Does Profit Really Ruin Health Care?

by JHI Staff on December 23, 2013

There’s an argument that seems to be echoing through the media and in many public circles these days: That the U.S. has an absurdly costly and ineffective health care system, and the reason is that much of it is provided by and paid for by the private sector, rather than the government. Though this case is made in many places, this article in the New York Times from early in 2013 laid it out in particularly strong terms. A small excerpt:

From the high administrative costs incurred by health insurers to screen out sick patients to the array of expensive treatments prescribed by doctors who earn more money for every treatment they provide, our private health care industry provides perhaps the clearest illustration of how the profit motive can send incentives astray. By many objective measures, the mostly private American system delivers worse value for money than every other in the developed world... . Improving the delivery of social services like health care and pensions may be possible without increasing the burden on American families, simply by removing the profit motive from the equation.

The argument, as exemplified by this article, is grossly oversimplistic—if not plain, flat-out wrong. Let’s start with the claim that our system provides terrible outcomes. As I and many, many others in health care have pointed out time and time again, it’s not at all clear that our health care system produces lousy results. As someone who constantly travels internationally to meet with health care leaders, government officials, clinicians and other health care stakeholders of all stripes, I can positively report that U.S. health care quality by and large remains the envy of most of the world.

Yes, we spend more than other nations—in most cases a lot more. There is a complex picture behind our higher costs. Yet pundits and others in the media keep pinning the entire problem on single, simple factors. Some say it’s because hospitals simply charge too much. Some say it’s because U.S. consumers have no incentive to price shop. Others say our health care providers’ incentives are all backwards. And then there’s the claim, as per the Times article, that it’s because we don’t just turn all of health care over to the government. (Perhaps tellingly, the author cited a small, 30-year-old study of sedatives at southern Wisconsin nursing homes as evidence for what he suggests is the general inferiority of for-profit care.)

Bad news: the problem of the high cost of U.S. health care is due to all of these things, and many more. (For example, one often overlooked factor is that Americans can on average afford to pay much more for health care than most of the rest of the world, so we opt for a much more elaborate and costly health care system.) At the same time, it is not really any of these things. That’s because there’s no good consensus of evidence that changing any one of these factors will substantially lower our health care costs. We need to tackle the big picture, and in many ways. (Something that the Affordable Care Act—for all its initial woes, potential shortcomings and controversies—aims to do.)

As we struggle to come to grips with these complexities in order to get a handle on costs, I have to question how helpful it is for pundits to point the finger at simplistic causes and solutions. And the notion that the whole problem can be laid at the doorstep of the private and for-profit components of our health care system is perhaps one of the most simplistic of all these claims.

Johns Hopkins Medicine collaborates around the world with public, private not-for-profit, and for-profit health care providers and payors, just as we work with both the public and private sectors here in the U.S. I don’t see any clear pattern in terms of whether one of these sectors does a much better job than the other two, either in holding down costs or boosting patient outcomes. As an academic medical center we happen to be private and not-for-profit, and we’re proud to be mission-driven. But I also see both government agencies and for-profit companies here and overseas create, invest in, support and run highly admirable health care systems. And I see all sides, including private non-profits, fall short in some systems, too.

Clearly, the battle to bring better health care to more people at a lower cost can’t reasonably be reduced to a question of profit versus not-for-profit—even putting aside the obvious political futility in the U.S. of trying to shift all health care responsibility to the government. We need thoughtful solutions, and a path to come together to develop them.


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Dr Mathijsen January 30, 2014 at 3:43 pm

Seen from overseas talking about profits, it seems that affordable cost of health care for patients and outcome should determine or justify profits. Private, public, for or not-for profit does not hold the answer they could all do it but some answers remain unclear:
1. Why do the US health care costs not show proportional improvement in outcomes?
2. Why does medication cost so much more in the US? and why do insurances pay less then the out-of-pocket patient for the same service?
3.Much effort is needed to maintain the US in the role as a Delivery of Health care reference. It's image is eroding rapidly. In the same way our airline industry has lost its laurels as a customer service reference the US is well on the road to loose that highly marketable Health care advantage as well. A first step would be to curb some of our arrogance as the results currently do not justify the costs. It is becoming a harder product to sell!
4. There are aspects of several health care delivery systems around the world that would be well worth a little more of our attention. A simple copy and past approach of the US system elsewhere is not a recipe for success. Recognizing strengths with an integrative approach might open more doors.


John Griswold December 23, 2013 at 2:28 pm

The variable is management and patient focus. A clear objective with the right team always achieves better results regardless of profit/nonprofit, union/nonunion, public/private, specialize/general, outsourced/resident staff, degreed personnel/or nondegreed....etc. These are elements a good management deals with to meet their objectives and achieve the best patient care. This is true here as in any other industry. To abdicate management to the government is a fatal mistake. This is evidenced in all businesses that were and are managed by governement. They are not here to manage...this is not their role and a misuse of a resource that otherwise can be beneficial to the process. We need to clarify objectives and responsibilities then act accordingly to move us to a new era of healthcare.


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