Dr. Solomon really muddled through his column on “Profit in health care” (June 2013, p. 12), leaving me bewildered as to why he started down this road in the first place.
Explore This IssueACEP News: Vol 32 – No 08 – August 2013
He begins with the assumption that profit “drives efficiency, innovation and … the lowest possible price” and concludes somehow with the notion that non-profit insurance commands more from your premium dollar.
Along the way, Dr. Solomon takes shots at for-profit health systems, physician supply, SGR, and – always an easy target – Pharma.
What is missing from Dr. Solomon’s “wisdom” is accurate vocabulary and a little Econ 101.
He clearly confuses “profit,” which is a tax treatment, with net “income,” which is what individual physicians (like corporations) work for over their careers.
In addition, he seems not to know that supply and demand is about unit-cost (not aggregate spending) and only works in free markets.
With that, Dr. Solomon implies that SGR is bad, when in fact it does just what pure supply and demand would do, and then he seems to want to imply that reductions in physician supply, which have been associated with lower aggregate costs, are somehow bad because of some sort of crisis that he fails to explain.
Dr. Solomon too tightly links stockholder dividends with reductions in capital investment, and seemingly fails to comprehend executive compensation.
Does Dr. Solomon really want to see all stockholder dividends invested in new plant and equipment?
It is exactly these investments (in new beds, unproven surgical robots, and 1,000+ slice CT scanners) that drive up fixed costs and ultimately prices.
Does Dr. Solomon really think executive pay in the non-profit sector is too high?
Those base salaries are actually a market response to the lack of equity compensation available in for-profits.
Will non-profits do better with lower executive salaries? Does he want them regulated? The last time I checked, hospital presidents made about the same as surgical sub-specialists.
The United States stands at a precipice of unsustainable health care spending.
Congressman [Tom] McClintock (hyperbole notwithstanding) represents an argument that free markets are a better solution to rising health care spending than further regulation and a continued march toward increased government financing of health care.
What is needed in this dialogue is not three columns of musings, but a critical evaluation of the issues at hand. Until then, my money is on the for-profits to innovate and better navigate change (and the reductions in costs) that will inevitably be required to reduce costs in the United States.