Of course, it’s easy to have low administrative costs when you’re not concerned about fraud. This is the deceptive part of any public insurance program - you can skimp on admin because you’re not the one picking up the cheque if someone steals from you - the taxpayers are. So your admin numbers look good, but the program budget keeps going up, and up…
How big a deal is Medicare fraud? About 60 billion dollars a year. Out of a medicare budget of about 460 billion. Or about 13% of medicare expenditures. Add the 2% for admin overhead, and you get a much more realistic number for the overhead of Medicare.
In contrast, the private health insurance market is estimated to have fraud levels at about 3%
You have no basis to conclude that the government isn’t concerned about fraud simply because the costs can be passed to taxpayers. After all, private insurers can pass the costs of fraud off to their policy holders too. Nor can we be certain that fraud only represents 3% of private insurers’ costs. How can we know the extent of private insurers’ exposure to expenditures that approach the borderline of being fraudulent, such as a doctor ordering up unnecessary but expensive diagnostic tests? Those costs can and do get passed on, and it’s driving up the cost of healthcare.
Indeed. Which is why efficiency calculated as payouts vs admin costs is meaningless.
Think about what happens in these scenarios:
Medicare begins negotiating with drug companies. The lower prices saves Medicare $100Billion a year. What does this do to its efficiency?
40 Million healthy, uninsured people are enrolled in Medicare. Medicare has to hire 20% more work force to accomodate the additional work. The people are healthy and don’t file any claims. What does this do to its efficiency?
Swine Flu reeks havoc. All seniors get multiple flu shots, costing Medicare an addition $10billion. What does this do to its efficiency?
Then, go back, and use admin costs per person as the metric, and re-evaluate the scenarios. Which do you think gives a better picture?
Medicare Advantage plans have many more options than just Medicare, so it’s logical that the administration costs are higher. That higher cost would also be reflected in the efficiencies calculated by admin costs per enrollee.
I did not modify that quote. Unless I’m mistaken, he edited the post after I had already hit the reply button. If you look at his edit date, you’ll see he editted it at the same time I posted.
Why do they need 20% more workforce to accommodate people who don’t file any claims? I would suggest that there is potentially quite a bit of overhead required to manage the care of old people who require a great deal of treatment, from a variety of doctors, in comparison to managing the care of someone who visits a doctor once a year.
Work capacity. There is no way to know in advance whether the additional enrollees will file claims, although there is still paper work in servicing the account.
Good point. Maybe the best measure of efficiency would be cost per claim processed.
Israel has a for-profit insurance company, universal health care system. Israel pays half what we do and the people live longer.
Our problem isn’t insurance, nor is it the burden of pharmaceutical R&D, nor any other single all-encompassing thing. The whole system is flawed in a multitude of places and needs cleaning. There isn’t a single, magic bullet that will clear it up short of tossing every bit of legislation and infrastructure we have and recreating everything from scratch. That’s impossible without major turmoil and twenty years preparation.
Sorry, Sam, but here your delightful Canadianness plays against you. Medicare spends more money in percentage terms on elgibility verification, fraud prevention and subrogation claims than any private insurer.
Of course Medicare fraud is done by corporations who already profit off health care. I saw a show on durable health goods through Medicare. They pay multiples of what a person could buy for walkers, wheelchairs and other equipment. When a move to stop it has been started, out politicians voted it down. The Medicare chiefs have tried to fix things before.
A lot of hospitals and doctors overcharge Medicare or charge for tests not run. They have to be stopped . But that is not a Medicare problem, but a policing problem.
Your cite gives the percentage of Medicare admin cost from claims processing. It does not do that for private insurers. My guess would be that Medicare, being basically a single payer system, would have relatively low costs. I think you have a point that overhead computed as a percentage of outlays is inaccurate, but computed on a per capita basis is just as inaccurate. Most insurance is done through employers, so there would be a relatively small per person cost for signing people up. Plus, when counting people would you be counting families as many people or as one? Households would be larger in private insurance than for Medicare, so the cost per person would be lower. Even if there were parity Medicare would win, because it deals with far more claims a person than does private insurers. The cite gives cost per beneficiary, so my household would have had one sign up cost for four beneficiaries before my kids got old. Now we have one for two. When we go on Medicare, we’ll have two for two.
Interesting how the article holds Medicare’s claim processing efficiency against it.
We need to also consider the costs of doctors’ offices having to deal with many incompatible insurance claims systems also.