**4.3 Profiteering**

Private insurers consume 15–20% of the health care dollar in bureaucracy, administrative overhead, and profits. **Figure 3** shows how much higher that overhead is compared to other countries [22]. At the same time, they have received large subsidies from the federal government for many years, now about \$685 billion a year [23] and projected by the Congressional Budget Office to double in another 10 years [24].

Overpayments for privatized Medicare and Medicaid have been a bonanza for private insurers, accounting for more than one-half of their net revenue. Their fraudulent practice of up-coding, mentioned above, accounts for much of that revenue, as shown in **Figure 4** [25].

Wall Street investors have much to say about what private insurers do in their unending quest for more profits. As one example, CVS Health, the parent company of Aetna, made far more money in 2021 than most other publicly traded corporations, in part because of Aetna's jacking up premiums and cost sharing, which it will do again in 2022. When the company issued a guidance for 2022 profits of just \$12 billion to \$13 billion (down just slightly from that for 2021 of \$12.5 to \$13 billion), its share price dropped by 6%, unnerving investors, and the company proceeded to buy back its own shares to boost earnings per share. Aetna's health insurance market has going down due to the decline of employer-sponsored health insurance, with less than one-third of businesses with 50 or fewer employees now offering health benefits [26].

Stepping back to consider all of this, Gerald Friedman, PhD, Professor of Economics at the University of Massachusetts Amherst and author of *The Case for Medicare for All*, brings us this important insight:

*In many commodity markets, profits are a reward for making good products at low cost. Profits reward the company that makes the laptop, for example, giving it an incentive to produce a computer at low price; the more they sell, the more they profit. The incentives in health care are different, however. Rather than increasing sales, health insurers profit by screening customers, segmenting the market so as to exclude those likely to use health care ("lemon dropping") while attracting the healthy and lucky who use less health care (cherry picking"). While profitable, such activities add to the cost of America's bloated health care administration, raising a question that we should ask of all health care insurers: how many patients did your company help today? [27]*
