What Do Private Insurers Do With Your Money?

Today, CNBC featured a debate between Kerry Weems, former acting director of CMS and former U.S. assistant secretary of health, and CAPAF Senior Fellow Judy Feder about the role of administrative costs in health care.

Weems, who wrote about the subject in yesterday’s Wall Street Journal, reiterated his argument that “the administrative expenses of private insurance plans represent money well spent for their members”:

Watch it:

Weems’ claims are specious at best. The rapid increase in premiums and corresponding spike in insurer profits — between 1999 and 2008, premiums have increased 117 percent for families, while the profits of the top 10 insurance companies increased by approximately 1000% — diminishes any notion that for-profit insurance companies are using their administrative dollars to negotiate for lower prices. As Feder pointed out, “the insurance industry has gotten more and more concentrated, they’re not competing. In almost every market one or a couple of insurance plans dominate and rather than making health care work for us and getting consumers good deals, what they’re doing is taking higher prices charged by hospitals, passing that onto consumers and even above that, increasing their profits.”

A more thorough debunk is available here, but one point bears mentioning. Weems claimed that Medicare does little to stamp out fraud. But as acting director of CMS, Weems himself implemented new anti-fraud measures, noting in one speech that “over the years, we’ve been able to save beneficiaries and taxpayers billions of dollars. However, we need to do more. Even one dollar paid to fraud is too much. CMS is working overtime to make sure that fraudsters will not find an easy mark in Medicare.”