Evening star. [volume] (Washington, D.C.) 1854-1972, 1963-06-21
THE HIGH cosT or HEALTH
Insurance Plans Need Close Study

InSuIdN
BY WILLIAM GRTGG
,a,l star staff writer
We had better look at how
we spend our health dollars,
because we spend a lot OF
them: i.,g
AS O Nation, we now devote
5.4 per cent Of our gross ma
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Lost 81 q Series
tional product to health and
medical care. This percentage
Is half again Whist u was In
the pre.depressicn years Of
i92s-2e, when the gross ma
tional product was considerably
lower. ss8 ~.
The amount spent annually
by individuals for medical care
In the United States more than
doubled from 1850 to 1850. At
the end Of the decade, the av-
erage Mathematical expendi-
ture for an American was SO
per cent OF his total expendi-
lures for all consumer items.
In washington, according to
an analysis OF Federal statis-
tics by the private Health In
surance Institute. the average
family spent $3.50 on health
care in 1850, compared to SOS
In lo47. Incomes increased DUR
ing the same period from an
average Of t4,l66 to $0.sSs.
Percentage Rises
80 the slice Of income spent
by the average family on med
ical care was 5 per cent In l947.
BY 1880, Il was SIS per cent.
Health costs, nationally,
went into the l900s without
pausing for breath. The Ma
ton spent Z per cent more in
1851 than in lo60-until pri-
vate expenditures by consumers
now top $40 billion o year.
For the average family,
health insurance and other
prepayment plans can offer
convenience and proection. But
the cost Of this service can
come very high.
In 19lo, when many plans
were getting underway. an av-
erage Of 80 cents out Of every
dollar spent for health insur-
ance went for administration,
reserves and net gain.
Cost Is Per Cent
Today, the same things cost
only an average Of Is per cent
Of the insurance dollar. a
Under some plans. Of course,
the cost is much BASKERVILLE
under others administration
costs are kept very low. 50 1t
pays to look before you buy.
The poor-who are almost by
definition economically unso-
phisticated" and not very good
managers Of what money they
have Aoften seek the very serv-
ices that make insurance more
expensive. They often, for ex-
ample. want an insurance man
TO collect personally and
weekly.
Ask Agent to Pay
They often ask the agent
TO pay the premium himself
this week-"and I'll make 1t
UP to you next week" The
agent usually does. This kind
of service makes any. insurance
policy cost more than 1t should.
The better buys in insurance
are usually the group plans
with low sales, administrative
and collection costs.
The non-profit Blue Cross
programs have operating costs
of about 40 per cent Of earned
income, for example. The Blue
Shield plans, which cover doc
tors fees, are more complicated
to administer. partly because
they, must work with bills from
many doctors instead Of bills
from 4 few hospitals. Shields
operating costs average about
OF per cent.
The operating expenses Of
many Of the group plans Of
fered by profit-making COM
panies are reasonable too.
Premium taxes add to the
difference between what Is paid
as premiums and what Ia re-
ceived as insurance benefits.
Some persons feel these taxes
are q particular oddly - In
light Of the legislative atten-
ton recently focused on health
costs and services. Insurance
companies and q few Blue
Cross and Blue Shield plans
are subject TO these taxes.
individual Plans Vary
Individual plans vary but. on
average, here's the slice lost to
administrative expenses. prem
ium taxes. additions to reserves
and profits:
Combined Blue Cross-Blue
Shield. 8 per cent. Other COM
munity plans, Q per cent. EN-
ployer-employe plans, 4
per cent. Insurance companies
group plans, 10 per cent. Group
clinic plans. 10 per cent.
But when you get 10 indi-
vidual health insurance plans,
the costs rise to Al per cent,
on average.
These percentages were de-
rived by The Star from So
cial Security Administration
! data.
Cover the Usual
They indicate that. on av-