Profit is Not Bad for Your Health


Some people see profit as a bad thing. I see profit as an incentive to do things right and to please the customer. This is certainly true when it comes to your healthcare.

House Democrats do not understand this principle. Their new Medicare For All bill asserts “a moral imperative . . . to eliminate profit from the provision of health care.”

Bill Hammond, writing in The Wall Street Journal, says the legislation specifies that federal health funding – virtually all health funding if the bill were to become law – may not be used for “the profit or net revenue of the provider.” He says that makes it even more radical and less realistic than Senator Bernie Sanders’ bill in the Senate.

Hammond tells us to ponder that scenario: “It one stroke, the House bill would sweep away the business model used by the vast majority of doctors in private practice, 28% of hospitals, 705 of nursing homes, and countless clinics, outpatient surgery facilities, dialysis centers, home-care agencies and more. The bill doesn’t detail an enforcement mechanism, but it seems to mean that thousands of providers would either have to reorganize as nonprofits or shut down.”

This is just the beginning of what government-controlled healthcare looks like. Every aspect of healthcare will be decided by bureaucrats in Washington instead of by your doctor. Do you think they will hesitate to save money at the expense of your healthcare? Do you think for one minute they will hesitate to deny you care they deem unnecessary or too expensive, no matter what your doctor says?

Profit is a good thing when it motivates doctors and hospitals to provide the best care possible to attract more customers. As long as the playing field is level – as long as there is transparency in pricing and the freedom for patients to choose – such competition for profits will drive prices down and quality up. Profits are only a bad thing when there is no competition.

Hammond says eliminating profit from an entire sector of the national economy would be unprecedented. He says a look at what’s happening now in the state of New York gives us an example of why this leads to dysfunction.

The New York hospital industry has been 100% nonprofit or government-owned for more than a decade. Hammond says this is a byproduct of longstanding, unusually restrictive ownership laws that squeeze for-profit general hospitals. The last of these closed its doors in 2008.

A report last year from the Albany-based Empire Center is quite revealing. The state’s healthcare industry’s financial condition is chronically weak, with the second-worst operating margins and highest debt loads in the country. There is no evidence that expunging profits has reduced costs. New York’s per capita hospital spending is 18% higher than the national average.

Despite several famous Manhattan flagship institutions, the overall quality of New York’s hospitals is poor. They only scored 2.18 stars out of five on the federal government’s Hospital Compare Report – last out of 50 states! Furthermore, they fall short on accessibility for the uninsured. They only spent 1.9% of revenues for charity care in 2015, a third less than privately owned hospitals nationwide. So the charge that “for-profit hospitals don’t do their share of charity work” is false.

Lastly, the Medicare For All bill in the House would also blow up the patent system for prescription drugs. If a manufacturer won’t agree to an “appropriate price” for its product, federal officials would be empowered to abrogate the patent and assign another company to make the drug. That policy would surely undermine pharmaceutical research and development of new, life-saving drugs. If this bill passes, it will be the patients who will be paying the steep price – with their health.