Saving money...for shareholders

by: Jay Stevens

Mon Jun 15, 2009 at 14:59:51 PM MST

Advocates claim that a public plan would achieve significant savings in administrative costs. Among other omissions, they ignore that a significant proportion of private insurers' expenses are incurred for creating and maintaining provider networks, and for monitoring payments to reduce waste and fraud. Private health plans have a strong incentive to spend a dollar as long as the expected savings in payments is at least a dollar. The resulting expenditures increase reported administrative costs, but they save money overall. A public plan will not have comparable incentives.

All you need to know about this editorial is that it's from a shareholder's point of view. Sure, the massive administrative expenditures of private insurers repay the companies' bottom line many times over...but that's because the bureaucracy is intended to discourage policyholders from filing claims, and to find ways to refuse claims. The bureaucracy adds to insurers' bottom line...but it costs us who pay more and more out of pocket, not to mention health-care providers, who need to add staff and other resources to deal with the administrative needs of private insurers.

Oh yeah, and it's bad for our health.

Only the WSJ editorial page could think that the health-care crisis is about insurance profits not being high enough...