President Obama has found a convenient whipping boy for all that’s wrong with health care in America — insurance companies.
But his choice shows again the fundamental problem with his health insurance reform plan: It does little to solve the real problem with the U.S. health care industry, skyrocketing costs.
The president has been on the health care warpath this week, and health insurers have been in his line of fire. “Every day, they raise premiums higher and higher and higher,” Obama told one audience Tuesday.
In Washington, meanwhile, Howard Dean fired up a group of protesters outside the Ritz-Carlton Hotel. “This vote is about one thing,” he said. “Are you for the insurance companies or are you for the American people?”
Stealing a page from the tea party movement, Obama and the Democrats are trying to energize their supporters by tapping into a deep well of anger toward insurance companies. Why they didn’t choose pharmaceutical companies, we’ll never know.
Unfortunately, while insurers may share some of the blame, the real problem is health care inflation. Between 1999 and 2009, health care costs increased 131 percent. Wages, meanwhile, went up 38 percent and the overall inflation rate was only 28 percent.
Simply put, the real crisis is that we can’t afford the health care we’re receiving.
Are health insurance companies part of the problem? Probably, but they only account for 4 percent of total health care spending. Hospitals are responsible for 31 percent, doctors 21 percent and medications 10 percent.
Are health insurance profits obscene? The top four insurers had profits of $14.7 billion last year, which is certainly a very big number. But that’s only a four percent profit margin, compared to 20 percent for drug companies.
But the volume of health insurers is so large, perhaps a 3 percent profit rate would be more reasonable. And that might shave a few billion off what is a trillion-dollar problem.
Meanwhile, the Obama plan — while promising a variety of new benefits for health care consumers — only vaguely suggests how prices will be controlled.
For instance, it says Medicare reimbursements will be cut by 21 percent for a savings of $300 billion. Who will eat those costs? Hospitals? Doctors? Recipients? No word on that in the plan.
In reality, Congress will never muster the courage to make those cuts. That would mean taking something away from somebody, and Congress rarely, if ever, does that.
Another example: Much of the revenue for the new plan would come from taxing high-end insurance plans. But that tax won’t go into effect for eight years, which would leave it up to some future Congress to impose that unpopular measure.
Would it really happen? We doubt it.
The singular problem with the Obama plan is its lack of balance, its commitment to expanding coverage without a similar commitment to cutting costs.
And insurance companies aren’t to blame for that.