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Medicaid Is Making Insurers Rich

Nov 11, 2017

medicaid making insurers rich


Medicaid insurers made over $5 billion in profits between 2014 and 2016, yet the California program often conjures thoughts of subpar care and low-income individuals. How is this possible?

California’s “Generosity” Toward Insurers

An in-depth investigative article recently published by the LA Times reveals that in the two year period between 2014 and 2016, Medicaid insurers reaped approximately $5.4 billion in profits. That’s an astronomical figure that is absolutely jaw-dropping, leading one health policy professor quoted by the LA Times to remark that “California is being wildly open-handed and generously excessive with insurers.” That’s taxpayer money that is flying into the pockets of insurance companies — on the back of a program that is supposed to help the nation’s neediest.


So, where did all this extra money come from? Believe it or not, it was the result of a failed bet that Obamacare would result in huge numbers of previously uninsured people rushing to state medical services once their Medicaid coverage took effect. This simply didn’t end up being the case, and the funds earmarked to handle the extra burden was simply “pocketed” by the insurers. To be fair, the director of the Medicaid program is insistent that the program will be receiving some of those funds back once audits are completed. But nevertheless, one unacceptable fact remains: insurance companies are making huge profits at the expense of Californians, who end up receiving subpar health care anyway.


Profit Margins Versus Effective Care

Yes, despite consistently critical and disappointing audits of the Medicaid system, insurers are being handsomely rewarded for their involvement in Medicaid’s function and operation. And make no mistake, Medicaid is currently a giant mess; for a program that insures approximately 33% of Californians, the standard of care that results from widespread reliance on Medicaid is terribly poor.


As a society, and as communities, it’s time for us to ask on a very basic level whether healthcare is about treating those who need medical attention, or driving profits for insurance companies. Urgent 9 is currently developing an exciting new approach to community health care that cuts out costly middlemen and puts the power back in the hands of patients. We’re excited to share in the coming weeks just how we’re working to improve the Glendale community, partially in response to the abuses and failures of the insurance system as it currently stands.