Is Medicare more efficient than private insurance?

[urbanlibertarian]

Interesting article from the Health Affairs Blog by by John Goodman and Thomas Saving.  Here's a taste:

Claim Of Lower Medicare Administrative Costs Is Based On An Incomplete Comparison

What about the claim that Medicare’s administrative costs are only 2 percent, compared to 10 percent to 15 percent for private insurers? The problem with this comparison is that it includes the cost of marketing and selling insurance as well as the costs of collecting premiums on the private side, but ignores the cost of collecting taxes on the public side. It also ignores the substantial administrative cost that Medicare shifts to the providers of care.

Studies by Milliman and others show that when all costs are included, Medicare costs more, not less, to administer. Further, raw numbers show that, using Medicare’s own accounting, its administrative expenses per enrollee are higher than private insurance. They are lower only when expressed as a percentage â€" but that may be because the average medical expense for a senior is so much higher than the expense for non-seniors. Also, an unpublished ongoing study by Milliman finds that seniors on Medicare use twice the health resource as seniors who are still on private insurance, everything equal.

Ironically, many observers think Medicare spends too little on administration, which is one reason for an estimated Medicare fraud loss of one out of every ten dollars of Medicare benefits paid. Private insurers devote more resources to fraud prevention and find it profitable to do so.

Whole thing here: http://healthaffairs.org/blog/2011/08/09/is-medicare-more-efficient-than-private-insurance/

[MusicMan]

Quote from UL: "Private insurers devote more resources to fraud prevention and find it profitable to do so."

They also devote more resources to denying claims, and find it profitable to do so. 

I guess you have forgotten, they are motivated by profit, not providing care. The rest of the world has it figured out, we lag behind them in this issue. Provide a good affordable public option and let folks choose. Rich folks can continue to pay for private, for-profit health care if they choose.  When/if you bring millions of younger healthier people into the Medicare pool ( Medicare Part E; for Everyone) then the entire system will improve in terms of cost efficiency.

By the way, do millionaires and billionaires even need health insurance? If Bill Gates needs open heart surgery he just pays for it, right?

[manasia]

Quote from UL: "Private insurers devote more resources to fraud prevention and find it profitable to do so."

They also devote more resources to denying claims, and find it profitable to do so. 

I guess you have forgotten, they are motivated by profit, not providing care. The rest of the world has it figured out, we lag behind them in this issue. Provide a good affordable public option and let folks choose. Rich folks can continue to pay for private, for-profit health care if they choose.  When/if you bring millions of younger healthier people into the Medicare pool ( Medicare Part E; for Everyone) then the entire system will improve in terms of cost efficiency.

By the way, do millionaires and billionaires even need health insurance? If Bill Gates needs open heart surgery he just pays for it, right?

MusicMan interesting point - They also devote more resources to denying claims, and find it profitable to do so.

[Dog Walker]

Urban, let me recommend an interesting little book to you that turned my head around on the whole private insurance company issue;  "Delay, Deny, Defend".  It's by a Rutgers University Law School professor.  Main library downtown has it. 

He shows how the insurance industry as a whole, not just the health insurance industry about 1993 realized that their claims adjustment process could be used as a profit center by delaying claim payment, by denying claims and then going to court to defend against paying claims.  It improved their profitability significantly and they have changed their whole claims process behind it.

[Tacachale]

No improvements to our health care system will be had until we find a way to reign in the costs. And that won't happen until (among other things) we find a way to reign in insurance costs. And THAT won't happen without meaningful tort reform to keep excessive litigation in check. The exorbitant costs of American health care affect both public and private systems.

[JeffreyS]

An interesting article UL.  The fact still remains according to the article that Medicare is still a little cheaper than private to implement. Now consider the two groups you are insuring.  Private only takes people who have been covered or can prove they are young and healthy Medicare takes all seniors.  The cost difference between these two groups is a staggering gulf.  The private does not even have a model that can cover that group and yet the Government does it cheaper than the ones with the 20 year olds.  To argue the costs about public vs private is to not be serious about the debate of the government's role.  The truth is that argument has been settled as well.  We don't let people die on the street covered or not we claim responsibility and treat them.  We now have a system where we (the state) cover the most expensive group (seniors) and people who wait until their costs will be at the highest (those uninsured who wait until problems are so bad they will cost a fortune) and give the young workers to the private sector to profit from. The private sector still can't hold costs down unless we now pass laws to protect them from their own negligence (tort reform). 

So we end up punishing the productive extra by giving them no medical benefit for their taxes that cover everyone else. So when the productive get really sick many even with decent insurance go bankrupt and get dropped.  If you don't want to do that we need to cover everyone or toss them all to the private sector who will not cover them all. Why would they?

I employ 24-27 people and offer insurance that I pay half the premium for.  Over the last 10 years the insurance we offer has gone from really good affordable coverage to fair expensive coverage.