Health care e-mail from the White House

[Kelly the Dog]

So how much is it then? What are the actual per person administrative costs of Medicare, that they're a fifth as much as provate insurance?

I don't know, but I do know we don't pay 11 trillion.

 

I deleted the post because I went back and looked at what you wrote and thought maybe i was wrong, that you were saying it costs 900 per month total. But in post 72 you said your numbers were just for administrative costs. That can't be.

 

There is no profit, much lower overhead, no huge salaries, no payment to shareholders, no lobbyist fees, much less underwriting, payments are less to doctors and hospitals, etc, all kinds of stuff that brings the administrative costs way down for Medicare. That's pretty obvious. I would agree that the average per person may be higher because of the age but maybe not so much because they don't have the best coverage or the gold plated plans or the same rates paid out.

[Taro T]

My point was less the numbers than it was that comparing Medicare to private insurers is an apples-to-oranges comparison made doubly stupid when no one knows the real numbers anyway, and triply stupid when one uses a single data point for comparison.

 

Though the $300/$900 numbers don't seem out of line to me - in my own health plan, I'm healthy, my wife's not comparatively, and I'm sure her admin costs are at least that much more than mine because of it. I can think of three easy reasons they'd be right - and three they'd be wrong (first on the list being: they're from the Heritage Foundation).

Reason #2 being, Krugman is using them also.

 

All I was suggesting was that the $300/$900 numbers would seem to be per year, not per month. At $300/month, that puts admin at $3,600 and (if Kelly's 20% figure is correct) full year cost for a single person at $18,000. Going w/ what would seem to be more realistic estimates for admin cost %ages would put that full year cost even higher.

 

For my family last year, our insurance premiums were ~$2k. I'd be surprised if the company were eating upwards of $16k (probably closer to $60k in that case as it is a family plan). The plan's full cost is probably more like $4k, which w/ put administrative costs most likely into the $400-$800/year range.

 

EDIT: And for the record, I agree that the comparison is an apples-to-kumquats comparison.

Edited August 17, 2009 by Taro T

[Kelly the Dog]

So how much is it then? What are the actual per person administrative costs of Medicare, that they're a fifth as much as provate insurance?

According to wiki, the total government expenditure on Medicare in 2007 was 440 billion. There are about 40 million people on Medicare. That would be $11,000 grand total, per person, per year. That seems about right to me. That would be about 440 per year on administrative costs if it were 4%.

[DC Tom]

According to wiki, the total government expenditure on Medicare in 2007 was 440 billion. There are about 40 million people on Medicare. That would be $11,000 grand total, per person, per year. That seems about right to me. That would be about 440 per year on administrative costs if it were 4%.

 

I'll let the wiki sourcing slide - just this once - because you knew how I feel about it before you posted.

[Kelly the Dog]

I'll let the wiki sourcing slide - just this once - because you knew how I feel about it before you posted.

 

 

This is a Kaiser Foundation study and figures. It says 432 billion total in 2007.

http://www.kff.org/medicare/upload/7731.pdf

[GG]

There is no profit, much lower overhead, no huge salaries, no payment to shareholders, no lobbyist fees, much less underwriting, payments are less to doctors and hospitals, etc, all kinds of stuff that brings the administrative costs way down for Medicare. That's pretty obvious. I would agree that the average per person may be higher because of the age but maybe not so much because they don't have the best coverage or the gold plated plans or the same rates paid out.

 

That's fine & dandy, except other than lobbyist fees, none of the items you listed would be classified as "administrative" costs.

[Kelly the Dog]

That's fine & dandy, except other than lobbyist fees, none of the items you listed would be classified as "administrative" costs.

There are numerous definitions, especially in the health care industry for "administrative costs" and "overhead" and other terms. The 20% figure I used included all of those items I listed above (excluding less payments to docs), including profits. That came from Wendell Potter, the CIGNA PR head turned whistleblower.

[Pine Barrens Mafia]

I'm healthy

 

 

Define "healthy."

[GG]

There are numerous definitions, especially in the health care industry for "administrative costs" and "overhead" and other terms. The 20% figure I used included all of those items I listed above (excluding less payments to docs), including profits. That came from Wendell Potter, the CIGNA PR head turned whistleblower.

 

Great, now we're arguing about accounting terms that a PR guy is using. Don't know anything about who Potter is, but it's kind of ridiculous to argue financial impact, when scary words like overhead are thrown in, without proper context.

 

I think Tom alluded to this issue, it's ridiculous to compare the mythical insurance company "administrative" cost to a government run "administrative" cost, because the government doesn't operate under any semblance of accounting standards that can be compared to the private sector.

 

To put it into perspective, a 14% savings in administrative costs is like bubble gum on the equator.

[Kelly the Dog]

Great, now we're arguing about accounting terms that a PR guy is using. Don't know anything about who Potter is, but it's kind of ridiculous to argue financial impact, when scary words like overhead are thrown in, without proper context.

 

I think Tom alluded to this issue, it's ridiculous to compare the mythical insurance company "administrative" cost to a government run "administrative" cost, because the government doesn't operate under any semblance of accounting standards that can be compared to the private sector.

 

To put it into perspective, a 14% savings in administrative costs is like bubble gum on the equator.

 

It doesn't matter whatsoever what is being counted where, under what terms, and what exactly the government admin costs are or what the private insurers admin or overhead costs are. All that matters is that for 10+ various reasons, it's cheaper for a government plan that doesn't need to make a profit or pay lobbyists or pay huge salaries or pay for buildings and can charge less for doctors and facilities, etc. And if the private insurers want to get a crack at the 40-50-60 million more potential enrollees that are out there in the marketplace, they will need to cut some of their administrative costs and profits and lower their premiums. There is money to be cut, and if they are close to the public plan in cost, the public will go with them. If they are not close, a larger portion may go the cheaper route.

[Taro T]

It doesn't matter whatsoever what is being counted where, under what terms, and what exactly the government admin costs are or what the private insurers admin or overhead costs are. All that matters is that for 10+ various reasons, it's cheaper for a government plan that doesn't need to make a profit or pay lobbyists or pay huge salaries or pay for buildings and can charge less for doctors and facilities, etc. And if the private insurers want to get a crack at the 40-50-60 million more potential enrollees that are out there in the marketplace, they will need to cut some of their administrative costs and profits and lower their premiums. There is money to be cut, and if they are close to the public plan in cost, the public will go with them. If they are not close, a larger portion may go the cheaper route.

It will likely be cheaper (in direct costs) to the insured person on the government plan. It is not at all a given that the government plan will in fact be cheaper. It especially isn't a given that it will be cheaper when no one knows what exactly the government plan is going to be.

[GG]

It doesn't matter whatsoever what is being counted where, under what terms, and what exactly the government admin costs are or what the private insurers admin or overhead costs are. All that matters is that for 10+ various reasons, it's cheaper for a government plan that doesn't need to make a profit or pay lobbyists or pay huge salaries or pay for buildings and can charge less for doctors and facilities, etc. And if the private insurers want to get a crack at the 40-50-60 million more potential enrollees that are out there in the marketplace, they will need to cut some of their administrative costs and profits and lower their premiums. There is money to be cut, and if they are close to the public plan in cost, the public will go with them. If they are not close, a larger portion may go the cheaper route.

 

I'm not an insurance co, analyst. But if we assume that the true profit margin for the insurance industry is 3%, that's not a whole lot of "savings" that the government can bring. Right now, Medicaid/Medicare is able to piggy back on the infrastructure that the private insurers have created and that's how the gov't plans cut back on the private costs. It's not a true cost saving when someone subsidizes you.

 

As government expands its share, administrative costs will escalate at a higher rate than the additional number of covered persons, because a) the private insurers will be more than happy to have the government shoulder its share of the true administrative costs and b) government programs never come in under budget.

 

That's why it's insane that you have a cottage industry that's shouting about these mythical savings in administrative costs, when the true cost of healthcare is in the actual provision of service, which isn't changing.

[Kelly the Dog]

It will likely be cheaper (in direct costs) to the insured person on the government plan. It is not at all a given that the government plan will in fact be cheaper. It especially isn't a given that it will be cheaper when no one knows what exactly the government plan is going to be.

They know pretty much how it is going to work. They know pretty much what they are going to charge doctors and facilities, which will be more than Medicare rates but less than private rates (closer to Medicare than private). The CBO looked at the actual House plan and said it would likely come in at 10% cheaper. Another group said it may be 20-30% cheaper but I doubt that and would trust the CBO number more.

 

The Democrats and other proponents of the reform only want to get a cheaper plan available so private insurers had some competition; it's not a secret conspiracy to take over the industry. In a lot of markets there is only 1-2 choices for people which is why the premiums are higher there. The national exchanges will also likely force the larger private insurers to lower their rates because they won't be able to be a monopoly (individuals paid a lot more because they didn't have purchasing power, but now they will be as if a huge corporation with hundreds of thousands of employees that can get cheaper rates).

[Magox]

They know pretty much how it is going to work. They know pretty much what they are going to charge doctors and facilities, which will be more than Medicare rates but less than private rates (closer to Medicare than private). The CBO looked at the actual House plan and said it would likely come in at 10% cheaper. Another group said it may be 20-30% cheaper but I doubt that and would trust the CBO number more.

 

The Democrats and other proponents of the reform only want to get a cheaper plan available so private insurers had some competition; it's not a secret conspiracy to take over the industry. In a lot of markets there is only 1-2 choices for people which is why the premiums are higher there. The national exchanges will also likely force the larger private insurers to lower their rates because they won't be able to be a monopoly (individuals paid a lot more because they didn't have purchasing power, but now they will be as if a huge corporation with hundreds of thousands of employees that can get cheaper rates).

why are you ignoring that the industry average for profit margins in the health insurance field is 3%?

 

Competition won't bring down the price, there isn't enough wiggle room. The only way that the price will be lowered under their plan of the "public option" would be if the quality of health insurance is watered down and that the private insurers are crowded out because of the government. It's simple economics.