I've heard this often, but some people claim it is a very misleading metric. Their argument:
Medicare's admin costs may be lower than private insurance when expressed as a % of claims paid, but Medicare costs are higher on a per-patient basis. The lower Medicare admin costs as a % of claims don't reflect any great efficiency on Medicare's part, but just the fact that their average patients are so much sicker that the average cost per patient is higher. Billing costs tend to be fairly fixed per procedure: it doesn't cost any more to process a claim for a $40K procedure than it does for a ten dollar procedure. Medicare patients are old and sick, they have expensive procedures so Medicare can spread their admin costs over a very large expenditure baseline.
From 2005:
- Medicare's average admin cost per enrollee: $509
- Private Insurance's admin costs per enrollee (includes profit): $453.
Here's a groovy chart:
Again, consider the
source (Heritage Foundation). Like every thinktank, they frame things to fit their world view, but I've found them to be factually accurate. A "per person" expression of admin costs is likely just as valid as a "percent of benefits paid" metric. If so, there's good reason to doubt that a Medicare-like government program would be a money saver if the program includes younger, less ill, populations.
"There are three kinds of lies: lies, damned lies, and statistics."
-- Benjamin Disraeli (and Mark Twain)