Frontline on Healthcare

I watched a television show called "Frontline" last night as its topic was on universal health insurance. The series runs on PBS and is notoriously left-wing in its perspective. Usually, Bill Moyers is the propagandist, but last night it was a different fellow. Sadly, the presenter's bias was easily uncovered. The US health care system was "bad" and the universal insurance systems were "good." The basic arguments presented against US insurance were as follows:

1. US administrative fees ran at 22% of cost compared to 5-8% in other systems.
2. US health insurance companies were 'for profit' the other country's' insurers were not.
3. The US spends 16% of GDP on health whereas the other spent 6-8% of GDP on health.
4. There are many medical bankruptcies in the US and none anywhere else.

All the topics are good ones to cover, but one would expect some intellectual honesty in the discussion. With each of the topics presented the dialogue seemed to come straight from the Michael Moore guide to screed. The US does this poorly, this other country does so well, why is this? The easy answer was always 'profit'.

Lets pop the profit balloon right now. First, a for profit entity only means that there are equity investors involved at the foundation of the company where year end surpluses may be given to the equity investors (dividends). In a not for profit entity, the year end surpluses are placed in reserves not earnings; there are no dividends, but it is the same thing. These left over earnings in both for and not for profit entities are used to fund future operations.

The second myth on profit is the bottom line. With an insurance industry standard of 2%-6% profit, that will not cause the problems Frontline claims. If the US spends 16% GDP on health care and theoretically the GDP is $100,000, then $16,000 is health costs and of that $320-$960 is profit, or 0.32%-0.96% of GDP is health care profit. As evil as one wants to make profit, the argument is sentimental at best because it carries no water. With profit out of the equation, US health care is 15% of GDP.

Finally, if profit were the true motive of the insurance companies, administrative fees would not be 22%. Administrative fees are the first place any good manager looks to cut costs to increase the bottom line. There must be another reason. The 'Evil of Profit' has become favored the left-wing trope when taking a moral stand.

One topic that the show did not touch upon was medical tort costs which account for 13% of the of health costs. In Germany, medical malpractice insurance is ~$1,400 per year compared to ~$140,000 in the US. The reporter was not ever curious as to why this might be. There is a reason John Edwards lives in an 18,000 square foot home, and health care is expensive in the US. If the show wanted to be fair, the case would have been made that lawyers should not make big profits off of health care in the US.

Overall, the show was incurious emotional propaganda packaged as intellectual argumentation.