Blue Cross Chief Tries to Set Record Straight On Plan Profitability

Nov 15, 2004 at 04:45 pm by steve

Dr. Scott Serota, BlueCross BlueShield Association

The head of the national BlueCross BlueShield Association has begun to urge health plans to get out in the community and start correcting a growing misperception about the amount of money managed care organizations are reaping from fast-growing premiums. In an address recently at the First Annual Frank R. Bradley Executive Lecture Series at Washington University School of Medicine in St. Louis, Scott Serota was one of several speakers to tackle the issue. And he devoted a significant amount of his talk to the economics of healthcare. "Based in the research we've seen," Serota told the group, "consumers have a misperception of plan profitability and where healthcare money goes. Consumers tend to believe that 52 to 54 cents of every dollar in premiums goes to pay for medical care," he said, citing research conducted by the association. "Twenty-five cents goes to business expenses and 20 to 25 cents go to profit." The facts, at least among the Blues companies, he said, are radically different: 86 cents on the dollar goes to cover medical claims, 11 to 12 cents pay for administrative expenses and only two percent, on average, is profit. "People refuse to believe that 88 cents on the dollar goes to medical benefits," Serota reportedly noted. "And when they hear that profit is only 2 percent to 3 percent, they wonder why anyone would invest in the business." For health plans, it was an unusual turn at the podium by a prominent industry leader, calculated to defend the industry at a time when people are increasingly angry at the cost of insurance. Over the past three years, health insurance premiums in the United States have risen more than 50 percent. And those ever-rising rates are considered a prime reason why the number of uninsured in America has shot up to 45 million. But no one in the managed care industry feels that they're enjoying salad days because of premium inflation. Serota was one of four speakers at the meeting. All of them were trying to give their perspective on the affordability - or lack of it - of healthcare. According to Serota, healthcare costs are a top consumer concern and consumers have misperceptions about premiums which makes it incumbent on health plans to try and give consumers a more accurate portrayal of where their healthcare dollars go. Meanwhile, just about everyone inside the industry is complaining loudly of ever tightening margins. Doctors complain that they're being squeezed by limited government reimbursements while hospitals complain of fresh competition for outpatient services. Health plans, physicians and hospitals aren't the only groups defending themselves. Drug companies, which have enjoyed the multibillion-dollar income of a variety of blockbuster drugs, are also on the defensive. Drug costs have become one of the central features of the ongoing election, with both President Bush and rival John Kerry vowing to do something about it. The most controversial suggestion has come from the Kerry camp, which has been advocating reimporting drugs from the Canadian market, where government price controls have reduced retail prices by anywhere from 30 percent to 50 percent below U.S. levels. According to the Centers for Medicare and Medicaid Services, drugs accounted for less than 10 percent of the health bill in 2000. By 2012, it's expected to be more than 14 percent. And a growing number of political leaders aren't waiting for a federal response. Illinois Gov. Rod Blagojevich has created a new online system to buy foreign drugs at a deep discount and a number of other states and cities have followed suit. But with the average annual cost of healthcare in the U.S. well over $1.5 trillion, and more and more businesses looking to shift rising premiums onto the shoulders of their workers, you can expect to read and hear a lot more from healthcare professionals like Serota seeking to counter a growing sense that big money is being translated into big profits.



November 2022

Nov 18, 2022 at 03:06 pm by steve

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