Issues 2020: Private Health Insurance Saves Americans Money

NEW YORK, NY – As this week’s debates made clear, Democratic presidential candidates are divided on Medicare-for-All, largely on the question of whether to keep or abolish private health insurance options. Missing from the debate is the critical role that private health insurance plays in controlling health-care costs, argues a new issue brief in the Manhattan Institute’s Issues 2020 series.

Senior fellow Chris Pope explains that although health insurance companies are easy to villainize, insurers provide a critical check on health-care spending, which saves people money and improves care. The real driver of U.S. health-care costs is enormous spending on hospitals and physicians’ services.

“The whole reason health insurance companies spend billions on administration is to cut down on fraudulent and wasteful claims from medical providers so that Americans can pay less. That saves us money," said Pope. "Without private health insurance, we would pay more because you will have lost an important tool in the system that keeps costs down. Medicare is a great example: private plans save enrollees an average of about 10 percent over the government option."

Key Findings:

• Health insurance administration accounts for only a small fraction of American health-care costs. Private health insurance expenses account for only 7 percent of U.S. health-care spending—the largest element of which is taxes.
• Money that health insurance companies spend on administration reduces the overall cost of the health-care system.
• In the Medicare system, private plans give enrollees better-quality medical care at 10 percent less cost.

Click here to read the full report.