Medicare Fuzzy Math- How the Health Industry Bilks Us

I’d like to discuss our beloved Medicare and the supplemental coverage provided by private insurance companies. This is rather boring, but timely, I hope it won’t put you to sleep. The contrast of the two medical plans is a vivid portrait of just how bad the private health insurance companies are compared to Medicare. The stark difference between the plans is probably lost to people who only know that Medicare exists, but don’t really have any desire to know the details. So a little primer is in order.

When everyone turns 65, the government offers Medicare in lieu of private insurance. In simple terms it covers all hospitalization costs with about a $1000 annual deductible and 80% of all medical service costs. The cost for all this coverage is about a $100 a month. The private insurance companies sell a policy that covers the difference, roughly 20% of the medical service costs and the deductibles. To keep things fair and prevent exploitation, all companies must offer exactly the same benefits in about a dozens different plans- they range from Yugo to Cadillac coverage- but only on the measly 20% not covered by Medicare. They are also required to insure everyone, regardless of pre-existing conditions or medical history.

So what do you think this supplemental coverage costs? Logic would suggest that if Medicare pays 80% at $100 a month, then the total cost might be around $120, right? Wrong. The cheapest plan, the Yugo coverage, only pays a percentage of the 20% (like 50% or 75%) after a large annual deductible of $2000 or even $4000. For that marginal coverage the cost is around $80 a month. Almost what we pay for the primary 80% covered by Medicare! But it gets even crazier. If you want complete supplemental coverage, benefits that pay all the gap costs- the full 20%- the cost is upwards of $250-$300 a month. And that’s per person. So a couple pays twice that amount.

It’s completely beyond me how any rational person can look at these cost comparisons and not be disgusted by what the health cartel is doing to us. They provide 20% of our medical benefits at 3 times the cost of Medicare. Their premiums are more than 10 times higher than they should be for what we get in return. Someday if we ever get universal single payer health care, I’m sure it will come with all the baggage we have in Medicare today. If I were the insurance industry, I’d be lobbying for 80% single payer for everyone, and then pick up the difference with obscene profits, just as they do with Medicare. It’s the perfect storm for the insurance industry- only 20% of the benefits are paid out, and we get bilked at costs almost comparable to the full coverage. I’d like to get some of that action.

OK, I’ve had my say, now you can wake up and go back to reading something interesting… I’m researching Vancouver. It looks like a nice place to live…good skiing, good sailing, and good health care… eh?