Are Profit And Healthcare Incompatible?

Authored by Charles Hugh Smith via OfTwoMinds blog,

The only way to systemically lower costs is to make prevention and transparency the top priorities.

As I have been noting for a decade, the broken U.S. healthcare system will bankrupt the nation all by itself. We all know the basic facts: the system delivers uneven results in terms of improving health and life expectancy while costing two or three times more per person compared to our advanced-economy global competitors.

U.S. Lifestyle + "Healthcare" = Bankruptcy (June 19, 2008)

Sickcare Will Bankrupt the Nation--And Soon (March 21, 2011)

How Healthcare Is Dooming the U.S. Economy (Three Charts) (May 2015)

You Want to Fix the Economy? Then First Fix Healthcare (September 29, 2016)

This chart says it all: the global outlier in low life expectancy and exorbitant cost is the U.S.

The profit motive is supposed to lower costs, not increase them. In the idealized model of a completely free market, the profit motive is supposed to lower costs as customers are free to choose the best product/service for the lowest price.

In U.S. healthcare, the profits are stupendous, yet the costs are even more stupendous. Rather than lower costs, the U.S. system of for-profit healthcare has sent costs spiraling into the stratosphere, to the point that the system's costs are threatening to bankrupt the government and the nation.

Why is this so? Karl Marx provided the answer in the 19th century. In the idealized model of free-market capitalism, those who provide superior services for the lowest price reap more profit than their less agile/productive competitors.

But as Marx observed, in real-world capitalism, open competition drives profits to zero. Every attempt to gain a competitive advantage in price increases supply and further commoditizes the product/service. This dynamic pushes prices down to the point that nobody can make a profit until competitors are driven out of business and a cartel or monopoly secures the market and controls supply, price and profit.

The most profitable structures in real-world capitalism are monopolies or cartels-- which is precisely what characterizes U.S. healthcare. The only way to maximize profits is to ruthlessly eliminate competition in the marketplace--which is exactly how the U.S. healthcare system operates: the pharmaceutical industry is a cartel, hospital chains are a cartel, insurance companies are a cartel, and so on.

In the real world of state-cartel-capitalism, competition is eliminated so cartels can maximize profits.

Do-gooders are always claiming that the system could be fixed by re-introducing competition-- this was the core idea behind Obamacare's insurance exchanges--but the do-gooders are blind to the core dynamic of state-cartel-capitalism, which is cartels own the machinery of governance via lobbying and campaign contributions. The state creates and protects the cartels, period.

In state-cartel-capitalism, there is no way to maintain real competition, as the cartels instruct the state to protect their monopolies/cartels. State reformers can try all sorts of complex reform schemes (ObamaCare) but they fail to lower costs because they all leave the cartel structure and cartel ownership of governance intact.

In the good old days of the 1950s and 1960s, U.S. healthcare was more localized, and the central state (federal government) wasn't the Sugar Daddy for the cartels. Hospitals were community hospitals (what a quaint idea in today's hyper-cartelized system) managed by physicians and administrators who saw their role as serving the community rather than arranging for $20 million annual salaries and millions of dollars in stock options.

This is why the cartels love Medicare For All proposals: the federal government--protector and funder of the cartels--will give the cartels a blank check not just for the 120 million people currently drawing benefits from Medicare/Medicaid but for all 325 million Americans.

Fast facts on Medicare and Medicaid (Center for Medicare and Medicaid Services)

Medicare Beneficiaries: 57.7 million
Medicaid Beneficiaries: 72.3 million
estimated dual Beneficiaries (drawing benefits from both programs): 10 million

Total Beneficiaries: 120 million

Medicare/Medicaid budget, 2015: $1.2 trillion

Total U.S. healthcare costs: $3.2 trillion, 18% of GDP

Department of Defense budget, 2015: $575 billion

Are profit and healthcare incompatible? In the real world of state-cartel-capitalism, the answer is yes: a profit-maximizing system fails to deliver prevention while pushing costs higher, eventually bankrupting the Sugar Daddy government and the nation.

Prevention, like a bag of carrots, is intrinsically low-profit. Illness, especially chronic illness, is highly profitable because the profits flow continuously from treatments, medications, procedures, tests, visits, hospitalization, home care, a constant churn of billing, etc.

The only way to systemically lower costs is to make prevention and transparency the top priorities. Prevention, community ownership of healthcare services, transparency and unfettered competition kill profits, period. Yet these are the only way to lower costs to be in line with our competitors.

You can reconfigure the system any way you want, but you have to eliminate cartels, cartel ownership of governance, opaque pricing, government blank checks and incentives for profiteering from chronic illness. If you don't eliminate all these, you've fixed nothing.


Pairadimes Richard Chesler Fri, 08/18/2017 - 11:48 Permalink

This is the grand, shared illusion of the present state of healthcare. We have all convinced ourselves that it is somehow a social good, instead of a market good. Because we have made this fundamental error, all analysis that follows is also erroneous. Nothing subsidized and regulated by the government is ever going to find market pricing, by definition. We wring our hands and spend billions analyzing the shit out of it with nothing to show for it but the ever-growing corruption and instability that marks an industry under excessive government control. People will always consume more of something that someone else is paying for. Only when we make people spend their own money on healthcare will it become rationalized by market forces, and return to some form of sensibility.

In reply to by Richard Chesler

gmrpeabody order66 Fri, 08/18/2017 - 09:34 Permalink

1970   Breaks arm trying to steal second head first. Waits in emergency room 15 minutes, in with staff for 30 minutes, out the door with a bill for $350, cast will be removed for free.2017   Breaks arm fleeing with stolen carton of smokes from 7-11. Waits in emergency room 3 hours, in with staff for 30 minutes, out the door with bill for dad of $17K, cast will be removed for another $750.

In reply to by order66

All Risk No Reward BennyBoy Fri, 08/18/2017 - 14:31 Permalink

So, educate yourself. The subject is complex, but I can provide direction that has worked well for me.

Overall goal: eliminate excess inflammation, avoid iron dysregulation toxicity, optimize enzymatic function (CIA has been working on enzyme disrupters for over half a century - reference A Terrible Mistake and Google Books search "enzyme" for the only reference), minimize other toxicity, support adrenal and thyroid glandular function, and try to achieve overall nutrition balancing.


The Root Cause protocol

Search "Morley Robbins" on Youtube and listen to his podcasts on copper dysregulation, iron toxicity, the dangers of excess calcium, and the critical importance of high quality magnesium.

Zone Diet Blog

Calcium Lie II (Dr. Thompson)

Death by Calcium (Dr. Levy)

Nutrition Balancingn (Dr. Wilson, use common sense as some of his ideas are "esoteric," but many of them are really, really good)

Book - Strands of Health

In reply to by BennyBoy

Common_Law JRobby Fri, 08/18/2017 - 11:42 Permalink

In 1973, Nixon did a personal favor for his friend and campaign financier, Edgar Kaiser, then president and chairman of Kaiser-Permanente. Nixon signed into law, the Health Maintenance Organisation Act of 1973, in which medical insurance agencies, hospitals, clinics and even doctors, could begin functioning as for-profit business entities instead of the service organisations they were intended to be.'d recommend for anyone wanting to avoid the sickcare industrial complex.

In reply to by JRobby

Bes Fri, 08/18/2017 - 09:18 Permalink

we are a captive market in an oligopoly.prices will never go down as long as they can charge what ever they want for as much profit as they want.not trump, nor the gop, nor congress (except for a few) want to change that basic structure. pharma needs a new yacht.#maga

LawsofPhysics Fri, 08/18/2017 - 09:19 Permalink

NO.  Like everything else you must; 1) Allow people to suffer the conseqeunces of their OWN BAD choices (i.e. smoking, drinking, overeating, being a general lazy fuck etc. etc.)2) Eliminate all the useless overcompensated middlemenIf these two points were applied to numerous other areas of the eCONomy, things would get much better in general.In the meantime... "Full Faith and Credit"

GunnerySgtHartman LawsofPhysics Fri, 08/18/2017 - 09:54 Permalink

being a general lazy fuckLMAO, gotta love that.  A lot of truth to it, too! +1The whole "profit and healthcare are incompatible" notion is bullsh*t.  If we follow through with that notion:- profit and food are incompatible (everyone has to eat!)- profit and housing are incompatible (everyone has to have a roof over their heads)- profit and water/heat/electricity are incompatible (everyone needs those things in this day and age, right?)- profit and transportation are incompatible (everyone needs to get around, after all!)and so on.  Taken to its logical end, we'd have government providing EVERYTHING - then where are we at?  Yep, COMMUNISM.The fact remains that we do not have, and have not had for decades, any sort of a "free market" for healthcare.  What is the pricing mechanism for healthcare services?  Negotiations between insurers, providers, and government does not constitute a pricing mechanism, much less a free market.  It constitutes three ravenous wolves deciding how they're going to divvy up the sheep for dinner.  Until the PEOPLE are in charge, there will be NO improvement - and by PEOPLE I do not mean "GOVERNMENT."

In reply to by LawsofPhysics

TheJohnnieWalker_Put Fri, 08/18/2017 - 09:29 Permalink

Ridiculous. The entire premise of this little propaganda piece is that the population of these countries are homogeneous and comparable. Put up a graph of longevity in Northern Utah and you will see gains very similar to the northern tier European countries. Certain populations don’t value preventative care or may fear the system. For immigrant and poor minority communities, many times the first pre-natal visit is in the delivery room. As long the politico's tolerate unfettered migration, pockets of third world poverty and underprivileged communities, global USA health scores will suffer. Things have gotten so ridiculous it’s obvious health care is not our leaders concern, it is their device. Trusting government to fix this is trusting the cure to the authors of the mischief. Fuck’m. 

flea Fri, 08/18/2017 - 09:34 Permalink

"In the good old days of the 1950s and 1960s, U.S. healthcare was more localized, and the central state (federal government) wasn't the Sugar Daddy for the cartels."


SantaClaws Fri, 08/18/2017 - 09:35 Permalink

There needs to be some kind of review of the staggering amounts we spend on end of life care -- huge amounts to prolong life often for very short periods.  Not an easy subject, but reducing the availability of some very expensive end of life care, liberalizing voluntary (assisted suicide), making available pain eliminating drugs, and perhaps working to reduce the fear of death might all contribute to a more sensible healthcare system.  Nutrition and lifestyle education should be improved.

govtsucks Fri, 08/18/2017 - 10:19 Permalink

Our health care system doesn't resemble a free market in any way, shape, or form. Obama's insurance exchanges certainly don't represent an attempt at competition. The insurance companies were promised multi-billion dollar subsidies for any losses they incurred. How can you have winners and losers when the losses are socialized?There is no interstate insurance competition allowed, let alone international competition. 90% of all medical expenses are paid by third parties. I'd pick the filet mignon over the hamburger if someone else were paying my grocery bill. Insurance is tied to employment. This should be eliminated. You should get paid a lump sum equivalent by your employer, deposit that money in an HSA, and then use the funds to buy your own policy with pre-tax dollars. Then you'd be free to choose the policy that best suits your needs. Some would choose high deductible/copay plans, others would choose first dollar coverage. We need price transparency. When you walk into a doctor's office, you should know what every procedure costs, just like you would at your auto mechanic. Procedures that aren't covered by insurance, such as Lasix, currently have this price transparency.There should be insurance available that you can purchase to guarantee your right to purchase health insurance. This will benefit people with pre-existing conditions.One thing to keep in mind is that, on average, approximately 80% of all medical expenses are incurred during the last couple years of life. So unless we're going to kill off all of the old people, there's only so much that costs can be reduced. 

Harry Paranockus govtsucks Fri, 08/18/2017 - 12:16 Permalink

Govtsucks: If you had mandatory annual physicals and labwork to detect problems early, along with surcharges in premiums for destructive physical behavior that is not modified, then you'd have lot fewer old people suffering from those conditions that eat up 80% of those excessive costs in the last few years of life.

In reply to by govtsucks

purdySun Harry Paranockus Fri, 08/18/2017 - 14:50 Permalink

So the Cartels (gov) should require evalution/ treatment for every oldster? Sounds more like enhanced senior genocide. Close to mandatory situation already. Cholestral level guidelines indicating needed treatment were lowered abt 8 yrs ago, precisely to sell more statins. No thanks. Don't want flu vax, shingles vax, pnemonia vax; hundreds of medicare marketing calls, 20+ prescriptions w/ enough money left for a toothpick! Stop the advertising. We are the only country in world, besides New Zealand, to allow multi-media barrage. How many have become hypochondriacs, or just constantly worried about "performance" issues? 

In reply to by Harry Paranockus

Dumpster Elite Fri, 08/18/2017 - 10:02 Permalink

The "fix" is simple, and will never happen, thus there will be no health care reform ever. 1) Massive tort reform, 2) Healthcare Insurance competition NATIONALLY, across state lines, 3) Big Pharma cut off at the knees, 4) Congress gets the same healthcare as you and I.

wcvarones Fri, 08/18/2017 - 10:10 Permalink

Completely bullshit relationship.

Health care spending is one of the least relevant variables in developed countries for longevity. Lifestyle, vehicle accidents, smoking, obesity, murder, alcoholism all are far more important.

Our health care spending is stupid, but has very little to do with longevity.

A. Boaty Fri, 08/18/2017 - 10:10 Permalink

Yes. Fee for service = market failure as very few people have enough info to make informed consumer choices. For fee for service to work would require a much higher level of health care education.

bshirley1968 Fri, 08/18/2017 - 10:25 Permalink

"Incompatible"?ABSO-FUCKING-LUTELY!The idea of making a "profit" (that must increase by at least 2% yearly) off the healthcare needs (lives) of others is the epitome of all that is evil in this country.  Then it is magnifies by the commie insurance program and purposeful restriction of true free market policies.People are being used, abused, and sucked dry by an "industry" that is supposed to help the sick, injured, and dying.  They are being robbed of everything they have all in the name of saving lives.I see a car roll down a hill and catch on fire.  I stop, run down the hill, drag the person from the car, bandage their wounds, and care for them until they get better.  What am i?  I am just a human being doing what is right.  Unlike the paramedics in their ambulance, that transport you to the ER,  or the x-ray tech, or the ER Dr., or the hospital that charges thousands of dollars and are called heroes of they raise the price of life by 10% every quarter.No one was EVER supposed to get rich healing the sick.  System is broken and completely corrupted by insurance money.  No insurance slush fund, and those SOB's would get right on the prices.The solution to this and the overreaching gov we have is simple.  QUIT PAYING THE BASTARDS!  TELL THEM NO!One month of not paying insurance, taxes or medical bills and these bastard's would be on their knees and prices would get right.  BAN ALL HEALTH INSURANCE. ....FOREVER! 

Juliette Fri, 08/18/2017 - 10:15 Permalink

The ancient Chinese knew how to make healthcare and profit compatible: Any medicine man got only paid AFTER the patient was cured of his disease, pain or ailment. if the patient did not feel any better or he even got worse or died, the medicine man did not get a dime.

Wilcox1 Fri, 08/18/2017 - 10:27 Permalink

Without a doubt profit and healthcare are incompatible. Making a living and healthcare are compatible. Making a good living, an above average living is compatible with healthcare. The obscene amounts of money the healthcare industry wrings out of the government and corporations is morally wrong. Its like putting a pile of corn out and shooting the deer while they feed. 

bshirley1968 Fri, 08/18/2017 - 10:33 Permalink

I am a small business owner.  You know what I charge for my product?  What the market will bear i.e. what my customers are willing to pay for it.They are taking advantage of what people are "willing to pay" to heal their sickness or broken bones, etc.  What if you were drowning and I held a life preserver that I could easily toss to you, but I held it back until you proved to me you could pay whatever price I demabd?  The public would call me an evil bastard......and they'd be right.Put me in a white lab coat, call me  doctor and now I am a life saving hero.  Bullshit!