Stanley Feld M.D.,FACP,MACE
It is getting harder and harder for me to read the New York Times. The half-truths are glaring. The bias is becoming more and more transparent.
Dr. Ezkiel Emanuel’s article in the New York Times on November 3rd continues with these half-truths and bias.
“According to many on the left, health insurance companies are sleazy and unethical, making obscene profits by charging high prices to sick people, giving physicians and patients the runaround to avoid paying bills, and rescinding policies just when people who paid in good faith get cancer, while their executives often walk away with millions in compensation.”
The individual state’s Board of Insurance is in charge of regulating the healthcare insurance industry. The stated goal is to protect consumers.
All state boards issue licenses to sell healthcare insurance yearly to healthcare insurers.
Few of the state Boards of Insurance have enforced their own regulations. The state insurance boards could easily refuse to issue a license to a company that doesn’t follow the regulations
Dr. Emanuel takes the healthcare insurance industry’s bottom line literally, while ignoring the financial facts.
“Last year, health insurance companies did rack up big profits, but it turns out that the combined profits of the country’s five largest for-profit health insurance companies — United, WellPoint, Aetna, Humana and Cigna — were $11.7 billion, only 0.5 percent of total health care spending.”
“Even confiscating every penny of those profits would add up to less than half of the cost-saving threshold. And even not-for-profit insurance companies need to have an operating margin — a profit by another name. There just isn’t enough money there to make a dent in health care spending.
Dr. Emanuel’s obvious conclusion is $11.7 billion profit is not meaningful. It should not be considered to influence the total cost of healthcare or future healthcare policy.
He says .
Health care spending in the United States typically increases by about $100 billion per year. Cutting a billion here or there from something that large is undetectable is meaningless. In health care, you have to be talking about tens of billions of dollars before you are talking about real money.
The bottom line figure after expenses might be published as only $11.7 billion dollars but the real profits are buried into the profit built into the administrative expenses that do not get added into the bottom line.
The truth is,
Over 20 percent of consumers who purchase coverage in the individual market today are in plans that spend more than 30 cents of every premium dollar on administrative costs.
An additional 25 percent of consumers in this market are in plans that spend between 25 and 30 cents of every premium dollar on administrative costs.
And in some extreme cases, insurance plans spend more than 50 percent of every premium dollar on administrative costs.
President Obama thinks his law will decrease these expenses. The public has also been lead to believe that Medicare’s administrative overhead is 2.5%. The 2.5% is the overhead to maintain a CMS department outsourcing administration services to the healthcare insurance industry and generating new regulations.
The percentage of overhead has to be higher much higher now with the development of Dr. Berwick’s bloated bureaucracy.
CMS outsources its administrative services to the healthcare insurance industry. The healthcare insurance industry adds an additional 20-30% to the bid price for services claims.
A large administrative service provider (Trailblazers) in Texas was just outbid for its administrative services by an east coast administrative service provider (Highmark) confirming the bid pricing mechanism.
Strangely, both Trailblazers and Highmark are subsidiaries of Blue Cross/ Blue Shield. This is the place that 20-30% is taken off the top of the Medicaid and Medicare budget and is not included in the bottom line.
The healthcare insurance industry is required to maintain the Medical-Loss Ratio at 80-85%. Medical Loss Ratio means it has to spend 80 to 85 percent of premium dollars on medical care and health care quality improvement rather than on administrative costs.
Healthcare insurance companies have been permitted, by the government, through the influence of its lobbyists, to shift certain expenses from administrative expenses into the patient care expenses. The result is less money spent on direct patient care.
- The cost of ferreting out fraud such as catching physicians over testing patients or doing unnecessary operations.
- The cost of programs that keep people who have diabetes out of emergency rooms.
- The sales commissions paid to insurance agents.
- Taxes paid on investments.
- Taxes paid on premium income.
These expenses are designated as direct patient care expenses. Each expense is a profit center. This profit is not reflected in the healthcare insurance company’s bottom line. These are the reasons the net income figures are bogus.
Aetna made $4.8 billion dollars in profit on Medicare Advantage and Medicare Part D alone two years ago.
“Citigroup research group estimates that presently the overall healthcare insurance industry’s net profit is about $56.5 billion per year. The addition of 16 million enrollees will add $40 billion dollars in net profit to the healthcare insurance industry’s bottom line.”
“Gail Boudreaux, UnitedHealth's executive vice president, told investors last month that: "The Medicaid space is a significant long-term growth opportunity for us. It's a big market that's getting even bigger." UnitedHealth pegs the value of new bids or expansions over the next three years at $40 billion.”
The net profit of $11.9 billion dollars is a bogus figure. Dr. Emanuel has to know this. The healthcare insurance industry is cooking its books.
President Obama and his administrative advisors are pretending to believe the numbers produced by the healthcare industry.
The administration in turn is using the media and its power of the pulpit to convince the public to believe it.
The bizarre thing is that the scheme is working as reflected in the comments to Dr. Emanuel’s article.
This is disinformation are its best.
The opinions expressed in the blog “Repairing The Healthcare System” are, mine and mine alone.
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