WALLACE: Governor Dean, you gave an interview to the liberal Web site Huffington Post this last week in which you said that Senate Democrats are in deep trouble on health care reform. And let's put it up on the screen.It seems that the 27% that the former governor is quoting is pretty close to the health care industry gross margin. Apparently, he thinks that that is too high.
You said that moderate Democrats are likely to water down the bill further and then added, "This is going to be death for Democratic campaign committees. Why would anyone donate to them if they're supporting candidates who defeat the Democratic agenda?" Governor Dean, things really that bleak?
DEAN: Well, you know, I think it's tough right now. We've got to get a decent bill with a public option in it so that we don't — aren't forced into this — what we've been forced into for the last 30 years.
Look, insurance companies take 27 percent off the top. They don't do a terribly good job. The costs have been going up at 2.5 times the rate of inflation. And the Democratic base expects, as we say, change you can believe in.
But the actual industry net margin is closer to 6%. In other words, the investors in health care companies get about a 6% return on their investment, just slightly better than they would if they'd gone out and invested in a balanced portfolio of grocery stores.
So what's the difference between the 27% and the 6%? That's easy:
That's right, folks, most of of what the former Chairman of the Democratic National Committee is complaining about insurance companies making in profit goes back to federal, state, and local governments.
So, since Dr. Dean is so intent on making insurance companies more efficient, I have a modest proposal: Let's let them operate tax-free.
In 2004, HHS estimated that $558 billion was disbursed for health care from private health insurance. We could reasonably expect that making health insurance tax-free would raise net margins to, say, 8%. So, given the current 27% gross margin, this would save 19%, or $106 billion in private health insurance costs.
Of course, that's just shifting $106 billion that could go to Medicare, Medicaid, and other public health spending to the private sector. Still, Dr. Dean seems more worried about punishing evil insurance companies than he does about actual, you know, health care. So I'm sure he'll find my proposal completely reasonable.
Oh, by the way: Does anybody happen to know whether the "public option," as it's currently established, has to pay taxes? I'm guessing not. So much for a level playing field...