Medicare administrative costs
September 4, 2012 3 Comments
A health policy factoid is that the administrative costs of Medicare are lower than are those for private insurance. Austin Frakt and Tyler Cowen were discussing a Yuval Levin piece that argued that was partly due to Medicare “free riding” on other government infrastructures by not paying for them, and that the real administrative costs were therefore higher. This claim appears to be incorrect, because Medicare does explicitly pay other agencies (Treasury, SSA, CMS, HHS, etc.) for administrative work related to Medicare.
Update: Via email with Austin and Paul Van de Water, Paul points out Part B admin expenses are also paid as discussed on pages 93-94.
Part D admin expenses are discussed on pages 118-19.
Paul Van de Water addresses the issue of relative administrative costs of health insurance in this National Association of Social Insurance (NASI) report (see pp. 45-47) and provides the following estimated delta on administrative costs using national health care accounts: Medicare 5.0%; Medicaid 7.7%; private insurance 12.2% (with great variation by employer size). I will do a bit more reading on this…it seems as though the administrative expenses across types of insurance should be knowable in a fairly non controversial manner. If we are thinking of issues that will need to be gotten straight to move toward a competitive bidding approach in Medicare with level competition, this is one issue. Another are the exit rights from private options back to traditional Medicare, and the hospice issue that exists with current Medicare Advantage plans.