Healthcare Hullabaloo: Pointing Fingers

Someone once told me never to point fingers – whenever you point, one finger points at your subject but three point back at you.

I’ll take my lumps on this one.

First up on the block, let me make an example of American Express.

American Express, you say? What do they have to do with healthcare problem?

Actually, nothing that I can think of – I have nothing against Amex – but they make a great way to illustrate my point.

Now, unless you live under a rock, you are very familiar with American Express – one of the most successful companies in American History. Most of us carry one of their cards in our wallets. Don’t leave home….

As a young man, I did some IT consulting for Amex. Twice a month, I would travel to New York’s financial district and set to work in some very impressive offices in Battery Park City, 50 floors or so above the Hudson, looking down towards Liberty State Park and Ellis Island. The most impressive offices I have ever seen. I would roll in about 10, have a nice catered lunch on Amex around noon, and take off around 4:30. For this, I was paid a daily wage that I still have trouble making again 25+ years later. God, I miss the eighties.

Yes, Amex was, and still is, a company that oozes wealth. But did you ever stop and think how they make their money? (HINT: It’s not on the $50 annual fee they charge for one of their cards).

No Amex makes their money by charging the merchant (store, gas station, etc.) a small percentage of the amount put on the card. This amount may vary depending on a number of factors, but usually is in the range of 2% to 3.5% of the purchase.

Doesn’t sound like much, does it? What’s 2% of my breakfast tab – hardly enough to get excited about. The key to their success is VOLUME. 2% of a $5 breakfast tab comes out to a thin dime - chump change. But if you consider the billions of dollars put on Amex cards every year, that 2% cut suddenly becomes significant. Very Significant. Enough money to buy them fancy offices in lower Manhattan.

What does this have to do with the healthcare crisis? Well, there is one very large player in the healthcare game that makes their money in much the same way that Amex does – the healthcare insurance providers. This isn’t an exact correlation. First of all, the insurance carriers make a much larger percentage of of your dollar than Amex does. How much? I can’t really say with certainty, because many carriers are not publicly held and play their financial cards very close to their chest. Even those who publish financial data don’t really give the whole story. Net profits really mean nothing here. Net profits are what’s left over after they pay all those salaries and bonuses, build those huge office parks, and shove huge sums of money down various ratholes that John Q. Public will never see. (We’ll talk about more of these ratholes later) In the days before big healthcare, all of these dollars that used to stay in the pocket of the patient or end up in the pocket of the doctor. Don’t be mislead - every penny spent by the huge insurance carriers has come out of the pockets of their subscribers – you and me. Every one of those dollars used to pay for healthcare – now they pay for bureaucracy, bloated bonuses, and blimps.

The second way in which these carriers are not like Amex is in the shear volume of money involved. According to Wikipedia (so it’s gotta be true!) health care expenditures account for 16% of the GDP, or over 2.2 TRILLION (with a T) dollars this year. If the healthcare carriers keep just 10% of that, they are pocketing 220 billion dollars a year as middlemen. Remember, these carriers don’t vaccinate, they don’t diagnose, they don’t treat the sick and elderly. They sponsor baseball stadiums, fly blimps, and produce ridiculously expensive TV commercials that try to convince us of how benevolent they are. They also pay their top executives ludicrous sums of money. And, perhaps most importantly, they pad the pockets of our elected leaders whose job it is to decide the future of healthcare.