United Health Care Profits Rose 13%

Today's New York Times article entitled " Profit Up 13%, United Health Raises Outlook" http://www.nytimes.com/2011/07/20/business/unitedhealth-groups-2nd-quarter-profit-jumps-13-percent.html reports that The United Health Group one of the nation’s largest health insurers, reported its second-quarter results on Tuesday, and the good news for the industry appeared likely to continue. UnitedHealth announced a double-digit increase in profits and raised its estimates for 2011 earnings. Its net income rose 13 percent, to $1.27 billion, or $1.16 a share, compared with $1.12 billion, or 99 cents a share, one year ago. And revenue increased 8 percent, to $25.23 billion. UnitedHealth was the first of the big insurers to report this quarter, and once again, the high profits appear to be partly the result of more budget-consciousness by their customers, even as the insurers ask for higher premiums. As they have for many months now, Americans seem to be putting off or forgoing medical care because of the weak economy and the increasing amount they are required to pay in medical bills as their deductibles and co-payments climb. In late spring, many health insurers said it was too soon to tell whether utilization would eventually rebound to the same levels as before the downturn. They argued that they could not count on the demand for medical care staying at relatively low levels.So the company continued to benefit from consumers making fewer doctor visits as they try to save money in the tough economy.
Following the logic of a free market economy, they should lower their premiums to entice consumers to "buy" healthcare services. But these rules DO NOT apply to the so-called "healthcare market" which is controlled by a few monopolies, in which only one seller faces many buyers who have no choice but to buy the product regardless of price.
Unfortunately, these monopolies also are acting as monopsonies, in which only one buyer faces many sellers. In this cases providers of health care services (doctors, hospitals etc) have no choice but to sell their services to a large insurance company because its buying power dwarfs the remaining market.
Ironically, the Patient Protection and Affordable Care Act will inadvertently exacerbate this situation because for-profit insurance companies play an essential role in the provision of services.
Who will suffer? The consumer who is forced to buy these expensive insurance products and the doctors whose negotiating power has been curtailed by regulations.
In this context a single-payer system, or a model based on not-for-profit insurance companies (i.e. Germany), may serve as a solution.
Unfortunately, we are doomed because we swallowed the "free market" ideology bait with hook, line and sinker and in the end have no choice but to stick with the worst solution anyone can offer.

Yours

Bernd