The Myth of Medicare's 'Low Administrative Costs'

cawacko

cawacko

Well-known member
For those who like to get into the weeds on this type of stuff do you have any comments or arguments about/against what is being said here?





The Myth of Medicare's 'Low Administrative Costs'


Many people wrongly believe that Medicare is more efficient than private insurance; that view was often stated by champions of Obamacare during the debate preceding the law's enactment. These advocates argued that Medicare's administrative costs — the money it spends on expenses other than patient care — are just 3% of total costs, compared to 15% to 20% in the case of private, employer-sponsored insurance. But these figures are highly misleading, for several reasons.

Medicare is partially administered by outside agencies

First, other government agencies help administer the Medicare program. The Internal Revenue Service collects the taxes that fund the program; the Social Security Administration helps collect some of the premiums paid by beneficiaries (which are deducted from Social Security checks); the Department of Health and Human Services helps to manage accounting, auditing, and fraud issues and pays for marketing costs, building costs, and more. Private insurers obviously don't have this kind of outside or off-budget help. Medicare's administration is also tax-exempt, whereas insurers must pay state excise taxes on the premiums they charge; the tax is counted as an administrative cost. In addition, Medicare's massive size leads to economies of scale that private insurers could also achieve, if not exceed, were they equally large.

Administrative costs are calculated using faulty arithmetic

But most important, because Medicare patients are older, they are substantially sicker than the average insured patient — driving up the denominator of such calculations significantly. For example: If two patients cost $30 each to manage, but the first requires $100 of health expenditures and the second, much sicker patient requires $1,000, the first patient's insurance will have an administrative-cost ratio of 30%, but the second's will have a ratio of only 3%. This hardly means the second patient's insurance is more efficient — administratively, the patients are identical. Instead, the more favorable figure is produced by the second patient's more severe illness.

Medicare has higher administrative costs per beneficiary

A more accurate measure of overhead would therefore be the administrative costs per patient, rather than per dollar of medical expenses. And by that measure, even with all the administrative advantages Medicare has over private coverage, the program's administrative costs are actually significantly higher than those of private insurers. In 2005, for example, Robert Book has shown that private insurers spent $453 per beneficiary on administrative costs, compared to $509 for Medicare. (Indeed, Robert has written the definitive paper on this subject, from which the above figure is taken.)

Remember these points the next time someone tries to tell you that Medicare is “more efficient” than private insurance.

UPDATE 1: Tim Worstall points out in the comments that we should also count the deadweight costs of tax collection as part of Medicare's administrative costs (say, 20% of the amount collected).

UPDATE 2: Benjamin Zycher has also written extensively about Medicare's administrative costs, as exemplified by this paper for the Manhattan Institute.


https://www.forbes.com/sites/theapo...icares-low-administrative-costs/#5df51f2140de
 
For all the arguments on this board about how smart people are no one has anything to say on this issue? I know there are multiple Bernie supporters here. No one can make an argument for single payer to argue against this?
 
You can manipulate stats anyway you want to support your agenda.

I once worked as a county coordinator for a specific program. And was responsible for analyzing the data. If I wanted to make the program look good, I could make it look like 90% of people were successful on said program. All you have to do is narrow fields and not control for variation.

Libs do this all the time. Like with the mythical "wage gap."
 
Irish said:
You can manipulate stats anyway you want to support your agenda.

I once worked as a county coordinator for a specific program. And was responsible for analyzing the data. If I wanted to make the program look good, I could make it look like 90% of people were successful on said program. All you have to do is narrow fields and not control for variation.

Libs do this all the time. Like with the mythical "wage gap."
Click to expand...

Fair enough. So are these folks manipulating the data to show single payer doesn't work?
 
Deplorable Me said:
Medicare is SP on a smaller scale.
Click to expand...

except, when I went on Medicare I had to decide whether to go with BC/BS or Priority for my Part C supplemental.........when I went with Priority they took over all administration of Medicare's Part A and B......Medicare is just an underwriter.......
 
Semantics. Now factor in the profits/dividends, and CEO pay, and do your calculations. Or is CEO pay already factored in for 'administrative' costs?

And how can Forbes (lol) possibly calculate what % of labor from the agencies listed, actually goes toward Medicare hours? Multi tasking is always more efficient.
 
Only a moron would think the gobblement can do anything more efficient than the private sector. It is impossible for the simple reason that the federal gobblement has ZERO incentive to be efficient. ZERO.

Wacko your article is spot on. It does leave out one major factor and that is the administrative costs Medicare imposes on physicians keeping up with all of the paperwork. They have to hire staff just to comply. Buy software etc. Now this is where libtards employ the faulty broken window theory of economics and highlight their ignorance.

If Medicare were so efficient and wonderful physicians wouldn't be limiting the number of Medicare patients they take. If Medicare were so great people wouldn't need Medi Gap.
 
cawacko said:
For those who like to get into the weeds on this type of stuff do you have any comments or arguments about/against what is being said here?





The Myth of Medicare's 'Low Administrative Costs'


Many people wrongly believe that Medicare is more efficient than private insurance; that view was often stated by champions of Obamacare during the debate preceding the law's enactment. These advocates argued that Medicare's administrative costs — the money it spends on expenses other than patient care — are just 3% of total costs, compared to 15% to 20% in the case of private, employer-sponsored insurance. But these figures are highly misleading, for several reasons.

Medicare is partially administered by outside agencies

First, other government agencies help administer the Medicare program. The Internal Revenue Service collects the taxes that fund the program; the Social Security Administration helps collect some of the premiums paid by beneficiaries (which are deducted from Social Security checks); the Department of Health and Human Services helps to manage accounting, auditing, and fraud issues and pays for marketing costs, building costs, and more. Private insurers obviously don't have this kind of outside or off-budget help. Medicare's administration is also tax-exempt, whereas insurers must pay state excise taxes on the premiums they charge; the tax is counted as an administrative cost. In addition, Medicare's massive size leads to economies of scale that private insurers could also achieve, if not exceed, were they equally large.

Administrative costs are calculated using faulty arithmetic

But most important, because Medicare patients are older, they are substantially sicker than the average insured patient — driving up the denominator of such calculations significantly. For example: If two patients cost $30 each to manage, but the first requires $100 of health expenditures and the second, much sicker patient requires $1,000, the first patient's insurance will have an administrative-cost ratio of 30%, but the second's will have a ratio of only 3%. This hardly means the second patient's insurance is more efficient — administratively, the patients are identical. Instead, the more favorable figure is produced by the second patient's more severe illness.

Medicare has higher administrative costs per beneficiary

A more accurate measure of overhead would therefore be the administrative costs per patient, rather than per dollar of medical expenses. And by that measure, even with all the administrative advantages Medicare has over private coverage, the program's administrative costs are actually significantly higher than those of private insurers. In 2005, for example, Robert Book has shown that private insurers spent $453 per beneficiary on administrative costs, compared to $509 for Medicare. (Indeed, Robert has written the definitive paper on this subject, from which the above figure is taken.)

Remember these points the next time someone tries to tell you that Medicare is “more efficient” than private insurance.

UPDATE 1: Tim Worstall points out in the comments that we should also count the deadweight costs of tax collection as part of Medicare's administrative costs (say, 20% of the amount collected).

UPDATE 2: Benjamin Zycher has also written extensively about Medicare's administrative costs, as exemplified by this paper for the Manhattan Institute.


https://www.forbes.com/sites/theapo...icares-low-administrative-costs/#5df51f2140de
Click to expand...

First, no one claims an administrative overhead of 3% for Medicare.
The actual cost is six percent.
Second, the economy of scale is the REASON, so why is it denoted as a negative? That is just stupid.
Third, private insurers' overhead is 30% and higher; these glaring inaccuracies do not lend credence to the writer or the source.
Finally, private can't possibly compete with government since government doesn't make a profit, pay for bloated CEO salaries or shareholder dividends.

As usual ILA's eruption is retarded.
 
Rune said:
First, no one claims an administrative overhead of 3% for Medicare.
The actual cost is six percent.
Second, the economy of scale is the REASON, so why is it denoted as a negative? That is just stupid.
Third, private insurers' overhead is 30% and higher; these glaring inaccuracies do not lend credence to the writer or the source.
Finally, private can't possibly compete with government since government doesn't make a profit, pay for bloated CEO salaries or shareholder dividends.

As usual ILA's eruption is retarded.
Click to expand...

I know you don't mind being an uneducated and ignorant fucktard

But as usual, you are wrong and I am right. I think it is cute you think the gobblement can be efficient with anything.

I bet you are the first cocksucker complaining about the long lines at the DMV and Post Office and can be seen screaming "I pay your salary"
 
The Internal Revenue Service collects the taxes that fund the program;
Click to expand...

Pretty difficult to calculate that into the costs. The IRS would have to collect the taxes from just as many people no matter what, it's already a sunk cost. It doesn't matter if they collect them from Medicare too. While health insurance companies are duplicating effort.
 
I Love America said:
Only a moron would think the gobblement can do anything more efficient than the private sector. It is impossible for the simple reason that the federal gobblement has ZERO incentive to be efficient. ZERO.

Wacko your article is spot on. It does leave out one major factor and that is the administrative costs Medicare imposes on physicians keeping up with all of the paperwork. They have to hire staff just to comply. Buy software etc. Now this is where libtards employ the faulty broken window theory of economics and highlight their ignorance.

If Medicare were so efficient and wonderful physicians wouldn't be limiting the number of Medicare patients they take. If Medicare were so great people wouldn't need Medi Gap.
Click to expand...

Not to mention the Fed govt is Designed to be slower. This was mentioned in a SCOTUS ruling. That govt works slower than the private sector because it has many layers of bureaucracy and has to make sure no one's rights/laws/regulations are violated.
 
cawacko said:
For those who like to get into the weeds on this type of stuff do you have any comments or arguments about/against what is being said here?





The Myth of Medicare's 'Low Administrative Costs'


Many people wrongly believe that Medicare is more efficient than private insurance; that view was often stated by champions of Obamacare during the debate preceding the law's enactment. These advocates argued that Medicare's administrative costs — the money it spends on expenses other than patient care — are just 3% of total costs, compared to 15% to 20% in the case of private, employer-sponsored insurance. But these figures are highly misleading, for several reasons.

Medicare is partially administered by outside agencies

First, other government agencies help administer the Medicare program. The Internal Revenue Service collects the taxes that fund the program; the Social Security Administration helps collect some of the premiums paid by beneficiaries (which are deducted from Social Security checks); the Department of Health and Human Services helps to manage accounting, auditing, and fraud issues and pays for marketing costs, building costs, and more. Private insurers obviously don't have this kind of outside or off-budget help. Medicare's administration is also tax-exempt, whereas insurers must pay state excise taxes on the premiums they charge; the tax is counted as an administrative cost. In addition, Medicare's massive size leads to economies of scale that private insurers could also achieve, if not exceed, were they equally large.

Administrative costs are calculated using faulty arithmetic

But most important, because Medicare patients are older, they are substantially sicker than the average insured patient — driving up the denominator of such calculations significantly. For example: If two patients cost $30 each to manage, but the first requires $100 of health expenditures and the second, much sicker patient requires $1,000, the first patient's insurance will have an administrative-cost ratio of 30%, but the second's will have a ratio of only 3%. This hardly means the second patient's insurance is more efficient — administratively, the patients are identical. Instead, the more favorable figure is produced by the second patient's more severe illness.

Medicare has higher administrative costs per beneficiary

A more accurate measure of overhead would therefore be the administrative costs per patient, rather than per dollar of medical expenses. And by that measure, even with all the administrative advantages Medicare has over private coverage, the program's administrative costs are actually significantly higher than those of private insurers. In 2005, for example, Robert Book has shown that private insurers spent $453 per beneficiary on administrative costs, compared to $509 for Medicare. (Indeed, Robert has written the definitive paper on this subject, from which the above figure is taken.)

Remember these points the next time someone tries to tell you that Medicare is “more efficient” than private insurance.

UPDATE 1: Tim Worstall points out in the comments that we should also count the deadweight costs of tax collection as part of Medicare's administrative costs (say, 20% of the amount collected).

UPDATE 2: Benjamin Zycher has also written extensively about Medicare's administrative costs, as exemplified by this paper for the Manhattan Institute.


https://www.forbes.com/sites/theapo...icares-low-administrative-costs/#5df51f2140de
Click to expand...

Amen; bump this to the top!

The media is refusing to tally the cost of Obamacare; they know it would infuriate the American taxpayer. Instead, they fabricate the number of people who would go without healthcare to infuriate the morons on the left.
 
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