Medicare’s Refusal of Medical Claims Continues to Outpace Private Rate

In his speech to Congress on the need to overhaul health care, President Obama asserted:

More and more Americans pay their premiums, only to discover that their insurance company has dropped their coverage when they get sick, or won’t pay the full cost of care. It happens every day.

The following week, Health Care for America Now, a group supporting the Democrats’ health care reform bill, ran a television ad claiming that private health insurance companies: “Deny 1 out of 5 treatments prescribed by doctors.”

When fact-checked by, it turned out the statistic had been derived by the California Nurses Association, which broadened its definition of “denial” to include such administrative non-events as a claim having been sent to the wrong insurer. Such snafus occur behind the scenes, and the patient never knows about them because his/her claim is, in fact, subsequently paid by the correct insurer.

And the drumbeat goes on

Every day in cities and towns across the United States, Americans with insurance are denied medically necessary care by a for-profit insurer. A treatment, test, medication or even a surgical procedure ordered by their physician is denied, all in the name of increasing the bottom line.

—surely leading inexorably to the conclusion that we must take action NOW to pass health care “reform”!

But, when you take the “profit” out of health care, what do you find?

According to the American Medical Association’s National Health Insurer Report Card for 2008, the government’s health plan, Medicare, denied medical claims at nearly double the average for private insurers: Medicare denied 6.85% of claims. The highest private insurance denier was Aetna @ 6.8%, followed by Anthem Blue Cross @ 3.44, with an average denial rate of medical claims by private insurers of 3.88%

In its 2009 National Health Insurer Report Card, the AMA reports that Medicare denied only 4% of claims—a big improvement, but outpaced better still by the private insurers. The prior year’s high private denier, Aetna, reduced denials to 1.81%—an astounding 75% improvement—with similar declines by all other private insurers, to average only 2.79%.

Maybe there’s something to be said for the need to keep your customers satisfied in order to make that profit after all.

Mary L. G. Theroux is Senior Vice President of the Independent Institute. Having received her A.B. in economics from Stanford University, she is Managing Director of Lightning Ventures, L.P., a San Francisco Bay Area investment firm, former Chairman of the Board of Advisors for the Salvation Army of both San Francisco and Alameda County, and Vice President of the C.S. Lewis Society of California.
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