Seems like a pretty good yardstick to me. Ultimately, it shows (partially) how much money is going through an insurer vs to an insurer. The revenue flow graph is included for UnitedHealth Group, for example, and about 2/3 is going through the company to medical providers.

Any good hacker is familiar with Amdahl's Law, and the same principle applies here. You can optimize the insurance providers all you want and maybe recover about 1/6 the total cost of care. At the very least, the first place we should be looking is the biggest expense, which is also clearly not the insurance.

The blog post is too simplistic an analysis. It ignores the second order effects of medical care financing reform.

Imagine if car engine oil changes had to go through car insurance. In such an inefficient equilibrium you might remark that only that insurer overhead is only 20% of a $300 oil change. Sellers always capture easy money that flows in from insurance money, credit, or government subsidies.

The fewer layers between a buyer and the seller, the lower the cost. Compare buying a bottle of ibuprofen at $5 for 200 doses compared with going to an urgent care and having a registered nurse hand you five doses at $200. Professional labor often used in medical care is expensive. Legalizing over the counter medication like birth control helps. Ironically a lot of poorly run companies try to shift HR policing of employees onto the healthcare system by requiring doctor’s notes. An insurance company processing claims is expensive.

Fee for service encourages more work ups and surgeries. The US caps physician residencies at a low count. Having the operations and financing as separate and adversarial companies adds a lot of friction. Hospitals charge 10x and the insurance brags they negotiated a 90% discount. No one health insurer has enough market power to push down outpatient, inpatient, or drug pricing. Without strong competition, automation, and price signals, healthcare spending is not going to get under control.

Does not consider global kickback schemes skimming money off the before profit revenue.