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private insurance
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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New Reporting on Insurance Claim Denials Highlights 'Scam' of For-Profit Healthcare
"Private insurance companies, including Medicare Advantage plans, are designed to generate profit. How do they do that? Take our money and then deny our care."
Jun 28, 2023
A pair of new stories examining the increasingly common but shadowy U.S. insurance industry practice of refusing to pay for certain treatments drew outrage Wednesday from patient advocates and Medicare for All proponents, who said the reporting further reveals the harms of for-profit healthcare.
The investigative outlet ProPublicafocused its attention on the "galling" secrecy around insurance companies' claim denials, which frequently leave patients with massive medical bills and little clarity as to why their claims were rejected.
"How often insurance companies say no is a closely held secret," ProPublica's Robin Fields reported. "There's nowhere that a consumer or an employer can go to look up all insurers' denial rates—let alone whether a particular company is likely to decline to pay for procedures or drugs that its plans appear to cover."
"In 2010, federal regulators were granted expansive authority through the Affordable Care Act to require that insurers provide information on their denials. This data could have meant a sea change in transparency for consumers," Fields added. "But more than a decade later, the federal government has collected only a fraction of what it’s entitled to. And what information it has released, experts say, is so crude, inconsistent, and confusing that it's essentially meaningless."
The data that is available indicates claim denials are on the rise. According to a February KFF study of Affordable Care Act plans, "nearly 17% of in-network claims were denied in 2021."
Elisabeth Rosenthal of KFF Health News wrote in a column last month that declining to pay for patients' treatments is "a handy way for insurers to keep revenue high."
"Millions of Americans in the past few years have run into this experience: filing a healthcare insurance claim that once might have been paid immediately but instead is just as quickly denied," Rosenthal wrote. "If the experience and the insurer's explanation often seem arbitrary and absurd, that might be because companies appear increasingly likely to employ computer algorithms or people with little relevant experience to issue rapid-fire denials of claims—sometimes bundles at a time—without reviewing the patient's medical chart. A job title at one company was 'denial nurse.'"
ProPublica noted Wednesday that "some advocates say insurers have a good reason to dodge transparency."
Citing Wendell Potter, a former Cigna executive who now supports Medicare for All, ProPublica reported that "refusing payment for medical care and drugs has become a staple of their business model, in part because they know customers appeal less than 1% of denials."
"That's money left on the table that the insurers keep," Potter told the outlet.
With their companies' profits booming, the CEOs of the top seven private health insurance giants in the U.S. took home a combined $335 million in compensation last year.
Medicare Advantage providers—private insurers paid by the federal government to cover patient care—have become notorious for denying claims for medically necessary treatments as enrollment in the program continues to surge.
As The Lever's Matthew Cunningham-Cook reported Wednesday, "Medicare Advantage insurers are threatening the foundational premise of the government's healthcare safety net for seniors and people with disabilities: that people in Medicare should get the care that is recommended by a doctor."
"A 2022 investigation by the inspector general of the Department of Health and Human Services found that in 2019, 13% of the total prior authorization requests denied by Medicare Advantage plans would have been covered under traditional Medicare, leading to an estimated 85,000 additional care denials," Cunningham-Cook wrote. "That year, Medicare Advantage plans also wrongly denied 18% of payment claims—covering an estimated 1.5 million claims—reducing the likelihood that doctors will recommend the costliest yet often most effective care, for fear of not being paid."
Social Security Works, a progressive advocacy group that backs Medicare for All, tweeted in response to the new reporting Wednesday that "private insurance companies, including Medicare Advantage plans, are designed to generate profit."
"How do they do that? Take our money and then deny our care," the group added.
Cunningham-Cook opened his piece with the story of Jenn Coffey, a former Republican state representative in New Hampshire "who, like many GOP faithfuls, believed private insurers could solve the healthcare crisis if they were allowed to do things like sell policies across state lines."
But Coffey's views were shaken when UnitedHealth, her ultra-profitable Medicare Advantage provider, "constantly rejected or second-guessed the care options her doctors suggested for her cancer recovery and for a rare and painful secondary disease that has no standard treatment plan," Cunningham-Cook reported.
“Now I've realized that you can't fix or repair the system,” Coffey told The Lever. "The insurance companies don't offer anything. They serve as a roadblock."
"The only way forward," she added, "is Medicare for All."
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UnitedHealth Touts Profit Surge After Lobbyists Weaken Medicare Advantage Crackdown
UnitedHealth CEO Andrew Witty told investors he "appreciates" the Biden administration's decision to slow the implementation of its Medicare Advantage reforms.
Apr 14, 2023
The chief executive of UnitedHealth Group told investors Friday that he "appreciates" the Biden administration's decision to more slowly implement its crackdown on overbilling in Medicare Advantage, a privately run, government-funded program that the Minnesota-based insurance behemoth touted as a key profit driver in its newly released first quarter earnings report.
UnitedHealth, one of the largest Medicare Advantage providers in the U.S., reported $91.9 billion in revenue for the first three months of 2023—15% growth year-over-year—and more than $8 billion in earnings from operations, exceeding analysts' expectations.
UnitedHealthcare, UnitedHealth Group's insurance business, "is pacing strongly to its outlook for another year of market-leading growth in serving more people through its Medicare Advantage offerings," the company said in its earnings release. The company said Friday that it added 655,000 new Medicare Advantage members in the first quarter of the year.
UnitedHealth's earnings report came after the company helped lead an aggressive lobbying campaign against new Biden administration rules aimed at limiting Medicare Advantage insurers' ability to overcharge the federal government by making patients appear sicker than they actually are.
According to The New York Times, UnitedHealth CEO Andrew Witty appeared on Capitol Hill in person to lobby against the proposed changes, which the lucrative Medicare Advantage industry falsely characterized as cuts to the program that now provides insurance to nearly half of the overall Medicare population.
Late last month, the Centers for Medicare and Medicaid Services (CMS) offered a number of concessions to the industry, agreeing to impose its policy changes over a period of three years instead of all at once and boosting Medicare Advantage payment rates by more than expected.
As STATreported last week, Wall Street investors were "overjoyed" by the Biden administration's move, which drew criticism from progressive lawmakers and healthcare analysts who warned the slow phase-in will allow Medicare Advantage plans to continue their abusive practices. UnitedHealth, like other Medicare Advantage insurers, has been accused of wrongfully denying or attempting to deny patients necessary care, in some cases utilizing artificial intelligence to determine when to end coverage.
When it comes to excess billing, CMS recently estimated that overpayments to Medicare Advantage totaled $11.4 billion in fiscal year 2022—a significant drain on the Medicare trust fund.
Citing one industry analyst, STAT noted that UnitedHealth could reap $900 million in additional profit next year alone thanks to the administration's decision to delay full implementation of the reforms.
\u201c$UNH CEO Andrew Witty says he "appreciates" @CMSGov's decision to phase in changes to Medicare Advantage risk adjustment. The delay could allow UnitedHealth to pull in at least $900 million of added profit, just next year. https://t.co/KnNbyCwqZO\u201d— Bob Herman (@Bob Herman) 1681477811
In an analysis published in February, former insurance executive Wendell Potter noted that UnitedHealth is one of just seven large for-profit insurance companies that now control 70% of the Medicare Advantage market, which is dependent on taxpayer money.
According to Potter, who now heads the Center for Health and Democracy, insurance giants UnitedHealth, Cigna, CVS/Aetna, Elevance, Humana, Centene, and Molina saw their combined revenues from taxpayer-supported programs grow 500% between 2012 and 2022.
"They've essentially been bailed out by taxpayers," Potter said of for-profit insurance giants like UnitedHealth in a recent interview with The American Prospect. "And members of Congress, and various administrations, have been just standing on the sidelines, not paying attention to what's been going on."
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