I recently attended a talk by the CEO of a hospital with $2.6 billion in annual revenue. She noted that patients on Medicaid are 40 percent of the census and that Medicaid pays only 50 percent of t…
Source: True cost of Medicaid is 2X headline cost?
This is a blog post from a professor at MIT, who explains that Medicaid is basically being HALF funded by overcharging people with private insurance. Also, here again, there’s anecdotal data that this is pushing people out of the private system, and into the public one, exacerbating the problem. I believe the private insurance system is teetering on the tipping point of collapse, where even people with “good” jobs won’t be able to afford it.
Cummins just announced a layoff that — reading between the lines — I *believe* is entirely related to health-care costs. Most people have absolutely no idea what their plan actually costs. The average cost of an insurance plan for a family is something like $20,000 year, and that’s for a huge company like Cummins, who can negotiate better rates with a huge insurance company. The average employee is only covering a portion of this.
If you estimate half of Cummins employees being in the US (say 30,000), and multiply this with the bulk of their health insurance premium (say $15,000), you come up with FOUR HUNDRED AND FIFTY MILLION DOLLARS A YEAR of health care costs to the company. Half a BILLION dollars! On an EBITDA of $3B, that’s significant!
And that’s just the premiums! That’s not even counting all the administrative overhead to manage the program, or all the subsidiary efforts — like wellness programs and their new health center — designed to reduce health-care related costs, to TRY to keep the premiums manageable! And — as everyone LOVES to point out about corporate taxes — this astounding sum of money is simply passed on to customers in the cost of engines.
As more people get ejected from the private side, it drives up the costs even more, leading other companies to follow suit, and prices continuing to rise. Right now, even people with good jobs are opting for super-high-deductible plans, and, if they can’t cover a catastrophic situation, the system will try to recoup those costs from other people in the system, and this dance exacerbates the situation even further.
The ideal solution seems to be to get the government to allow me to buy health insurance like car insurance — with lots and lots of competition. Then employers can give me that $20,000, and let me go shop for it. I think the situation would sort itself out in no time. No, health care won’t suddenly be cheap, but I think the costs would get a lot more sane very quickly. At the least, I think that would end the $500 band-aids at the hospital.
But, no, the insurance companies like their profits too much to let the market reduce them, so they’re not going to let Congress do anything like this, and the system will fall over, and there won’t be any other choice left but to nationalize it all, and then Anthem suddenly becomes the largest organ of the government. And even though I think a “Pentagon of health care” is a workable backup idea, we all know that won’t happen either.