Private Profits, Cost Shifting and the Need for a Public Plan Option

[WillYourVoteBCounted]

Center for Medicare Advocacy, Inc.
Innovative Legal and Technical Consulting
Advancing fair access to Medicare and health care



Private Profits, Cost Shifting and the Need for a Public Plan Option

One common objection used to undermine a public plan option in health care reform is the idea of "cost shifting." Opponents of a public plan say that this supposed cost shifting is one of the problems with Medicare, our nation's current public health care option. They say that Medicare underpays health care providers, with the result that private insurers end up subsidizing those same health care providers because Medicare has underpaid them.<1> The argument claims that a public plan would not be "fair" to private health insurers; that private health insurers could not compete with a public plan because they would be, in effect, subsidizing the public plan, or that a public plan would result in a health care reform package that is too expensive.

The truth, however, is that a public plan is needed to provide more and better competition and lower overall health care costs. This is particularly true given the increasing consolidation of the insurance market resulting in fewer and fewer private health insurers.

Private health insurance companies are some of the most profitable corporations in the nation. According to insurance industry filings with the federal Securities and Exchange Commission, profits for the 10 largest publicly traded health insurance companies rose 428% from 2000 to 2007, from $2.4 billion to $12.9 billion. As examples, Aetna's profits increased by 1,342% during this 2000-2007 period; Wellpoint's profits increased by 1,380%<2>; Humana's by 827%; and UnitedHealth Group's by 532%<3>.

If it were true that Medicare's proven cost effectiveness is subsidized by private health insurers through cost-shifting, it certainly does not seem to be affecting the huge profitability of those private insurers. And it surely is not effecting the compensation of their chief executive officers. In fact, in 2007, the CEOs of these 10 companies collected combined compensation of $118.6 million, roughly $11.9 million each. This is 468 times more than the $25,434 that the average American earned!

...more here
http://www.medicareadvocacy.org/Reform_09_09.03.CostShiftingMyth.htm

[joeycola]

1. and single payer would save more.