Private healthcare insurance has margins well below most profitable companies, in the us. If anything I'd hazard that the poor treatment of consumers by these entities stems from being barely able to hold the line, not because of greed. Rising medical costs, I think, have the blame elsewhere, but insurance companies sure do make a good Boogeyman for politicians, because they are very poorly understood.
I'm not sure you understand what circular reasoning is. And anyways, i can show you an industry with enormous redundant costs that also has high margins - hollywood - but of course they achieve that through clever use of corporate law; the median hollywood company loses money but the wins all go to the margins of the major holding companies.
It seems like the argument you are making is that a sector cannot be wasteful because it has low margins. In order to accept that argument, one would have to agree in advance that the sector has a net positive value to society and should definitely exist. Agreeing that the sector should exist makes it impossible to seriously discuss whether the sector should exist.
The value of a sector to its host civilizaiton is the amount by which its externalities exceed its revenues. If the sector were eliminated, those revenues could be directed elsewhere.
In the case of Hollywood, the value of the movies produced is worth at least as much as people are willing to pay to see them. Solvency here is evidence of net positive value.
Even in a vilified industry like big tobacco, the value of the product is worth more to the people paying for it than their money is. Solvency here is evidence of net positive (perceived) value.
But in the case of the private medical insurance sector, the amount of benefit that all customers receive has to be less than the amount that all customers pay. Solvency is evidence of net negative value, unless there are some other externalities. So, what could those be? Fire insurance can prevent disruptions to a city. But can private medical insurance prevent public health hazards? I don't see why it would be better suited to do so than a single-payer alternative.
It's hard to tell, because pricing is so opaque, but everywhere the incentives are misaligned.
Insurance companies are regulated on profit margins, which means it's actually in their interest for costs to rise, since their income is limited to a percentage of the costs. Administrative overhead at the insurance company is limited by percentage as well, but I don't think that includes the overhead at medical offices required to deal with insurance billing.
Users may be able to pick between different cost options, but at best they know the direct cost to them, not the overall cost. There's also a sense of wanting to get the most the insurance will cover, because that's why you paid for it.
Doctors' compensation is certain a factor, especially since there are effective rate limits on new doctors based on the number of slots for residencies, that aren't adjusted for population growth.
Employers (who are usually the ones selecting the insurance plans) may be cost aware, but might be selecting based on direct costs to the employer and not on total cost to the employer and employee combined.
Seems to be a huge reluctance for anyone in politics to place the blame on them. But I'm pretty sure they make far more in the US than anywhere else in the world.
From what I've read, doctors are also substantial owners of the malpractice insurance companies. Also, their premiums are paid by their employers. In fact, salaries don't tell the entire story for doctors, since they are heavily invested in their own industry. For instance, at one point my health insurance provider advertised itself as being doctor-owned.
As mentioned above, a problem is that the system is so opaque, seemingly by design. A potential benefit of a government run system is that there could simply be fewer business entities. For instance, doctors could just work for the government, for a decent salary.
> But I'm pretty sure they make far more in the US than anywhere else in the world.
Yea, but the opportunity cost of getting there is huge. At graduation, most doctors are in the ballpark of $1MM behind where they'd be if they went straight into a professional career.
Also, doctor's salaries only account for 8% to 20% of total healthcare costs.
that's not entirely true. There are nonprofit medical providers and they are equally expensive as for-profits; and there are also in the US a handful of "extreme for-profit" medical providers which are considerably cheaper (without sacrificing quality).
Non-profit doesn't mean "we don't pay our staff, partners and suppliers market rate". It's entirely possible that non-profits contribute towards rising medical costs through the same mechanisms that for-profit entities do.
