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Much well Health Care Reform quickly transformed into health insurance reform is because the insurers are seeing is a big part of the problem.
And he he targets especially what Democrats call their big profits.
Take a listen to some comments from President Obama recently.
The problem gets worse.
Every year insurance covers and I'm more people coverage because they've got pre existing connections.
Every year they drop more people's coverage when they get sick right when they need -- Every year.
They raise premiums higher and higher and higher.
Now undoubtedly the insurance companies dropping those with preexisting conditions are to blame for some of the negative publicity however.
When it comes to the issue of profits by industry.
Take a look at this recent study by fortune magazine shows that on -- profits as a percentage of revenue basis.
Aren't in the top five.
They're not in the top ten in fact.
They're barely in the -- 185.
Insurers as a profit percentage of revenue comment.
As the 22.
Highest ranking industry according to fortune magazine so.
Is some of the focus of the health care fight on insurers misguided.
Jack -- is a resident scholar with the American Enterprise Institute.
And he is our guest from Washington DC I'm not gonna let the insurance companies off the hook here Jack -- did you know we we got a story coming up later which underscore that point however.
When you go after profits it's easy if -- around you know billions here billions there yet because they're big companies.
But according to fortune magazine on a percentage basis.
They're not that -- That's right it's it this is a very tough business and -- to make a profit no one's making big profits for very long.
You know it's shifting at the open of the show we went to what are your points which is.
If it was such a great business YR Warren Buffett.
And why -- met life do you know why are other big insurance companies in health insurance what's the answer.
The answer is it was very difficult to control costs what happens is that if doctors have some kind of nice arrangement and community hospital is the only hospital in particular region or one of very few hospitals.
They've been pushing up their race -- in the -- -- the insurance companies can do about that because the patients.
Want to have access to those particular hospital so what you'll find his.
Yes rates do go up.
But it doesn't matter whether -- -- for profit insurance company or nonprofit insurance company.
In both cases rates have -- going to happen in those rate increases have been driven by price and I buy that by the cost of providing health care itself.
Quinn -- HHS -- -- secretary Sebelius put out a report a couple of weeks ago attack in the insurance companies because the rates are going up so fast.
She had a list of a lot of insurance companies at any increased their rates but.
Probably half of those insurance coming back from nonprofit insurance companies that don't make any profit at all.
-- it nonprofits.
Are being held as.
Increasing their rates but I thought they are increasing their rates because they were.
Profitable or for profit industries that -- that's the case.
No profits have very little to do with the and the increase in insurance rates it's driven almost entirely by increases in the cost of providing health care.
You know that we could take the ethical side of insurance for everybody out of it because that's a different argument.
But if we follow the Massachusetts.
Example which many are holding up as an example.
It looks like higher premiums might be on the way because according to some numbers out there Jack the Massachusetts.
Per patient premium.
Is the highest on the state level basis and America correct that's according to cut.
That's right that's right -- Massachusetts reform.
Has gotten quite a few people insurer who previously were not insured but the net result is that that costs have been going -- instead of down premiums have been going up and sent down.
In of course taxpayer subsidies have been going up very rapidly so the net result of the of the Massachusetts reform is higher cost somewhat more people getting.
But there's no solution whatsoever to the cost problem back they're getting ready to revamp the entire reimbursement system.
And they really don't know how they gonna do that -- don't know whether it will do any good.
What is the answer that -- How do we lower costs.
Well you know everyone has their own opinion on my health economists and in my take on this is the best way to do this.
Is to revamp the tax structure so that right right now is -- is you know health insurance premiums are mainly paid by employers.
Those premiums do not going to taxable income that is essentially a tax subsidy for health insurance.
I think we'd be back and in it's also the reason why almost everyone gets their insurance through -- employer rather general on their own the way to get auto insurance why insurance and so.
I think we would be better off.
If the tax system were revised we would.
Reduce the marginal tax rates to make up for what would happen if we eliminate.
The the tax exclusion for health care premiums.
That would would mean the most people would migrate from insurance provided by by their employers to insurance they -- on their own they could keep it the way they keep life insurance auto insurance and so on.
They'll pay a lot more attention to cost in that situation there will be better competition among insurers and I think we would have a much stronger situation in terms of controlling costs.
This this is.
-- -- side of the argument Jack which is very politically unpopular it's hard to say I know the politicians necessarily.
Won't say at least directly but but is the reality.
And your health economist is the is the reality that when something is paid for by someone else whether it's your employer side whether it's Medicaid whether it's Medicare.
If something has paid for by someone else.
It will be over consumed.
Short answer is yes that is almost always true if we got our housing have we got her meals and food and so on.
Through our employers -- someone else paying for I assure you there would be tremendous cost pressures in -- would be a constant crisis over controlling those costs.
You have any health care and health care is no different correct.
No it just health care happens to be the young and the best example there is so what happens.
When someone else is paying for almost everything.
-- -- with the American Enterprise Institute Jack we appreciate your insight today thank you very much.
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