End The AIG-like Financial Entitlement of Health Insurers

President Obama and his advisers have announced, with great press coverage, that they have found a way to save $300 million a year from health care expenditures for the next 10 years. Simple multiplication shows that this - miraculously - amounts to $3 billion over 10 years for this element of his reform plan, certainly no small amount.

Let's compare the savings announced by Obama with what could be saved by reigning-in insurance company administrative overhead. If we are about to spend about $3 trillion a year on US health care, and Medicare and other government expenses account for half, that leaves another $1.5 trillion for non-government health expenditures. If half a trillion is spent outside traditional health insurance,HMOs, PPOs and others, that leaves about $1 trillion a year passing through the coffers of the insurance company. If (an approximation) 25% of a significant number of insurance company expenditures go to administrative overhead, wiping out that overhead might save much more than $250 million dollars (perhaps as much as $250 billion?) a year (minus a modest amount for true administrative overhead - comparable to Medicare and Kaiser Permanente). And in addition, if there was one central source of payment for all "insured" health services, the cost of physicians' offices submitting bills might be reduced from over $5 per bill to less than $1.00 per bill through increased efficiency. Net savings would dwarf the $300 million per year trumpeted by Obama for his plan. The difference is that this money would have come from the same insurers who have met, in private conference in Senator Kennedy's offices, and with President Obama, who are significant political campaign contributors, and who are running shameless (covert?)advertising on television aimed at frightening Americans away from serious health reform.

The other really big important difference is that this savings could be plowed into buying health care for Americans, instead of perpetuating the AIG-like attitude of insurers that they are entitled to be made profitable by the sweat of small businesspeople and other working Americans.