More Health Care Mythinformation

President Obama habitually accuses critics of his various health reform “plans” of myth-mongering. Examples:

• Portsmouth Town Hall: “… nother myth that we’ve been hearing about is this notion that somehow we’re going to be cutting your Medicare benefits. We are not.”
• On 60 Minutes: When asked the purpose of his speech to the Joint Session, he replied “Well, I think the most important thing was to make sure that American people understood the nature of the problem, what exactly I was proposing, to debunk some of the myths that had been floating around out there…”
• Minnesota Town Hall : “… And contrary to some of the myths out there…”

There indeed are many myths about Obama’s proposed plan(s) floating around, but most of them are floated by the White House and its friends on a veritable sea of misinformation and outright falsehoods.

For example, Obama frequently argues that a public option is necessary to counterbalance and restrain obscene industry profits. Thus in a July 22 news conference he asserted that

having a public plan out there that also shows that maybe if you take some of the profit motive out, maybe if you are reducing some of the administrative costs, that you can get an even better deal, that’s going to incentivize the private sector to do even better. And that’s a good thing. That’s a good thing.

Now, you know, there had been reports just over the last couple of days of insurance companies making record profits. Right now, at the time when everybody’s getting hammered, they’re making record profits and premiums are going up.

This and similar assertions are simply not true, as shown by the analyses of two separate fact-check organizations, the Annenberg Public Policy Center’s FactCheck.Org and the St. Petersburg Times’ PolitiFact.com. And two days ago a Wall Street Journal article pointed out that “[h]ealth insurance companies aren’t quite as profitable as many critics seem to think.”

Consider WellPoint, the biggest private health insurer on Wall Street, which has about 35 million customers nationwide. Last year, it paid out 83.6% of revenues in expenses. Net, after-tax income as a percentage of total revenue came to a princely 4.1%.

Profits are thin at WellPoint, Inc.’s Indianapolis headquarters.

In other words, simply eliminating profits would only allow the public option to undercut the private sector by 4% or so.

Returns on assets, a key measure of profitability, are typically pretty modest too. According to analysis by FactSet, WellPoint’s ROA has averaged 5.8% over the past five years, Aetna’s, 4.2%. Those were, remember, supposedly boom years. UnitedHealth was higher, at 9.6%, but fell to 6.4% in 2008. These are reasonable, but hardly spectacular, results. By comparison, Wal-Mart averaged a 9.2% return on its assets and Dell, Inc. 12.4%.

According to the New York Times yesterday, West Virginia Senator John D. Rockefeller IV says insurance company profits are “out of sight.” It may well be true that the Senator can’t see them, because many things are out of sight to those with closed eyes and mind but open mouth.