Paul Levy, the perpetually newsworthy CEO of Beth Israel Deaconess Medical Center, makes a crisp argument today blogging about the rising cost of health care.
Levy says while insurers often whine about the “underlying rise in medical costs” as the key driver of higher health insurance premiums, there is, in fact, another critical culprit: outsized administrative expenses racked up by the major health insurers, on average about 9.3 percent annually.
Levy’s Exhibit A is a February 2010 report issued by the state Division of Health Care Finance and Policy on premium levels and trends in the private insurance market:
“How can this be the case?” Levy wonders. “In other financial services industries, unit costs of transactions have gone down, not up. What is it about health care that suggests the opposite should be the case?”
Not to be outdone, the Massachusetts Association of Health Plans gave me a fairly lengthy response. Touche:
Reducing administrative expenses in health care is important and efforts are underway, but those costs are not what is driving health plan premiums. More to the point, talking about administrative costs distracts from focusing on the the major cost driver, which is escalating medical expense. Continue reading