Health Insurers’ Efficiency Is Questioned
Commercial health-insurance companies spend 14 times as much as the federal Medicare program does on administration, overhead and marketing, a private group said Tuesday.
And the private-insurance sector spent 11 times as much per dollar of claims paid as the Canadian national health-care system, according to a report by the group, Citizen Action.
If the private health-insurance industry was as efficient as Medicare, about $13 billion could be saved and used to provide insurance to 11 million uninsured people, the group’s study found.
“Competition in the insurance market is wasteful and expensive,” said Robert Brandon, vice president of Citizen Action. “In health care, a free market cannot work. What we need is a single-payer system, where the government is the sole insurer.”
Citizen Action’s report claimed that in 1988 commercial health-insurance companies spent 33.5 cents on administration, marketing, commissions and other overhead expenses for every dollar in claims paid out.
By comparison, Medicare’s administrative costs were 2.3 cents per dollar in claims paid out. In the Canadian health-care system, administrative costs amounted to about 3 cents per dollar in claims paid, the group said.
The Health Insurance Assn. of America said Citizen Action’s study was misleading because it did not include Blue Cross and Blue Shield plans or plans sponsored by large, self-insured companies. When these are factored in, the 1988 administrative costs in the commercial sector drop to 13 cents for each dollar of benefits paid, the association said in a statement.
The association also said private insurers are spending an increasing amount of money to make sure doctors’ and hospitals’ bills are appropriate. This effort saves billions of dollars annually, the association said.
The association also said Citizen Action was misguided in its call for a government-run health-insurance program. Noting the budget disagreement that shut down the federal government over the weekend, the insurers said “most logical observers . . . would not be inspired with confidence by the efficiency of government-run programs.”
Medicare helps pay doctors’ and hospital bills for the nation’s 33 million elderly and disabled citizens. Medicaid is a federal-state program that provides medical services to the poor. An estimated 37 million Americans have no health insurance, public or private.
Private insurance companies, in their efforts to compete for more business, spend money on things that are not necessary when coverage is provided by a single public program, the group said.
One of these functions is the internal review required to deny claims.
“Incredibly, the commercial insurance way of paying for health care leaves Americans spending more to deny people coverage than it would cost to provide everyone with coverage,” the report said.
