Apples-to-Oranges Comparison of Profits Among Healthcare Companies Lets Big Insurance Off the Hook

Rick Newman's recent U.S. News & World Report article, "Why Insurance Companies Make Lousy Villians", suggests that the profit levels of the major insurance companies are not that high compared to pharmaceutical, biotech, and medical equipment companies. Saying, “blaming insurance firms for runaway healthcare costs is a weak argument, because the insurance industry isn't all that profitable to start with," Mr. Newman's argument plays right into the hands of the insurance industry.

Using Morningstar's ranking of corporate profits among major healthcare-related companies, Mr. Newman has found yet one more way to let the insurance industry off the hot-seat. After all, who could begrudge those hard-working folks at WellPoint a measly 4% profit when Amgen's making 30% and Pfizer's pulling in over 16%?

This kind of analysis is exactly what the insurance industry counts on to (yet again) shift the spotlight away from what they're doing and onto someone else.

But when you consider the role that Aetna, Unitedhealth, and WellPoint play in the actual day-to-day financing and delivery of healthcare, Mr. Newman's comparison is truly "apples-to-oranges" and here's why:

By virtue of their agreements with doctors and hospitals across the country, as well as thousands of employers representing millions of subscribers, managed care companies can literally control how medical care is provided. They pay or don't pay for services; authorize or don't authorize treatments; and can quickly interfere with the delivery of medical services by doctors, hospitals, and other medical providers at any time to fulfill the insurance companies' profit motives.

I don't know of one pharmaceutical company, biotech firm, or medical equipment manufacturer that can dictate how physicians practice medicine or control what services are covered or paid for. The freebies, trips, and other incentives that these companies offer medical providers may create a certain amount of influence over what medications doctors prescribe or equipment/techniques they use. But in the end, doctors are still free to practice medicine as they see fit, regardless of marketing efforts put upon them by such profit-rich companies on Morningstar's list.

Shifting blame away from the insurance companies will not serve the advancement of meaningful healthcare reform. The integral part that managed care companies play is simply too big to suggest that any other factor should be considered first or foremost. My suggestion: Keep the heat turned up the managed care companies and the insurance industry, and keep the fork ready.