FACT CHECK: Health Plan Profits and Administrative Costs

Posted by The Campaign on September 29, 2009 at 11:25 AM

Today's Senate Finance Committee markup focused on health plan profits and administrative costs.  Here are the facts about these two issues:

For every dollar our nation spends on health care, less than one penny goes towards health plan profits.  A sincere cost-containment discussion would focus on the other 99 cents.  Check out this document which sets-the-record-straight about health plan profits.  Also, check out Fortune Magazine's recent industry profitability rankings.  In 2008, health plans had a profit margin of 2.2% and are 35th on the list.

As part of the Fortune 500 list, Fortune magazine looks at industry profit margin.  Fortune reports that the "Health Care: Insurance and Managed Care" sector had a profit margin of 2.2% in 2008.  To see where this puts the health plan industry on the list, click here.

The Heritage Foundation released a research paper comparing administrative costs between Medicare and private health plans. 

Two important facts to consider:

• "...on a per-person basis Medicare's administrative costs are actually higher than those of private insurance--this despite the fact that private insurance companies do incur several categories of costs that do not apply to Medicare."

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• "In the years from 2000 to 2005, Medicare's administrative costs per beneficiary were consistently higher than that for private insurance, ranging from 5 to 48 percent higher, depending on the year."

Tags: Profits, Admin Cost, Fact Check