Net Profit Margins for players in the Health Care sector (first quarter 2011):
15.4% Drug Manufacturers – Major
13.9% Medical Instruments & Supplies
13.6% Drug Manufacturers – Other
12.7% Biotechnology
12.6% Medical Appliances & Equipment
9.0% Specialized Health Services
7.7% Drug Related Products
7.6% Diagnostic Substances
6.9% Home Health Care
6.3% Drugs – Generic
5.0% Hospitals
4.4% Health Care Plans
3.6% Medical Practitioners
1.8% Long Term Care Facilities
-2.3% Medical Labs & Research
-4.0% Drug Delivery

(Yahoo Finance 5/12/2011)
It’s clear from the above that despite rising costs and increasing premiums, Health Plans and Insurance Carriers are not earning huge profits from the health care industry. Price controls such as the MLR (Minimum Loss Ratio) in Health Care Reform which were directed at health insurance companies are unlikely to be effective at reducing costs.
What would be more effective at reducing cost would be to regulate the monopolistic pricing practices for the players at the top of the profitability heap, e.g. Brand Name drugs., patented medical devices. Other participants and cost factors that inflate health care, yet are not shown above include profits made by malpractice law firms. Overusage or use of unnecessarily costly procedures, especially among patients of cadillac care plans, such as those of public employee unions. Overusage due to the practice of defensive medicine. Continuous cost shifting by insolvent Government-run health care programs to the Private sector, e.g. Medicare, MediCal, Medicaid, Veterans programs. Government, by continuously lowering their reimbursement schedules to doctors and hospitals, below their profitability levels, are forcing them to charge higher fees to private payers like employers and families in order to remain in their medical practices. It explains the shortage of Family Practice Physicians because they receive the lowest reimbursement rates from these Government programs. Other cost drivers include fraudulent medical research papers, from unscrupulous researchers funded by cash-rich pharmaceutical companies, touting expensive new procedures and drugs.

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