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peoples policy project
Huge Administrative Waste Makes Clear For-Profit Insurance Is 'Actually Very Bad': Analysis
"It is totally fair for people to identify private insurers as the key bad actor in our current system," writes Matt Bruenig of the People's Policy Project. "The quicker we nationalize health insurance, the better."
Dec 10, 2024
Last week's murder of UnitedHealthcare CEO Brian Thompson brought to the surface a seething hatred of the nation's for-profit insurance system—anger rooted in the industry's profiteering, high costs, and mass care denials.
But that response has led some pundits to defend private insurance companies and claim that, in fact, healthcare providers such as hospitals and doctors are the real drivers of outlandish U.S. healthcare costs.
In an analysis published Tuesday, Matt Bruenig of the People's Policy Project argued that defenders of private insurers are relying on "factual misunderstandings and very questionable analysis" and that it is reasonable to conclude that the for-profit insurance system is "actually very bad."
"From a design perspective, the main problem with our private health insurance system is that it is extremely wasteful," Bruenig wrote, estimating based on existing research that excess administrative expenses amount to $528 billion per year—or 1.8% of U.S. gross domestic product.
"All healthcare systems require administration, which costs money, but a private multi-payer system requires massively more than other approaches, especially the single-payer system favored by the American left," Bruenig observed, emphasizing that excess administrative expenses of both the insurance companies and healthcare providers stem from "the multi-payer private health insurance system that we have."
He continued:
To get your head around why this is, think for a second about what happens to every $100 you give to a private insurance company. According to the most exhaustive study on this question in the U.S.—the CBO single-payer study from 2020—the first thing that happens is that $16 of those dollars are taken by the insurance company. From there, the insurer gives the remaining $84 to a hospital to reimburse them for services. That hospital then takesanother $15.96 (19% of its revenue) for administration, meaning that only $68.04 of the original $100 actually goes to providing care.
In a single-payer system, the path of that $100 looks a lot different. Rather than take $16 for insurance administration, the public insurer would only take $1.60. And rather than take $15.96 of the remaining money for hospital administration, the hospital would only take $11.80 (12% of its revenue), meaning that $86.60 of the original $100 actually goes to providing care.
High provider payments, which some analysts have suggested are the key culprit in exorbitant healthcare costs, are also attributable to the nation's for-profit insurance system, Bruenig argued.
"Medicaid and Medicare are able to negotiate much lower rates than private insurance, just as the public health insurer under a single-payer system would be able to. It is only within the private insurance segment of the system that providers have been able to jack up rates to such an extreme extent," he wrote. "Given all of this, I think it is totally fair for people to identify private insurers as the key bad actor in our current system. They are directly responsible for over half a trillion dollars of administrative waste and (at the very least) indirectly responsible for the provider rents that are bleeding Americans dry."
"The quicker we nationalize health insurance," he concluded, "the better."
Bruenig's analysis comports with research showing that a single-payer system such as the Medicare for All program proposed by Sen. Bernie Sanders (I-Vt.), Rep. Pramila Jayapal (D-Wash.), and other progressives in Congress could produce massive savings by eliminating bureaucratic costs associated with the private insurance system.
One study published in the Annals of Internal Medicine in January 2020 estimated that Medicare for All could save the U.S. more than $600 billion per year in healthcare-related administrative costs.
"The average American is paying more than $2,000 a year for useless bureaucracy," said Dr. David Himmelstein, lead author of the study, said at the time. "That money could be spent for care if we had a Medicare for All program."
Deep-seated anger at the systemic and harmful flaws of the for-profit U.S. insurance system could help explain why the percentage of the public that believes it's the federal government's responsibility to ensure all Americans have healthcare coverage is at its highest level in more than a decade, according to Gallup polling released Monday.
"There's a day of reckoning that is happening right now," former insurance industry executive Wendell Potter, president of the Center for Health and Democracy, said in an MSNBCappearance on Monday. "Whether we're talking about employers, patients, doctors—just about everybody despises health insurance companies in ways that I've never seen before."
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Calls Mount for US to Provide Free School Meals to All Children
"Hiving off a tiny part of the public school bundle and charging a means-tested fee for it is extremely stupid," argues Matt Bruenig.
Mar 20, 2023
Minnesota last week became just the fourth U.S. state to guarantee universal free school meals, triggering a fresh wave of demands and arguments for a similar federal policy to feed kids.
"Universal school meals is now law in Minnesota!" Democratic U.S. Rep. Ilhan Omar, who represents the state, tweeted Monday. "Now, we need to pass our Universal School Meals Program Act to guarantee free school meals to every child across the country."
Omar's proposal, spearheaded in the upper chamber by Sen. Bernie Sanders (I-Vt.), "would permanently provide free breakfast, lunch, dinner, and a snack to all school children regardless of income, eliminate school meal debt, and strengthen local economies by incentivizing local food procurement," the lawmakers' offices explained in 2021.
Congressional Republicans last year blocked the continuation of a Covid-19 policy enabling public schools to provide free breakfast and lunch to all 50 million children, and now, many families face rising debt over childrens' cafeteria charges.
"The school bus service doesn't charge fares. Neither should the school lunch service."
Matt Bruenig, founder of the People's Policy Project, highlighted Monday that while children who attend public schools generally have not only free education but also free access to bathrooms, textbooks, computer equipment, playgrounds, gyms, and sports gear, "around the middle of each school day, the free schooling service is briefly suspended for lunch."
"How much each kid is charged is based on their family income except that, if a kid lives in a school or school district where 40% or more of the kids are eligible for free lunch, then they are also eligible for free lunch even if their family income would otherwise be too high," he detailed. "Before Covid, in 2019, 68.1% of the kids were charged $0, 5.8% were charged $0.40, and 26.1% were charged the full $4.33... The total cost of the 4.9 billion meals is around $21 billion per year. In 2019, user fees covered $5.6 billion of this cost."
Bruenig—whose own child has access to free school meals because of the community eligibility program—continued:
The approximately $5.6 billion of school lunch fees collected in 2019 were equal to 0.7% of the total cost of K-12 schooling. In order to collect these fees, each school district has to set up a school lunch payments system, often by contracting with third-party providers like Global Payments. They also have to set up a system for dealing with kids who are not enrolled in the free lunch program but who show up to school with no money in their school lunch account or in their pockets. In this scenario, schools will either have to make the kid go without lunch, give them a free lunch for the day (but not too many times), or give them a lunch while assigning their lunch account a debt.
Eligibility for the $0 and $0.40 lunches is based on income, but this does not mean that everyone with an eligible income successfully signs up for the program. As with all means-tested programs, the application of the means test not only excludes people with ineligible incomes, but also people with eligible incomes who fail to successfully navigate the red tape of the welfare bureaucracy.
The think tank leader tore into arguments against universal free meals for kids, declaring that "hiving off a tiny part of the public school bundle and charging a means-tested fee for it is extremely stupid."
Bruenig pointed out that socializing the cost of child benefits like school meals helps "equalize the conditions of similarly-situated families with different numbers of children" and "smooths incomes across the lifecycle by ensuring that, when people have kids, their household financial situation remains mostly the same."
"Indeed, this is actually the case for the welfare state as whole, not just child benefits," the expert emphasized, explaining that like older adults and those with disabilities, children cannot and should not work, which "makes it impossible to receive personal labor income, meaning that some other non-labor income system is required."
Conservative opponents of free school lunches often claim that "fees serve an important pedagogical function in society to get people to understand personal responsibility" and because they "are means-tested, they serve an important income-redistributive function in society," he noted. "Both arguments are hard to take seriously."
Pushing back against the first claim, Bruenig stressed that right-wingers don't apply it to other aspects of free schooling such as bus services. He also wrote that the means-testing claim "is both untrue and at odds with their general attitudes on, not just redistribution, but on how child benefit programs specifically should be structured."
A tax for everyone with a certain income intended to make up the $5.6 billion in school meal fees, he argued, "would have a larger base and thus represent a smaller share of the income of each person taxed and such a tax would smooth incomes over time," while also eliminating means-testing—which would allow schools to feed all kids and ditch costly payment systems.
As Nora De La Cour reported Sunday for Jacobin: "The fight for school meals traces its roots all the way back to maternalist Progressive Era efforts to shield children and workers from the ravages of unregulated capitalism. In her bookThe Labor of Lunch: Why We Need Real Food and Real Jobs in American Public Schools, Jennifer Gaddis describes how early school lunch crusaders envisioned meal programs that would be integral to schools' educational missions, immersing students in hands-on learning about nutrition, gardening, food preparation, and home economics. Staffed by duly compensated professionals, these programs would collectivize and elevate care work, making it possible for mothers of all economic classes to efficiently nourish their young."
Now, families who experienced the positive impact of the pandemic-era program want more from the federal government.
"When schools adopt universal meals through community eligibility or another program, we see improvements in students' academic performance, behavior, attendance, and psychosocial functioning," wrote De La Cour, whose reporting also includes parent and cafeteria worker perspectives. "Above all, the implementation of universal meals causes meal participation to shoot up, demonstrating that the need far exceeds the number of kids who are able to get certified."
Crystal FitzSimons, director of school-based programs at the Food Research and Action Center (FRAC), told Jacobin, "There is a feeling that we can't go back."
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'Seems Like a Good Policy!' CBO Shows Medicare for All Could Cover Everyone for $650 Billion Less Per Year
The analysis shows that administrative costs under a single-payer healthcare system "will be lower than what even the most rabid Medicare for All supporters have traditionally claimed."
Dec 10, 2020
The Congressional Budget Office on Thursday released a report examining the costs associated with universal healthcare proposals based on Medicare's fee-for-service program. The report found that implementing a single-payer health insurance program in the United States would not only guarantee coverage for every person in the country but also reduce overall healthcare spending nationwide.
"A large share of Medicare administrative costs are tied up in tasks like eligibility determination... that would no longer exist in a Medicare for All system."
--Matt Bruenig, People's Policy Project
In the words of researcher Matt Bruenig--founder and president of the progressive think tank People's Policy Project who called the CBO's working paper (pdf) on the topic "more exhaustive than any other recent study on the subject"--the new analysis shows that administrative costs under a single-payer healthcare system "will be lower than what even the most rabid Medicare for All supporters have traditionally claimed."
Bruenig states, "Modeling the cost of a single-payer program is relatively straightforward. You begin with the status quo healthcare system and then make educated guesses about the following questions:
- How many more units of healthcare services will be demanded and supplied when price barriers are removed?
- How much more efficient will health insurance administration be after the enrollment and payment systems are radically simplified?
- How much money will be saved by reducing the payment rates for healthcare providers and drug companies?"
In its analysis, the CBO looked at several distinct single-payer designs and determined that four such systems--fully implemented by 2030--would save anywhere from $42 billion to $743 billion that year alone.
"Never let a politician ask: 'How will we pay for it?'" tweeted Democratic Socialists of America for Medicare for All.
\u201cNever let a politician ask: \u201cHow will we pay for it?\u201d\u201d— DSA for Medicare for All (@DSA for Medicare for All) 1607645614
Bruenig explained that the CBO option that most closely resembles current Medicare for All proposals is the one based on low payment rates and low-cost sharing, which would generate $650 billion in savings in 2030.
He noted that if long-term support and services were added to that option, as many current Medicare for All proposals do, savings would fall to about $300 billion.
What Bruenig found most noteworthy is the CBO's findings on administrative costs:
Medicare for All advocates have historically pointed towards the 2% administrative costs of traditional Medicare as what we should expect in a Medicare for All system. Critics of this view have typically argued, among other things, that Medicare's low administrative costs are a mirage driven by the fact that their per-enrollee administrative costs are being divided by disproportionately large per-enrollee healthcare utilization.
This rebuttal never really made any sense. Private Medicare Advantage plans have a similarly sick and elderly enrollment population, but manage to spend a whopping 13.7% of their revenue on administrative expenses. The CBO's analysis, which starts with the current Medicare administrative costs and then determines how each element of those costs would go up or down in a single-payer system, seems to put this claim to bed once and for all.
Indeed, the CBO finds that the current Medicare administrative costs that are often touted by advocates are actually higher than the administrative costs you would expect in a single-payer system because a large share of those costs are tied up in tasks like eligibility determination and collection of Medicare Part B premiums that would no longer exist in a Medicare for All system.
What this means, Bruenig said, is that other studies estimating the effects of a single-payer system on administrative costs are "missing hundreds of billions of dollars of savings per year."
"Overall," he continued, "the study confirms what serious Medicare for All analysts have known for some time now: It is possible to provide high-quality public health insurance to every person in the country while also saving money overall on health spending."
Bruenig added that "the barriers to the policy are not technical deficiencies or costs, but rather political opposition from Republicans and conservative Democrats who would rather spend more money to provide less healthcare."
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