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Health Care Insurance Myths

Posted By Conn Carroll On May 2, 2008 @ 11:59 am In Obamacare | Comments Disabled

Health care insurance companies are easy targets for so called health care experts [1] and liberal politicians pushing socialized medicine [2]. Problem is, most of their populist rhetoric is not based in fact. Mark Gimein exposes three of the most pernicious health care insurance company myths in Slate [3] including:

  • Myth No. 1: Insurers’ profits are responsible for our health care costs.
    The problem here is that between them the five biggest health insurers—UnitedHealthCare, Wellpoint, Aetna, Humana, and Cigna—which cover 105 million members, last year had profits between them of $11.8 billion. This is not a small number; these are very profitable companies. But total U.S. health care costs last year were in the area of $2.3 trillion.
    So, with a membership that included a little more than half of the Americans covered by private insurance, these five insurers’ profits came to 0.5 percent of total health care costs.
  • Myth No. 2: Evidence from Medicare shows that a government program can provide the same services for less than the insurers.
    A common argument raised in support of a national “single payer” health insurance system is the experience of Medicare Advantage, a program that gives seniors the option of replacing traditional Medicare with private insurers’ HMO or “preferred provider” network plans. Nine million of the 44 million people Medicare covers have signed up. A well-publicized report by the Commonwealth Fund calculated the cost of these plans at 12 percent more than traditional Medicare.

    These accurate numbers miss the fact that Medicare Advantage’s design virtually guarantees that it will be more expensive than traditional Medicare. The reason for this, however, is not the excessive cost of having private insurers administer the plans. It’s the cost of inducements that government has offered seniors to join them.
  • Myth No. 3: The concentration of power in a few large insurers raises health care costs.
    Big insurance mergers have been vigorously opposed by the politicians in California who fought against the huge Anthem-Wellpoint merger, and in New York.

    We should be wary of mergers driving up the premiums that insurers can charge. But that fear is not the real reason why the American Medical Association has vociferously lobbied to put the brakes on mergers. That reason is the other, bigger effect of consolidation: It lowers the reimbursement rates that insurers give to doctors and hospitals. The hospital you go to and the doctor you see face to face might be more sympathetic than the health insurers, but they are a much larger part of the health care cost equation.

Article printed from The Foundry: Conservative Policy News from The Heritage Foundation: http://blog.heritage.org

URL to article: http://blog.heritage.org/2008/05/02/health-care-insurance-myths/

URLs in this post:

[1] so called health care experts: http://www.prospect.org/cs/blogs/ezraklein_archive?month=03&year=2008&base_name=how_insurance_doesnt_work#105278

[2] liberal politicians pushing socialized medicine: http://www.barackobama.com/issues/healthcare/

[3] Slate: http://www.slate.com/id/2190273/

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