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August 07, 2006

A Question of Profit

David Sirota has a nice column advocating a not-for-profit health care system. As he says, studies have repeatedly found that non-profit hospitals deliver better care than their for-profit brethren, the VA delivers the best care in the country, and Americans believe medicine shouldn't be dominated by the quest for profit. So why don't we make that into a reality? Well, the money:

No, as with everything in Washington, the real answer to the question is found by following the money. Politicians don’t talk about creating a not-for-profit health care system because they operate in a pay-to-play culture — one that rewards their silence.

Since 2000, the health industry has donated more than $370 million to the lawmakers of both political parties. The No. 1 recipient of that largesse last year was Republican Sen. Rick Santorum — the third-ranking Republican in the U.S. Senate who has ardently opposed a single-payer health care system. No. 2 was Democratic Sen. Hillary Clinton — who, just 12 years removed from her attempt to reform health care, is now giving speeches apologizing for her previous efforts. Also bathed in health industry cash has been Senate Majority Leader Bill Frist. He has been a key opponent of health care reform — not surprising, considering he is also one of the heirs of HCA, the largest for-profit hospital chain in America.

These campaign contributions and conflicts of interest guarantee that false debates substitute for a discussion of serious health care reform that might end health industry price gouging.

Points granted. It is, however, a bit more complicated than Sirota lets on. Nationalizing an industry that accounts for a ninth of our entire economy isn't an easy or obvious process. What do you do, for instance, with the pharmaceutical companies? How do you calm Americans happy with their current insurance and fearful of seeing their insurer dissolved? What about those who don't want the government plan? Can we have boutique medicine? What does the non-profit system look like? What does it pay doctors? Do we buy the for-profit hospitals? At what price? Etc and so on.

This country isn't moving towards non-profit care any time soon. What may happen, however, is the creation of a parallel non-profit care structure within the current context, one that Americans can look to as a model for what truly nationalized medicine would look like. Imagine if anyone who wished to could buy into Medicare. Or the VA. Or even a reworked FEHBP. That's what Pete Stark is proposing, and it's not a half bad idea.

It's also worth saying that a literally non-profit system isn't a particularly desirable outcome. The profit incentive does much good in medicine, and we enjoy more than a few breakthroughs, treatments, and advances bearing its imprint. What we want to do isn't end the incentives and innovations of profit, but sublimate them, use them where and when they make sense rather than letting them overlay the entire system. The either/or impulse is destructive on both ends. The hunt for profit can be part of American medicine without exerting total control over it.

August 7, 2006 | Permalink


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Ezra - be careful with your implicit assumption that the "Profit motive does much good in medicine". I know that we were all taught in Econ 101 about how wonderful the profit motive is, and how great markets are, but don't buy it completely. Remember all those plans, like Hillary care that made that assumption?

The painful fact is that all countries in the industrialized world have socialized medicine, except for the US and South Africa. And almost all of them have better health statistics than we do.

Almost all have a system in which the state runs the hospitals, general care, and the training, while the private sector produces the supplies and other goods needed.

And if you look at the medical system you can quickly see why micro-economic models DON'T work. No perfect information, no informed consumers, massive supplier power (have to rely on the doctor's expertise, etc.), Huge longterm trade-offs, etc.

Posted by: Samuel Knight | Aug 7, 2006 2:51:45 PM

I am careful. Almsot all those countries benefit from partially for-profit systems, and all of them use for-profit compnents of the health industry (pharmaceutical companies, etc). Indeed, just about no countries have a totally non-profit, or totally socialized, system -- not France, or Germany, or Japan, etc.

Posted by: Ezra | Aug 7, 2006 3:00:53 PM

Non profit doesn't necessarily elminate the profit motive. You can have a non profit which has a for-profit subsidiary etc. Unless you are referring here to something entirely different than the present non profit structure. The main question is really what is the central organizating force- profit or providing healthcare efficiently- they aren't the same thing. Even in terms of innovation you repeat a mistake- these ventures in healthcare have often been public-private ventures either in actuatual agreement or de facto through how they came about. The main thing that non profit could allow for is the ability to look at other factors other than the bottom line of the shareholders. You really need to define your terms here I think to begin to have a discussion because as I think about it, I don't really know what you mean by non profit versus what Sirota means. I can see how the present system could be easily modified to address your concern

Posted by: akaison | Aug 7, 2006 3:09:10 PM

There's a big difference between for-profit pharmaceutical and medical technology companies and for-profit hospitals. There is almost nothing about actual care that benefits from a for-profit motive. Even the vaunted "streamlinings" that people touted in the 90's eliminated "waste" in the system only turned it into profit for the for-profit hospitals. The doctors, nurses, other health-care workers, and patients didn't see much of it (unless they happened to own a hospital). That "waste" was even sometimes helpful to the patients trying to get well and the doctors trying to do their jobs (although admittedly it was also sometimes just poorly managed wasted money).

Having non-profit hospitals and payer systems and having strong negotiators with the for-profit entities is probably going to turn out to be the right mix in the end.

Posted by: NonyNony | Aug 7, 2006 3:12:28 PM

When will someone, or a group of someones, put together the data that shows that universal health care is more important to national security than the GWOT. Many, many, many more American die each year due to inadequate medical care than have died in all terrorist attacks and related military follow-ups. I would wager that economic loses are also substancially lopsided, just not as flashy.

The information needed to change minds is out there, but no one is aggregating it. Sounds like a job for you, Ezra. You have a megaphone. Use it to help your fellow citizen. I'll help anyway I can.

Posted by: Keith G | Aug 7, 2006 3:20:51 PM

The hyperbolic assumption that universal health care will wipe out private health care is just scare talk. As long as there are people with money who want specialized treatment (or to just be treated special) those services will be sold, just as they are the world over. And always remember that while for-profit medical R&D has brought us some wonderful things, it often spends zillions of dollars on marketing and developing treatments that are purely cosmetic and inconsequential to actual physical health.
OT, David Sirota's book "Hostile Takeover" is a terrific read. Recommended.

Posted by: sprocket | Aug 7, 2006 3:39:20 PM

Keith G is right, ezra should untangle the Democrats' agenda on healthcare. Democratic leaders stand in front of slogans like "Medicare For All" but voters don't want that. Other Democratic leaders, like Hillary and the Democratic Leadership Council want Employer-based health insurance even though its not portable.

Ezra wouldn't want his own sister on employer-based health insurance if she got cancer and couldn't work her required 30 hours per week. These employers just dump their sick employees on over-priced "short term" COBRA insurance.

Democrats should come up with another option besides Single-Payor or dangerous Employer-Based health insurance. Union mothers may not mind letting their employers choose the health insurance on their children but self employed mothers are a little bit smarter.

Senators Kennedy and Clinton are multi-millionaires and they don't pay taxes on their health insurance. President Bush wants all Americans, even those who can't get employer-based health insurance, not to pay taxes on their health insurance, exactly like rich Democratic Senators. The President says, "Its a matter of fairness." Democratic Senators say, "NO, that will fragment the employer pools." Its like Democratic Senators have theirs so to heck with everybody else. Why can't everybody get the same tax dodge on health insurance as rich multi-millionaire Democratic Senators?

Posted by: Ron Greiner | Aug 7, 2006 4:15:01 PM

How do you calm Americans happy with their current insurance

With Abilify, I would guess. It will take away the hallucinations, too.

Posted by: calling all toasters | Aug 7, 2006 4:18:55 PM

Ron Greiner wants sick people to fuck off and die.

Does anyone really think that insurance companies will sell individual insurance policies to people with serious pre-existing conditions?

"Medicare for all" *is* a popular position. And as for the DLC traitors, Lamont's victory tomorrow will scare them back into line. And if they don't, then we have primary challenges for them too.

Posted by: Firebug | Aug 7, 2006 5:29:53 PM

Ezra, I think that I was saying the same thing you were: "Almost all have a system in which the state runs the hospitals, general care, and the training, while the private sector produces the supplies and other goods needed."

The general rubric of most of the world's successful health care systems is socialized, but specific sectors are private.

Posted by: Samuel Knight | Aug 7, 2006 5:36:29 PM

...Americans happy with their current insurance and fearful of seeing their insurer dissolved...

Who are these strange creatures you speak of? Do they flit about the forests at night on faerie wings, and bed down with unicorns for warmth in winter? Oh, how I wish I could meet such a wondrous creature!

Unless you mean SAG members, that is. I've had it up to here with them.

Posted by: collin | Aug 7, 2006 7:07:43 PM

Just going to a socialized medical system wont fix the cost problems. Just because government runs it does NOT mean it will be cheaper. IN fact hte only reason why Canada and Europe are cheaper is because they use rationing provided by the monopoly of government control to cut costs.

Thats the real issue Americans will have to confront. If you eliminate the billions of dollars that the US spends on futile "end of life" care and the 20% overhead margins that private insurance companies skim off hte top, then the american system costs about he same amount per capita as european/canadian systems.

Consider someone who has Stage IV breast cancer (90% terminal in 5 years, regardless of treatment).

IN the US, Stage IV patients get loaded up with multiple chemo regimens taht run into the hundreds of thousands of dollars. These fancy chemo regimens reduce your quality of life to shit, and they "extend" your life by an average of only 2 months. Tack on top of that bilateral, mostly prophylactic mastectomies that cost 50k in operating costs.

In Canada/Europe/everywhere else, when you are diagnosed with STage IV breast cancer, the doctor tells you that your case is terminal and you are going to die. There is no discussion of surgery or chemo, which will do almost nothing to imrpove your life or extend it. The government pays for you to receive home care by a nurse, or if you are unable to take care of yourself, you are put up in hospice care. Hospice care is 100 times cheaper than the "state of the art" medicine that you get in the USA, and furthermore the aggregate data show NO STATISTICAL DIFFERENCE IN OUTCOMES between USA and Europe stage IV cancer patients.

If the USA switched to a 100% socialized system tomorrow, we wouldnt have any cost savings to show for it, we'd still be spending way too much money.

The cost savings that other nations have realized with their socialized medical systems have come about ONLY because they made reasonable decisions on futile "end of life" care. Unlike the US system, they use statistics to guide their therapies and they save billions of dollars because of it.

Posted by: joe blow | Aug 7, 2006 8:20:25 PM

There is a big difference between 'single-payer' and 'not for profit'. Medicare today functions in a mixture of for-profit and non-profit operations. There is every reason in the world to want to allow doctors to set up practices in rural and inner city locations and not have to become government bureaucrats.

Sirota is off-base hear and Ezra is insufficiently correcting the course of discourse. The key is not in squeezing the profits out of medicine, it is in squeezing it out of the profits of insurance, and trimming it out of Big Pharma by letting Medicare bargain like every other health care provider in the world.

You can be a Socialist without Socializing, a subtlety that will leave the Ron G's of this world sputtering.

Posted by: Bruce Webb | Aug 8, 2006 6:49:29 AM

This is the kind of splitting the difference we've come to expect from fat cats like Ezra. He likely hasn't worked on a winning campaign, and from the confines of a cushy job in Washington, likely never has to experience the severe economic challenges ordinary Americans face on a daily basis. /Sirota>

Posted by: gswift | Aug 8, 2006 7:08:54 AM

This is the kind of splitting the difference we've come to expect from fat cats like Ezra. He likely hasn't worked on a winning campaign, and from the confines of a cushy job in Washington, likely never has to experience the severe economic challenges ordinary Americans face on a daily basis.

While I can't claim to know Ezra's economic position I doubt very much he is making a ton of money as a writer for a magazine. I can, however attest that he does pay attention to those facing harsh economic challenges. He certainly fights for those who do. In fact the main theme in this blog is seeking healthcare solutions for the millions of Americans who go without.

I don't always agree with Ezra but I can honestly say he is definately not a "fat cat." And if he never has to face the harshest of economic challenges - fucking awsome. I wouldn't wish my reality on anyone. I would like to see less poverty - even if it means that people like Ezra never have to face it. There are plenty of people around to describe how shitty many aspects of life can be for those living in poverty without health care.

Posted by: DuWayne | Aug 8, 2006 10:36:21 AM

Hook, line, and sinker.

Check that end tag again, and read the second paragraph here.

With Sirota, disagreement often qualifies you for instant membership in the fat cat/corporate shill/Washington ivory tower club.

Posted by: gswift | Aug 8, 2006 11:48:38 AM

The feature of nationalized healthcare that would be both extremely difficult attain, yet also extremely beneficial, is the feature that comes from a unified payment system--a quality-generating feature for both medicare and the VA system. Both of those government-run programs have found ways to generate improvements in quality through systems management not achieved by privatized care. When we see studies proving that there are 200,000 people killed each year by hospital error, and 1.5 million people injured by medication errors each year, we must find ways to improve the quality when we attempt to increase availability. Many pilot programs have achieved quality improvment. Overall cost of healthcare can be reduced by over 100 billion dollars each year if we could simply do away with hospital-acquired infections. We could start there. Michael Townes Watson, author of "America's Tunnel Vision--How Insurance Companies' Propaganda Is Corrupting Medicine and Law." www.StopMedicalError.com.

Posted by: Michael Townes Watson | Aug 8, 2006 12:07:28 PM

I've also seen estimates that hospitals spend 25% of their gross revenue on filing insurance claims and individual physicians typically pay 20% of their gross revenue to insurance billing services. A single payer plan would sharply reduce overhead on the supplier side of the equation, too.

Posted by: J Bean | Aug 8, 2006 1:50:46 PM

With Sirota, disagreement often qualifies you for instant membership in the fat cat/corporate shill/Washington ivory tower club.

Oh my goodness, I had no idea he's such a jackass. I've heard him on radio a few times and while he's obviously from the "learn from your enemy" crowd I had no idea he was so dogmatic about it. He sounds very much like the person who becomes there enemy for want of realizing when to stop.

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