Thursday, January 20, 2011

Obamacare revisted

Wall Street Journal:

Researchers at Goldman Sachs Group estimate that the top four publicly traded [health] plans will show earnings increases averaging 21% in the fourth-quarter of 2010 compared to the year-earlier period. UnitedHealth could see profit rise in the fourth quarter by 17%, according to Bernstein estimates. Aetna Inc., which reports its numbers in early February, could see a 65% jump in the quarter just ended, says Goldman analyst Matthew Borsch.
In 2014, insurers will need to begin accepting applicants with pre-existing illnesses, and new health-insurance exchanges will increase competition. Insurers will get millions of new customers from the law and that could counteract any negative effects, since individuals will be required to buy coverage.

Health insurance profits come from whatever revenue isn't spent on providing patient care, relative to the total pool of customers. Because profit is the name of the game, you can't ask the US health system to treat sick people if it means taking money away from deserving executives and investors. They'll just move that money into their legislative war chest, and produce the bill they want.

In the case of "Obamacare," that's pretty much what happened. Insurance companies will spend more on patient care because the government has legally guaranteed them millions of new customers. The relative relationship between the insurer's expenditure and profit has likely changed, but in their favor. This brings with it political and economic consequences (the power of insurers and overall cost of health services, respectively) that are worth thinking about, even if we concede the importance of this reform for many patients.

No comments: