EDITORIAL: HOW MUCH FOR THE MIDDLEMAN?
Much of the controversy over the recently enacted Medicare bill concerned how much to pay the insurance companies that offer private “Medicare Advantage” health plans. The bill made modest adjustments to the formula that determines the subsidies these companies receive, which will save taxpayers $45 billion over the next 10 years.
The insurance lobby tried unsuccessfully to convince Congress that these subsidy reductions would result in benefit cuts and higher costs for enrollees in their plans. The lobbyists did not mention that, for every dollar they receive, insurance companies on average pay 87 cents for medical care, with some plans paying even less. The rest goes to administrative and marketing expenses and, of course, to profit. Original Medicare spends about 3 cents on the dollar on administrative costs. No money is diverted towards marketing or profit.
The lobbyists also did not mention that most of the excess subsidies that insurance companies receive remains untouched by this bill. These subsidies will cost taxpayers $150 billion over the next ten years, compared to the cost of providing coverage through Original Medicare.
The cut taken by the middlemen in our health care system has impacts far beyond Medicare. According to a recent report comparing health care in the U.S. with care in other industrialized countries, the U.S. tops the chart on the percentage of health care spending that goes to administrative costs, marketing and profits. We also have the highest rates of death from preventable or treatable diseases. And we have the highest percentage—over one third—of adults who go without care or medicine because of the cost.
We need leaders in Congress and the White House who are willing to make the tough decisions needed to rein in the skyrocketing cost of health care. These leaders will need to take a long look and a sharp knife to the dollars wasted on insurance middlemen, both in Medicare and in our health care system as a whole.
"Medical Record”- References and More Information"
- Adapted from: “How much for the middleman?”, Asclepios, Your Weekly Medicare Consumer Advocacy Update, from the Medicare Rights Center , July 17, 2008 • Volume 8, Issue 29.The U.S. spends twice per capita what other major industrialized countries spend on health care, and costs continue to rise faster than income. We are headed toward $1 of every $5 of national income going toward health care. We should expect a better return on this investment. Performance on measures of health system efficiency remains especially low, with the U.S. scoring 53 out of 100 on measures gauging inappropriate, wasteful, or fragmented care; avoidable hospitalizations; variation in quality and costs; administrative costs; and use of information technology. Lowering insurance administrative costs alone could save up to $100 billion a year.”( Why Not the Best? Results from the National Scorecard on U.S. Health System Performance, Commonwealth Fund Commission on a High Performance Health System, July 2008)
“ On average, Medicare Advantage [Medicare private health plans] projected that they would allocate about 87 percent of total revenue to medical expenses; approximately 9 percent to non-medical expenses, including administration, marketing and sales; and approximately 4 percent to the plans’ margin, sometimes called the plans’ profit. About 30 percent of beneficiaries were enrolled in plans that projected they would allocate less than 85 percent of their revenues to medical expenses,” ( Medicare Advantage: Increased Spending Relative to Medicare Fee-for-Service May Not Always Reduce Beneficiary Out-of-Pocket Costs, Government Accountability Office, February 2008)
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