intercst
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Great video. Thank you to the Doc for trying to clear things up, including the bizarre moral confusion of the moment.
But he leaves the crux point unstated: the dead CEO and ilk are “merely doing their jobs” as hirelings of those who most benefit. The crux evildoers are the members of Congress who accept bribes (OK Free Speech campaign contributions) to shovel tax money into the maws of USELESS (a technical term in this instance) pseudo health organizations. They do not insure in any historic sense (pooling funds on behalf of their members to pay for unpredictable and random events), instead they simply and utterly illegitimately claim a percentage of the national healthcare budget. I say we need a campaign to bring the equivalent of “capital punishment” to a lot of corporations and political careers.
Health is more a herd than an individual phenomenon, and this pseudo insurance scam is a descendant of the denigration and ignorance of Public Health
has been a deathly, malevolent factor in USAian politics for well over 100 years.
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Of course they insure. Otherwise you wouldn’t buy health care insurance.
Your health care expenses next year are unpredictable. You can be reasonably certain they won’t be zero - but you don’t know if they’ll be a thousand dollars or a million dollars. So you purchase insurance - your insurer agrees that in exchange for your premium, they will pay a portion of your health care expenses during the coming year.
Some people will have health expenses that are more than the premium, some will have lower. That’s what you’re insuring against. Like fire or auto insurance, the most likely outcome is that you’re paying more in premiums than the covered expenses. You’re insuring against the chance that the expenses are higher.
If they weren’t insuring, then no one would want or need health insurance. They’d just self insure. But because your future health expenses are uncertain and variable, you buy insurance against the chance that those costs are very high.
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Do “they” not get funded by the federal government? And is the federal government not in a far better position to do the pooling and management. Oh hey, it is the feds who do the pooling and even much of the management except for the part about irrationally disallowing claims….
But I am not an insurance guy. I am just a guy who has had a lot of experience with healthcare outside of the USA….
d fb
d fb
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The major public insurance programs do (Medicare, Medicaid, VA), and the ones on the exchanges get some subsidies. Most private insurance policies don’t.
Maybe. But that’s not the point you made. Whether you think the federal government could do a better job of providing insurance, that doesn’t mean that private insurers aren’t actually providing insurance.
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That’s where an understanding of math is involved.
An INDIVIDUAL’s health care expenses are unpredictible. But if you have a risk pool of 100 million members, even that rare person with a $12 million dollar a year illness is lost in the roundoff.
A for-profit insurer will want to slice and dice the population into smaller and smaller risk pools and then claim the need to add a “risk premium” because of the unpredictability of having someone with an expensive illness in the pool.
An honest insurance actuary will tell you that larger risk pools are cheaper to insure because of the small to zero “risk premium”.
intercst
(proud reader of the Society of Actuaries magazine since 1994)
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Health has two legs, individual healthcare and public healthcare. If either fails healthcare is hobbled. Public healthcare might be more visible but that does not mean that individual healthcare is negligible.
My father and one of my best friends died of cancer. The progression of the illness from diagnosis to death was a terrible experience not just for the patient but for their families. Strange as it may seem it increased the discord in one family and eliminated discord in the other. The experience was so dramatic that I decided to die healthy. It took some years before I was done with the rat race and had time to heal insulin resistance and the cascade of consequences. My doctors had told me that my conditions were chronic, incurable, and that I would have to take medication until the day I died. False! I cured myself by eating and living right.
If everyone did the same the scope of public healthcare would shrink dramatically. In my case, I stopped taking eight daily medications and have spent just a few dollars a year on doctors and medications. BTW, I no longer have to get new glasses every couple of years, my eyes are no longer degenerating.
Patient, heal thyself!
The Captain
Please don’t reply saying that not everyone can do it. That’s so obvious that it’s trivial. The majority could if they were educated enough in the art of healthy living.
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Again, both of those statements can be true - and it’s still true that the insurers are providing insurance. It might not be the most efficient form of insurance, but it is insurance nonetheless.
And most of the big private insurers are…big. They have pretty large risk pools in most states. Which is why private insurers collectively don’t have an administrative load that’s all that much higher than Medicaid (or even Medicare) - just a few percentage points.
Nonsense.
Medicare operates with 1.2% of the program budget going to admin costs and 98.8% being spend on doctor’s visits, hospital charges and prescription drugs – you know, actual medical care for the beneficiaries.
UnitedHealthcare is the largest Medicare Advantage insurer with 9 million seniors on its books. Its medical loss ratio (MLR) for the fourth quarter of 2023 was 85%, the highest it’s been since the start of the COVID-19 pandemic. This is a key metric that measures the percentage of premiums a company pays out to cover claims, and a higher MLR means less room for profit.
That means United health Care only spent 85% of premiums collected on actual medical care. The other 15% went to commissions to health insurance brokers, a large for-profit bureaucracy designed to frustrate and delay your access to health care (e.g., 33% of claims submitted are randomly and summarily denied with little scrutiny), and an unGodly amount of excessive Executive Compensation.
Also, since United Healthcare is now a vertically integrated health care conglomerate (with 75,000 doctors as employees or under contract, plus a captive Pharmacy Benefit Manager) if they overcharge you on a doctor’s visit or prescription drug that still counts as a “medical expense” that increases the MLR ratio, even though the price gouging flows to its bottom line. It’s “legal” theft pure and simple.
I paid $400 in cash for the 3 generic drugs I took in 2023. If I used my Part D insurance and Aetna’s Pharmacy Benefit Manager mail order option where the PBM controls the complete supply chain and has the lowest cost, it would have cost $1200.
Better to have that $800 in my pocket, than lost to price gouging and excessive Executive Compensation with Aetna.
intercst
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…and that education is a prime goal and expertise of public health.
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Per the Centers for Medicare and Medicaid Services (which collects this data), the net cost of health insurance for Medicare in 2023 was about 5.8%. The net cost of health insurance for private insurance was about 10.3%. You can’t look at the MLR for a single private provider, even a very large one, and draw conclusions about what private insurance generally is like. Medicaid is right in the middle - about 7.4%.
It’s definitely cheaper to run a program like Medicare - no costs of enrollment or customer acquisition (it’s mandatory), no costs of collecting payments or chasing down folks who owe premiums (it’s deducted). Plus, your percentage MLR is going to be lower because it’s a higher claim population (your admin costs get spread over a much larger payment base) - the average net cost per enrollee for Medicare was about $960 vs. $680 for private insurers.
So while it’s certain that Medicare is cheaper than private insurance, only a portion of that difference is attributable to profit.
How come crap food is still legal?
The Captain
I don’t see that 5.8% figure quoted in the .pdf document you linked.
Here’s what Medicare’s chief actuary says, (Note: he’s the CMS employee who would be compiling these figures.)
{{ The overall cost of administering benefits for traditional Medicare is relatively low. In 2021, administrative expenses for traditional Medicare (plus CMS administration and oversight of Part D) totaled $10.8 billion, or 1.3% of total program spending, according to the Medicare Trustees; this includes expenses for the contractors that process claims submitted by beneficiaries in traditional Medicare and their providers.
This estimate does not include insurers’ costs of administering private Medicare Advantage and Part D drug plans, which are considerably higher. Medicare’s actuaries estimate that insurers’ administrative expenses and profits for Part D plans were 8% of total net plan benefit payments in 2021. The actuaries have not provided a comparable estimate for Medicare Advantage plans, but according to KFF analysis, medical loss ratios (medical claims covered by insurers as a share of total premiums income) averaged 83% for Medicare Advantage plans in 2020, which means that administrative expenses, including profits, were 17% for Medicare Advantage plans. }}
see link: What to Know about Medicare Spending and Financing | KFF
intercst
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You can derive it from the CMS tables in the first link.
Perhaps, but Medicare Advantage plans are not the same as “private insurance” generally. Most private insurance enrollees are in employer group plans, and most of those are in employer-funded group health plans. Which are generally more efficient than the rest of the market (especially individual coverage).
Even large employee plans are subject to wanton price gouging per WSJ.
You can’t handwave around it. The numbers are the numbers – the nation collectively is getting screwed.
intercst
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It’s not handwaving. Insurance company profits are large, but they’re a very modest component of health care expenditures - or even of health insurance expenditures.
Another way to look at it is by their earnings. The seven largest private insurance companies (UHC, CVSHealth/Aetna, Humana, Centene, Elevance, Cigna, and HCSC) earned about $50 billion last year. Which is a very big number.
But those companies have about 60% of the health insurance market, and total health insurance payouts for 2023 were about $1,500 billion. Which puts health insurance company profits at less than 5% of premiums (because all the non-profits, like Kaiser and some of the blues, are in the remainder of the market).
https://www.visualcapitalist.com/the-biggest-health-insurance-giants-in-america/
https://www.fiercehealthcare.com/payers/medicare-advantage-headwinds-didnt-prevent-payers-turning-profit-2023
You’re still not getting it. It’s not the profits. It’s the additional costs beyond the reported profits that are being forced on consumers/patients.
That’s why MLR is the metric to track, plus the added costs of captive provider price gouging.
Take the example of my Part D drug cost. I shopped around and paid $400 for drugs Aetna would have charged $1,200. That whole $1,200 is included in Aetna’s MLR as a medical care expense even though $800 (or more) is falling to their captive PBM’s bottom line.
intercst
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But if that were representative of users’ experiences generally, you’d see different figures across the industry. For example, Aetna has about 39 million people enrolled. If each of them had a single instance of an $800 pure profit from that kind of markup, then that would yield about $32 billion in profits. From just that one thing. But Aetna’s profits last year were “only” $8.3 billion. That’s about $212 per enrollee. It’s just simply not enough for them to be getting anything like what you’re describing on a regular basis.
So they have to be providing insurance. Most of the money they bring in for premiums goes out the door in health care or the administrative expenses of running an insurance company. Whether they’re earning more profits than they “should,” in some abstract sense, they’re still performing the core functions of an insurer.
If you look just at MLR (Aetna’s was about 90% in 2024), that’s also consistent with what it costs to run an insurance company. The figures are much lower in other types of insurance, like (say) auto insurance, which tend to run in the 60%'s. So the fact that MLR exists and is a few percentage points lower than the public programs, doesn’t mean that they’re not providing insurance.
We’re paying the double the cost of healthcare in other large industrialized countries for poorer results largely because of the involvement of for profit insurers and the Congressmen & Senators they’ve bought and paid for.
I’m sure I’m in the Top 1% of consumers who are examining the system and taking measures to make sure I’m not getting screwed. But most people don’t have the time, inclination, or technical knowledge to do that. Heck, less than 1/10th of 1% of the people United Healthcare randomly deny claims on even appeal. People don’t have the time to devote to this administrative burden being placed on them.
intercst
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Because people want it? Liquor and tobacco are legal too.
Steve
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