Sunday, June 28, 2009

Heritage: Medicare has HIGHER Admin Costs

Over the past couple weeks of the health care debate, I have continually heard the claim that a public option could lower health care costs by reducing administrative costs, and the evidence for this is supposedly that Medicare has much lower administrative costs than private insurance.

However, the fact is that Medicare's administrative costs on a PER PERSON BASIS are actually HIGHER than those of private insurance. All the rhetoric lately of Medicare having lower admin costs is because they are taking the admin costs as a percentage of the total dollar amount spent for admin plus paying claims. Because Medicare pays more in claims per beneficiary, the admin costs are divided into a much larger denominator than private insurance's. In fact, the more fraud, waste, and abuse there is in Medicare, the lower their admin costs are as a percentage!

Read the entire Heritage memo here:
June 25, 2009
Medicare Administrative Costs Are Higher, Not Lower, Than for Private Insurance

Money quote is:

The fact is that, in recent years, Medicare administrative costs per beneficiary have substantially exceeded those costs for the private sector, this despite the fact that, as critics note, private insurance is subject to many expenses not incurred by Medicare. Contrary to the claims of public plan advocates, moving millions of Americans from private insurance to a Medicare-like program will result in program administrative costs that are higher per person and higher, not lower, for the nation as a whole.

And here's the Heritage graphics:

Hat tip to Tom Bevan at RealClearPolitics where I spotted this first.

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