Yesterday the DNC unleashed some pretty devastating hits on Mitt Romney, over his repeated habit of publicly defending health insurance companies, the interest group everyone loves to hate:
Given that I voted for Romney in 2002 and only sometimes regret it, perhaps it falls to me to point out that Romney is sort of right about this. Recall this McKinsey chart of excess spending in US health care:
There are two ways to look at this. The one that makes insurance companies look bad is that the “excess” share of their share of overall health spending is extremely high—other countries spend way less on insurance administration and their insurance is perfectly well-administered. This is why the potential for increasing the medical loss ratio is so important.
But the other way to look at it is that though the “fat” share of the insurance slice of the pie is quite big, the insurance slice of the overall “fat” pie is relatively low. The primary driver of high American health care costs is that we spend a lot on health care providers who don’t make as juicy a political target. That said, it’s hard to have a ton of sympathy for the insurance companies. The reason they wind up taking a disproportionate amount of the blame for the health care system’s woes is that it’s very hard to find them adding any value at all to the system. Providers account for a larger share of the problems, but they also provide tons of valuable services to people. Insurers are basically just red tape and money spent on socially undesirable risk-screening and profit-taking.