More on Medicare’s Administrative Costs

I’ve previously written on how Medicare drastically underestimates its administrative costs. Benjamin Zycher, a senior fellow at the Manhattan Institute,has analyzed these costs a different way and concluded that administrative costs under a single payer scheme would be twice those of today’s health insurance.

He doesn’t really count the hidden costs that I was carrying on about, so the actual administrative costs of Medicare for all are likely even higher. Furthermore, we’re not likely to get Medicare, but rather Medicaid. Medicare currently sets about 1 million prices. Before the Soviet Union collapsed its government was setting about 30 million prices, so I guess we still have some room to maneuver.

When the federal government assumes all the responsibility for the nation’s medical bills they will be overwhelmed with ruinous costs. They only possible response will be to dispense less medical care. They will find themselves setting millions of prices and rationing everything from hips to dialysis in the name of “efficiency”. “Effectiveness” and “Evidence Based Medicine” are about to become synonyms for rationing.

I don’t really understand why I or anyone else should have to explain that expanding medical care, no matter how much of a good you think it to be, must cost more. Even if the government can print an infinity of money it cannot in truth make 2 + 2 equal anything but four no matter how fuzzy or creative its math.

The automobile business is just a warm up for the really big mouthful that’s national healthcare. The country’s GI tract is headed for either infarction or obstruction, or even both. The country seems ready to swallow a pill big enough to choke a pachyderm. Seeming to keep your head while everyone else are appropriately losing theirs is the worst kind of false assurance.

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5 Responses to More on Medicare’s Administrative Costs

  1. Terra says:

    I would disagree. I know about 60 people (give or take) personally. Of those about 5 have private insurance right now. (4 are on medicare.)

    The amount of money that is spent on filing insurance, on trying to get payments from people that can’t afford medical care, the amount of money lost when selling a debt to a collection agency, and so on… All of these services add up to a lot.

    When people get really sick their private insurance starts costing them more (sometimes to the extent they can no longer afford it), kicks them off (with limited if any other programs that will take them), and so on.

    Neither medicare or medicaid is a good example of single payer beyond the concept of the “disruption” from the change over. Both cost more than they should, not only because of the costs mentioned before but a few other things as well.
    #1 Medicare takes care of only the older people, those that are sick more than others.
    #2 Medicaid ends up doing the same thing. When people that are truly sick loose their insurance many are left with no option but to make their income low enough to be able to be put on this program.

    Thus a single payer program would balance out the system, and the sick and those not sick would be paying into the same base. In this way, and only in this way would we make the system work. As long as the healthy people are the ones that are being insured, then no one is really protected.

    My life example: My daughter (15) was diagnosed with an autoimmune disease last year. She won’t loose her insurance until she is 18 or she taps her insurance out at a million dollars. However, now that she is diagnosed no affordable health care is going to come her way. The current system will allow her two options.
    #1 Live as close to a real life as possible, but always be in debt so much that she will never get to own anything. Then when she gets far enough in debt, unless she waits until it is a medical emergency and goes to the hospital she won’t get care. (She is on chemo, to keep her immune system down; all the time antibiotics to make sure she doesn’t get an specific type of pneumonia that would be devastating; weekly blood tests, and on the list goes.)
    #2 Accept her life as a welfare recipient, make sure she never makes much money so that medicaid will take care of her…

    For her and others like her our system has to change.

  2. You raise serious issues which deserve a serious response. A single payer system must be run by the government. It will of necessity resemble either Medicare or Medicaid. It will also have to deal with the increased cost of covering all the population. It has only two choices – ration care, typically by delay – or raise taxes. The latter is usually very unpopular leading to the former. We already have another national medical provider – the VA. I’ve worked at VA hospitals most of my career. The care there is good, but not what I would want for myself or my family even though I am a veteran and eligible for it. Long lines, delays, and restricted treatment options are the rule. But it’s “free”.

    The root of the problem is the high cost of medical care. No one really asks why it costs so much. If anyone bothers the stock answer is better and expensive technology. But technological advances in every other sphere lower costs rather than increasing them. An MRI “costs’ $4,000 to $9,000. A EBT which is of similar technological sophistication costs $100. Why? Medicare and private insurance cover the MRI but not the EBT. Price competition has reduced the cost of the latter. Computers get better and cheaper every year. Why? Competition.

    Any “reform” of medical care that does not include competition will not control costs and will inevitably lead to rationing by delay. Costs cannot be contained by moving to a single payer system without rationing.

    People who currently have health insurance will likely find themselves forced into a single payer system because employers will drop health insurance as it will be to their economic benefit to do so even if they have to pay fines. Also the system must be compulsory. The government must force people to buy health insurance even if they don’t want to. Given the mandates for coverage that many of the state governments have imposed under pressure from providers who want their services reimbursed the cost of health insurance will be further increased.

    A system which fosters competition both among insurers and providers will lower costs. Adding catastrophic insurance to the mix and allowing patients to form large groups will handle the problem of providing medical insurance to those with pre-existing conditions.

    The subject is too complex for me to go on at greater length. You can read some of my earlier posts on the subject. But you can be certain that a single payer system will not result in lower costs or delivery of services which is the equal much less better than that provided to people who currently are adequately insured. The system desperately needs reform, but not reform which is ruinously expensive and which degrades care.

  3. Thanks for the Zycher link. He points out the obvious……. that is ignored. As do you.

    “I don’t really understand why I or anyone else should have to explain that expanding medical care, no matter how much of a good you think it to be, must cost more.”

    Here in California we face bankruptcy, despite the highest taxes in the nation (gas, income, sales). Yet, legislators only know to expand, not to contract Our districts are horribly gerrymandered so fiscally responsible candidates usually lose. We provide many medical programs that only expand. Public employee unions and their even now continuing demands are the other huge expense.

    Why is it taken for granted that medical care is a right?

    Ronald Reagan as governor said “Our state animal is a bear, not a cow, and its not to be milked!!”

    How things change!!


  4. Even if our brilliant Dr. Kurtzman were made medical czar and could bring the costs down, I think there are too many other factors that would still collapse the system eventually. One is that this is not a closed system.

    By judicial mandate we (CA) are required to give free care to anyone who comes across the border, whether they need it or not. (Some aliens are actually of means) Heaven forbid we bill their native countries for the services. 10% of Mexico is here, most in our state. An endless, increasing expense.


    The current federal government seems to be anti competition.


  5. […] Based Reimbursement It didn’t take long. The day after I wrote that Evidenced Based Medicine would be used to ration medical care the June 8 issue of the Archives […]

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