Sunday, November 1, 2009

"Medicare Fraud: $60 Billion; Profits of Top Ten Insurance Companies: $8 billion" -- The Search for the Political Equivalent of Dark Matter

"Annual Medicare Fraud: $60 Billion; Annual Profits of Top Ten Insurance Companies: $8 billion"--that's the headline atop Jeffrey H. Anderson's Saturday blog posting in The Weekly Standard.

Anderson's apt juxtaposition of two different numbers from two very different sources makes me think of dark matter, which we know exists, even if we can't see it. As Wikipedia explains:

In astronomy and cosmology, dark matter is hypothetical matter that is undetectable by its emitted radiation, but whose presence can be inferred from gravitational effects on visible matter. According to present observations of structures larger than galaxies, as well as Big Bang cosmology, dark matter and dark energy could account for the vast majority of the mass in the observable universe.

In other words, most of us look up at night sky, or think about the universe, and we think of stars and planets suspended in nothingness. But in fact, space is not nothing, it is full of material--dark matter. We can't see it, but we still know that it's there.

Indeed, as the graphic above illustrates, "dark matter" accounts for about 23 percent of the universe, whereas mere stars and planets account for about .4 percent. And on top of the dark-matter category, there's "dark energy," which accounts for 73 percent of the universe. All of which serves as yet another reminder to us--to be humble about our own powers of intuitive perception, as opposed to the tools that are needed to truly apprehend the situation. Or, to put it another way, back here on earth, one can rely on politics to simplify and shorthand things, to the point where their true solid proportion threatens to melt into the air, like so much dark matter.

In other words, the insurance companies declare their legal profits, paying taxes on them, and all those numbers go into the maw of OMB, CBO, the media, think tanks, etc. Meanwhile, the illegal profits simply go into the pockets of criminals, who presumably pay little tax on their ill-gotten gains. But the Beltway hue and cry is over insurance company profits.

It's the difference between the observed and the unobserved. We all know the joke about the man who loses the dollar bill on Fourth Street but looks for it on Third Street--because the light's better on Third Street.

The natural pattern for human beings is criticize, even excoriate, what you can observe, while you mostly ignore what you can't observe. To be sure, Democrats who run the show in DC would all say that they are against Medicare fraud, and also Medicaid fraud, but ask yourself: When's the last time you heard anyone in charge of anything on Capitol Hill complaining about Medicare or Medicaid fraud?

Here's Anderson's brief post:

As 60 Minutes reported last week, Medicare fraud is rampant and has now replaced the cocaine (ahem) business as the major criminal activity in South Florida. Both 60 Minutes and the Washington Post report that Medicare fraud now costs American taxpayers roughly $60 billion a year. That may sound like a lot of money, but surely it pales next to the extraordinary profits of private insurance companies, right?
Well, let's see.... Last year, the profits of the ten largest insurance companies in America were just over $8 billion -- combined. No single insurance company made even five percent of what Medicare reportedly loses in fraud.

While we're making comparisons, in its real first ten years (2014-23), the Senate Finance Committee bill would cost $1.7 trillion. At the rate of last year's profits, the combined ten-year profits of America's ten largest insurance companies would be $83 billion -- five percent of the costs of the Senate Finance Committee bill. Eighty-three billion dollars may not buy you much in comparison with BaucusCare, but -- on the bright side -- that ten-year tally is somewhat more than what Medicare loses each year in fraud.

So, the next time someone alleges that government-run health care is cheaper because of "lower administrative costs" -- a truly preposterous claim on its surface -- these numbers would be good ones to have at the ready: $60 billion in annual Medicare fraud, $8 billion in combined annual profits for America's ten largest insurance companies.

H/T: Newsalert blog


  1. Mr. Pinkerton: The salient point here is that Big Government has had misfortune and calamity with virtually ever major initiative they touch.I think that the massive CIT bankruptcy with all its repercussions with lost jobs, failed small businesses who will be divested of loans, the bailout past and the new bailout we need now in addition our soaring tax burden is enough. Medicare and medicaid fraud, vaccines somewhere in an unknown pipeline with over 1,000 Americans already dead from swine flu mean two immediate results. A Republican referendum Tuesday to change the change we never got and the retirement permanently of the Public Option. My mother had an expression when I acted up as a teen, "When the cup is full, the cup is full (A Hungarian Idiom meaning we have had enough and there is no more room).

  2. So, Dark Matter is really the old bait & switch game inside the Belt Way District Lines. The Ds saying: Get those Insurance Companies. They are acting like capitalists & making $8 Billion.
    Duh, Ds, that's what capitalists are supposed to do. However, they should have their state lines removed from their tennis courts. Then they can play anywhere in the universe they want. And this will Matter!
    Good column Jim. I'm going to start thinking of you as Luke Sky Walker.