RSS Articles and Information
  • Hobby Lobby wins Supreme Court case, can opt out of mandate July 23, 2014
    The Supreme Court ruled in favor of Hobby Lobby and against Obamacare mandates.  They decided that the government cannot force employers to violate their religious beliefs.  Christian corporation Hobby Lobby did not want to have to cover certain types of …
  • Hundreds of Newborns to have Genomes Sequenced July 21, 2014
    Genome sequencing would not replace the newborn screening tests most states require. They are researching if sequencing is better than regular screening at detecting genetic disorders, immune function, as well as metabolic disorders. Researchers believe that cataloguing a newborn’s genome …
  • VA Seeks Help from Corporate Healthcare Giant HCA July 18, 2014
    The Department of Veteran’s Affairs has recruited the Chief Medical Officer of hospital giant HCA, Dr. Jonathan Perlin, to help them find solutions for all the problems of their mismanaged system. Dr. Perlin is known for being a leader in …
  • The Trap Known as Health Insurance July 16, 2014
    The cost of health care is on the rise and is continuing to grow exponentially. One of the biggest factors to this cost is health insurance. Third parties don’t care about quality or affordability. They are spending your money for …
  • Current Health System Provides No Privacy for Patients July 14, 2014
    Dr. Deborah Peel has advocated for patient privacy for over 20 years.  She explains to the tech community how breaches in computer systems using electronic health records destroy privacy.  When patients are in control of their own money and move …
  • Is There a Link Between Saturated Fat & Heart Disease? July 11, 2014
    For the last several decades, we have been taught that saturated fats in butter, cheese, and meat are dangerous for your health. The truth is that this has never been proven. Countries that have high fat diets do not have …
  • Wellness Health Check – July Special July 7, 2014
    Men and Women’s Health Check Blood Tests for $99! (Retail is $800) This is a good way to be proactive and keep up with your health and that of your loved ones. Women’s Test includes: The Comprehensive Wellness Panel(CWP) is …
  • Physicians’ Declaration of Independence July 4, 2014
    by Richard Amerling, MD A physician’s responsibility is to the patient. To protect the patient-physician relationship, payment should be decided between these two parties, assuring all information is kept confidential. Involving third parties is destructive to the patient-physician relationship. Physicians …
  • Ralph Weber: Healthcare with Transparency in Quality & Pricing July 2, 2014
    MediBid helps patients find the best treatment solution for them at the best quality and price. Physicians set their own prices and this transparency allows for competition. MediBid started as a means for Canadians on waiting lists to get timely …
  • Steps to Increase Price Transparency June 30, 2014
    Summary by The Market Institute The Center for American Progress recently published a brief detailing their opinion on how hidden health care costs are hindering market competition and ultimately making healthcare expensive for consumers. Unlike almost every other scenario in …
  • How Obamacare Affects the Affordability of Your Medical Care June 27, 2014
    Those who do not get health insurance from their employers or Medicaid/Medicare find their premiums increasing, some states more than others. While some people will be eligible for Obamacare tax credits, many will still have to pay these premium increases …
  • Canada needs a prosperous Ontario June 27, 2014
    Ontario’s poor economic performance is dragging down Canada’s economy.A Fraser Institute study, Can Canada Prosper without a Prosperous Ontario?, examines Ontario’s shift from the economic engine of Canada to a “have not” province that received $3.2 billion in equalization payments …
  • Why Coconut Milk Might Not Be Your Friend June 25, 2014
    Those following a Paleo diet get most of their fat from coconut milk. Coconut milk is great for making smoothies. Canned coconut milk may contain BPA, a chemical which can leach out of the metal and into acidic foods, such …
  • Increasing Cost of Medical Care Can Make You Sick June 23, 2014
    At the onset of an illness or serious injury, Americans are finding the costs too much to bear – even when they have insurance. Medical expenses are the biggest financial burden in American households today. Nearly 50% of Americans cannot …
  • Natural Alternatives for Sun Protection and Sunburn Treatment June 20, 2014
    With summer activities in full swing, many of them outdoors, it is important to remember to protect your skin from the damaging effects of the sun. Some exposure is beneficial, and can cause your skin to produce Vitamin D. Vitamin …
  • Your HSA Can Double as an IRA June 18, 2014
    Some Americans are supplementing thier retirement funds with a Health Savings Account. People with a high-deductible insurance plan can have an HSA to cover future medical expenses. There is a penalty to withdraw this money for nonmedical reasons, yet after …
  • OMTEC 2014 – The Past, Present and Future of the Implant Market: A Surgeon Inventor Perspective June 17, 2014
    What does the future hold for the orthopaedic implant market? Dr. Robert S. Bray, Jr., a globally recognized spine surgeon, entrepreneur and inventor, provides a look at the industry past and present and answers the question: How will the development …
  • Real Illness or Not? June 16, 2014
    by Sue Redmond Should Doctors prescribe for a “non-disease”? Infants spit up.  Many on a daily basis (some studies show as high as 40-70%).  Just one of the reasons may be that they drink a large volume of liquids and …
  • How Obamacare Impacts Small Businesses June 13, 2014
    Cost increases due to Obamacare will be sharp and immediate for small businesses. As they renew their group health plans, they are discovering an onslaught of new regulations which will also affect their future hiring and business growth. Over 60% …
  • B12 deficiency: a silent epidemic with serious consequences June 11, 2014
    Symptoms of B12 deficiency include: Alzheimer’s, dementia, other memory loss MS and neurological disorders mental illness (depression, anxiety, bipolar) heart disease learning disorders in children autism spectrum autoimmune disease cancer infertility   B12 deficiency is quite common, more so than …

Medicare vs. Private Admin Costs: Let the facts stand

By Ralph Weber CFP®, ChFC®, CLU®, REBC®, and Dave Racer, M.Litt*

health care and medical care for the uninsuredMany health care reformers cite Medicare’s administrative cost as a reason to drop private insurance and move to a government-managed health care system. Depending on who makes the claim, Medicare’s administrative cost estimates range from 1.5% to 12%. In much the same breath, these reformers claim that private insurance companies spend 10% to 50% on administration.

The real administrative cost of Medicare and private health insurance relies on how one defines administrative expense. The estimated cost of administering Medicare, for instance, often excludes overhead items that are not only common to private health insurers, but to all businesses. These different ways of accounting confuse an honest evaluation of the government’s Medicare administrative cost.

So what constitutes an administrative expense? Where can one find real, honest numbers with which to make an intelligent comparison?

Governments across the country have turned to HMOs and managed care to resolve health system problems. Yet, do the most common administrative cost measurements include the high cost of administering managed care, compounded by CPT codes and other billing codes, the cost of billing a host of different insurance companies, and all the other normal business accounting practice cost? These additional – and unnecessary – costs add tens of billions of dollars to the health care bill; a sorry waste of money when there is a less costly, workable solution available (and it is not Medicare).

The best way to measure administrative cost is also the simplest: Take the total dollars spent on health care and subtract how much actually gets to the providers (doctors, hospitals, etc.). The difference is administrative cost.

The health care spending “bible” is the endless set of statistics from the Centers for Medicare and Medicaid (CMS). CMS tables provide a detailed, line item description of how each dollar is spent.

One spending line item on the CMS tables is tiled “Government, Administration and Net Cost of Private Health Insurance.” This is the line item so often quoted out of context when proponents of government medicine are trying to understate the costs of government administration. For private insurers, this line item includes the cost of administration, marketing, research, premium taxes, facilities, equipment, insurance and reinsurance losses, as well as profit.

The CMS data for government spending include additional line items that fall below the “Administration” line: “Government Public Health Activities, Research, and Structures and Equipment” (see Table 1). If CMS separated these same costs for private insurers in the same manner as it does for government plans, it would be a fairer way to compare the two; but it does not, and that fact goes ignored.

Table 1

      Private Insurance Government 

Healthcare

 
Non Patient Care costs        
  Government Administration and Net Cost of Private Health Insurance   x x
  Government Public Health Activities   x
Investment  
  Research   x
  Structures and Equipment   x

 

To shed light on real administrative cost of public versus private health care requires computing the actual per capita cost in absolute dollars. Table 2 shows such a comparison.

Table 2

Costs as percentage of expenses   Private Insurance Medicare Medicaid   Government Grand Total
Number of enrollees   201,991 41,375 39,554   91,884 299,106
Total cost in millions   775 431 329   1,036 2,241
  Cost per Capita   3,837 10,422 8,328   11,272 7,493
Patient care costs   680 410 304   851 1,878
  Medical Loss Ratio   87.79% 94.99% 92.29%   88.32% 86.67%
Non Patient Care costs   12.21% 5.01% 7.71%   11.68% 13.33%
  Government Administration and Net              
  Cost of Private Health Insurance   12.21% 5.01% 7.71%   5.74% 6.95%
  Government Public Health Activities           6.19% 2.86%
Investment              
  Research           3.68% 1.89%
  Structures and Equipment           2.26% 4.49%

 

If one assumed from Table 2 that Medicare administrative cost is just 5.01%, compared to 12.21% for private insurance, it might seem that Medicare is administered at a significantly lower rate. However, comparing the percentage of cost for activities not directly related to patient care paints a far different and truer picture: Private insurers’ non-patient care costs are 12.21% compared to 11.68% public healthcare. Yet, this still leaves out vital data.

Table 3 shows the cost of care in dollars per capita and leads to the truth. Considering “Government Administration and Net Cost of Private Health Insurance” in isolation, the net cost of administering Medicare is 11% greater than that of private insurers on a per capita basis. Including all non-patient care cost indicates that public healthcare administration is 281% greater than that of private insurance administration. This assessment still does not include the cost of collecting taxes, nor does it include the providers’ cost of complying with insurance billing and collection requirements.

Table 3

Per capita in absolute dollars   Private Insurance Medicare Medicaid   Government Grand Total
Number of enrollees   201,991 41,375 39,554   91,884 299,106
Total cost in millions   775 431 329   1,036 2,241
  Cost per Capita   3,837 10,422 8,328   11,272 7,493
Patient care costs   3,368 9,900 7,683   9,257 6,280
Non Patient Care costs   468 522 642   1,317 999
                 
  Government Administration and Net   -          
  Cost of Private Health Insurance   468 522 642   648 521
  Government Public Health Activities   - - -   698 214
Investment   - - -   - -
  Research   - - -   415 142
  Structures and Equipment   - - -   255 337

 

Americans have always been mistrustful of the concept of “government efficiencies” (the ultimate oxymoron). The idea that government can manage health care more effectively and more efficiently is counter-intuitive, and for good reason: The facts show it is not true.

Let the facts stand, and in so doing, let us quit considering the nonsense of a government-run health system. Instead, let us move toward the kind of reforms that will unlock the power of American consumers, and watch effectiveness and efficiencies fall into place.

About the authors

Ralph Weber is a Canadian expatriate, now a Tennessee-based health insurance design consultant, and CEO of Route Three Benefits, Inc. Also the founder and CEO of MediBid Inc., A free market online medical shopping portal for transparency in pricing.

Dave Racer is a speaker, writer, publisher and co-author of Your Health Matters: What you need to know about US health care (Alethos Press LLC, 2006), FACTS: Not Fiction – What really ails US health care (Alethos Press LLC, 2007), and Why health care costs so much: The solution – Consumers (Alethos Press, 2009).  See Alethos Press.

—-

Notes:

CMS expenditure data taken from Table 4, and table 6, National Health Expenditures, by source of funds and type of expenditure: Calendar year 2007. Last accesses January 18, 2009

Enrollment data taken from CPS Annual Demographic Survey Table HI01. Health Insurance Coverage Status and Type of Coverage by Selected Characteristics: 2007. Last Accessed January 18, 2009

No related content found.



At MediBid, we restore market forces to medical care. Doctors get to set their own rates based on their training, experience, and outcomes, and patients get to shop for medical care across state lines and international borders. Many times with MediBid, you will find procedures that are more effective than procedures allowed, or covered by health plans. Transparency and competition are the only way to achieve reasonable costs. Many of our employer clients offering group health insurance through MediBid save $5,000 per employee per year. Those are substantial savings. Patients are saving an average of 48% vs. insurance discounted rates, or 80% vs. retail. Contact us for more information.
Share

Comments

This entry was posted in Cost of Health Care, Insurance and tagged , . Bookmark the permalink.
Categories
Bulk Email Sender

Switch to our mobile site