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I didn't (and can't) downvote you, but in general you're simply wrong. You cannot add more costs to "remedy" a cost center. If an insurer takes on more client

by dpark 10y ago

I didn't (and can't) downvote you, but in general you're simply wrong. You cannot add more costs to "remedy" a cost center. If an insurer takes on more clients, they might make more profit, they might mitigate some risks, but their costs will definitely go up proportionally with their client base. I'd also like to propose a thought exercise for you. Imagine a private insurer. They have, say, 50K clients. They make a couple million dollars a year in profit and make many millions of dollars in medical payments. Next year they double in size, which reduces their risk of failure and improves profit margin slightly. The better profit margin allows them to reduce costs a bit to attract more new clients. The next year they do the same, and the year after. Then they start merging with other insurers while continuing to grow. All along, as their client base grows, they improve profitability (and/or reduce costs) and their business becomes less risky. Suppose eventually all Americans use this one enormous insurance company. They have the power to negotiate the best rates with doctors, drug companies, hospitals, etc. They have such a large client base that there is no risk, just extremely predictable income and expense. They can get costs as low as the medical industry will allow because they have such a large base. Now suppose that this one enormous company is simply a part of the federal government. What changes to make single payer not work when it was working just fine before the words "federal government" were introduced?

ThomPete 10y ago
An insurer is a business it can make money, that makes it a profit center, it does not mean that they will make a profit. A public healthcare system get a budget, they cant make a profit only manage their cost. So no i am not wrong i am fully inline with the very definition of those two terms in this context. Yes an insurer can have cost centers too but they are again in this context able to make money.
- unprepare 10y ago
  profit/cost centers as i understand them are internal parts of an organization. its uncommon to say an entire organization is a cost/profit center; instead you would say x department is a cost/profit center. FWIW, i believe most insurance companies make their money from investing the insurance premiums - i would say within an insurance company the finance department is likely the profit center, and whichever department handles payouts to healthcare providers would be seen as a cost center for the org. oh it may be worth adding- most major US insurance companies are run as non-profit organizations.
  - ThomPete 10y ago
    Yes but in this context it's important to distinguish between something which is purely run at a cost with only budgets determined by politicians and then something which is turning a profit and can use that to invest. Another way to put it is that companies have both cost and profit centers, public healthcare systems like the one in Denmark only have a cost center. I am not sure what this seems so controversial. This IS the big difference between a system which is purely run by tax money and don't take any revenue and then one which do.
    - dpark 10y ago
      Private insurers make their money by providing less care per dollar. They cannot raise rates arbitrarily (or if they can, it indicates they have no competition and there's no free market at play) and they cannot reduce the cost of care significantly. The best way for an insurance company to make more money is to simply make fewer payouts. i.e. Reduce the cost center. Every dollar a private insurer makes (or invests) is a dollar they didn't spend on care for their clients. If you assume that insurers have, say, a 5 percent margin, the fastest way to cut the cost of care by 5% is to eliminate the profit.
      - ThomPete 10y ago
        An insurance company can get more companies as customers and there can be more companies created. You are getting way to hung up on the internal details of how it works. Insurance companies are one part of the healthcare package. There is a reason it's a business which can do well or not so well. Thats very different than a public healthcare system where EVERYTHING is budgeted.
- dpark 10y ago
  As unprepare pointed out, you're using these words incorrectly. Payouts for medical care cannot be anything except a cost center. I also don't know why you think private corporations are excluded from having budgets. I assure you that Aetna and Kaiser and all the other insurers have budgets for the medical care that they pay for. They cannot print money to pay the bills. All they can do is raise rates or provide less coverage. On the other hand, the government can print money if they need to.
  - ThomPete 10y ago
    No I am not using them incorrectly you are simply just not taking this discussion in it's proper context. We are talking about a healthcare system like the US version and comparing it to the Danish version. The funding of those two systems are very different. The US healthcare system is run as a business with profits. There is no such thing as profits in a public healthcare system like the danish and so everything is a cost. In the US system thats not the case. I frankly don't know why this is such a controversial discussion.

by dpark 10y ago

ThomPete 10y ago

An insurer is a business it can make money, that makes it a profit center, it does not mean that they will make a profit. A public healthcare system get a budget, they cant make a profit only manage their cost. So no i am not wrong i am fully inline with the very definition of those two terms in this context. Yes an insurer can have cost centers too but they are again in this context able to make money.

unprepare 10y ago
profit/cost centers as i understand them are internal parts of an organization. its uncommon to say an entire organization is a cost/profit center; instead you would say x department is a cost/profit center. FWIW, i believe most insurance companies make their money from investing the insurance premiums - i would say within an insurance company the finance department is likely the profit center, and whichever department handles payouts to healthcare providers would be seen as a cost center for the org. oh it may be worth adding- most major US insurance companies are run as non-profit organizations.
- ThomPete 10y ago
  Yes but in this context it's important to distinguish between something which is purely run at a cost with only budgets determined by politicians and then something which is turning a profit and can use that to invest. Another way to put it is that companies have both cost and profit centers, public healthcare systems like the one in Denmark only have a cost center. I am not sure what this seems so controversial. This IS the big difference between a system which is purely run by tax money and don't take any revenue and then one which do.
  - dpark 10y ago
    Private insurers make their money by providing less care per dollar. They cannot raise rates arbitrarily (or if they can, it indicates they have no competition and there's no free market at play) and they cannot reduce the cost of care significantly. The best way for an insurance company to make more money is to simply make fewer payouts. i.e. Reduce the cost center. Every dollar a private insurer makes (or invests) is a dollar they didn't spend on care for their clients. If you assume that insurers have, say, a 5 percent margin, the fastest way to cut the cost of care by 5% is to eliminate the profit.
    - ThomPete 10y ago
      An insurance company can get more companies as customers and there can be more companies created. You are getting way to hung up on the internal details of how it works. Insurance companies are one part of the healthcare package. There is a reason it's a business which can do well or not so well. Thats very different than a public healthcare system where EVERYTHING is budgeted.
dpark 10y ago
As unprepare pointed out, you're using these words incorrectly. Payouts for medical care cannot be anything except a cost center. I also don't know why you think private corporations are excluded from having budgets. I assure you that Aetna and Kaiser and all the other insurers have budgets for the medical care that they pay for. They cannot print money to pay the bills. All they can do is raise rates or provide less coverage. On the other hand, the government can print money if they need to.
- ThomPete 10y ago
  No I am not using them incorrectly you are simply just not taking this discussion in it's proper context. We are talking about a healthcare system like the US version and comparing it to the Danish version. The funding of those two systems are very different. The US healthcare system is run as a business with profits. There is no such thing as profits in a public healthcare system like the danish and so everything is a cost. In the US system thats not the case. I frankly don't know why this is such a controversial discussion.