alt Hacker NewsThe theory behind Medicare Advantage is that it would cost the government less than traditional Medicare because the private insurer would be more efficient. Guess what happened.
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rwarren63 • yesterday at 9:00 PM
I think the logic of running a more efficient company is true - they are making more money operating them than the government can/is.
The insurers are such behemoths and so largely vertically integrated it is controlling the system instead of improving it.
Notice how there is rarely ever any new competition in the health insurance space to drive down pricing.
Well the only ways to make any sort of insurance pool (whether it's run by the government or a private organization, for or non profit) more efficient is to deny more payouts or aggressively select for a less risky risk-pool. Medicare insures everyone over age 65, so the second option doesn't work. You can't just leave half the elderly uninsured because they're fat and likely to run up $100,000 in knee replacements. So you have to deny more claims.
Insurance is brutally simple. Money in, money out. Trying to make your back office more lean with tech and automation has extremely limited returns, because the back office is such a small portion of the total cost structure. 95-100% of costs in any given insurance operation are claims. So everything to do making things more efficient and reducing costs has to do with reducing claims.