Major health care proposals ignore the ‘Big Leak,’ says health insurance expert

“Universal health care is getting the attention it deserves, but unfortunately the proposals receiving the most attention ignore the ‘Big Leak,'” which is the enormous non-benefit costs incurred by health care providers who must match their billions of billings with thousands of differing private health care plans,” says Merton C. Bernstein, a founding member of the National Academy of Social Insurance and the Coles Professor of Law Emeritus at Washington University in St. Louis. “Putting everyone under the Medicare umbrella would eliminate that leak,” he says.

“Medicare’s single-payer system would reduce non-benefit spending by doctors, hospitals, clinics, laboratories and health care insurers by about $300 billion a year, providing funds to insure everyone without additional outlays.”

Bernstein is available to discuss current universal health care proposals as well as the Medicare-for-all option. His current comments on health insurance follow:

Health insurance companies, unlike Medicare, deal with vast administrative costs:

“Hundreds of private insurers offer innumerable differing plans,” Bernstein says.

Merton Bernstein
Merton Bernstein

“Those differences usually reflect marketing considerations rather than medical goals. In contrast, Medicare has one set of charges in a region. That helps explain Medicare’s low administrative costs — about 2 percent of benefit outlays. In addition, Medicare does not have the marketing and advertising costs that add significantly to private insurer outlays. In dealing with Medicare, medical care providers need master only one set of rules and schedule of charges — a clear gain in efficiency.”

Giving patients a choice:

“Some contend that their proposals offer patients a choice,” he says. “To start, patients don’t choose their coverage, their employers do. Even when there are several plans on offer, the employer chooses which ones to include. Further, the employer chooses who administers the plans. That’s where much of insurance competition occurs — who can offer the lowest cost to the employer/chooser; that turns on who can produce lowest benefit payout.

“The choice patients cherish most is who will be their doctor and which hospital will provide care. Many private insurance arrangements limit those choices. Under Medicare, the patient chooses.”

Proposed plans rely on tax breaks and other subsidies:

“The major proposals depend upon tax breaks and other subsidies to make coverage appear more affordable,” Bernstein says. “This merely shifts costs to other plan participants or taxpayers. This increase total costs and thereby make the programs themselves less affordable.”