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Following The Money

As is his wont, President Obama is trying to sell his health care financing seizure reform plan by casting it as an "us against them" theme. The guy simply can't seem to make a point without having a convenient villain to play against -- even (or most often) he has to make one up.

In this case, his first try was the greedy doctors -- you know the ones, the mad scientists who would rip out tonsils or amputate limbs purely to make a buck. That one was an epic failure.

So he fell back on big business. More specifically, the big health insurance companies who are making "obscene" profits at the expense of Mr. and Mrs. Average American, and their 2.3 Average American children. (One wonders if the .3 of a child was a result of a greedy surgeon taking away Junior's feet and tonsils.)

So, just how profitable are these companies?

Not very, it turns out.

Oh, in actual dollars, not that bad. But as a percentage of their total revenues? They suck. The biggest, WellPoint (whose card I carry), scored profits of 4.07% in 2008. That's how much of their income they managed to keep.

As a point of comparison, the huge, evil, diabolical ExxonMobil couldn't quite manage a 7% profit margin last year. But since they're such a huge company, that still worked out to 19 billion dollars.

In either case, if you want to find an industry that offers serious returns for investors, take a look at this list. Forty industries rank higher than Exxon, and 71 better than WellPoint.

You wanna know where some REAL money, as a percentage of total income, goes in the health care field? Ask Dr. Tara Wah, an obstetrician in Tallahassee, Florida. She's got plenty of time to answer -- she gave up her very successful practice when her malpractice insurance premiums topped $125,000 a year. For sixteen straight years, Dr. Wah took home less and less money as that cost kept rising. Eventually, she took home no pay for two months before she finally said "screw this" and left medicine entirely to take up jewelry repair and design.

It's not just OB/GYNs who have problems here, though. (Although they were John Edwards' favorite victims -- he pretty much single-handedly decimated the practice in his home state.) It's general practitioners, the "family doctors," the "primary care physicians" that are the linchpin of our system (and Obama's nightmare of a plan), too. One doctor has to fork over $11,000 a year in his malpractice insurance, at a time when the government is cutting how much they will pay him for Medicare patients.

Let's set aside the fact that Dr. Schreiber is a doctor, and look at him as a businessman. He's the CEO of a small company that employs two nurse practitioners and has revenues of $800,000 a year. Dr. Schreiber is also a highly-trained and highly-educated individual: Doctors, on average, spend at least ten years in training and education before they are licensed, and Dr. Schreiber graduated from medical school 29 years ago. Let's say he's had his current practice for 20 years -- I can't find that out, but it's a reasonable number.

He's a small businessman who is highly trained, highly skilled, (presumably) quite competent and well liked by his customers, employs two other highly-trained and highly-skilled employees, and his annual take-home pay is $100,000. For that he sees 120 patients a week. That works out to 24 a day, or -- presuming he works 8 hours a day, which I highly doubt -- 20 minutes per patient.

And that's purely what Dr. Schreiber, employee, does. Mr. Schreiber, CEO, has to also do all the other routine crap that goes with owning and running a small business.

For that, he gets $100,000 a year. And as the article noted, that's being threatened as well.

There are a lot of doctors who are simply "going Galt" and opting out of Medicare. It's not because the doctors can make more money through other providers -- it's that they actually lose money on Medicare. When the costs of processing all the required paperwork and fighting to get actual, timely payment is added up, it often exceeds the amount Medicare chooses to pay. So the doctors would actually be better off just treating people for free.

Which is absurd. So they don't treat them at all.

There's a real problem here, beyond Medicare. It's the costs of malpractice insurance. It's getting harder and harder for doctors to justify staying in what have been deemed "high-risk" fields because they simply can't afford to support themselves and their families and their malpractice coverage.

But fixing that will never be a part of Obamacare. The trial lawyers missed their chance to get one of their own into the White House with John Edwards, but they've bought and paid for enough other leading politicians -- including President Obama, who has a rather spotty record for staying bought if you're not a union -- to keep meaningful reform on this field off the front burner.

So good doctors like Dr. Wah go into the bling biz. So other doctors like Dr. Schreiber start wondering if it's really worth putting up with all the government paperwork and runarounds.

What's really important is that Wellpoint made a 4% profit last year, and that is just intolerable. They must be strung up for that.


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Comments (37)

The physician who takes car... (Below threshold)
jim m:

The physician who takes care of my elderly parents has for a long time refused medicare payments. My parents, and all his patients who are covered by medicare, must pay him directly. This means that they must seek reimbursement from Medicare.

That has 2 ramifications: First, they bear any financial burden that Medicare or their co-insurance does not cover. Fortunately for them they can afford a very good coinsurance plan. Second (and of more significance), because their doctor does not receive direct payments from Medicare he is allowed to speak to my parents about treatments that are not covered by Medicare. It is illegal for a physician to even inform his medicare patients about potential curative therapies if said therapies are not covered by Medicare.

Imagine, should Obamacare become law, that this same restriction will be applied to ALL physicians for ALL patients.

I'm not insensitive to the ... (Below threshold)
James H:

I'm not insensitive to the costs of medimal insurance, but I have to ask ... what kind of tort reform would you consider ideal? My main concern is ensuring that individuals with relatively low-dollar economic claims (say, below $100,000) can effectively seek compensation in the courts.

James, 'tort reform' would ... (Below threshold)

James, 'tort reform' would be aimed DIRECTLY at 'lawyers' like John Edwards. Yeah, occasionally they hit the jackpot with an obviously incompetent doctor, but most of the time (and all the BIG money) is what insurance companies call 'nuance lawsuits'. Vague claims and damages are claimed and insurance companies PAY THEM TO GO AWAY, because it would cost MORE to defend against the actual suit. Reform, as I see it would make the plaintiff (patient) pay ALL COURT COSTS if they lost. It would definitely cut down on the bullshit.

Interesting show with George Will last week. Some incipient liberal was going on about the EVIL profits of a health insurance company. Will pointed out that the profits (2%) would pay for health care for everyone in the US for TWO DAYS! His question to the liberal then was, "so who is going to pay for the other 363 days?"

this post kina reminds me o... (Below threshold)

this post kina reminds me of this story:
"A small businessman was being questioned about how many employees he had and how much he paid them....
His first employee had been with him for ten years and was paid $25.00 an hour.
His second employee had been with the company for eight years and was paid $ 19.50 an hour.
His third and fouth employees had joined the company at the same time two years ago and were each paid $14.00 an hour.
The small business owner said there was one final employee who had been with the company from the very start who he liked to refer to as the "moron" who with all the hours he had to put in on paperwork and timekeeping and all the minor details of running a small business was paid only around $ 4.00 per hour.
" who is this 'moron' you're referring to" asked the questioner.
"Me" replied the small businessman.

or something like that.

Garand, I think you mean "n... (Below threshold)

Garand, I think you mean "nuisance" lawsuits.

And Steve... another reason their profits are down is that Obama has demonized them, and investors are wondering if they'll end up getting treated like the government treated AIG, GM, Chrysler...

An entirely reasonable concern.


"...there's that black man ... (Below threshold)

"...there's that black man in the White House and that just plain pisses some people off royally."


You fucking imbecilic ass!

stevie G ...last y... (Below threshold)

stevie G ...

last year was 2009 you pin head, not 2007

2009 2008 2007 2006
4.3 3.5 6.1 5.8

those are the Wellpoint annual numbers ... from Google ...

tool ...

ha ha ha ha ha ha ha ha!!!!... (Below threshold)

ha ha ha ha ha ha ha ha!!!!

After lecturing us for months and months on "peer reviewed science" and "melting glaciers", Steve the business imbecile is now lecturing us on business practices!!!

What's next Stevie-o? A lecture on spacecraft dynamics??

There's no limit to your abject ignorance coupled with your unlimited desire to comment (authoritatively in your own mind)!!

I have to tell you that it's really entertaining!!

So, how might politicians demonizing an industry/company affect that companies profits (gross or net)?

Well, if powerful politicians, who have already demonstrated a willingness to effectively take over and/or hand to their friends control of other companies in other industries (Chrysler/GM--Unions), then companies now under political assault will inevitably experience a bit of capital flight (decreased investment).

What impact does decreased investment have on a companies profits?

Less capital available to be employed in such a way as to take advantage of new profitable market opportunities (which generally result in a higher rate of return until competitors show up).

I see this everyday in my work as a business consultant.

It's actually quite simple really, which is why li'l stevie doesn't understand it.

Now, if we had posed as liberal "business scientists", proclaimed we had irrefutable "scientific" and "peer-reviewed" mathematical models demonstrating that loss of corporate profits was a primary driver of global warming (then climate change), but that we couldn't provide you the data or our algorithms, but that some of our pals had "peer reviewed" our "stuff" and it was all "cool, and whatever", then li'l stevie would have bought it all hook line and sinker.


"The guy simply can't seem ... (Below threshold)

"The guy simply can't seem to make a point without having a convenient villain to play against -- even (or most often) he has to make one up."

Jay, this is Obama's entire approach to policy discourse in a nut shell. There is no other president who comes close in this regard.

Steve Green,
Your words: "But if you want to play with percentages - look at the years prior to the biggest damn recession in the last several decades."
This is a typical problem with you. You ask us to check other facts and don't have the decency in rebuttal to link the specific information from which you are drawing your conclusions. And then when your frustration reaches a certain level you pull out the race card. Now, I'll give you credit. Recently you have shown some maturing of character by delaying your race baiting posts to much later in a thread, but in this case you seem to be regressing.


A 5% four year average net ... (Below threshold)

A 5% four year average net income makes Wellpoint craven profiteers, huh?

Steve, tell us what you think a "reasonable" profit ought to be.

Enlighten us right-wing haters. Share your brilliance and educate us.

"KNOW that you're being ... (Below threshold)
P. Bunyan:

"KNOW that you're being lied to'

No worries comrade! I know I'm being lied to every time I hear Barack speak or read one of your blog comments.

I know that Barack can't up... (Below threshold)
P. Bunyan:

I know that Barack can't upset his owners--the trial lawyers--but what do you think their percentage of profits is? I would guess it's greater than 50%. So I guess to Marxists like Steve and Barack profit is an evil and horrible thing, unless it's made by a trial lawyer.

I get it now Steve. Those who provide valuable products and services that benefit pretty much everyone or at least most people, and make a small profit are demons, but those who exist as parasites and leaches and only help a handful of people and harm everyone in society (even those they help) while making obscene profits for themselves are angels.

My what an ass-backwards worldview you Barack, Hugo, Fidel, Il, et al have.

Note to Jay Tea: while I'm... (Below threshold)
P. Bunyan:

Note to Jay Tea: while I'm personally against banning commenters except in extreme cases, Steve Green's constant racial bigotry (e.g. "black man in the White House") is getting quite tiresome and in my opinion would justify whipping out Olaf's hammer (or whatever it's called). If you let racists and bigots like Steve, whose primary focus seems to always be on race even though it's totally irrelevant to most everyone else here (as we are not bigots like Steve), continue to post on this blog the site will go downhill quickly.

li'l confused stevie green:... (Below threshold)

li'l confused stevie green: "Obama "demonizing" these poor companies is the reason their profits drop? Nope. Nice try, but major FAIL on that one.

Nice strawman there li'l man!!

Obama's demonizing is a contributing factor. Not that any answer that isn't black and white will make sense to you steve, seeing how simple your mind is.

BTW, what are your thoughts about current ramjet tchnology?

I mean, seeing how it appears to be your policy to comment on things you clearly know nothing about......

bryanD: "blah blah blah inc... (Below threshold)

bryanD: "blah blah blah incoherent blah blah non sequitor blah blah"

Hey bryan, shouldn't you be laying off the pills and getting back to work, now that your lunch break is over?

BTW stevie green, what's th... (Below threshold)

BTW stevie green, what's the current unemployment rate right now?

I mean, it's not like it's above 8% or anything right?

I mean, since the "stimulus worked better than anyone dreamed", we clearly aren't above 8%, right?

Oh, and how are GM and Chryslers profits these days? I mean, since obambi and sheriff Joe gave controlling interest in those companies to their union pals and government lackeys?

I mean, talk about a liberals wet dream!! Ownership of 2 out of the big 3 car companies!!
Wow! What a thrill it must be for you that your political allies now OWN 2 car companies. I mean, it's a socialists dream come true!!

What are the profits there again? I keep forgetting. Now that those evil capitalists are under your pals control, things must be going swimmingly!!!

Speaking of swimming, how are those polar bears doing? Are any even still alive??

Why can't everyone just let obambi eat his waffles???

The profits of hea... (Below threshold)
jim m:
The profits of health care companies drop during recessions because unemployment increases in a recession. Those who become unemployed lose their insurance, so enrollment drops while fixed costs remain steady.

Steve, Let's tighten up the language here: This is not about health care companies, because this argument applies specifically to the insurance companies. If you wanted to broaden this to all health care companies (and I assure you that you don't because you don't know what you are talking about here much less in the wider industry) then you would find that medical device companies, hospital supply companies as well as hospitals themselves are all very negatively effected by the current recession as well as Obama's foolhardy demagoguery. Medical device companies et al are feeling the squeeze because not only are more people unemployed and therefore temporarily sans insurance, but those employed are postponing procedures as well.

Obama "demonizing" these poor companies is the reason their profits drop? Nope. Nice try, but major FAIL on that one.

But hey - you tried to carry more hod.

Since Obama was elected I have seen health care companies scaling back. Hospitals have frozen hiring across the entire nation. Capital purchases have been postponed. When the government says that it is going to take over health care and that it will keep growth flat, they are saying that they want all the health care companies to stop growing. They are saying to the hospitals, "Don't hire anyone and don't give them raises" That's the case where I work: no raises & all positions save a very few have been frozen.

2 years ago there would have been 30-40 new job positions posted weekly in the Chicago area where I used to live. Currently it runs about 5 positions per week for the job area I work in.

Yes insurance companies are hurting because the economy is suffering. They are hurting not just because fewer people are employed, but because employers are not willing to accept increases in their share of premiums. Small employers are less likely to start carrying coverage for employees since Obama will make it cost prohibitive to do so and the government option will be the only real option for small employers.

If you think that 4% is too much of a margin for a health insurance company to make then what margin is reasonable? Oil companies make slimmer margins, but make larger $ profits due to volume.

I suppose that you don't mind that trial lawyers get insanely high margins for their professional services. What are their costs? A personal injury lawyer like John Edwards, who makes 7 or 8 figures per year, probably runs a profit margin measured in 100's of %.

But the insurance companies are the blood suckers. You're an idiot.

Poor stevie, I've already a... (Below threshold)

Poor stevie, I've already addressed the thread topic several times!!

I'm not surprised you've called for my banning.

I don't blame you.

It's just unfortunate, for you, that you lack the "peer review" status to disallow my comments.

Keep trying though, little man....

Old steve green: "What good... (Below threshold)

Old steve green: "What good little hod carriers.... but then, there's a powerful motive to mislead and lie - there's that black man in the White House and that just plain pisses some people off royally."

New steve green: "This jerk is off-topic and abusive. When will this blog get rid of trolls like Drago? I call for his banning."

ha ha ha ha ha ha ha ha ha ha ha ha ha ha!!!!

I don't know Steve. He isn... (Below threshold)
jim m:

I don't know Steve. He isn't any further off topic than you get.

li'l stevie, why do you DEM... (Below threshold)

li'l stevie, why do you DEMAND others behave in ways that you refuse to?

How painful it must be that you don't have a collegiate "hate speech" rule you can apply in a completely partisan and one-sided way.

BTW, why haven't you addressed Jims very much on-the-mark comment about trial lawyers?

I bet I can figure out why you haven't.........

The "lacking in foresight a... (Below threshold)

The "lacking in foresight and remarkably lacking in self-awareness" steve green: "...When will this blog get rid of trolls....."

Careful what you wish for little troll.....

Steve Green (vocal and stup... (Below threshold)

Steve Green (vocal and stupid) blathered:

And look at that number - $4.5 BILLION in PROFITS.

The government wastes more money on fraud* via Medicare every year than the top 15 health insurers earn combined.

*$60 billion/year in fraudulent claims per CBS News.

But for idiots like Steve $... (Below threshold)
jim m:

But for idiots like Steve $60B in Medicare/Medicaid fraud is no big deal because that is just people stickin' it to the man.

Steve doesn't look at it as people stealing his tax dollars because he doesn't believe that his tax dollars ever belonged to him. He believes that the government owns his income and that it costs the government to let him keep some of that income.

So defrauding the government is free, whereas a company making profit is taking his money from him. You see the company shouldn't be allowed to make a profit because the money belongs to the government. Profit means that either the company is stealing from the people or it is stealing from the government.

It's really simple if you have a simple mind.

Greenie, would you feel bet... (Below threshold)

Greenie, would you feel better if I started calling it BidenCare?

Dennis Miller said it best about Obama: "It's not the color of his skin that bothers me, it's the thinness."

There are actually people who can look at Obama and see past his skin color. Very few of them, it seems, are among his supporters, who have decided to make that his defining trait by saying that it is the only (or at least the major) reason people oppose his plans.

You're starting to sound an awful lot like the punchline to the old joke about the guy being shown Rorshach blots. "You're the one with all the dirty pictures!"


"would you feel better if I... (Below threshold)
jim m:

"would you feel better if I started calling it BidenCare?"

But then you would be racist for not giving Obama his due.

Or you would be an anti Irish or German bigot depending on whatever ethnicity Biden is claiming affinity to this month.

Face it. When dealing with a group of people (liberals and democrats) who see he whole world through the prism of race, no matter what you do if you disagree with them you are automatically a racist.

Of course it never occurs to them that by seeing the world the way they do, it is actually they who are the racists.

Maybe one should look at wh... (Below threshold)
Bruce Henry:

Maybe one should look at what percentage of the company's revenue is taken up by the compensation of, say, the top 50 executives of that company.

Maybe their margin would be higher if the top executives were paid a normal salary.

Bruce, we already played th... (Below threshold)

Bruce, we already played the "evil executive" game. But if you really want to play that, let's look at the compensation of the top 50 lawyers that manage to get awarded what would normally be income for the insurance company, which, if the insurance company were not forced to pay out might also cause the price of insurance to go down for the individual. I mean c'mon. They easily take 40% on ALL cases.

Why is everyone so loathe to look at the damn lawyers? Not that all are bad guys, and many of those claims are legitimate, but is there anyone here that doesn't know the name of two or three lawyers in their own town they could easily label as "bottom dwellers"?

So, how much is TOO much, B... (Below threshold)

So, how much is TOO much, Bruce?

More importantly, by what right to you (or, by extension, "we" the general public) have the right to decide how much is "too much" money to make?


I don't know how much is to... (Below threshold)
Bruce Henry:

I don't know how much is too much, Mr Tea. Is $100M in compensation for the CEO of a company making 4% profit too much?

When I ran a restaurant, I made a $1000/mo bonus if my store made a 10% profit. If it made 9.9%, I got jack shit. Seemed fair to me.

My point is that it's the wrong way to look at it to say that insurance company profit margins are small. Inordinate compensation of top executives subtracts from the bottom line much more than frivolous lawsuits do.

Oyster, do you think a lawyer personally keeps 40% of what they win? Remember, a law practice is a small business too. They must pay secretaries, paralegals, investigators, and fixed costs like rent, equipment, etc. And they get paid NOTHING for cases they don't win. I don't know what the margin is for a personal-injury or medical malpractice law firm. I bet you don't either.

"Remember, a law practic... (Below threshold)

"Remember, a law practice is a small business too. They must pay secretaries, paralegals, investigators, and fixed costs like rent, equipment, etc. And they get paid NOTHING for cases they don't win."

Bruce, dear heart, insurance companies don't have any of these expenses, do they? And law offices don't even take cases that don't have a certain level of viability. A lot of these cases don't even make it to trial. They end up in mediation. I've personally taken part in MANY mediations and the insurance companies almost always pay out. It's only a matter of how much. I've seen minor slip and fall cases pay out $150k. I've seen cases that were absolutely ridiculous get paid out. But the climate is such that juries are often far too sympathetic to the plaintiff (often because of tactics like John Edwards used) so insurance companies will most often elect for mediation.

Currently we have a Congress and President that are so busy demonizing evil-insurance (when they're not assuring us that evil-doctors can't wait to rip out our kids' tonsils) that they've totally ignored the other elephant in the room - Lawyers. The fact that the vast majority of our legislators ARE lawyers ought to give us pause.

Now ....do I think $100M is a ridiculous salary? Why, yes! But I also think a 40% cut for lawyers is ridiculous too. I'm certainly not going to petition my government to cap their salaries though.

Did I say anything about pe... (Below threshold)
Bruce Henry:

Did I say anything about petitioning the government to cap anyone's salary? Did anyone on this thread?

When I said a law practice is a small business too, my comparison was not law practice/insurance company, "dear heart." (Why the condescension, can't you ever be civil?). It was law office/doctor's office.

And thanks for tacitly admitting that you don't know what the typical law office profit margin is either.

Again, my point is that a small profit margin for an insurance company doesn't mean its executives aren't obscenely overcompensated. It just means its shareholders aren't.

As for what constitutes "obscene overcompensation," it's kinda like pornography: one knows it when one sees it.

Bruce, CEO compensation is ... (Below threshold)

Bruce, CEO compensation is strictly the businesss of the shareholders. If they think he/she's being paid too much, they're the ones who get to say so.

Not you.

I realize that's shattering to your self-image as the most important person in the world, but you aren't an owner of the company, but a customer at best. So you don't get a say.


Since the boards of these v... (Below threshold)
Bruce Henry:

Since the boards of these various corporations are incestuous and intertwined, and they decide executive compensation, most shareholders don't get a say, either, Mr Tea. If you don't think that game is rigged, you're hopelessly naive, I'm afraid.

And "most important person in the world?" Where the hell did that come from? What a silly and irrelevant thing to say.

Pet Peeve time.> <... (Below threshold)

Pet Peeve time.

> That's how much of their income revenue they managed to keep.

Income = Profit
Revenue = Sales

BTW I just noticed comment ... (Below threshold)
Bruce Henry:

BTW I just noticed comment # 22.

Jim, if every single dollar a law firm brought in was profit, that would mean it had a margin of 100% You cannot have a profit margin of 100s of percent. And Mr Green is the idiot?

"Going Galt" — that's... (Below threshold)

"Going Galt" — that's beautiful. It's been on my mind a lot lately. I'm drawing up plans right now for a hidden city in the Rockies. Any takers?






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