There are two glaring examples where the author tries to debunk a myth by quoting data that supports the myth.

In particular:

The problem here is that between them the five biggest health insurers—UnitedHealthCare, Wellpoint, Aetna, Humana, and Cigna—which cover 105 million members, last year had profits between them of $11.8 billion. This is not a small number; these are very profitable companies. But total U.S. health care costs last year were in the area of $2.3 trillion.

So, with a membership that included a little more than half of the Americans covered by private insurance, these five insurers' profits came to 0.5 percent of total health care costs. (One interesting point of comparison: In 2006, the income earned by the 50 biggest nonprofit hospitals alone came out at $4 billion.)

Since this is a Moneybox column I shouldn't need to point out the difference between income and profit. So the 5 biggest companies made $11.8B in profits. If their profit margin is 0.5% that implies that their income was $11.8B/0.5%=$2.36 Trillion. So apparently the $2.3 Trillion quoted above was either just for the insurers or the profit margin was 1%. The dig at the 50 biggest nonprofit hospitals seems ridiculous when you figure out that insurers' combined income is 590 times the nonprofit income.

Then take a look at the Senate tesitmony from the head of the PA Medical Society linked to in the article. The link was provided in the context of how consolidation helps keep costs down (apparently the author hasn't been paying attention to the consolidation discussion about the airline industry). Unfortunately, that testimony was exploring the profit margins of PA insurers and pointed out the 85% reimbursement rate relative to Medicare rates was to point out that insurers have mainly pocketed premium increases. From the linked testimony:

From 2000 to 2004, Pennsylvania health insurers increased premiums 40 percent per enrollee, from $2,161 to $3,022, nearly double the U.S. average, while insurer surplus reserves rose from $5 billion to $6.8 billion. Total annual profits of Pennsylvania health insurers increased from $468 million in 2000 to $621 million in 2004.

So premiums went up 40%. What about insurers reserves and profits? Reserves went up 36% and profits went up 33%. Total increases in insurers outlays unrelated to medical expenses (reserves+profits) increased 36%. So, at most, only 4% of that increase went to increased spending on patient care, overhead, salaries, etc. Sounds like they're pocketing 90% of the premium increase and only devoting 10% of that increase to patient care, inflation, etc. So if premiums were increased only to cover increases in patient coverage, inflation, etc. without regard for reserves or profits, then the average PA premium should have only gone up 4% to $2247. If you let profits increase by the same amount to maintain a profit margin, then premiums should have gone up 8% to $2334.

The point is that increased health care costs ARE going mainly to the insurance companies and not to the doctors or patients.

Sure it's gonna look bad when you start using the correct definitions of words with your numbers.

Gimein's attempt to compair the income of the providers to the profits of the insurers was sneaky at best. He should be ashamed.

nicely done

The top five insurers profits -- that's their net income -- were $11.8 billion. That's one half of one percent of total US health care costs. I think you misread something. "Profits" and "income" are the same -- "profits" is simply a little less formal. I just didn't say anything about their profit margin (because different industries calculate revenues in different ways, discussing profit margins is often quite difficult).

You seem to be confusing "income" and "revenue." And also total US health care costs ($2.3 trillion) with the insurance companies' revenues (that will be a much, much lower number).

And this has really been Krugman's point too. The insurance companies have some very high salaries, nice offices, etc, that do not really help get healthcare to people, but worst of all that 30% of there cost (not profits) goes to finding ways to not pay or to get someone else to pay.