Cost versus Profit

7.5% …is the increase in 2008 medical costs projected by publicly traded health insurers.

Let’s get one thing straight: medical cost DOES NOT mean medical spending.  In this case, ‘medical costs’ means ‘premium costs’. The greatest fallacy in managed care is that the cost of securing health care insurance is linked to what it costs to provide that healthcare.

According to CIBC World Markets analyst Carl McDonald:“Managed care plans earn higher margins today than they ever have before, and operate at lower medical loss ratios than at any time in their history….There are a lot of reasons for this, like enrollment growth, new products and acquisitions, but the bottom line is that isn’t exactly a sympathy-inducing state of affairs.”

These comments are supported by a Verden analysis conducted using SEC filings for the 5 largest publicly traded national insurance companies. Except for one thing – much of those lower medical loss ratios are a direct result of cutting reimbursement rates to providers and eroding reimbursement through policy and procedure changes.

Need more proof? You can find it in The Verden Report: Special Edition – Cost versus Profit in Managed Care Today

(Available – free – now at )

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