Newsweek blames competition for the problems in health care, but misses the big cost government imposes on hospitals, private insurers, and the self-insured.
In an otherwise helpful story by Jerry Adler and Jeneen Interlandi about what sets the Cleveland Clinic apart from other hospitals, the authors and copy-editors screw up the conclusions.
The pull-quote on the final page says, “If you’re looking for ‘waste’ in the health-care system, a good place to start is the cobbled-together system of private insurers.” As proof, they offer this example of costs:
Thousands of times a day, clerks pick up the phone and get put on hold like anyone else who calls an insurance company. Industry estimates put the average cost of handling a phone call at $3, to each party. This is the hidden cost of competition; whatever else a government-run health-insurance system would accomplish, it would impose a uniform billing system on the current one, in which clinic’s 2,000 doctors require 1,400 clerks to handle their billing.
The authors also quote the hospital’s chief of cardiovascular medicine who says, “The overhead for private insurers is 29 percent. For Medicare, it’s 3 percent. If what’s left over is what you can spend on patients, I think 97 percent is a much better deal.” But he and they ignore the differences in what Medicare and the private insurers pay for care, which the author’s explicitly acknowledge elsewhere:
Like most hospitals, the clinic counts on privately insured patients, who generally are profitable, to balance those on Medicare, which pays about 6 percent below cost, and Medicaid, whose payments average about 14 percent below. Unlike most hospitals, though, its reputation assures it a steady stream of wealthy patients, including foreigners, whose bills do not have to pass the needle’s eye of an insurance-company claims examiner.
Got that? Medicare pays 6 percent below cost and Medicaid pays 14 percent below cost, using 97 percent of their money on care (excluding the cost of tax collection and fraud).
Private insurers, on the other hand, despite devoting 29 percent of their budgets to overhead such as claims approval and those $3 per call interactions with hospitals, still pay enough to offset most of the hospital’s costs for their insured members PLUS the losses the hospital takes on government-paid patients.
What will happen to the Cleveland Clinic when more wealthy people decide to travel to India for their heart surgeries rather than further subsidize the US government’s below-cost payments?
