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Politics : A US National Health Care System?
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From: TimF5/1/2008 7:11:47 PM
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"Actually, the truth is that administrative costs at Medicare are about 2% and at Medicaid are about 6%"

Um no, that’s not true either.

First, most of the actual administrative costs that sustain Medicare and Medicaid aren’t counted as part of their budget, they’re either passed along to providers through the regulatory power of the government (whereas private insurance companies have to account for them since they can’t simply pass them along to providers) or they’re coming out of other parts of the federal budget. Example: Medicare premiums are collected by the IRS which acts as Medicare’s accounts receivable department but since it isn’t part of the actual “Medicare budget” it isn’t counted as an administrative expense for Medicare while a private insurance company using activities-based costing would count it as part of the administrative overhead.

The other reason is that the percentages brooksfoe is claiming are actually based on a percentage of payments and Medicare payments tend to be larger (about 60% more or double what the average payment made by most private insurers) so you can have a situation where while it actually costs more to process a request for Medicare/Medicaid payment but because the actual payment will be larger, it shows up as a smaller percentage of the payment.

So basically what brooksfoe’s numbers are based on is (a) funny accounting whereby the government doesn’t count it as an “administrative cost” if it’s coming out of someone else’s budget (even though it makes no difference to the taxpayer or patient since the costs is just being passed along) and (b) differences in the size of Medicare payments rather than the size of administrative expenses.

Posted by Thorley Winston | May 1, 2008 3:17 PM

meganmcardle.theatlantic.com
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