The Government Gives Insurers Even More Money

This is why putting the government in charge of healthcare has been a travesty. It turns out the insurers found another way to game the system. They are supposed to estimate the cost for proving prescription drug benefits to those they serve on Medicare. Wouldn’t you know it, they are often wrong:

However, year after year, most of those estimates have turned out to be wrong in the particular way that, thanks to Medicare’s arcane payment rules, results in more revenue for the health insurers, a Wall Street Journal investigation has found. As a consequence, the insurers kept $9.1 billion more in taxpayer funds than they would have had their estimates been accurate from 2006 to 2015, according to Medicare data obtained by the Journal.

The cornerstone of Part D is a system in which private insurers such as CVS Health Corp. ,UnitedHealth Group Inc. and Humana Inc. submit “bids” estimating how much it will cost them to provide the benefit. The bids include their own profits and administrative costs for each plan. Then Medicare uses the estimates to make monthly payments to the plans.

After the year ends, Medicare compares the plans’ bids to the actual spending. If the insurer overestimated its costs, it pockets a chunk of the extra money it received from Medicare—sometimes all of it—and this can often translate into more profit for the insurer, in addition to the profit built into the approved bid. If the extra money is greater than 5% of the insurer’s original bid, it has to pay some of it back to Medicare.

For instance, in 2015, insurers overestimated costs by about $2.2 billion, and kept about $1.06 billion of it after paying back $1.1 billion to the government, according to the data reviewed by the Journal.

What business would allow this to happen? None! But those that work for the government don’t care because it is not their money. Add this farce to the deal that the insurers got with Obamacare and we have just made these idiots stronger and stronger.

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Douglas Farrago MD

Douglas Farrago MD is a full-time practicing family doc in Forest, Va. He started Forest Direct Primary Care where he takes no insurance and bills patients a monthly fee. He is board certified in the specialty of Family Practice. He is the inventor of a product called the Knee Saver which is currently in the Baseball Hall of Fame. The Knee Saver and its knock-offs are worn by many major league baseball catchers. He is also the inventor of the CryoHelmet used by athletes for head injuries as well as migraine sufferers. Dr. Farrago is the author of four books, two of which are the top two most popular DPC books. From 2001 – 2011, Dr. Farrago was the editor and creator of the Placebo Journal which ran for 10 full years. Described as the Mad Magazine for doctors, he and the Placebo Journal were featured in the Washington Post, US News and World Report, the AP, and the NY Times. Dr. Farrago is also the editor of the blog Authentic Medicine which was born out of concern about where the direction of healthcare is heading and the belief that the wrong people are in charge. This blog has been going daily for more than 15 years Article about Dr. Farrago in Doximity Email Dr. Farrago – [email protected] 

  5 comments for “The Government Gives Insurers Even More Money

  1. Seneca
    January 9, 2019 at 7:29 am

    As I say to the patients complaining about Medicare drug coverage: Before Medicare part D, old people had to buy generic drugs. After Medicare part D, old people still have to use generic drugs and we pay a couple of billion tax dollars to administer the program.

  2. Tracy
    January 8, 2019 at 8:33 pm

    Hey Doug,
    Your old friend ZDOGG is trying to make MOC changes through a petition. Maybe you can use your power to get even more docs to sign the petition.
    See his website:

    • Doug Farrago
      January 8, 2019 at 9:08 pm

      I did sign the petition but you have a point. Will get it out this weekend.

  3. Sir Lance-a-lot
    January 8, 2019 at 7:58 am

    “… we have just made these idiots stronger and stronger.”

    Um… Doug… “9 Billion Dollar Upcharge” vs dragging ourselves in to work for 12-14 hours to get less pay every year.

    The idiots ain’t them.

    Since all of the humanity has been corroded from my soul by modern medicine anyway, does the WSJ article say where I can join up and make some lush drug company bucks?

  4. RSW
    January 8, 2019 at 7:48 am

    This is why putting the insurers in charge of government has been a travesty.

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