NCPA - National Center for Policy Analysis


August 3, 2009

A specter is haunting America: the specter of profit, says Stephen Carter, a Yale law professor.  Flash back three years ago.  In 2006, Exxon Mobil announced the highest profit in the history of American corporate enterprise.  Politicians and pundits stumbled over each other to call for an investigation. Profit, it seemed, was an evil, but large profit was even worse. Today, the debate on the overhaul of the health care system sparks a shiver of déjà vu.

Indeed, one reason the "public option" health insurance program under debate may turn out to be more expensive than advocates suggest is that here, unlike in Europe, we are unlikely to put up with government restrictions on what sorts of care will be available, especially for seniors:

  • A board of experts might decide to limit access to hip replacements, for instance, but there is little chance Congress will let them get away with it.
  • Private insurers, by contrast, will cut whatever they can; this puts them at constant war with regulators and patients, but beneath this tension is a certain useful discipline.

We want health care to be cheaper, and the for-profit health care industry has every incentive to make it so, says Carter:

  • Supporters of the public option tout Medicare's cost advantages over private insurance, but those are largely obtained by setting below-market reimbursement rates for medical services (meaning that private patients subsidize Medicare patients).
  • Moreover, the costs of compliance with the hundreds of pages of Medicare regulations are also transferred to the providers, and thus, again, to private patients.

Furthermore, an expanded public option will be possible only if the for-profit sector remains vibrant and strong -- and profitable, concludes Carter.

Source: Stephen L. Carter, "Profits We Should Cheer," Washington Post, July 30, 2009.

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