Originally Posted By: Gary Allan
Quote:
Do you have a link for that?
Now that he's given you a link ..to prove what he asserted ...what do you have to say??
Let's not leave this untended, Tempest...
Certainly. If you actually read the paper he quotes, it shows the flaws in the idea that Medicare is more efficient. Namely, it doesn't show all the true costs of medicare. It also doesn't factor in profit that medicare also does not receive.
In short, they are comparing apples to oranges:
Quote:
The Underlying Distortion in Medicare’s Administrative Cost Ratio. As stated
earlier, Medicare arrives at its administrative cost ratio by dividing the amount of
money reportedly spent on administration by the amount of claims paid. Unfortunately,
that approach gives Medicare an unfair advantage. That’s because Medicare serves the
senior population, while comprehensive private insurance policies target the under-65
population. Seniors spend, on average, more money on health care than those under 65.
As a result, the average claim paid in Medicare is higher than that for those under 65.
To use an easy example, suppose the average claim for a senior is $2,000, while the
average claim for a person under age 65 is $1,000. And suppose that the cost to
administer both claims is $100. In this scenario, the administrative cost ratio for the
private sector would be 10 percent, but only 5 percent for Medicare. In other words,
even if the administrative costs are exactly the same in Medicare and the private sector,
Medicare will look more efficient because the average claim is larger. How much
larger?
Table 3
Estimated Private Market Expenses (percent of earned premium)
Market (Profits)
Admin without
Commission, Premium
Tax and Profit
Commission
and
Premium Tax
Total
Admin
Individual 3.0% 12.5% 14.5% 30.0%
Small Group 2.0% 10.5% 10.5% 23.0%
Large Group 2.5% 8.0% 2.0% 12.5%
Composite Private 2.5% 8.9% 5.3% 16.7%
$100 Admin Costs
$ 1,000 Claims
= 10% Admin Cost Ratio
$100 Admin Costs
$2,000 Claims
= 5% Admin Cost Ratio
10
"In many states
policies sold in the
individual market are
very affordable."
For medical costs only, excluding out-of-pocket spending, in 2003:
· Medicare spent $6,600 per person.
· The private sector spent only $2,700 per person.
· That means that average per-person claim in Medicare is more than
twice the average per-person claim in the private sector.
So how does that affect the administrative cost ratio? The Milliman report concludes
that when the relevant administrative costs are included in Medicare, the ratio is about
5.2 percent. If the numbers were adequately “handicapped” for comparison with the
private sector, the Medicare administrative cost ratio would be roughly 6 to 8 percent.
And there are other distortions that could affect the ratio. For example, Medicare deals
with each senior separately; there are no family policies in Medicare. Not so in the
private sector, where a large percentage are family policies. Why does that make a
difference? Because the private sector bundles the premiums in a family policy. The
cost of a four-person family policy will be significantly less than if all four were rated
separately. That practice reduces the total premium received, but has no effect on
ultimate claims costs — which negatively affects the administrative cost ratio.
The point is that even if the numbers show Medicare’s administrative cost as lower than
the private sector, variations such as higher average per-person claims could vastly
underestimate Medicare’s true administrative costs.
Quote:
http://www.cahi.org/cahi_contents/resources/pdf/CAHI_Medicare_Admin_Final_Publication.pdf
Even the text in his link notes that the cost of the IRS to collect funds is left out.
The numbers are bad.
