, as Gordon Gekko so sinisterly put it, "greed is good." Or, a softer way to put it is that greed can be a good thing. Greed has the potential to drive investors off the cliff, but at least its their choice. But it also has the potential to convince a group of investors to risk a large sum of money to test and develop a life saving drug that might not other wise be made. In this sense, greed has saved lives.

Ultimately, greed—the desire to make a large profit—is a positive for the health care realm. The desire to make money is a powerful motivator, and profit itself isn't evil. So when the desire for profit creates powerful new drugs or drives an increase in quality of care through technological advance, then it seems "greed" is doing good.

Now, one may think certain drugs are overpriced because of the "greedy" drug companies. But those firms don't make products out of the goodness of their hearts. They spend a lot of money developing them, and then charge accordingly. After 12 years or so cheaper generic brands hit the markets, but in the meantime, the drugs are generally priced higher than people would want them (and the price people want is always an arbitrary number that isn't based in an awareness of supply and demand pricing theory.) Still, I do understand it is not fun to pay hundreds of dollars for drugs, or thousands as the case may be. The problem is that if we attack those companies and their ability to charge a premium for their new products—because we somehow feel we have a right to those products because they save lives—then companies will simply stop making them all together.

Of course, it is a complicated issues. I say all this knowing that there are real people, who are really very sick or dying, who simply don't make enough money to afford the treatments that they need. It is tragic to think of a person dying when the technology and science is there, but the money is not. This is what drives the "we're the richest country in the world, so give people the damn drug" argument. And I certainly get that it appears cold hearted to say that the rights of the drug companies to make a profit, or of hospitals to charge high for procedures, should be protected over that person's life. But this only the case on the anecdotal level.

Sure, with a single person in front of you and the drug on the shelf it is a lot easier to say, give him the drug. Let the taxpayer cover it. We can all spare a penny. But that's short-term thinking. That is not giving thought or care to the millions of other people that may also need a drug in future that never gets made. With the cost of producing a single drug sometimes at a billion dollars a pop, it's easy to imagine a drug company investors to forgo a project with the thought that they wouldn't see a return on their investment.

There are seen costs and unseen costs with everything we do. When it comes to health care, because the stakes are so high, the seen costs often get heavy play. But the unseen costs are no less important or critical. If we attack the "immoral" drug companies for charging a lot to sell aids medicines in Africa, then we just won't have the medicine in the first place to sell them. Is that helpful? Is that a caring, compassionate way to treat people? I want sick people in Africa to have access to the medicine they need, and I want companies to feel it is worth their time and personal money to invest in a making that medicine for them.

When it comes to similarly "evil and greedy" insurance companies that won't cover pre-existing conditions or put caps on how much a policy will pay out, the perspective is the same. Sure, it would be nice to have a company that would cover every problem I'll ever have, with unlimited payouts for the rest of my life, and have it be cheap as dirt. But what company can afford to do that? Of course the insurance companies want to find ways to be profitable. And the reality is that you get what you pay for. If you read an insurance contract before you sign up for it, then you know what kind of coverage you have. But if we attack the insurance companies ability to choose who they cover or how and force them into unprofitability then we wind up hurting all the people that they were covering and causing people to lose their jobs. Is that a caring attitude for people?

Will more or less people benefit from insurance companies going broke and shutting down, with U.S. taxpayers broadly picking up the tab for those left out in the cold? And by the way, such a scenario is likely to increase the national debt and hurt our children and grand children's ability to prosper in a debt riddled nation... that doesn't seem like a caring, just, or compassionate way of reforming health care to me.