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Misconceptions on health reform
Oct 05, 2009 | 706 views | 0 0 comments | 1 1 recommendations | email to a friend | print

Our national debate about health system reform is a much-needed opportunity for learning about reform proposals and how our current system works. One thing has become clear, from letters to editors to town halls to talk-shows: there are many misperceptions about what needs reforming.

Regence strongly advocates reform that extends affordable coverage to all, improves quality and effectiveness, and curbs waste and inefficiency. We don’t yet know the final shape of reform, but both the government and insurance industry agree on this: If reform doesn’t curb medical spending, coverage will become unaffordable no matter who pays the bill.

Our public debate must proceed from understanding these core truths about medical spending in a health care system that takes one in every six dollars in the world’s largest economy.

Most U.S. health care coverage is already nonprofit: 46 percent of our national health care dollars go to tax-supported coverage, according to federal data. And 61 percent of people with private coverage are in a nonprofit health plan (of at least 100,000 members).

Regence is nonprofit, and has no profit motive to defend. In any case, profits are insufficient to pay for reform. According to Kaiser Health News’ “Ad Watch,” the profits and executive compensation of the top 10 for-profit health plans comprise only 0.5 percent of national health spending, about two days’ worth of care.

When people see their premiums go up, they often blame insurer profits. Actually, about 87 cents of the national health care dollar goes to medical spending, and 13 cents to administrative services. Profits lie elsewhere: Forbes magazine ranks pharmaceuticals as the third most-profitable industry for 2008, with profits of 19.3 cents per dollar of revenue. At No. 4 are medical supplies and equipment, with 16.3 percent profit.

Consumers fund these profits through medical claims and health insurance premiums, whether they have public or private sector coverage, a nonprofit or for-profit plan.

In contrast, even for-profit health insurance is a low-margin business, ranking 35th, with a profit of 2.2 percent. Nonprofit Regence had a net gain of three-tenths of a penny (0.3 percent) on the premium dollar last year, with 88.2 cents going to medical claims.

Reforming insurance should be easy: Insurers have already volunteered to change business practices and accept all applicants regardless of health, with a personal responsibility requirement to carry insurance, similar to auto insurance rules. True health system reform requires us to help people be healthy while we target waste in medical spending to reduce costs. When reform legislation tackles these key issues, we’ll know we are headed in the right direction: toward effective care and affordable coverage for all.

Scott Ideson

President of Regence BlueCross BlueShield of Utah
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