So if United is the insurer they’re owned by an umbrella, that umbrella takes 20% or less. However United makes special deals and steers people to providers owned by the Umbrella. So that the Umbrella makes more money as well. This is true for medicine as well. For example Cigna requires all maintenance medication be purchased through express scripts as a means to retain or increase profit.
United has a history of also squeezing organizations by forcing them into pre-payment review when they’re high volume. This causes the providers to basically not have no revenue for months on end until it gets sorted. Then they might get a chunk or settle out of court. Often they go bankrupt and are purchased by the umbrella.
In terms of Medicare/Medicaid another catch-22 is that insurance handles the claims for providers. The insurance can recode claims and pocket the difference without telling the provider. It’s on the provider to catch it.
There is a tremendous amount of dark money, shadow games, hidden corporate structures, Wyoming and NM LLCs with Anonymous owners, etc.
Insurance as a whole tries to own the entire feedback loop for healthcare. They don’t like you going out of their feedback loop.
>For example Cigna requires all maintenance medication be purchased through express scripts
Important note: Cigna owns Express Scripts. Today the biggest "insurance" companies are actually massive conglomerates that own the clinics, the doctors and the pharmacies. United = Optum. Aetna = CVS + Caremark. Humana = CenterWell. Elevance/Blue Cross/Anthem/Carelon. Centene = Envolve
Once a giant like United gets big enough in a city, say ~40% of the population, they lower the reimbursement rates for independent doctors and if the doctor refuses the contract, they are kicked out of network and lose 40% of their patients. Go bankrupt or sell to Optum.
Digi is also right about Medicare upcoding. It is a well-documented $$billions scam where Medicare Advantage insurers comb through patient records to add diagnostic codes making the patient look sicker on paper than they actually are so the government pays the insurer a higher flat rate for that patient.
Insurance as standalone entities are not much better or worse for total cost than these giant vertical monopolies. At least yet, thy are only recently becoming large enough to truly put the screws to people. Because insurance was not all that profitable made it prime targets for these sorts of shell game shenanigans.
It’s basically the point I was making. Fixing “insurance” isn’t a fix at all because the problem is far greater than just that layer of the onion. Costs are hidden and embedded and cross-subsidied to the point no one can unwind it without burning the entire thing to the ground. It’s grift from bottom to top. Aside from a few poor souls actually at the ground level who are still true believers trying to provide service to patients. And a lot of those are burning out. I think out of the 5 or 6 medical doctors I met while they were in medical school, only one is still practicing. They would now be late 30s to early 40s and in theory at the prime of their careers. Instead they got out as soon as medical school debt was paid off and moved onto other less stressful things. Another hidden cost in the shit-tier system rarely talked about.
I’m simply pushing back on the idea that the 20% medical loss ratio is the source of all (or even most) issues for the cost of healthcare or why insurance sucks so much to deal with. It’s nearly irrelevant.
The surprise was nonprofit hospitals: median markup of 3.96x actual operating costs, versus 2.39x for for-profit and 1.87x for government hospitals. That's hard to square with the narrative that nonprofits deserve their tax exemptions ($28-37B/year) because they serve charitable purposes.
On the self-funded employer point — you're correct that self-funded plans have more negotiating latitude, and thousands of them already use reference pricing (capping hospital payments at a percentage of Medicare). That's actually the policy fix this analysis proposes. Montana Medicaid implemented it and saved $47.8M. The question is why it isn't the default.
That’s only half the story though insurance companies also try and reject way more claims, cover fewer people, and are just harder to get money from than Medicare.
This means hospitals can’t afford to give them cheaper rates as they just require vastly more work from staff for the same procedure.
The industry isn’t blind to this effect, but has little reason to change.
Private insurance subsidizes Medicare and Medicaid even after you add in admin overhead.
Or doesn’t live.
https://www.macrotrends.net/stocks/charts/UNH/unitedhealth-g...
All the other managed care organizations have similar 2% profit margins.
It is funny seeing complaints of excess profit margins from businesses earning 2%, that compete against non profits, from people on a forum composed of employees of tech businesses earning 20%+ profit margins. I wonder how much Epics’s profit margin is?
And then there is also pharmaceuticals, also earning double digit profit margins. And then the law firms in medical malpractice suits, who I imagine are not working for 2% profit margins either.
https://relentlesshealthvalue.com/episode/ep502-how-some-pre...
Also, I'm not going to trust a podcast owned and operated by Stacey Richter, who also just so happens to be the co-president of Aventria Health Group and QC-Health.
These are synonyms for having higher overhead, right? If you pay a billion dollars in claims with ten million dollars in administrative costs then your "administrative overhead" is 1%, even if half the claims are fraud. If you increase "administrative costs" to a hundred million to get rid of the fraud, in practice you just saved 410 million dollars but now your "administrative overhead" is up to 20%.
There's a common, misleading, claim that Medicare is more efficient because they spend far less than commercial insurance on overhead like claims processing. This claim is true. But the impression that it gives is absolutely the opposite of reality. The reason that Medicare doesn't spend as much on admin is that they offload all of this work onto the providers. Every hospital in America has a "Medicare Reimbursement" team. A moderate-sized hospital is going to have something like 2 FTEs focusing just on the reimbursements from Medicare and Medicaid. And that's a lot more work than just filing the right forms for each case. There's a ton of additional work. Each spring they have to file a HUGE "Medicare Cost Report", requiring a couple of months of work to get all the data in place for it. (Source: my wife was "Director of Reimbursement" at various hospitals for quite a few years, before going into consulting.)
That Medicare Cost Report that I mentioned is, beyond a huge effort sink, the source of many other evils. Because of the amount of work that's needed to gather and collate all this data, hospitals naturally structure their Accounting around the way Medicare wants them to report. The thing is, that's largely orthogonal to the way a rational person would do cost accounting. The result is the common criticism about how widely varying the cost of a given specific line-item is between hospitals: they don't really know how much a given procedure costs because that's not how they track their expenses, so they apply some allocation heuristics, and every hospital does that a bit differently.
There are also various perverse incentives in the system. For example, Medicare is smart enough to know that it costs more to deliver care in NYC or SF and so forth. Every locale has a Cost Index that scales how much they expect to need to pay. This leads to hospitals needing to show that their expenses are higher so they should be classified into locale X rather than neighboring locale Y.
Another one my wife told me about her hospital: Medicare realized that a lot of UTIs were hospital-acquired, and they rationally said that they would no longer pay for UTI treatments unless the hospital could prove that they were not hospital acquired. Well, maybe that wasn't rational, because with Medicare/caid being such a huge portion of their business, they changed their policy to test for UTI for everyone at admission, so that they could furnish the proof demanded. Think of all that wasted lab work...
So no, Medicare is NOT more streamlined and efficient. It's absolutely, 180-degrees, the opposite of that.
> something like 2 FTEs focusing just on the reimbursements from Medicare and Medicaid
2FTE’s vs what?
The question isn’t is this free, the question is how large is the total staff including price negotiations, doctors, and IT time spent handling billing issues, and is Medicare more or less than 50% of the total.
I am ware of one hospital and 2 medical clinics where the difference is very much in favor of Medicare.
Coding is a different layer. Everything needs coding, whether for gov't or commercial payers. So the folks doing this coding can't be separated out for commercial. In fact, it's kind of the opposite:
CPT codes (for procedures) - these are defined by AMA, but mandated by CMS (i.e., Medicare/caid). Because the gov't mandated them, the commercial payers adopted them too.
HCPCS codes (equipment and supplies) - defined by CMS.
ICD-10-PCS codes (hospital inpatient stuff) - defined by CMS.
versus nothing. Hospitals don't have to maintain a whole team for UnitedHealth, or for Anthem, etc.
This is my point. Medicare cooks the books to look more efficient by offloading their administrative costs onto providers. Other payers can't do that because, even if huge, they don't operate at the same scale.
Think about it: we often hear on the news about disputes about contracts when a local hospital's agreement with some insurance company comes up for renewal. They play hardball, getting local news to run stories on how many people will be affected if they can't come to terms. But you'll never hear this in the context of Medicare/caid. Hospitals have leverage to negotiate with commercial payers, but not with the government.
I work in this area and you're right that Medicare can require a huge amount of paperwork from providers. And a hospital will have far more than 2 FTEs for this (it's called Revenue Cycle Management).
The ideal long term strategy is to drive everyone’s costs to go up slowly over time slightly faster than inflation. Adding administrative burden to medical institutions is a perfect way to achieve that, but clearly that never happens…
That's assuming price is the only variable.
Suppose one insurance company is accepted by more providers, including ones that might be closer (but pay higher real estate costs) or have nicer rooms etc. Meanwhile employers are looking for cost/benefit rather than just cost. If they give employees a better insurance plan they could pay them less or provide less of some other benefit and still get people to work there.
So before the insurance company didn't really care if you got a $10,000 plan or a $20,000 plan if they both had a $2200 margin, or if anything would prefer the former because they make the same money with lower costs. The employer is likewise fairly ambivalent as long as the more expensive plan seems like it's buying something (even if the something is convenience/luxury). But now the insurance company isn't allowed to have a $2200 margin on the first plan and still is on the second, so that's what they market, and then what more employers choose, resulting in higher average costs.
> Insurance providers also rarely operate at the full freight 20% either way though.
There are only really two options, right? Either the market is actually competitive and then a margin cap has no effect because competition would prevent margins higher than that regardless and the rule should be gotten rid of as totally redundant, or the market is less than perfectly competitive and then it does something but the something is a bad perverse incentive to raise costs to cheat the rule and it should be gotten rid of as actively harmful.
This is why there needs to be a real second option. A public option like medicare for all would be the way to go. Let everyone choose between either private insurance or public insurance. Then you'd actually see some real competition.
No argument from me that insurance is not competitive enough. But they are almost all public corporations that are highly regulated so the numbers on profit and expense ratios are easy to get for yourself to prove the point. No need to take my, or anyone with an agenda word for it. Almost everyone wants a simple answer to a complex interdependent problem that does not have one.
If there was a single solitary answer of “what is the problem with US healthcare” I’d have to go with it being a principle agent problem. If everyone who consumed healthcare had to pay up front very few services would cost what they do. Even changing it so people were billed directly and then had to submit insurance claims later like how pet insurance or car insurance works would go a long ways. But even that doesn’t solve the problem entirely, as it leaves massive gaps. Second answer would be “administrative class bloat” like in all areas of the US today.
Single payer is certainly a major part of the answer, but in isolation it’d solve almost nothing and potentially make things even worse as all the inane cross-subsidy comes crashing down overnight.
Edit: the point is medical loss ratios, admin overhead, etc. is public information not hidden behind some private company firewall. The fact non profits haven’t captured 100% of the market by being crazily cheaper should be telling on its own.
That’s what I mean when I refer to facile ideological reactions. For many people, “profits” are the problem, and they don’t care that health insurers on average are less profitable than Subway franchises. It’s just the mirror image of people who say the New York MTA is a disaster because the government is running it, and don’t care that governments in other countries manage to run cost-efficient train systems.
Big players like United just shuffle money around because they own the entire vertical market. Their insurance arm is regulated so they just move the money to to their service provider arms like Optum which are unregulated with uncapped profits.
The real players are big corps like United and CVS, who control the whole vertical of provider and payer. They own the doctors, the pharmacies, and the insurance.