Viewing entries tagged with 'Admin Costs'
FACT CHECK: What is Driving Premium Increases
Posted by The Campaign on June 22, 2010 at 11:19 AM
Fact Check: What Is Driving Premium Increases
“Insurance is still going to be expensive because healthcare is expensive.”
-- Gary Claxton, VP, Kaiser Family Foundation
(Reuters, 06/21/2010)
Underlying Medical Costs Drive Premium Increases
· Federal government data confirms that rising health care costs are driven by increased spending on hospital care, physician services, and prescription drugs. The government data[i] show:
o “Hospital spending growth is projected to have accelerated from 4.5 percent in 2008 to 5.9 percent in 2009, as spending reached $760.6 billion.”
o “Spending growth for physician and clinical services is expected to have accelerated to 6.3 percent in 2009, up from 5.0 percent in 2008, with expenditures having reached $527.6 billion.”
o “Prescription drug spending is expected to have grown 5.2 percent in 2009, an acceleration of 2.0 percentage points from 2008, and to have reached $246.3 billion.”
· Between 2000-2008, the growth in premiums tracked directly with the growth in benefits.
|
|
2000 |
2008 |
2000-2008 Growth |
|
PHI* Premiums |
454,784 |
783,157 |
72% |
|
PHI* Benefits |
402,802 |
691,179 |
72% |
Source: http://www.cms.hhs.gov/NationalHealthExpendData/downloads/tables.pdf
(see table 12)
Note: PHI = Private Health Insurance as defined by CMS
http://www.cms.hhs.gov/NationalHealthExpendData/downloads/quickref.pdf
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Health Plan Administrative Costs are Not the Cause of Premium Increases
· Health plan administrative costs increased at a slower rate than spending on prescription drugs, physicians and clinical services, hospitals, and total national health expenditures from 2000-2009.
· In 2009, the percentage of premiums that went towards administrative costs and profits declined for the sixth year in a row.
· The average yearly increase in health plan administrative costs from 2000-2009 was lower than the increase in spending on hospitals, physicians and clinical services, prescription drugs, and total national health expenditures.
Health Plan Profits Average Between 3-5 percent
“Insurance company profits in the large picture have very little to do with the overall rising cost of health care.”
-- Henry Aaron, Brookings Institution
(ABC News, 11/10/09)
· According to Yahoo! Finance’s latest analysis of quarterly financial data, the net profit margin for the entire health care sector is 15.48%. Using the same index, health plans have a 4.7% net profit margin.
o This ranks the health insurance plan industry 12th out of the 16 industries that make up Yahoo! Finance’s health care sector.
· Analyzing 13 health insurance plan companies on the Fortune 500 list, the profit margin for these 13 companies averaged 3.19 percent for 2009 -- for 2008 it was 2.3 percent for these same 13 companies.
o Six of the 13 companies actually saw a decline in their profit margin - averaging a decline of 48.7% in profit margin from 2008 to 2009.
· What experts say about health insurance plan profits:
o According to Kaiser Health News, “With the nation’s health care spending estimated at $2.5 trillion this year, even the elimination of insurers’ profits and executive compensation would lower health care spending by just 0.5 percent.”
o According to Ezra Klein of The Washington Post “The insurance industry is not a particularly profitable industry…That’s not to pretend that 3.3 percent is nothing, but it’s hard to see how that’s a primary driver of health-care spending, much less the growth in health-care spending.”
o Alwyn Cassil, Center for Studying Health System Change: “‘…this idea that (taking) this $12 billion that they have in profits … would fix our health-care spending problems is just a pipe dream.’”
For a printable version click here.
[i] Truffer, et al, Health Affairs, “Health Spending Projections Through 2019: The Recession’s Impact Continues”, Published online February 4, 2010.)
FACT CHECK: PricewaterhouseCoopers' Study on Benefits and Administrative Costs
Posted by The Campaign on November 02, 2009 at 6:11 PM
According to the U.S. Government, Underlying Medical Costs and Premiums Track Directly Together
According to government data, health insurance premiums track directly with the underlying cost of medical care. As the cost of providing medical care increases, premiums rise accordingly. Some employers and families have chosen plans with lower premiums and higher cost-sharing (deductibles, co-pays, and coinsurance) to offset the increase in premiums.
Source: PricewaterhouseCoopers, A Shared Responsibility: Advancing Toward a More Accessible, Safe, and Affordable Health Care System for America, p.7
PwC Report Is Entirely In Line With Government Data
- In 2008, PwC released "The Factors Fueling Rising Health Care Costs 2008" which analyzed 2007 National Health Expenditure (NHE) data. The findings of this report relative to administrative costs and medical benefits paid are entirely consistent with the NHE data.
- PwC reported "About 87 percent of the costs of health insurance are benefits paid out. Administrative costs and profits account for the other 13 percent."
- According to NHE data taken from Table 12 of the National Health Expenditure data the net cost of private health insurance was 12.2 percent. (NOTE: CMS defines the net cost of private health insurance as "the difference between benefits and premiums. This difference includes administrative costs, and in some cases, additions to reserves, rate credits and dividends, premium taxes, and profits or losses and, is estimated separately for various types of insurers."
MUST READ: Ezra Klein Examines Administrative Costs
Posted by The Campaign on July 07, 2009 at 8:48 PM
The Washington Post's Ezra Klein examines several recent articles in various publications comparing administrative costs between Medicare and private health plans.
To read the full article click here.
To learn more about the value of health plans download this report.
FACT CHECK: Medicare's True Administrative Costs
Posted by The Campaign on June 26, 2009 at 1:55 PM
The Heritage Foundation released a research paper comparing administrative costs between Medicare and private health plans.
Two important facts to consider:
- "...on a per-person basis Medicare's administrative costs are actually higher than those of private insurance--this despite the fact that private insurance companies do incur several categories of costs that do not apply to Medicare."
*****
- "In the years from 2000 to 2005, Medicare's administrative costs per beneficiary were consistently higher than that for private insurance, ranging from 5 to 48 percent higher, depending on the year."
This graphic illustrates the point very clearly:
