The Medicare Argument: Get the Facts Straight

Tuesday, August 25, 2009


I read this comment on the HR3200 bill this morning and am hearing many more like it.

Medicare is BY FAR the most efficiently run health care system in the world. Their administration costs are well under 10%...compare that to over 50% for your private insurance plan
If you hear the left using this to justify a government single-payer or public option, a red flag should go off in your mind. Not only are the numbers themselves false, but it is a misleading statistic and those who quote it don't actually understand how it was determined.

Medicare administrative costs are actually HIGHER than those of private insurance, even considering costs that private companies must pay that don't apply to Medicare. Medicare patients usually have higher health care costs in general
so expressing administrative costs as a percentage of total costs gives a misleading picture. Administrative costs are incurred primarily on a fixed or per-beneficiary basis; this approach spreads Medicare's costs over a larger base of patient care cost i.e. their administrative costs per person would be divided by a larger number for patient care costs thus appearing lower.

The people quoting this have also not taken into account that
in the case of private insurance, administrative costs are measured by the difference between premiums collected and claims paid. The result is that this includes some costs that are not really "administrative."

Considering this, if the projected number of Americans on private insurance switch to a public option, an increase in administrative costs will be in the billions of dollars making Obama's plan far expensive and surely not "deficit neutral".

Excerpted from a Heritage Foundation article by Robert Book, Ph.D.

3 comments:

PersonalFailure said...

Medicare patients usually have higher health care costs in general

Because Medicare is solely for the elderly and disabled. They tend to be a little more expensive than healthy people in their twenties.

cura te ipsum said...

Exactly. That's why the math is so messed up with this statistic. I didn't think I needed to state the obvious.

Dr B said...

Apparently this false notion got pushed in John McCain's town hall meeting. Fox News took issue with it:

http://emac.blogs.foxbusiness.com/2009/08/26/medicare-more-efficient-than-private-insurance/

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