Medicare Costs Are Higher, Not Lower
Nina Owcharenko /
In his testimony before the House Education and Labor Committee on the Tri-Committee Health Care Reform bill, Dr. Jacob Hacker (the architect of the now famous “public plan option”) continues to suggest that a public plan has the benefit of lower administrative costs compared to private coverage:
Perhaps the most pressing of these problems is skyrocketing costs. Public health insurance has much lower administrative expenses than private plans, it obtains larger volume discounts because of its broad reach, and it does not have to earn profits as many private plans do. Furthermore, experience suggests that these lower costs are accompanied by a superior ability to control spending over time.
Dr. Robert Book, in a new Web Memo entitled “Medicare Administrative Costs Are Higher, Not Lower, Than for Private Insurance,” argues against the claims put forth by Dr. Hacker:
Health care reform is a complex problem, of which administrative costs is only one component. However, for policymakers and ordinary Americans to understand these issues, journalists, analysts, and advocates have an obligation to avoid “playing with numbers”–either through inadvertent misunderstanding of what the numbers represent or through a deliberate choice of misleading numbers that appear to support a desired policy.
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.