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United Healthcare defends itself?

Writer's picture: Michael ConnellyMichael Connelly

CEO Andrew Witty issued United Healthcare's first official response to the recent outpouring of public criticism of the insurer's practices.


The gist of his comments focused on blaming hospitals and drug companies for the rising cost of healthcare. In one specific quote Witty states:"Fundamentally, healthcare costs more in the U.S. because the price of a single procedure, visit, or prescription is higher here than it is in other countries. […] The core fact is that price, more than utilization, drives system costs higher.”


Witty took an indirect shot at hospitals, saying there are “participants in the system who benefit” from higher prices even as others work to fix the problem. He said patients would benefit from cheaper sites of care, but that threatens revenue streams for organizations that depend on charging more for care!

 

That is a reference to longstanding efforts in Congress, fiercely opposed by hospitals, to equalize Medicare payment for certain services provided at hospital outpatient departments with those provided in physician offices.


These criticisms of hospitals illustrate Witty's fundamental misunderstanding of the health system's dependence on the flawed cross subsidization system - because it drives healthcare's problems. Witty's focus on hospital prices is misguided.


Hospital payments have little to do with prices. For example, Medicare and Medicaid account for 70-80 percent of hospital payments. Those payments are regulatory and have nothing to do with hospital prices. These government payments pay hospitals less than costs. The most recent American Hospital Association studies indicate that government payments only cover 80 percent of hospital costs. So private insurers do pay higher prices to cross subsidize these inadequate government payments. The bottom line is that hospital profits are very modest while United Health’s profits are robust and increasing.


In fact, United is exacerbating the cross-subsidization problem by paying hospitals less than Medicare for United Medicare patients.


The article also discusses the fact that United Healthcare’s medical loss ratio is increasing - which supposedly means United is making less profit. However, one way United increases the medical loss ratio is by acquiring physician practices. They make money off physician practices and use the cost of those practices to raise their medical loss ratio.


Finally, United asserts that their Medicare Advantage plans are good for consumers. The truth is Medicare advantage plans cost Medicare 108 percent of traditional Medicare - costing taxpayers billion. At the same time United aggressively limits patient choices for care and routinely denies coverage.


United Health’s defense of its operations leaves much to be desired.


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