Saturday, July 21, 2007

Health Care And Profit Motive Don't Mix

Sometimes I have found myself wondering just how it is that the Monied Elite's obsession with profit came to so thoroughly screw up the access to health care in this country.

Part of the problem, I believe, has to do with the fact that over the last couple of decade many insurance companies have changed from "mutual" companies, where ownership was spread across the policyholders, to stock companies, where shares are traded on the open market.

Now, apparently the investors of public companies are brutal beyond recognition and often punish a company brutally not for overall profit or anything else that makes any sense, but rather over excruciatingly obscure factors collectively referred to as "metrics".

Case in point is a ginormous health insurance company called UnitedHealth that reported earnings last week. Profits were way up, but, as reported by Melissa Davis at TheStreet.com, one particular metric called "commercial MCR" - "medical cost ratio" - showed signs of deterioration and UnitedHealth's stock was pummelled as a result.

The "Medical Cost Ratio" is the ratio of the amount of premiums collected to the amount of medical bills paid.

Now, what's going on here is that because these insurance companies have been moved onto the public stock market, they are being measured as if they are a company selling marshmallows or something of the sort. You see, if the price of a raw ingredient, like sugar, is going up for the a publicly traded marshmallow company and they are unable to raise the prices for the finished marshmallows, mutual fund companies and large investors will freak out and dump the stock of the marshmallow company.

Similarly, if people - [[gasp]] - get sick and have to see a doctor or get some sort of procedure, this is similar to the "raw materials" of the insurance company going up in an environment where it is often difficult to raise premiums.

Net result? The insurance companies try to do precisely the same thing that the marshmallow company would do. The marshmallow company, for instance, might try to use cheaper corn syrup sweetener rather than sugar or try to get sugar from a cheaper country.

Only problem is of course that, in many cases, there are no cheaper suppliers of health care. Once an insurance company drops what it will pay below a certain level, whole classes of doctors will simply refuse to supply to that insurance company - for instance Bridgepointe's recent decision to drop out of the Anthem / Wellpoint network.

Michael Moore, although obviously a little weak on details, is pretty dead on the big picture.

Health care shouldn't be treated like cars or computers or self-sealing stem-bolts. In their distaste for "utilization" and "medical cost ratios", the Monied Elite are causing the suffering and destruction of hundreds of millions of people.

We must find another way ...

Related:
UnitedHealth investors to focus on cost measure - Marketwatch
Healthcare vs. the Profit Principle - The Nation

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