Health Insurers: Heads They Win, Tails. . .
. . .taxpayers lose, or so says a report featured in the Washington Post (find the Post article here). Excerpts:
Despite the sluggish economy, the nation’s major health insurers have prospered in large part by expanding their role in government programs such as Medicare and Medicaid, according to a study released Thursday.
The share of large insurers’ revenues contributed by their Medicare and Medicaid business has jumped from 36 to 42 percent over the past three years. And the report by Bloomberg Government, a research division of Bloomberg LP, suggests that insurers will further increase their reliance on federal dollars with full implementation of the health-care law in 2014 — when Medicaid will expand to cover an eventual 16 million additional low-income Americans and the federal government will begin subsidizing private-insurance policies for an estimated 19 million more.
During last year’s first three quarters, the combined operating margin of the five largest publicly traded insurance companies averaged 8.65 percent — the best three-quarter performance of the past three years.
This occurred even as revenues from traditional private-insurance business have remained virtually flat since the end of 2008.
Essentially, the private companies are hired to run managed-care plans as an alternative to the traditional fee-for-service plans provided by the two programs. Under the arrangement, the insurer receives a fixed amount from the state or federal authority ultimately responsible for a given Medicaid or Medicare population. In many cases, the insurer can then keep part of any savings it generates by managing the care of the covered population more cost-effectively.
The practice is attractive to states seeking to curb spending on Medicaid, which is funded with a combination of state and federal dollars. Privately run Medicare managed-care plans — called Medicare Advantage Plans — have also long been common.
The health-care law will actually reduce federal payments to Medicare Advantage Plans by $136 billion. Nonetheless, the study’s author, Peter Gosselin, posits that insurers still expect the plans to prove profitable, because the current national focus on debt reduction will give them political cover to manage beneficiaries’ care more tightly than was considered palatable in years past.
That same logic might explain why insurance companies and their investors appear unruffled by the possibility that the health-care law could be overturned by the Supreme Court or drastically altered by the next Congress.
In the absence of the law, Medicaid might not be expanded. But the political imperative will still be to reduce spending on both Medicaid and Medicare — and this would probably be done through further outsourcing to private companies.
“It seems as if insurers have figured out a way to win whether the law is fully implemented or not,” Gosselin said.
Wake up, American taxpayer. We are giving away billions of tax dollars to an industry with a rising profit margin during the most difficult economic period in a century. And they are making money by providing inefficient, poor quality care to our patients. They are taking us for chumps. They have so wired the political system that no matter what policy prevails, or which party is in power, health insurers will profit handsomely.
There is no evidence that handing public money to private health insurance businesses saves tax dollars. Quite the contrary. Their profits balloon while our health care is flat-lined.
Join us for a renewed effort to really reform the American health care system.
Dr. Joe Jarvis