Health care is big profit business
By MARTIN DYCKMAN, Times Associate Editor
© St. Petersburg Times
published December 15, 2002
TALLAHASSEE -- One of the perils of being a public official is to mingle with and take favors from people he will have reason to wish he had never met. (Remember the Keating Five?). Most recently, it happened to Gov. Jeb Bush.
He took a pasting in the press over private jet trips and campaign contributions provided by a company called National Century Financial Enterprises and its founder, Lance K. Poulsen. National Century was hit last month with a $3.5-billion fraud suit, filed for bankruptcy, and involuntarily welcomed swarms of FBI agents and accountants to its Ohio headquarters.
But the real story, universally overlooked, was bigger than the efforts of yet another questionable entepreneur to ingratiate himself with one of the Bushes. It had to do with the nature of the perfectly legal business that National Century was in.
That business was to finance doctors, hospitals, nursing homes and other health care providers while they waited -- and waited, and waited -- for money owed them by health insurance companies, HMOs, and Medicare and Medicaid.
Every dollar in profits was a charge against the nation's overall health care bill. Not a penny of it made any sick person well.
There would be no place in an efficient or humanistic health care system for a practice like that.
It must be an awfully lucrative business, however, because there are other companies in the field.
They do it by buying accounts receivable at a discount and pocketing the difference when they finally collect the unpaid bills. It comes as no news that health insurance companies stall on paying out for as long as they think they can get away with it.
The business of buying accounts receivable is known as factoring. It is common in other lines of commerce.
But health care is not, or ought not to be, just another line of commerce. It's a matter of life or death for everyone. It should more resemble a religion than a business.
Instead, health care has become the biggest of businesses. Overall, America will spend an estimated $1.5-trillion on health care this year. That's more (often more than twice as much) by every measure -- total, per capita, percentage of gross domestic product -- than any other developed nation. Yet for more than 40-million Americans, those with no health insurance of any kind, the doors of this business are closed except on an emergency basis, when it is most costly and often too late.
A shocking amount of this money -- $112-billion this year, according to government data -- is written off to what it calls "government administration and net cost of private health insurance." The private sector accounts for most of that.
Another significant statistic, according to the Organization for Economic Cooperation and Development, is that 27 of 28 other countries spend proportionately more of their total health costs out of public funds than we do. (The exception is South Korea). The OECD average: 74.1 percent. The United States: 46.4.
Many of the others are healthier, though whether it's for better medical care or for eating less and walking more would be hard to say.
None squanders money the way we do in ways that make people richer but not healthier: on swollen profits for HMOs, hospital chains and the like.
Everywhere else, private health insurance is a small slice of the pie. Here, it's nearly 35 percent. France, at 12.8 percent, and Germany, at 12.5, come next.
Speaking of France, the total bill for a routine visit to the doctor is $20, and the Securite Sociale refunds the patient most of that.
The United States could afford good health care for everybody with the money we would save by getting rid of the middlemen.
Sam Gibbons, the former congressman, had the right idea: Medicare for everyone.
Medicare has its faults, chiefly in the exclusion of pharmaceuticals and preventive care. It also pays less than the doctors and hospitals say they need. But it is not as slow to pay as the private insurers are. Unlike the private insurance companies, it has no profit motive for making the doctors wait for what they have earned. Its cost of administration is the lowest of all, and it could easily be expanded into a true single-payer health insurance system covering everyone.
This issue is coming to life again despite the calamitous defeat under the Clintons. Even Al Gore, reversing himself in barely two years, has come out for single-payer ("A death-defying act," according to the Economist.)
But that single-payer has got to be the government, not the private health insurance industry. Otherwise there will always be money to be made not from making patients well, but by stiffing the people who do.