“Look at the business model of an insurance company. It’s to bring in as many dollars as they can in premiums and to pay out as few dollars as possible for your health care. That leaves families with rising premiums, rising co-pays, and fighting with insurance companies to try to get the health care that their doctors say that they and their children need.” Elizabeth Warren, quoted by Jack Cassidy/New Yorker in The First Democratic Debate Shuns Donald Trump in Favor of Substance June 27, 2019


One: Health insurers are not driving US healthcare spending. Over the last several years, insurers’ profit margins have been relatively modest, ranging from 3-5%, on average. And thanks to the profit motive, private insurers have done a better job of reining in medical fraud than Medicare, saving much more money than what’s “wasted” in profit. (For the record, employer tax incentives, patient demand, over-treatment, over-testing, lack of pricing transparency, hospital market clout, fraud, and political cowardice are what’s driving US healthcare spending).

Two: Almost all developed countries with universal healthcare use gatekeeping systems to control accessed to specialists.

Three: All developed countries with universal healthcare require residents require some out-of-pocket spending. As a percentage of overall healthcare spending, US beneficiaries actually pay less out-of-pocket than average compared to other developed countries with universal healthcare.


_2019 Cross-Country Healthcare Spending+OOP+Gatekeeping.png

According to a study by the National Association of Insurance Commissioners, the private insurance industry made $23.4 billion in profits in 2018 and $16.1 billion in 2017. Sounds like a lot, but the companies' profit margins were just 3.3% in 2018 and 2.4% in 2017.

According to the US Government Accountability Office, “Medicare improper payments were estimated to be about $52 billion in fiscal year 2017”. In other words, in 2017 Medicare’s fraud losses were three times higher than the profits of private insurers.

Links and References:

Accident & Health Insurance  Pre-Tax Profit Margins:https://csimarket.com/Industry/industry_Profitability_Ratios.php?ind=702

Behind The Headlines: Private Healthcare Plans Pay Hospitals More Than Twice The Medicare Rate. Exploring the Problem Space, May 27, 2018

Centers for Medicare & Medicaid Services (CMS) National Health Expenditure Accounts https://www.cms.gov/research-statistics-data-and-systems/statistics-trends-and-reports/nationalhealthexpenddata/nationalhealthaccountshistorical.html

GAO-18-88 and GAO-18-88 Reports on Medicare and Medicaid Fraud https://www.gao.gov/assets/690/688748.pdf    https://www.gao.gov/assets/700/693156.pdf 

IOM Report Focuses On $750 Billion In Inefficient Health Care Spending https://khn.org/news/iom-report-focuses-on-750-billion-in-inefficient-health-care-spending/

How Employer-Sponsored Insurance Drives Up Health Costs by Avik Roy/Forbes Lyu et al. (2017) Overtreatment in the United States https://doi.org/10.1371/journal.pone.0181970

NHE Fact Sheet 2017 https://www.cms.gov/research-statistics-data-and-systems/statistics-trends-and-reports/nationalhealthexpenddata/nhe-fact-sheet.html