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Posts Tagged ‘insurers’

The Financial Times reported on September 30, 2010, that England will try to revise drug prices to get them in alignment with their value for patients. That sounds good, but can governments and regulators really make good decisions about this?

In a socialist world where government takes responsibility for providing medical care, government has to decide what it will and won’t pay, and what it will and won’t cover.  Another approach is for patients to decide how much to pay by deciding how much a drug treatment is worth to them.  That system seems to work well in the rest of the economy.

So many of us have come to rely on others — insurers or the government — to make our health care decisions for us.  I’m not saying whether that’s good or bad, just that it is.  If we want to control the cost of health care, we’re either going to have to let insurers or the government make those decisions for us, or we’re going to have to change to a system in which we make those decisions for ourselves.  But to do that, we have to be responsible for paying for our health care.  I discuss this in more detail in my Primer on Health Care Reform, available for free by clicking here.

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Tribune Washington reporter Noam Levey reported that “the five largest health insurance companies racked up combined profits of $12.2 billion” in 2009 (http://seattletimes.nwsource.com/html/nationworld/2011050573_healthprofits12.html).

I’m sure there are many ways to spin this, but I’m not at all impressed that this is the cause of the high cost of health care. When the nation spends hundreds of billions, $12 billion in profit isn’t that striking. The article reported that profit margins for these large health insurers ran from roughly 3 percent to 7 percent, the higher numbers in part due to sale of part of the company. Growth in the stock market could have contributed as well.

We need to fix our health care system, no doubt about it. Demonizing one sector — like health insurers — is not the answer. Someone has to take responsibility for controlling costs. Right now, our third party payment system has taken much of that responsibility off of patients. That leaves high costs or rationing as the other options, neither of which is particularly palatable.

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