We all know that health care costs in the U.S. are too high. But why is American health care so expensive? Some experts blame the desire for profit. Russell Andrews, a neurosurgeon and author of Too Big To Succeed laments “the morphing of American medicine from a function of a humanitarian society into a revenue stream for health care profits, drug and medical device companies, hospitals, and insurance companies. In essence, we have transformed health care in the U.S. into an industry whose goal is to profitable.” Andrews goes on to characterize the profit motive as “a virus” infecting the system.
Sachin Shah, a physician affiliated with Doctors For America, contrasts the struggles patients have paying for their medical bills to the enormous profits of American insurance companies:
“The five largest health insurance companies — WellPoint, United Health, Aetna, Humana, and Cigna — … earned over $3.3 billion in profits [between April and June 2011].” Shah goes on to contend that “Profit in the health insurance industry is the single greatest barrier to building an efficient, sustainable system of health care in this country.”
David Goldhill is not convinced that profits are the problem. Author of Catastrophic Care: How American Healthcare Killed My Father and How We Can Fix It, Goldhill points out how small those profits are in the face of overall health care spending:
Imagine confiscating all the profits of all the famously greedy health insurance companies. That would pay for 4 days of health care for all Americans. Now add in the profits of the 10 biggest “rapacious” drug companies. Another 13 days.
Who is right: Goldhill, a cable television executive who wrote a book after his father had a horrible medical experience, or Andrews and Shah, two physicians who claim to have seen the effects of the profit motive up close, in their own patients’ lives?
Would it surprise you to learn that my answer is: Neither? Instead, all of them are having a hard time distinguishing between income and profits.
Let’s start with the two physicians I quoted above. Both bemoan the way that money influences medical care in the U.S., with physicians no longer concerned primarily with patients’ best interests. As Andrews puts it: “Medical services since ancient Greek times have sworn to uphold the Hippocratic Oath. Medical students since ancient Greek times have sworn to uphold the Hippocratic Oath. Yet nowhere in the Hippocratic Oath is money, financing or making a profit mentioned.”
Andrews is wrong about the Oath, which does mention money, but only in the context of medical training, instructing physicians in training to regard their teachers as partners: “and when he [the teacher] is in need of money, to share mine with him.” Hippocrates aside, Andrews is harking back to a time when the medical industry was presumably not focused on profits the way it is today.
Shah does not focus on the physician/patient relationship, but instead on profit mongering companies: “These companies,” Shah writes, referring to for-profit insurance companies, “are morally bankrupt parasites.” Shah then concludes that their “business model is to profit by finding ways to avoid caring for sick people in their time of greatest need.”
I think these well-intentioned physicians are conflating interest in making money with the pursuit of profits. Shah vilifies for-profit insurance companies, but non-profit insurance companies also have a financial incentive to withhold care from patients. Indeed, much of the money in the American health care system flows through very well paid non-profit businesses. The Mayo Clinic? A wealthy non-profit institution, whose CEO makes around $2 million a year. The CEO of Blue Cross/Blue Shield of Illinois, a non-profit insurance company, made $16 million in 2012. Shah and Andrews are upset about the profit motive in medicine, but should be more focused on greed. Profits are not to blame for health care costs in the United States. We could run an entirely non-profit system and still witness high health care costs.
Goldhill is also focused too much on profits rather than on health care spending more generally. Perhaps insurance company profits only amount to a few billion dollars here, another few billion dollars there, all amounting to a drop in the proverbial health care spending bucket. But by focusing on profits, Goldhill ignores the salaries that insurance company employees make, salaries that are paid before the company can determine whether it has made any profits. Remember, Blue Cross/Blue Shield receives billions and billions of dollars of money from health insurance enrollees. It pays most of that out to health care providers. But it also rewards many of its employees, especially its executives, with very lucrative salaries, salaries that influence health care costs, even though they are not counted as health care profits.
When we debate health care costs in the U.S., we need to be clear on whether we are focusing on profits, per se, or instead on the simple fact that everyone in the health care industry — from for-profit insurance companies to private practice physiotherapists — understandably need to focus on their own bottom lines. Undoubtedly, being a for-profit company with anxious shareholders puts more pressure on that bottom line. But everyone working in the health care industry has to make sure that the revenues they receive, in the long run, at a minimum cover their operating costs.
A more nuanced debate about health care costs in the US should better distinguish between health care related income and outright profit. No one should go bankrupt either paying for medical care or providing it. But that doesn’t mean health care businesses, whether profit or non-profit, should enrich themselves at the expense of society. It is important not only to recognize that health care businesses — from solo medical practices to ginormous insurance companies — ignore the bottom line at their own peril, but also to recognize that too much money grubbing — whether from for profit or non-profit health care businesses — threatens our ability to provide needy patients with affordable medical care.
Peter Ubel is a physician and behavioral scientist who blogs at his self-titled site, Peter Ubel and can be reached on Twitter @PeterUbel. He is the author of Critical Decisions: How You and Your Doctor Can Make the Right Medical Choices Together. This article originally appeared in Forbes.