FIXING THE GAME

Ideas from the insurance industry and its supporters

Fixed Rule:

That is actually the defense tactic some insurance industry supporters have taken to try to downplay how much more efficient public programs like Medicare are than private insurance companies.

The Adequate Health Care Task Force (AHCTF) of Illinois have incorporated the following assumptions with regard to administrative costs into its modeling in search of the best way to cover the uninsured:

• 4% for public programs;
• 15% for large group;
• 25% for small group; and
• 30% for the individual market.

The Council for Affordable Health Insurance (CAHI), a research and advocacy association of insurance carriers active in the individual, small group, HSA and senior markets, argues that the administrative costs of private plans like are actually higher because the:

“Revenue to pay the government’s share of Part B — 75 percent of the program’s costs — comes from general revenues collected by the IRS. And the Social Security Administration collects the 25 percent of the Part B program that comes from seniors’ Social Security checks. Yet again, those “collection costs” are ignored in Medicare administrative cost estimates.”

The American Medical Association makes a similar argument:

“Tax collection to fund Medicare—this is analogous to premium collection by private insurers, but whereas premium collection expenses of private insurers are rightly counted as administrative costs, tax collection expenses incurred by employers and the Internal Revenue Service do not appear in the official Medicare or NHE accounting systems, and so are usually overlooked.”

But that is exactly the point!

Public insurance programs are able to achieve such dramatic administrative savings precisely because they can take advantage of other government systems already in place. The Social Security Administration collects the Medicare Part B premiums, while the Internal Revenue Service collects revenues for Medicare. But if even Medicare were abolished, the IRS would still be collecting taxes and the Social Security Administration would remain to send out retirement checks every month.

Each private insurer, on the other hand, has to establish all of those systems individually, which increases their costs—and ultimately ours.

Add to that the costs of marketing and profits and it becomes clear that private insurers can never match the administrative efficiencies of a public plan.

Fair Rule:

• A public alternative to insurance company coverage that is accountable to us.
• Fair regulation and oversight of insurance companies, with government as a watchdog.



Learn More

Read more in the "Fixing the Game" Archive.