Good day, family and friends!
Lets continue our look at the costs associated with healthcare insurance...
Thanks to knee-jerk reactions by both the courts and the insurance companies to the actions of a handful of miscreants, modern healthcare insurance policies are engorged with fine print designed to severely limit what the policy covers while balancing the need to provide a value to the customer with that of making a profit for the company's shareholders. Unfortunately, all this fine print creates a burden on everyone...from the customers who have to track what is and isn't covered, to the medical providers who have the additional cost of hiring dedicated specialists to handle the jungle (excuse me...'rain forest') of policies and paperwork created by the fine print, to the insurance companies themselves who are also saddled with the costs of having entire departments dedicated to handling the paperwork and interpreting the policies created by the fine print. Depending on which study you read, between 14% and 32% of the cost of healthcare are the administrative costs associated with the fine print.
Believe me, if the insurance companies thought it would be safe to operate without the fine print and its concomitant costs, they would scrap it in a heartbeat. After all, as with any publicly-traded company, they have a duty to those investors who hold shares of the company's stock to be as efficient and profitable as possible. And do you honestly believe that doctors enjoy spending any part of the capital of their practice on the clerical necessities of insurance claims?
It will probably surprise most of you that the premiums paid for insurance policies make up only a portion of an insurance company's capital. The rest of it comes from the sale of stock in the company and from investments the company makes with its capital on hand. This is why making certain the shareholders get some sort of return on their investment is so important. If the company makes no profit, there are no dividends for the stockholders. If there are no dividends, there will be no new stockholders and existing ones will begin to divest themselves of their shares. The end result is that, without the working capital provided by investors, the insurance companies will go out of business.
This is the point where I expect to hear politicians and progressives start whining about "the obscene profits insurance companies make on the suffering of the American public." How does one define "obscene profit"? Currently, there are just over 1,300 insurance companies operating in the United States that offer some sort of healthcare policy. The average profit for all of these companies in 2008 was 2.2%.
*GASP!* How obscene!
It gets even worse. The 16 largest insurance companies that account for right at 80% of the net worth of the insurance industry averaged a whopping 3.4% profit, with the single highest profit in the healthcare insurance industry for 2009 being (drumroll, please) 4.6%.
O! The Humanity! Say it isn't so!
Let's compare that to the average profit margin of...oooh, let's say...professional politicians. These fine, upstanding, selfless individuals make a profit of 100%. Or how about that planetary champion of the climate, Al Gore. His projected profit for 2009 for his 'humanitarian' efforts to fight 'global climate change' is 290%. If the 'Cap and Trade' Bill is signed and put into effect in the next 6 months, then Vice President Gore stands to make a profit of nearly 500% in 2010.
So, which profits are the most obscene?
Next time: Insurance Fraud and special interest legislation...litigation's ugly stepsisters.
Until then, best regards...
© James P. Rice 2009
30 November 2009
29 November 2009
Healthcare in America: Affordability, pt. 2
Good day, family and friends!
Last time, we established that most medical professionals are working hard to earn a living in what they believe to be their true vocation. Quite frankly, anyone who chooses to pursue a medical career in our overly-litigious society deserves a warm round of applause and a hearty pat on the back.
Now, to continue with the analysis...
The second component we have to look at when asking why healthcare costs what it costs is insurance. Thanks to a concerted effort by certain politicians, a growing entitlement mentality spreading through our society, and a very few bad apples in the insurance industry, healthcare insurers have been painted as demons in the healthcare debate. The biggest reason for this is that most modern Americans have a skewed vision of exactly what insurance is.
As a result of the creeping efforts of the Progressive movement over the last 75 to 80 years, most Americans now view their insurance premiums as payments for entitlements. They believe that, as long a their monthly payment is made, they are entitled to access to any healthcare they desire, no matter the cost or availability, as long as they also pay their token co-payment and a small deductible. This warped view of insurance is why many people are unhappy with their healthcare coverage.
The truth of the matter is that insurance is nothing more than a legal form of gambling. When your premium is paid, whether by your employer or out of your own pocket, a wager is placed with the insurance company (the House) that you are going to need medical assistance and that they, within the 'rules' of the wager, will pay for all or part of it. When they accept your wager (premium), the House (insurance company) is betting that you will remain healthy and hale and won't need said medical services. Unfortunately, most bettors (you the customer) let themselves be distracted by the bright shiny lights that is the marketing campaign for the insurance policy and fail to actually read and understand the rules of the wager (i.e. the fine print). Additionally, most bettors also forget the first rule of gambling: "The odds are always in favor of the House."
To be fair, most of that fine print is as complex and convoluted as the worst example of an ambulance-chasing shyster could make it, so it does take a considerable investment in time for the average American to read through and understand what they are getting. Unfortunately, all that fine print evolved over time in response to economic pressures placed on the insurance companies by gradual changes in litigation. This is where some of those 'bad apples' come in; unscrupulous men who would describe a policy to a potential customer as being one thing when it was something completely different just so they could make a sale. Thus, the actions of a few resulted in the implementation of policies and procedures within the insurance industry that were designed to minimize the damage caused by future bad apples and protect the interests of their shareholders. In other words, the only people who won at that table were the lawyers.
Next time, we continue to look at the costs involved with healthcare insurance.
Until then, best regards...
© James P. Rice 2009
Last time, we established that most medical professionals are working hard to earn a living in what they believe to be their true vocation. Quite frankly, anyone who chooses to pursue a medical career in our overly-litigious society deserves a warm round of applause and a hearty pat on the back.
Now, to continue with the analysis...
The second component we have to look at when asking why healthcare costs what it costs is insurance. Thanks to a concerted effort by certain politicians, a growing entitlement mentality spreading through our society, and a very few bad apples in the insurance industry, healthcare insurers have been painted as demons in the healthcare debate. The biggest reason for this is that most modern Americans have a skewed vision of exactly what insurance is.
As a result of the creeping efforts of the Progressive movement over the last 75 to 80 years, most Americans now view their insurance premiums as payments for entitlements. They believe that, as long a their monthly payment is made, they are entitled to access to any healthcare they desire, no matter the cost or availability, as long as they also pay their token co-payment and a small deductible. This warped view of insurance is why many people are unhappy with their healthcare coverage.
The truth of the matter is that insurance is nothing more than a legal form of gambling. When your premium is paid, whether by your employer or out of your own pocket, a wager is placed with the insurance company (the House) that you are going to need medical assistance and that they, within the 'rules' of the wager, will pay for all or part of it. When they accept your wager (premium), the House (insurance company) is betting that you will remain healthy and hale and won't need said medical services. Unfortunately, most bettors (you the customer) let themselves be distracted by the bright shiny lights that is the marketing campaign for the insurance policy and fail to actually read and understand the rules of the wager (i.e. the fine print). Additionally, most bettors also forget the first rule of gambling: "The odds are always in favor of the House."
To be fair, most of that fine print is as complex and convoluted as the worst example of an ambulance-chasing shyster could make it, so it does take a considerable investment in time for the average American to read through and understand what they are getting. Unfortunately, all that fine print evolved over time in response to economic pressures placed on the insurance companies by gradual changes in litigation. This is where some of those 'bad apples' come in; unscrupulous men who would describe a policy to a potential customer as being one thing when it was something completely different just so they could make a sale. Thus, the actions of a few resulted in the implementation of policies and procedures within the insurance industry that were designed to minimize the damage caused by future bad apples and protect the interests of their shareholders. In other words, the only people who won at that table were the lawyers.
Next time, we continue to look at the costs involved with healthcare insurance.
Until then, best regards...
© James P. Rice 2009
21 November 2009
Healthcare in America: Affordability, pt. 1
Good day, family and friends!
Well, its been over 2 months since my last post. For those of you who have been following this series, I apologize. However, I receive no compensation at all for my blog and activities that pay the bills must come first.
As I started looking into the affordability of healthcare in America, the question I started with was, "why does it cost what it costs?" There are as many different opinions as to 'why' as there are corrupt politicians in government. Some have claimed that costs are set and controlled in secret by a consortium of medical insurance corporations and pharmaceutical companies with a goal of padding the bottom line. Some claim that the healthcare providers themselves are just greedy individuals who are demanding every dime the traffic will bear. President Obama even went so far as to suggest that physicians are performing unnecessary surgeries in order to collect higher fees from MedicAid/MediCare. In fact, the truth is that modern medical technology is simply very expensive to develop, learn, acquire, and maintain, and that rampant insurance fraud and out-of-control litigation makes healthcare coverage prohibitive for the underwriters.
So, let's start with the physicians. Most physicians start their careers at least $200,000 in debt from their education. Additionally, the average start-up cost for a new medical clinic for a General Practitioner is between $300K and $500K. If the clinic is for a medical specialty (e.g.: Endocrinology or Orthopedic Surgery), add another $200K - $300K. This means that a new doctor opening a new clinic incurs between $300K and $800K in additional debt before they ever see a patient. This plus the desire to have access to a pool of experience causes most new physicians fresh out of their residency to become employees of an established clinic.
While it is true that these highly-trained medical employees usually do make a salary in the low six-figures, they earn every penny of it. These men and women are usually the ones pulling the long and undesirable shifts. Most averaging 68 hours of work per week and only 8 days total of vacation in the first five years after they complete their residency. These new members of the clinic are usually the ones on call during the holidays. Basically, they work hard to establish themselves with their patients and the local hospitals at which they have privileges. In other words, they are 'paying their dues.' On top of that, most physicians spend an average of 36 hours per year in additional training on new procedures, equipment, and medications.
In addition to the cost of employing these medical professionals, the clinics themselves also have a staff of highly-trained nurses, physicians' assistants, and medical receptionists/clerks to pay. Their overhead also includes items such as the facilities themselves, routine medical equipment maintenance, cleaning crews that specialize in medical facilities, and medical/laboratory courier services. Finally, they usually have at least two medical billing specialists just to deal with the complexities of the plethora of insurance options available to their patients. After all that, most medical clinics (with the exception of clinics specializing in 'elective' procedures) barely clear a profit of 6% at the end of the year. Not exactly an easy way to get rich quick, is it.
Next time, I'll look at what goes into the cost of healthcare insurance and address the abominable suggestion made by the President.
Until then, best regards...
© James P. Rice 2009
Well, its been over 2 months since my last post. For those of you who have been following this series, I apologize. However, I receive no compensation at all for my blog and activities that pay the bills must come first.
As I started looking into the affordability of healthcare in America, the question I started with was, "why does it cost what it costs?" There are as many different opinions as to 'why' as there are corrupt politicians in government. Some have claimed that costs are set and controlled in secret by a consortium of medical insurance corporations and pharmaceutical companies with a goal of padding the bottom line. Some claim that the healthcare providers themselves are just greedy individuals who are demanding every dime the traffic will bear. President Obama even went so far as to suggest that physicians are performing unnecessary surgeries in order to collect higher fees from MedicAid/MediCare. In fact, the truth is that modern medical technology is simply very expensive to develop, learn, acquire, and maintain, and that rampant insurance fraud and out-of-control litigation makes healthcare coverage prohibitive for the underwriters.
So, let's start with the physicians. Most physicians start their careers at least $200,000 in debt from their education. Additionally, the average start-up cost for a new medical clinic for a General Practitioner is between $300K and $500K. If the clinic is for a medical specialty (e.g.: Endocrinology or Orthopedic Surgery), add another $200K - $300K. This means that a new doctor opening a new clinic incurs between $300K and $800K in additional debt before they ever see a patient. This plus the desire to have access to a pool of experience causes most new physicians fresh out of their residency to become employees of an established clinic.
While it is true that these highly-trained medical employees usually do make a salary in the low six-figures, they earn every penny of it. These men and women are usually the ones pulling the long and undesirable shifts. Most averaging 68 hours of work per week and only 8 days total of vacation in the first five years after they complete their residency. These new members of the clinic are usually the ones on call during the holidays. Basically, they work hard to establish themselves with their patients and the local hospitals at which they have privileges. In other words, they are 'paying their dues.' On top of that, most physicians spend an average of 36 hours per year in additional training on new procedures, equipment, and medications.
In addition to the cost of employing these medical professionals, the clinics themselves also have a staff of highly-trained nurses, physicians' assistants, and medical receptionists/clerks to pay. Their overhead also includes items such as the facilities themselves, routine medical equipment maintenance, cleaning crews that specialize in medical facilities, and medical/laboratory courier services. Finally, they usually have at least two medical billing specialists just to deal with the complexities of the plethora of insurance options available to their patients. After all that, most medical clinics (with the exception of clinics specializing in 'elective' procedures) barely clear a profit of 6% at the end of the year. Not exactly an easy way to get rich quick, is it.
Next time, I'll look at what goes into the cost of healthcare insurance and address the abominable suggestion made by the President.
Until then, best regards...
© James P. Rice 2009
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