Hillary's False Claims
By MERRILL MATTHEWS
December 1, 2007; Page A12
Earlier this week, campaigning in New Hampshire, presidential candidate Hillary Clinton asserted that health insurance companies spend $50 billion to avoid paying claims. "This is all part of their business model," she was quoted as saying. "This is how they make money, but it's so bad for the rest of us. I say to them, use the $50 billion to actually take care of people."
Statements like these raise real questions about Sen. Clinton's grasp of the facts. But they are also part of a broader effort by the left to disparage the private-sector health insurance industry as wasteful and inefficient, meanwhile claiming that there would be great savings if the government covered more people.
The health insurance industry does indeed monitor claims as they come in -- and pays the vast majority without hesitation. There is a cost to that monitoring. But there is also a cost to not monitoring those claims, and it is significantly higher.
Currently, the private sector health insurance industry spends about $600 billion a year paying traditional health care claims for those under age 65. According to a major actuarial firm, the industry spends roughly $30 billion a year adjudicating those claims -- not "denying" them, but evaluating and processing them. There doesn't seem to be a solid number for the amount of claims actually denied, but several health actuaries estimate that amount to be around $3 billion.
Regardless of Mrs. Clinton's insinuations, however, the money spent evaluating claims is not wasted, and would not be better spent "taking care of people."
Duplicate claims, for example, are often filed. Then, too, people may file a claim for a gym membership in order to lose weight, or for over-the-counter vitamins and other drugs. While these services and products may be helpful, they aren't necessarily covered by one's health-care policy. Should insurers just pay them anyway?
Insurance is a pass-through business; insurers have to collect enough in premiums to pay claims. If they pay additional and unnecessary claims, premiums will go up -- and Mrs. Clinton would be complaining, even more than she already is, about the high cost of health insurance.
Then there's fraud. Last summer, the Centers for Medicare and Medicaid Services (CMS), the agency that administers the country's two largest insurance programs, announced a pilot program to investigate fraud in the medical device industry. Law enforcement officials, for example, visited 1,600 businesses in Miami that were billing Medicare for services. One-third of them didn't even exist, yet they billed Medicare for $237 million in the previous year. The government has now charged 120 people in 74 cases, and Medicare filings in the area are down by $1.4 billion from last year.
This monitoring costs taxpayers money. Is it wasted? Does Mrs. Clinton think that private-sector insurers aren't the target of fraud? Part of the cost of claims adjudication is for the detection of fraud. Does Mrs. Clinton believe insurers should instead just pay?
Quite apart from fraud, health-care providers also make mistakes in treating and billing patients. Insurers monitor claims to make sure that providers (physicians, hospitals and clinics, pharmacies, etc.) charge according to agreed-upon pricing contracts and services are appropriate for the medical condition. Insurers try to catch those errors early; this too is part of their "business model."
To be sure, claims adjudication can turn adversarial, and insurers themselves surely make mistakes. No one denies the current process needs to be improved. Mrs. Clinton thinks the solution is more government regulation. But regulation is one of the primary causes of high health-insurance costs. States impose more than 1,900 mandates (requirements that insurers cover, or offer to cover, specified providers and benefits). Mandates raise the cost of coverage. Some states micromanage who insurers have to accept, and impose price controls on the policies. All of those states have significantly higher premiums than the less-regulated states.
Actually, the best way to get past third-party claims adjudication is to move toward a system where patients, in consultation with physicians, do most of the monitoring themselves -- at least for smaller and routine expenditures. That is what does happen when people use health insurance only for the major expenses, paying smaller bills out of a tax-free account, such as a Health Savings Account (HSA) or Health Reimbursement Arrangement (HRA).
There are about 4.5 million Americans covered by HSAs and high-deductible health plans today. But we still have a long way to go before we hit a critical mass where patients -- not insurers -- are monitoring their own health care dollars and demanding value for their money.
Mr. Matthews is executive director for the Council for Affordable Health Insurance and a resident scholar for the Institute for Policy Innovation. |
