My new book
The Great American Healthcare Scam: How Kickbacks, Collusion and Propaganda have Exploded Healthcare Costs in the United States
The following information is based primarily on historical data provided by the Centers for Medicare and Medicaid Services (CMS) and the financial disclosures of the seven largest for-profit health insurance companies.
Summary of Main Points
1 . Expenditures by all types of health insurance including Medicare, Medicaid and private health insurance have risen dramatically since the year 2000.
2. Patient out-of-pocket healthcare costs have also gone up during that time, but not by nearly as much.
3. Since 2007, much of the increase in Medicare and Medicaid expenditures have been due to the increasing number of Medicare and Medicaid recipients.
4. The increase in private health insurance expenditures are primarily due to increasing costs per recipient since the number of people covered by private health insurance in the U.S. has been rather stable for more than a decade.
5. Since 2003 private health insurance companies have been aggressively selling policies to Medicare and Medicaid recipients.
6. Private health insurance companies are covering fewer non-Medicare or Medicaid recipients each year since more employers each year are opting to self-insure by covering all, or almost all, employee healthcare expenses themselves.
7. More than 60% of all personal healthcare expenditures in the U.S. are directed by private health insurance companies in some way.
According to CMS, a total of $3.492 trillion was spent on healthcare in the United States in 2017. Of that, $2.961 trillion was spent on personal healthcare (directly on patient care) and the remaining $531 billion was spent on research, administrative costs and government agencies like the NIH and the CDC.
Personal Healthcare Expenditures
In 2017, about 88% of personal healthcare expenditures in the U.S. were paid by some form of insurance including Medicare, Medicaid and private health insurance. The remaining 12% was paid directly by patients as out-of-pocket costs. Figure 1 and 2 show that insurance expenditures as a proportion of total healthcare expenditures have risen significantly in recent years.
Figure 1: Total healthcare expenditures by all forms of insurance, including Medicare, Medicaid and private insurance have increased considerably in the U.S. since the year 2000. Out-of-pocket healthcare expenses by patients have also increased, though not by nearly as much.
Figure 2: Total health insurance expenditures by all payers went up significantly faster than out-of-pocket healthcare costs for patients in the U.S. between 2007 and 2017.
Figures 3 and 4 show that expenditures by Medicare, Medicaid and private health insurance have all gone up dramatically since the year 2000 and, proportionally, Medicare and Medicaid expenditures have risen more quickly than those of private health insurance companies.
Figure 3: Total expenditures for all forms of health insurance including Medicare, Medicaid and private health insurance have increased dramatically in the U.S. since the year 2000.
Figure 4: Total healthcare expenditures for Medicare and Medicaid actually increased more rapidly between 2007 and 2017 than total expenditures for private health insurance in the U.S. during those years.
Figure 5: A major reason total expenditures by Medicare and Medicaid increased more rapidly than total expenditures by private health insurance is that the number of Medicare and Medicaid recipients have gone up far faster than private health insurance recipients in the U.S. since the year 2000.
Figure 6: Between 2007 and 2017, the total number of people in the U.S. covered by private health insurance actually decreased slightly whereas the number of Medicare and Medicaid recipients increased substantially during that time.
Cost Per Person
Figures 7 and 8 show that the cost of taking care of each Medicare or Medicaid recipient has gone up far less quickly in recent years than the cost of taking care of the privately insured.
Figure 7: Healthcare expenditures per enrollee have actually increased more slowly for Medicare and Medicaid recipients than for those covered by private health insurance in the U.S.
Figure 8: Between 2007 and 2017, healthcare expenditures per person increased more than twice as quickly for those covered by private insurance as they did for Medicare recipients. Per person private health insurance expenditures increased at more than three times the rate as for Medicaid recipients.
Private Public Health Insurance
Since 2003, private health insurance companies have been steering away from selling commercial health insurance and, instead focused on signing up as many Medicare and Medicaid recipients as they possibly can. The four main types of policies private insurance companies sell to Medicare and Medicaid recipients are:
1. Medicare Advantage- where a Medicare beneficiary signs over their Medicare benefits to a private insurance company to be managed by them.
2. Medicare Part D- which is a prescription drug program for Medicare beneficiaries mediated by the private insurance companies but paid for, largely, by the Federal Government.
3. Medicare Supplemental policies which are private policies purchased by traditional Medicare recipients to cover Medicare deductibles and co-insurance payments.
4. Medicaid Managed Care policies in which a Medicaid recipient has their benefits managed by a private insurance company.
Meanwhile, private insurance companies have increasingly shifted the burden of commercial healthcare costs to employers by convincing them to self-insure and use the insurance companies for administrative services only. These administrative service only contracts (ASCs or ASOs) ensure that private insurance companies have very little real exposure to the actual healthcare costs of most privately insured people in the U.S.
Figure 9: Since 2003, private health insurance companies have been aggressively selling private policies to Medicare and Medicaid recipients.
Figure 10: Since 2005, overall health insurance coverage for people not receiving Medicare or Medicaid in the U.S. has changed very little. What’s more, far fewer people in the U.S. who have private health insurance are directly covered by their health insurance companies for healthcare costs.
Source of Funds
Figure 11 shows the breakdown of the proportion of total personal healthcare expenditures in the U.S. paid in 2017 by Medicare, Medicaid, private insurance, other types of insurance and patient out-of-pocket. A few things should be noted about figure 11, though:
1. The majority of “private insurance” expenditures actually come from employers who self-insure and simply use health insurance companies for administrative services.
3. The vast majority of out-of-pocket healthcare expenses are determined by health insurance companies in the form of co-pays, deductibles, out-of-network and denied claim expenses.
With that in mind, figure 12 gives a much clearer picture of how much total control private health insurance companies have over all of the money spent in the U.S. on healthcare each year.
Figure 11: Personal healthcare expenditures by original source.
Figure 12: Personal healthcare expenditures by final source which takes into account the 44% of Medicare’s expenditures and 40% of Medicaid’s expenditures that go through private insurance companies as well as private insurance influence in determining most out-of-pocket healthcare expenses in the U.S.