Saturday, May 16, 2009

Dude, where's my health care savings?

David Brooks in his column for the NYT contends that the President is operating with the theory that he can pay for the Great Society II by squeezing savings out of the health care industry. This is a breezy assumption on a breezy theory.

We simply don’t see how a “pledge” by the health care industry of cutting the rise in health care costs 1.5% in each of the next 10 years will support the President’s hyper-aggressive agenda.

And what’s that? Not a 1.5% cut but a 1.5 rise…? Someone wasn’t taking very good notes at that meeting.

He does zero-in on something that is central to impending health care legislation

If you read the C.B.O. testimony and talk to enough experts, you come away with a stark conclusion: There are deep structural forces, both in Medicare and the private insurance market, that have driven the explosion in health costs. It is nearly impossible to put together a majority coalition for a bill that challenges those essential structures. Therefore, the leading proposals on Capitol Hill do not directly address the structural problems. They are a collection of worthy but speculative ideas designed to possibly mitigate their effects.

Without serious health cost cuts, this burst of activism will hasten fiscal suicide.

It is these “deep structural forces” that are the reason why an overwhelming majority of Americans want health care “reform” but do not necessarily agree on what form, fit and function that “reform” be enacted. Our idea of “reform” may not necessarily mirror what yours does.

For the record: At the core of our “reform” would be the ability to customize one’s health care plan, i.e., having the power to determine what one does and does not want to have covered and thus what one is willing to pay for out-of-pocket. Going hand-in-hand with this would be the ability to negotiate the price of treatment one-on-one with health care provider rather than having it, as is currently done with managed plans, by third parties which makes the price of health care divorced from the realities of the market. Unfortunately, we do not see this anywhere close to being legislative reality.

As it stands then, and being as charitable as we can regarding the sausage factory workers in Congress, we do not expect to see any real meaningful reform and certainly nothing that will actually lower the cost and therefore the price of health care.


K T Cat said...

For me, the whole idea of health care savings is shot down by looking at the insurance company's profit margins.

Wellpoint (WLP), which owns Blue Cross, has a profit margin of 3%. That's really low. By contrast, every progressive's favorite, Apple (AAPL) has a profit margin of 14.7%.

You can certainly make the argument that there are savings to be squeezed from Apple, but I don't see the evidence that there are a lot of savings to be squeezed from Wellpoint.

K T Cat said...

One more data point. Here are the corporate tax rates.

Apple pays 30%

Wellpoint pays 35%

Exxon pays 40%

(Said in a signsong voice): Somebody is mommy's favorite!