Comparing Aetna and Medicare: $30 vs. $4 a claim
posted by Frank Pasquale
Steven Brill has a remarkable article in Time on health care. Perhaps the paragraph that stood out the most to me was this one:
[T]he only players in the private sector who seem to operate efficiently are the private contractors working — dare I say it? — under the government’s supervision. They’re the Medicare claims processors . . . . Medicare’s total management, administrative and processing expenses are about $3.8 billion for processing more than a billion claims a year worth $550 billion. That’s an overall administrative and management cost of about two-thirds of 1% of the amount of the claims, or less than $3.80 per claim.
According to its latest SEC filing, Aetna spent $6.9 billion on operating expenses (including claims processing, accounting, sales and executive management) in 2012. That’s about $30 for each of the 229 million claims Aetna processed, and it amounts to about 29% of the $23.7 billion Aetna pays out in claims.
I’ll soon be publishing an article looking at public-private partnerships in Medicare and Medicaid. I, too, was impressed by many contractors, however much remains to be done to optimize their performance. The other lesson: the harder one looks at the supposedly “public” or “private” parts of our health care system, the more one realizes how imbricated they are. The categories simply cease to be meaningful in the context of US health care (and increasingly outdated in our finance, telecom, and other industries, as well).
February 21, 2013 at 5:47 pm
Posted in: Health Law
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Responses (6)
Shag from Brookline - February 22, 2013 at 8:39 am
Frank,
I just watched a rerun of Jon Stewart’s extended interview of Steven Brill[iant!] from last night’s Daily Show. Perhaps you could provide a link to it. Especially interesting was Brill’s description of hospitals in FL advertising with billboards for medicare patients, which can be quite profitable – not for the docs and nurses but for hospital administrators, drug and device companies, etc.
mls - February 22, 2013 at 8:42 am
So is the implication that Aetna could increase efficiency by outsourcing its administrative functions to Medicare?
Shag from Brookline - February 22, 2013 at 9:14 am
Perhaps the volcanic ashes of Aetna should be doused rather than outsourced, replaced with a single payer system for efficiency.
Ken Rhodes - February 22, 2013 at 10:51 am
MLS–Since Aetna is a stockholder company with commission sales personnel, perhaps their total costs could be substantially reduced if (a) they outsourced their sales function and executive management to Medicare, (b) they stopped their lobbying and campaign contributions, and (c)they paid their profits to Medicare.
Thomas - February 25, 2013 at 3:56 am
And what about the billions of dollars tax payers lose from Medicare fraud. Read the FBI and the Scooter Store article and the other millions if not billions lost to fraud which have not been investigated.
Frank Pasquale - February 25, 2013 at 11:42 am
There is a good post on the problem of Medicare fraud here:
http://theincidentaleconomist.com/wordpress/a-few-remarks-on-medicares-administrative-cost/
The key issue: we really don’t have good comparative estimates. Fortunately, anti-fraud efforts at CMS have been intensifying for years.
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