Best Health Care System in the World

A Senate committee has found that private insurers regularly rip off consumers and providers through the manipulation of rates based on cooked data. In other news, water is wet.

It sure is great that the United States relies more than any other developed nation on the private insurance industry for care. Otherwise, we wouldn’t get great results like this:

Congressional investigators have discovered that large health insurers in every region of the country are relying on faulty databases to underpay millions of valid insurance claims.

In a report released Wednesday, the Senate Commerce Committee said insurance companies nationwide have failed to provide consumers with accurate or understandable information about how they calculate “reasonable” or “customary” charges for out-of-network care.

Insurers also signed contracts prohibiting them from disclosing information about the databases to consumers or doctors, the report said.

The flawed databases are owned by Ingenix Inc., a subsidiary of UnitedHealth Group Inc. UnitedHealth recently settled with the New York attorney general’s office to resolve charges that Ingenix drew up billing rates that underpaid hospitals and doctors for out-of-network care.

Patients had to make up the difference. It is unclear how much they have overpaid over the years.


Providers and patients have suspected for years that insurers were underpaying for out-of-network care, but they haven’t been able to prove it.

Committee investigators found that Ingenix developed its payment models based on claims data provided by its customers, the insurance companies.

A committee aide said those companies sometimes would “scrub” the data sent to Ingenix—throwing out outlying high costs. Ingenix then would use questionable statistical models to come to its own rate estimates.

So basically, the insurers would set their own rates by lying about it. It’s not clear to me how exactly these rates should be set: the article does not mention Medicare and Medicaid, so perhaps they set them in different ways. When you use terms like “usual and customary charges” in a system dominated by third-party providers you’re liable to get into some problems.

But it’s a nice little racket for the insurers: you jam down the “providers” — aka the doctors — on rates, and then you jack up the prices for the “consumers”. If anyone tries to challenge you, you force them to spend a lot of money in the process. Works quite well. Except for, you know, the public.

Author: Jonathan Zasloff

Jonathan Zasloff teaches Torts, Land Use, Environmental Law, Comparative Urban Planning Law, Legal History, and Public Policy Clinic - Land Use, the Environment and Local Government. He grew up and still lives in the San Fernando Valley, about which he remains immensely proud (to the mystification of his friends and colleagues). After graduating from Yale Law School, and while clerking for a federal appeals court judge in Boston, he decided to return to Los Angeles shortly after the January 1994 Northridge earthquake, reasoning that he would gladly risk tremors in order to avoid the average New England wind chill temperature of negative 55 degrees. Professor Zasloff has a keen interest in world politics; he holds a PhD in the history of American foreign policy from Harvard and an M.Phil. in International Relations from Cambridge University. Much of his recent work concerns the influence of lawyers and legalism in US external relations, and has published articles on these subjects in the New York University Law Review and the Yale Law Journal. More generally, his recent interests focus on the response of public institutions to social problems, and the role of ideology in framing policy responses. Professor Zasloff has long been active in state and local politics and policy. He recently co-authored an article discussing the relationship of Proposition 13 (California's landmark tax limitation initiative) and school finance reform, and served for several years as a senior policy advisor to the Speaker of California Assembly. His practice background reflects these interests: for two years, he represented welfare recipients attempting to obtain child care benefits and microbusinesses in low income areas. He then practiced for two more years at one of Los Angeles' leading public interest environmental and land use firms, challenging poorly planned development and working to expand the network of the city's urban park system. He currently serves as a member of the boards of the Santa Monica Mountains Conservancy (a state agency charged with purchasing and protecting open space), the Los Angeles Center for Law and Justice (the leading legal service firm for low-income clients in east Los Angeles), and Friends of Israel's Environment. Professor Zasloff's other major activity consists in explaining the Triangle Offense to his very patient wife, Kathy.