Thursday, November 7, 2013

For-Profit or Non-Profit in Health-Care and Health Insurance: Who in Fact is Supplying the Majority of Health-Care and Health Insurance?

A common talking point/debate point in the ongoing ACA debate is: for-profit health-care and health insurance is a mal-motive in health care/health insurance and hence leads to inefficiencies. As with most debate points little insight is gained and merely debate points earned.

What about for-profit in health-care and health insurance? Is the majority of health-care and health insurance produced by for-profit or non-profits? What form, for-profit or non-profits, is in fact providing the majority of supply regarding health care and health insurance? Who in fact is producing inefficiencies?


Consider this:

“My cost-cutting examples are all for-profit companies. About 70% of hospitals and 85% of health-care employment is in non-profits, (10) whose legal and regulatory treatment protects much inefficiency from competition.”

“Maybe for-profit companies pay too much attention to stock prices. But non-profits can go on inefficiently forever, with no stockholders to complain. The whole point of a non-profit is to pursue goals other than economic efficiency.” (1)

**10 Lakdawalla, D., and T. Philipson (2006), “Non-Profit Production and Industry Performance”, Journal of
Public Economics, v 90 (9), 1681-98.

The sophistry of the for-profit talking point/debate point of mal-motive leading to inefficiencies is further illustrated in that the vast majority of health insurance supply is non-profit [e.g. Blue Cross, Kaiser Permanente, Health Care Service Organization, and Himark, Inc. not to mention Medicaid and Medicare]. “…more than 60% of the health insurance providers in America with at least 100,000 subscribers are nonprofit organizations” (2) (3)

Hence one ends with the talking/debate point of for-profit health-care and health insurance as a mal-motive in health care/health insurance leading to inefficiencies, as completely backwards, as the majority of health-care supply and health insurance supply is provided by non-profits. Further, as pointed out by Cochrane: “The whole point of a non-profit is to pursue goals other than economic efficiency”.




(1) After the ACA: Freeing the market for health care, John H. Cochrane, October 18 2012, pg. 6

Updated version 02/06/13:

(2) Do non profit health insurance companies exist? Health insurance provider, 01/04/2012

(3) Basic facts & figures: nonprofit health plans. Alliance for Advancing Nonprofit Health Care.

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