DISCLAIMER: I'm not a member of the healthcare industry. The following thoughts, analysis, and conclusions are pretty much pulled out of my a--. Any resemblance between them and reality, living or dead, is likely coincidental. 

It seems to me that one of the main problems with healthcare is the whole notion that it is legitimate to profit off of the sickness of others. This philosophical question gets occasionally raised, and then only obliquely by Democrats, but I don't recall ever having seen it argued directly, forcefully, and consistently. I think that was the whole point behind the presidential debate question of whether healthcare is a privilege or a human right.

If healthcare is merely a privilege, then profit making is not only legitimate but, indeed, should be the prime motivating force behind the design and operation of our healthcare system/industry. Just as profit is the prime motivating force behind all other successful commercial industries. That is, if you believe Adam Smith's 'Invisible Hand' theory. But, if on the other hand, healthcare is a human right, is there any legitimate place for the usual profit making motivations?

In exploring this philosophical question we require a basic qualitative definition of profit. By profit, I mean those earnings above the cost of providing healthcare services and products. All costs of operating, including doctor and staff pay, and including certain non-operating costs such as reinvestment are not profit, they are costs. Profit is excess earnings paid to investors after all those other costs have been paid. Obviously, this definition can be gamed to include huge pay packages to executives, as was done by Health South, and which fall, none the less, under the definition of a legitimate operating cost. The only means which I can immediately think of to control that sort of abuse is either by regulation of executive compensation or by greatly increasing market competition - increasing market competition, though, can be highly problematic in healthcare. I think we should move the healthcare industry toward some low or non-profit model justified by the notion that healthcare is a human right. Let's begin with the low hanging fruit, the health insurance companies.

I think that private health insurance companies either shouldn't exist at all, leaving the government to insure everyone as a non-profit entity, or, they should be strongly regulated by some model of 'cost plus'. 'Cost plus' isn't the same as a pure non-profit model. It means that they can charge premiums high enough only to cover their legitimate operating costs plus some modest fixed profit margin. This was/is the model used to regulate many utility companies and for much of the same philosophical reasons I'm suggesting are true for the healthcare industry.

Attempts to remove as much (or all) of the profit motivation as is practical from the healthcare industry would predictably meet stiff opposition from conservatives, both Republican and Democratic, in congress. Yet, we as a nation have done something similar in principle, if not scope, before by the regulation of utility companies. I realize that this a bit of an apples-to-oranges comparison because water and electric utilities usually owned monopolies within their local markets. AT&T owned a national monopoly on telephone service until 1984. AT&T was considered a utility and operated on a 'cost plus' basis, however, they didn't face any real competition. However, even with those specific differences, I think there are enough similarities to justify such an approach for our healthcare system. At the very least, what was done in the utility industry provides historical proof that some model which is not designed to maximize profit isn't somehow Marxist or un-American.

One of the problems with a pure non-profit models is the real issue of how to attract capital for financing innovation and capacity expansion. It may be possible to create a special low-risk government  bond, maybe, a health T-bill. Or, maybe, bonds would be issued directly by the healthcare companies, but guaranteed against default by the government, just like the FDIC does for savings accounts, in order to attract needed capital investment. I would not argue that this approach would be perfect or even the best approach. It leaves out equity market participation - however, I suspect that may be a net positive. I would argue that the criteria for evaluating any proposed new healthcare system should be whether it would be dramatically more efficient and effective, in terms of patient servicing, not in profit making, than is our current system.

 Our current healthcare system appears to operate without much local competition, especially for hospitals and doctors. That seems a practical market reality based on limited supply in many markets. Add to that quasi-monopoly market environment a customer base which very often is desperate to be serviced and typically in no position to negotiate price and we get a market formula which results in very high pricing. Utilities had/have cost control regulation to prevent just such an unfair market pricing environment.

Pharmaceutical and medical device suppliers seem to ride the gravy train inherent to any market where a third party pays for their products. One only need reference the automobile collision and bodywork market to see an example of insurance company involvement, IMO, resulting in outrageously high service pricing. No one would have auto bodywork performed if the payment was wholly out of pocket. The auto collision industry would be forced to drastically lower their prices. I'm not, for a second, suggesting that medical insurance is not required. The point of my post is that healthcare is a right, and therefore, must be both affordable and accessible.

The cost of health insurance must be made to come down without depending only on free-market forces. The cost of most other healthcare participants, such as doctors, hospitals, drug, and medical device suppliers can be made to come down via increased competition and increased buyer power. Two forces which those participants likely wouldn't want to see strengthened. Personally, I'm a skeptic regarding the savings which will be realized via health IT, or convincing Americans to improve their health habits.

P.S.

I've neglected to explicitly state why I believe that healthcare should be a right. I believe this becuase I feel that it's immoral to incidentally profit (in the coporate sense that I defined above) from the suffering of others. This is a notion which I also believe applies to the defense industry. The idea of removing profit motivation from the defense industry was advocated by Gen. Smedley Butler as a solution to unecessary war (by which, he meant, nearly all wars) in his famous, "War is a Racket" written way back in 1935.

Link: http://www.lexrex.com/enlightened/articles/warisaracket.htm