Medicare, one of the most costly U.S. government programs, has been paying health insurance companies in advance of medical services, allowing them to profit from this practice by investing the money.

 

By “playing the float,” insurers collected $376 million from investment income in 2007, according to an audit by the Department of Health and Human Services’ inspector general.

 

Consequently, the government is missing out on new revenues of its own if it were to pay after medical services are rendered. For instance, had Medicare in 2007 held onto the money it distributed in advance, and put the funds into long-term Treasury securities, the program would have had an additional $450 million in interest income.

-Noel Brinkerhoff

 

Insurers Profit on Medicare Float (by Ricardo Alonso-Zaldivar, Associated Press)

Rollup Review of Impact on Medicare Program for Investment Income That Medicare Advantage Organizations Earned and Retained From Medicare Funds in 2007 (Inspector General Department of Health and Human Services) (pdf)