Comparing Government and Private Health Insurance

If you listen to a liberal when it comes to health insurance, they’ll tell you that private health insurance rates are spinning rapidly out of control.  This is the argument they use to justify something like universal health care.

So, I decided to put this to the test.

This all came about when I had an argument with a person I define as a “stealth liberal.”  A stealth liberal is a person who tries to mask their overtly liberal and/or socialist beliefs in populist rhetoric, or couched with approachable phrases that make them seem even-minded.  Some may even have the audacity to call themselves “Conservatives.”  They’re not.  They’re liberals.  The particular stealth liberal I’m referring to stated that Medicaid was a “well run program.”

So, I did a little fact-checking on my own.  You should treat liberals very much in the same way Reagan treated the Soviets: trust but verify.  This shouldn’t be surprising to anyone.  The only difference between an American liberal and a member of the USSR Politburo is that the American Liberal speaks fluent English.  Well, fluent enough.

Medicare is a publicly-funded health insurance program instituted by the federal government, targeted specifically for the elderly and disabled.  This does NOT include SCHIP, for which we now tax tobacco.  Yes, guaranteeing health coverage of low income children by hoping that American adults participate in unhealthy habits.  There’s a plan for ya…

Anyways, the best numbers I could find about Medicare came from 2006.  In 2006, Medicaid had something like 43.1 million enrollees.  Now, as far as I can tell, that means 43.1 million people are covered by Medicaid, which differs from “subscribers”, who are a glorified “head of household” when it comes to insurance billing.  Now, on the Health and Human Services website, I managed to locate total federal spending on Medicare, which  comes out to something like $402,296,000,000.00.  Doing some simple math:

$402,296,000,000.00 / 43,100,000 enrollees = $9,334.01 per enrollee per year.

So, I do a little checking on the Michigan Blue Cross Blue Shield, and selected an individual insurance plan with a $1,500 deductible, a $4000.00 out-of-pocket annual maximum (I used the in-network numbers as a vast majority of health care providers in Michigan are in-network).  The Monthly payment, according to their website, was $188.24.  So, some more simple math:

($188.24 x 12) + $4,000.00 = $6,258.88 per person, per year.

Dental coverage will cost you more.  Maternity coverage jacks the monthly fee up to $437.98.  if you go with a lower deductible ($2,500.00), your costs STILL come in under what the federal government pays for Medicare.  And, I might point out, that I’m using 2009 Blue Cross Blue Shield numbers to compare to 2006 Medicare numbers.  Also consider that the number I cited is actually lower when spread across the population of BCBS subscribers.  That’s because not all of the people will pay $4,000.00 out of their pocket each and every year for health services – only a portion will.  This then drops the average dollars spent per year significantly.

Even if you look at Medicare spending per enrollee in 2004,  ($7,439.00 nationwide, and $7,860.00 in Michigan) you’ll find that that even using “cooked” numbers for Medicare spending, how much is actually spent on government-run health insurance tops what’s spent in the private sector.

Medicaid allegedly does better with the same numbers for 2006, coming in around $5,811.00 per enrollee (using 58,714,800 as the number of enrollees according to the Kaiser Family foundation).  Again, this is comparing 2006 group numbers to 2009 BCBS individual rate numbers, but there is another problem here.  Medicaid is a combined state and federal program.  The federal government only pays out so much per state, and the state has to make up the rest of the budget through its own tax revenue schemes; this also includes SCHIP.  So, what is reported in the links above may be off a tad.

Of course, the enrollment are slightly suspect, as the site that I used to check the data provides the following caveat when it comes to their numbers:

Enrollees are presumed to be unduplicated (each person is only counted once).

Which has been a slight problem with many federal programs: fraud.  Medicare, is rife with fraud, which has been reported on over the years.  Here is a more recent article from the Las Vegas Sun concerning the issue:

To dig up more Medicare fraud…

All you have to do is look, it seems — which is why watchdogs think the government should do more.

By Marshall Allen
Wed, Apr 15, 2009

The numbers don’t lie: The federal government does not put its money where its mouth is in terms of fighting Medicare fraud.

Everyone talks about the importance of policing Medicare fraud, but consider the following annual figures:

• Medicare billing totals more than $400 billion, and that’s mostly taxpayer money.

• Kim Brandt, who leads Medicare’s anti-fraud efforts, said some estimate the agency loses up to $80 billion to fraud, though she thinks that number sounds too high. (The truth is, no one is sure. All they know is that the more they look the more they find, Brandt said.)

• In 2008 Medicare recovered about $20.4 billion related to fraud.

• Medicare spends only about $120 million on fraud investigation.

If the problem is so large, and if every dollar spent on enforcement is multiplied exponentially in the form of recovered taxpayer money, why doesn’t Medicare spend more money to ferret out fraud?

“That would be a call for the administration and Congress to make,” Brandt said. “From our perspective we always try and do the best we can. There’s always going to be more fraud than the resources we have to meet it.”

Medicare spends most of its fraud-fighting budget on contractors who comb through billing data, searching for aberrations. They search to see whether providers or geographic areas show an unusually high number of claims for electronic wheelchairs or diabetic shoe inserts, for instance. They check to see whether physicians’ claims for patient visits are dramatically more than the average.

Medicare flags unusual activity but the question of whether the billings are fraudulent is left for other agencies to determine, Brandt said.

Medicare also spends $2 million annually to maintain offices in Los Angeles, Miami and New York, which are considered the hotbeds of Medicare fraud. But the locations are staffed by only about 20 investigators combined. A few other investigators work in Chicago and Dallas.

The dearth of Medicare ground troops is one of the biggest critiques of Medicare made by Pat Burns, spokesman for the advocacy group Taxpayers Against Fraud.

“If you go through paperwork you won’t find fraud,” Burns said. “The paperwork is there to support the fraud, not illuminate it. You find fraud by ground-truthing — go to places and find out what’s going on.”

Burns said the best way to root out fraud is to recruit whistleblowers and observe what’s happening in the community.

The Sun recently reported that two Las Vegas infectious disease specialists are being accused of billing Medicare for examinations they did not provide. Burns said documenting such allegations is easy: Follow the doctor for 25 minutes. Any fraud “would be evident very quickly. Or talk to the nurses.”

A Medicare audit revealed that one of the specialists, Dr. Dhiresh Joshi, billed for more than 80 Medicare patients in one day, when a typical specialist can see about 30. Medicare made Joshi repay the money for that day, but took no additional action.

Burns compared the audit’s discovery to finding a rat — if one is in sight, hundreds more are in hiding. Auditors should have pulled Joshi’s bills over a period of time to see whether there’s a pattern of wrongful billing, he said. But there’s little incentive for them to be that aggressive, he said.

Medicare’s fraud enforcement efforts could be far-reaching, because the people cheating the government could be ripping off private insurance companies, too. Private insurers estimate they lose $68 billion to $226 billion to bogus claims — and that’s money passed on to consumers in the form of higher premiums and health care costs.

Of course, Medicaid isn’t exactly a well-oiled machine either.  It too has problems with fraud, as the following article details:

Medicaid fraud victimizes public, state, experts say

Posted by DIANE IVEY
Capital News Service
March 21, 2008

LANSING– When a low-income Detroit man died from lung cancer in February, his family and friends were caught by surprise.

The Medicaid recipient had been laid off from work, and could afford to go only to local clinics, where he got a clean bill of health from unqualified doctors, according to Maureen Taylor, state chair of the Michigan Welfare Rights Organization.

It wasn’t until he arrived at a hospital emergency room that cancer was discovered. And at that point, it was too late.

Taylor said she hears of similar cases on a daily basis.

Doctors who lie about their credentials, clinics that don’t do necessary medical screenings and health care companies that sweep their low-income recipients under the rug are all part of the increasing problem of Medicaid fraud, Taylor said.
She’s fighting for universal health care in a system that, she claims, works against her cause.

“Medicaid fraud primarily exists among the providers,” Taylor said. “The reason fraud continues is because the people who are making the decisions are part of the fraud themselves.”

But James McCurtis of the Department of Community Health said the growing problem of Medicaid fraud can’t be blamed solely on unethical health care providers.

“Medicaid is being taken advantage of by everyone, no matter who they’re affiliated with,” McCurtis said. “I can’t say it’s just individuals or companies who are doing it. It’s subjective.”

Medicaid fraud has been a problem since the 1970s, according to a study by the Attorney General’s Medicaid Fraud Control Unit. But a new bill would inflict stricter penalties on both health care providers and patients who make false claims. Individuals or groups could be fined up to $10,000 for each instance of falsifying records.

Medicaid fraud is hard to pinpoint, McCurtis said, because there are many situations where fraud could occur.

For example, according to the unit and McCurtis, individuals can commit fraud by changing information about their prescriptions, medical records or referral forms. They could let someone else use their card to get treatment or use covered transportation to go somewhere other than the doctor’s office.

“When people abuse the system, it just makes the problem worse,” McCurtis said. “I don’t know why they do it, but every time they do, it takes advantage of a system that’s out there to help people. Vulnerable citizens need that attention, and fraud makes it harder for everyone.”

Fraud by providers includes lying about credentials like college degrees, not ordering tests or other services that are medically necessary and forging signatures on contracts.

Taylor said, “The ironic thing is that these providers try to involve the patient and make them seem like part of the problem.

“They want to act like the victim was responsible for the fraud. It’s easy for hospitals to bill patients for services they didn’t use because the Medicaid bills are no longer item-by-item. There are too many doctors who aren’t eligible to see people,” she said.

Health care fraud is a felony punishable by up to four years in prison and a $50,000 fine, according to Blue Cross Blue Shield’s fraud investigation study. Blue Cross Blue Shield has opened 32,000 cases involving both corporations and individuals and has recovered $249 million in civil cases, the health insurer reported.

McCurtis said, “We see all kinds of things. We see people taking advantage of the system, as well as medical providers and physicians. There’s no common denominator, but it’s all fraud.”

Rep. Marc Corriveau, D- Northville, said he sponsored bill because it would give money back to the state.

The bill would entitle Michigan to a federal grant that would give the state 10 percent of recovered money from Medicaid fraud.

In February, the Attorney General won an $8 million Medicaid fraud settlement, and the state would have received $800,000 if the proposed law had been in place.

“Michigan is facing tough times, so that is money we could certainly use,” Corriveau said.

Corriveau added that he believes both companies and individuals are equally responsible for Medicaid fraud.

“When the state did the $8 million recovery, that’s clearly from a corporation,” Corriveau said. “Only a bigger entity can take that much. Corporations take advantage, but it goes all the way down to the ground level on an individual basis. Either way, when the government gets ripped off, everyone suffers.”

Taylor said she will continue to fight for a fraud-proof system for the poor.

“Medicaid isn’t the best,” she said. “But it’s all we have right now.”

Note that Blue Cross and Blue Shield – a semi-private insurance company – recovered HUGE losses when dealing with fraud.  That’s because they’re not backed by tax dollars, and have to at least break-even to survive.  This, of course, differs from federally-funded programs like Medicare and Medicaid which rely on endless streams of tax dollars that flow from an ever-expanding national debt.

But there is more.  How is it that Medicaid is able to contain costs, and bring the rates below Blue Cross and Blue Shield?  Putting aside the fact that Medicaid deals mainly with a younger generation – who are more apt to be healthy than those on Medicare and Blue Cross Blue Shield – they also reduce spending by cutting services and cutting the amount paid to health care providers.  The result of all of this?  In Michigan the number of doctors who would see Medicaid patients went from 88% in 1999 to about 64% in 2005.  The reason?

For every chest X-ray Dr. Mukkamala performs, for instance, Medicaid pays him $20. Commercial insurers such as Blue Cross pay about $33 and Medicare pays $30. But with technicians, film and other equipment, his costs are about $29 per X-ray, he estimates. Medicaid patients he sees at Hurley Medical Center in Flint make up 28% of his work there.

Funny – Canada does the same thing.  Canadian citizens regularly go to the United States to get important or critical medical services.  In many cases, they have no other choice.

It’s fairly clear to me, when looking at the numbers, that government-funded health insurance is a total failure when it comes to keeping costs in line.

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