Monday, October 12, 2009

Talk about "You lie!"

Here's a report from Senator Charles Schumer and HCAN, issued in August.

(Note: According to their website "What is Health Care for America Now (HCAN)?Health Care for America Now (HCAN) is a national grassroots campaign of more than 1,000 organizations in 46 states representing 30 million people dedicated to winning quality, affordable health care we all can count on in 2009. Our organization and principles are supported by President Obama, Vice President Biden, and more than 190 Members of Congress.")

The report says:“Profits at 10 of the country’s largest publicly traded health insurance companies rose 428 percent from 2000 to 2007. In 2007 alone, the chief executive officers at these companies collected combined total compensation of $118.6 million—an average of $11.9 million each. That is 468 times more than the $25,434 an average American worker made that year.”

So, if we skim the data we think that health insurance companies are making a 428% profit. And medical being such a huge sector in the economy, you are talking about billions and billions of dollars.

No wonder Waxman sent off his questionnaire to the insurance companies.

But HCAN laid it on thick by comparing the average salary to that of the insurance company executives. One could turn the tables on HCAN and ask if they are suggesting that everyone in America make the same amount of money, but I for one don't want to know the answer.

But the truth is, that number is misleading. It really doesn't express the true profit margin of the insurance companies. The distortion is made worse by the number of mergers in the insurance industry which causes the dreaded apples-to-oranges comparison. Simply put, it's just bad data presented in a way that deceives.

What you really want to know is the profit margin for health insurance companies, and maybe a little comparative data. We don't need "really big numbers" just for the sake of headlines.

So, here are the real profits, according to Morningstar:
Amgen (biotechnology): Profit margin, 30.6 percent
Gilead Sciences (biotechnology): 37.6 percent
Celgene Corp. (biotechnology): 11.9 percent
Johnson & Johnson (drug manufacturer): 20.8 percent
Pfizer (drug manufacturer): 16.3 percent
GlaxoSmithKline (drug manufacturer): 17.4 percent
Unitedhealth Group (healthcare plans): 4.1 percent
WellPoint (healthcare plans): 4 percent
Aetna (healthcare plans): 3.9 percent

MedcoHealth Solutions (healthcare services): 2.1 percent
Express Scripts (healthcare services): 3.7 percent
Quest Diagnostics (healthcare services): 8.7 percent
Medtronic (medical equipment): 14.9 percent
Baxter International (medical equipment): 17.5 percent
Covidien (medical equipment): 12.3 percent
Exxon (oil): 9 percent
Google: 20.6%
Microsoft: 24.9%
Apple: 15%
Walmart: 3.3%
Home Depot: 5.3%

In fact, as a sector, health insurance companies aren't that great:
"Overall, the profit margin for health insurance companies was a modest 3.4 percent over the past year, according to data provided by Morningstar. That ranks 87th out of 215 industries and slightly above the median of 2.2 percent. By this measure, the most profitable industry over the past year has been beverages, with a 25.9 percent profit margin. Right behind that were healthcare real-estate trusts (firms that are basically the landlords for hospitals and healthcare facilities) and application-software (think Windows). The worst performer was copper, with a profit margin of minus 56.6 percent." (US News)

Here's an interesting chart from The American Catholic:

As you can see, if Obama thinks they can make healthcare available to everyone by outperforming the greedy insurance companies, they've only got less than $100 a year per person to work with. Unless, of course, they start cutting corners somewhere. But isn't that their argument about those big, bad insurance companies who deny people the care they need?

I'm sure they are counting on those insurance executive profits, that $118.6 million. Well, the government now reimburses hospitals about $200 million a year to pay for uncompensated care. The bad news is that illegal aliens alone suck $4.3 BILLION from the emergency rooms in unfunded treatment, so $118 million isn't much.

At the core of it all for me is that the very people screaming about insurance companies (Schumer, Reid, Pelosi, Waxman, Durbin, Obama) are the same people who set the bailout forecast with a "We just wanted to choose a really large number," having no idea what the plan would really cost.

These are the same people who tax a gallon of gas in Illinois at 52 CENTS while complaining about the 18 cents profit the oil company makes.

And, lest we forget, these insurance companies are probably in your portfolio if you hold mutual funds. So...don't they understand economics in Washington, or don't they care?

You won't hear any complaining in Washington about the pharma sector, even though their profits are higher than insurance companies by a factor of four. Why the amnesty? Because pharma agreed to endorse Obamacare.

And they wonder why America doesn't like congress.

(By the way, I used the official White House "Reality Check" logo, but don't look for any of this information there; you won't find it.)

No comments:

Post a Comment