The company says it is protecting nursing home residents by curbing unnecessary hospital transfers. Whistleblowers allege cost-cutting tactics have endangered the elderly
The exact same thing works for multiple people, especially when averaged out. If they avoid spending a bunch of money on 10 people the average spending overall goes down. Even if they have a limit on how much they can profit, doing this pretty much guarantees a profit while sending them to the hospital every time it is necessary means less likelihood of making a profit because it costs them more both in payments and the internal costs of processing the payments.
It isn’t accounting trickery, it is basic math.
Is the concept of spending less means they get to keep more of what they collect too complicated?
It is based on flawed assumptions and a complete misunderstanding of how business works. Not understanding the basics of ‘paying less out means for profit companies get to keep more money’ means I don’t really have a way to explain why it is bad. Like just understanding that basic concept should make it easy to see why your math is bad.
The first step is that the insurance company bets on how much someone will cost them on average. So they have estimated that x number of people being insured will cost the company y dollars. Then they collect those premiums and being able to keep 20% of that AFTER paying for the medical care AND the costs to process the medical care. If an individual costs more to provide medical care to the company loses money on that person and the costs are averaged out with others that cost less than the average amount.
So if they can get the majority of people to cost less then they come out ahead and can keep some of it as the 20%. If they guessed low on the premiums they might lose money. They do NOT automatically get the 20% portion and that portion has all their operating costs and what is left over is profit. The incentive to lower hospitalizations and deny care is that it increases the proportion they can possibly turn into profit.
The exact same thing works for multiple people, especially when averaged out. If they avoid spending a bunch of money on 10 people the average spending overall goes down. Even if they have a limit on how much they can profit, doing this pretty much guarantees a profit while sending them to the hospital every time it is necessary means less likelihood of making a profit because it costs them more both in payments and the internal costs of processing the payments.
It isn’t accounting trickery, it is basic math.
Is the concept of spending less means they get to keep more of what they collect too complicated?
I see you’ve downvoted all my comments here, so you know I’ve already laid out how the math works for each scenario.
Your math was bad and you seem unable to grasp extremely basic concepts of how companies work.
What part of my math was bad?
Yes.
So all of it?
Yes.
It is based on flawed assumptions and a complete misunderstanding of how business works. Not understanding the basics of ‘paying less out means for profit companies get to keep more money’ means I don’t really have a way to explain why it is bad. Like just understanding that basic concept should make it easy to see why your math is bad.
So let’s see. The first input in both equations is “Premiums paid to the insurer by the customer”. If that’s wrong, what happens instead?
The first step is that the insurance company bets on how much someone will cost them on average. So they have estimated that x number of people being insured will cost the company y dollars. Then they collect those premiums and being able to keep 20% of that AFTER paying for the medical care AND the costs to process the medical care. If an individual costs more to provide medical care to the company loses money on that person and the costs are averaged out with others that cost less than the average amount.
So if they can get the majority of people to cost less then they come out ahead and can keep some of it as the 20%. If they guessed low on the premiums they might lose money. They do NOT automatically get the 20% portion and that portion has all their operating costs and what is left over is profit. The incentive to lower hospitalizations and deny care is that it increases the proportion they can possibly turn into profit.