The State of Our Healthcare Industry is Weak

| Tue Jan. 23, 2007 9:44 PM EST

Bush said tonight that when it comes to our health care, private insurance is the way to go. As you take that in, consider this: Americans spend $5,000 more per capita on health care, fully 50% more than any other country.

What's Bush's solution? According to the Washington Post, Bush wants to redirect federal money away from hospitals that serve the poor and uninsured, and away from Medicare and Medicaid. Redirect it where, you ask? To private insurance companies, of course.

Now consider this: Private insurers take a dollar for every five dollars in the health care industry. It's a super-duper rip-off. How? Well, have a look at the "medical loss ratios" of major insurers—that is, how much insurers pay in doctors bills, hospital bills, tests and drugs, divided by their revenue in insurance premiums.

  • 76.9% - Aetna
  • 82.3% - Cigna
  • 83.9% - Health Net
  • 83.2% - Humana
  • 78.6% - UnitedHealth Group
  • 80.6% - WellPoint

Get it? You pay Aetna $100 a month? They spend $76.90 percent on your health and $23.10 on corporate overhead, administration, and their own healthy profit margin. That list was compiled by Jonathan G. Bethely of American Medical News, but it's quite easy to find in insurers' SEC 10 filings, though insurers prefer to call it "benefit cost ratio" and "benefit expense ratio." (Whatever they call it, it's no perfect measure, argues James Robinson, a UC Berkeley professor of public health. But it's what we have to work with.)

And it's not all. How many staff at doctors' offices and hospitals devote their time to billing, negotiating, and haggling with insurance companies? In order to get private insurance companies to pay up, doctors' offices spend 14 percent on "billing and insurance-related functions" and hospitals spend another 7 to 11 percent, according to the journal Health Affairs.

Add that up and you see that one in three dollars in the healthcare industry is spent on neither health nor care. That's how efficient the market is! The state proposals to force people to buy private insurance — and Bush's proposal tonight to divert money from government caregivers to private insurance — just send more money down the drain. The answer is single-payer health care. But in the meantime we have patchwork plans like Arnold's, though at least his would cut what insurance companies skim down to 15 percent.

— April Rabkin

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