Help me out here. I am going to go out on a limb and accept the statistics at face-value. That may turn out to be a mistake on my part, but I want to examine this argument on its merits. Let’s say it is misleading to claim that Medicare has significantly lower administrative costs than private health insurance. Why? Because Medicare covers elderly people that use a lot of health care, so when you say that only 3% of Medicare’s payout goes to cover administrative costs, you need to factor in that it is 3% of a giant pie. Private health insurers cover the healthiest people, so the 12% of their payout that goes to administrative costs is 12% of a much smaller pie. If, as the Heritage Foundation alleges, Medicare actually spends more than private insurers on a per-patient basis, then maybe we shouldn’t expect to see any cost savings from a public option. The 12%-3% difference is an illusion.
I can see how this argument can be made, but I think Tom Bevan goes too far when he says:
But here’s the catch: because Medicare is devoted to serving a population that is elderly, and therefore in need of greater levels of medical care, it generates significantly higher expenditures than private insurance plans, thus making administrative costs smaller as a percentage of total costs. This creates the appearance that Medicare is a model of administrative efficiency. What Jon Alter sees as a “miracle” is really just a statistical sleight of hand.
See, I think Bevan is engaging in a sleight of hand, too. Because the key to the comparatively lower per-patient administrative costs of private insurers is that most of their customers do not use the system and thus it requires very little to administer their accounts.. The real question is whether private insurers could maintain their administrative costs if they had to administer a pool that included everyone over sixty-five years of age in this country. Or, conversely, could the government vastly improve their per patient costs by taking on a pool of healthy adults? I’m guessing that we don’t learn much by making apples-to-oranges comparisons, and what we’re seeing is just two-sides using statistics to suit their own arguments.
A better way to judge is to compare our system to Canada’s and the other large population industrialized nations’ health care systems. How are we doing in the aggregate compared to them? What kind of improvements should we anticipate if we mimic their systems?