Are you on Medicare? You’re in good company: 60 million Americans and 1 million Minnesotans are, too. The Medicare annual open enrollment period just ended in December. In those eight weeks, how much glossy mail did you receive from private insurers?
Original Medicare (the federal “Big Pool” of Part A and Part B) simply sends your card when you are first eligible, an annual guide called “Medicare and You” and a quarterly statement of claims showing how your card was used. That’s it. As a financing model, Medicare is very efficient. But, since its 1965 creation, its coverage has big holes and no shortage of private insurer options to fill them. That’s where the confusion lies.
It all adds up. What entered your mailbox this fall as Medicare “coverage choices” was 99% waste: the paper, trees, printing and mailing costs. Multiply by a million people in Minnesota. Who pays for that? We all carry that burden, through higher premiums passed to us as an administrative overhead expense. Ditto all the prime-time TV advertising and the armies of people writing the fine print about what’s excluded from your coverage, multiplied by how many insurance plans. So does the burden of stress and worry about choosing incorrectly.
Unnecessary complexity is expensive. Simplicity is cheap. Original Medicare’s administrative overhead is less than 2% of its budget. No private insurer comes close to that. The difference between the public and private cost is arguably wasted money, an inefficiency that could cover dental care for millions, for instance. Instead it is spent on overhead that benefits no one’s health.
Another complexity cost happens at the health care provider level, as each must deal with the demands of so many differing payers (or they hire staff to do so). Original Medicare has its set of payment rules, but so do all other private insurers; each has differing pre-authorizations for procedures, formularies for prescriptions, networks of providers who may need referrals, etc. Time is money. For a primary care provider, the burden of dealing with complexity of payment means less time hands-on with you, the patient needing care and attention.
Research shows that the “gap in health administrative spending between the United States and Canada is large and widening, and it reflects the inefficiencies of the U.S. private insurance-based, multi-payer system. The prices that U.S. medical providers charge incorporate a hidden surcharge to cover their costly administrative burden.”
That is the conclusion of David Himmelstein, Terry Campbell and Steffie Woolhandler in “Health Care Administrative Costs in the U.S. and Canada, 2017,” Annals of Internal Medicine, published Jan. 7, 2020.
Imagination time: Can you envision having a choice of trading in the junk mail and getting a free dental exam/cleaning? Or perhaps a free 45-minute-long, in-depth chat with your favorite primary health care provider? That and more could happen, if we as a nation choose to rethink the multi-payer financing model and use the savings to pay for real health care, not waste.
Lisa Krahn is executive director of the Seven County Senior Federation. She writes from Mora, Minn.