Notice the article that you quoted from a far right wing source started out by admitting that medicare's administrative costs were lower than private insurance's costs. So right off the bat, even the far right admits that is true.
They go on to explain the reason you can't compare the two is because medicare specifically insures the elderly instead of the general population so you can't compare the two. That is actually a fair point. So lets compare medicare to other insurances that insure the same population.
Medicare advantage is private insurance that exclusively is available to the same population that qualify for medicare. By limiting comparisons of medicare to medicare advantage plans we can remove that variable from the equation. Now we have an apples to apples comparison of private insurance vs public insurance.
Guess what? The administrative costs of private medicare advantage plans are still 12% proving the explanations given in that article false.
http://www.aishealth.com/ManagedCare/Medicare/MAN_MA_Administrative_Costs.html
And as I said before, we pay more than any country in the world with a socialized system, double what many countries pay. Not everyone needs to be for profit. Profiting off of whether people live or die has produced many serious financial and ethical problems.
I knew you would try to discredit the source. What is that called again? Here is another article which I pulled from the Heritage Foundation, another conservative organization. Proceed with another ad hominem attack. I've linked to the website from which this article came. I think part of the problems with numbers is that they are easy to manipulate. Both sides are claiming one is more efficient and both put up interesting arguments. In my experience government does nothing more efficiently than the private sector. I'm not bashing government, there is simply no incentive for them to be really efficient. I mean, they are only spending taxpayer dollars anyway, right?
http://blog.heritage.org/2009/07/06/medicare-administrative-costs-and-paul-krugman’s-propaganda-shop/
In his blog, New York Times columnist Paul Krugman launches an
unsubstantiated attack on
The Heritage Foundation for our
June 25 report showing that Medicare administrative costs are higher than those private health plans, not lower, as Krugman has frequently claimed. We find it somewhat encouraging that his only “refutation” to our basic point consists of (a) an
ad-hominem-like attack, and (b) an old quote that is doesn’t refute the point of our report — and is incorrect anyway.
The point of our paper is that expressing health administrative costs as a percentage of total program costs is silly, since the bulk of program costs are health care claims, and administrative costs are mostly unrelated to the level of health care claims. (Medicare claims processing is only about 4% of administrative costs; the other 96% is unrelated to the level of claims). This is clear from a moment’s thought — if you insure a healthy 25-year-old who never goes to the doctor (or at least, not enough to exceed the deductible), a health plan’s cost for that person is 100%, no matter how efficient the administration is. Private insurance has a lot more people like that than Medicare does.
The appropriate measure is administrative cost per person, and by that standard Medicare is more expensive than private health plans. This point stands unrefuted, even with the additional quote from Jacob Hacker.
Hacker refers to a
GAO report that says administrative costs (including profit) for Medicare Advantage plans (privately-run managed care plans for Medicare beneficiaries) total 16.7% of total program costs.
Hacker claims that “[t]his is a near perfect ‘apples to apples’ comparison of administrative costs, because the public Medicare plan and Medicare Advantage plans are operating under similar rules and treating the same population.”
This is simply not true. The Medicare Payment Advisory Commission (MedPAC)
reports (page 62) that Medicare beneficiaries who report their health status as “excellent” or “very good” are twice as likely to enroll in Medicare Advantage as those who report their health status as “poor.” Any Medicare beneficiary can enroll in Medicare Advantage, but those who choose to do so are, on average, healthier than those who remain in the “traditional” Medicare program. In short, Medicare Advantage plans are not “treating the same population.” They are not “operating under similar rules” either; the Medicare Advantage plans have an entire set of regulations of their own, quite different from the rules of the traditional Medicare fee-for-service system.
Putting aside the factual errors and the fact that expressing administrative costs as a percentage of total costs is misleading, the GAO report doesn’t say what Hacker says it says. The administrative costs shown in the GAO report include major administrative functions not included in the figures, which are not comparable to those for reported by Hacker for traditional Medicare. Since the bulk of Medicare Advantage plans are HMO plans, the 16.7% figure includes both functions of operating a health plan and functions that occur in doctors’ offices and health plans. In traditional Medicare, the fees paid to physicians and hospitals include an amount attributable to their internal administrative costs. For physicians, that amount averages
17.3% of their fees — this is administrative costs in addition to costs incurred at the Medicare program level. Hacker says this comes up to 2%, but is actually 3% or 6%, depending on whether you count just the cost of the Medicare bureaucracy, or include with that cost the costs other government agencies incur in support of Medicare.
So even if we believe Hacker’s comparisons between Medicare Advantage and traditional Medicare, a true “apples-to-apples” comparison shows that traditional Medicare’s administrative cost are higher — even using a “percentage-of-costs” approach weighted in its favor.
In other words, Krugman’s criticism of out report consists of an
ad hominem attack, and a quote that doesn’t refute our point based on a report that doesn’t say what he says it says.
Krugman’s resort to name-calling (he calls Heritage a “propaganda shop”
is welcome, in a way, since it demonstrates that he can’t refute our point based on the plain facts. Regardless, the facts stand, even if Krugman doesn’t like the employer of the person who brought them to light.
Edit: I also am including a link to the article that this article is talking about. Fair is fair, right?
http://krugman.blogs.nytimes.com/2009/07/06/administrative-costs/