Yes, as the health care battle continues into the next few years, we’re going to have to ask our health insurers why they should continue to exist. This matters, since both John Edwards and Barack Obama have offered plans which envision Medicare competing with private plans. The private insurers will offer arguments as to why government-based health insurance really isn’t that much better, in spite of studies that say it’s a lot more efficient. Here’s Charlie Baker’s effort, (ht: HCFA) and he claims to find some hidden costs that the feds incur that typically aren’t counted in a comparison with private insurers:
What I’ve heard before is that Medicare only spends 4% of its money on a per beneficiary basis on administration, while the plans spend 14% per member on administration — a big difference. This is interesting, but misleading. Medicare beneficiaries are over the age of 65. They spend almost three times as much money on health care as a typical private plan member — most of whom are under the age of 65. If the Medicare member typically spends $800 per month on health care, and 4% of that is spent on administration, that’s $32 a month on administration. If the private health plan member typically spends $300 per month on health care, and 14% of that is spent on administration, that’s $42 a month — a much smaller difference. But we?re not done yet. Medicare is part of the federal government, so its capital costs (buildings, IT, etc.) and benefit costs (health insurance for its employees and retirees (!), pension benefits, etc.) are funded somewhere else in the federal budget, not in the Medicare administrative budget. Private plans have to pay for these items themselves. That’s worth about $5-6 per member per month, and needs to come out of the health plan number for a fair comparison. Now we’re almost even. And finally, Medicare doesn’t actually process and pay claims for all of its beneficiaries. It contracts with health plans around the country to do much of this for them. That’s not in their administrative number, either — and it is, needless to say, in the private health plan number.
First of all, the private plans’ costs on that $300 a month is still some 24% more than the Medicare’s. A “much smaller difference”? Well yeah, but an enormous difference even so. Is that supposed to be a strong point for the private insurers?
Even more to the point: Baker seems to complain about the advantage that Medicare has due to its economies of scale as part of the federal government. That’s a very strong reason for a government-funded health care system: We’ve already paid for a lot of the necessary infrastructure, centrally, and fairly efficiently.
As a health care consumer, I don’t care if the federal government has some kind of “unfair” advantage. If the feds can leverage that advantage, and it adds up to lower costs for me, then fabulous. It’s not my job, or my concern, to keep Mr. Baker in business.
You hit the nail on the head here, Charley: “I don’t care if the federal government has some kind of “unfair” advantage. If the feds can leverage that advantage, and it adds up to lower costs for me, then fabulous.” What we need to do is free the market and make the insurance companies work for a living: the more competition the better and if that comes from Medicaid, great! That’s the American way: everyone has to work, and the more competition the better. This is the same kind of self-indulgent “poor, poor bloated, inefficient second-rate health care corporations” whining that gave us this classic affirmation of the incompetence of our current system — not to mention of the corruption of the Republican Party — in January as reported by Bloomberg:
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What does this mean?
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One of the functions of government is to step in when there is market failure and impose a system that is fair. Zoning by-laws and environmental regulations come to mind.
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It’s clear to me that our health care system is not well-served by market-based solutions. So let’s just do it right. Medicare for all.
Let people buy their health insurance from the government. If that provides better value than the private companies, great! The market should be free to offer the greatest possible competition: why coddle the private companies by locking ordinary people out of access to public insurance programs.
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As to zoning and environmental regulations, I don’t see those as examples of market failure where the government, “imposes a system that is fair,” whatever that means. I see those as systems that provide a foundation for effective competition. It’s not as though the real estate market vanishes when zoning and environmental rules are imposed.
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As to Medicare for all, I think any solution that tries to make the entire existing private health care industry vanish is a pipe dream. The private companies should compete, however: that is what I mean by “freeing the market.”
I think what he meant is that the current health care market is not free, as Ive stated before in my own view HMOs function more like cartels dolling out private monopolies on employers coverage and forcing employees to choose just one form of coverage. Granted there are private forms of coverage that do not require employment but they tend to offer less comprehensive coverage and get pricey. What I think our friend was saying about Medicare lowering costs and ‘freeing the market’ is that it will create a two tier system and force private insurers to compete with the government and ideally this will lead to lower costs and increases in the quality of the system.
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So yes we can have universal coverage but we should not make private insurance illegal either.
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He didn’t point to economies of scale. Mr. Baker pointed out that many costs that should be allocated to Medicare programs, are actually in other portions of the Federal budget: Capital plus benefits.
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Seriously, your penultimate paragraph is just wrong.
of baby boomers accessing medcare, will push it over the edge.
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Secondly, what has the government ever done, that was cost effective. Government regulation guarantees ineffective cost control.
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I work in health care. 30% of my time is spent in an administrative function to satisfy a federal bureauocracy that I am in fact doing what I say I do. Whether or not it is accurate is not an issue, simply stating it in black and white makes it so. It’s crazy
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Thanks, but no thanks. I’m very happy with my healthcare plan. Australia doesn’t have this problem because they are an island and ket the lid on immigration for years and still maintain a very tight grip on who gets in and who doesn’t. Yes, I’m alluding to the fact that we have essentially twenty million illegal aliens screwing up our healthcare.
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My sister recently spent four hours in an ER after she was having an exacerbation of an intracranial bleed. She left after four hours due to the fact that there were was a myriad of non English speakers ahead of her and the hospital ER wanted to be PC. Am I angry? Oh yes.
well, that’s a new one.
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unless, i guess, if you pay attention to michael graham or howie carr.
I don’t believe you for a minute that you actually work in health care. No health care worker that I know would have that degree of hostility for his patients.
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MCRD, let’s see you come out of the closet with a name and some credentials — otherwise I’m just going to assume you’re lying your ass off.
…the commenter or commenters posting under the MCRD handle had anything to do with reality for some time. Earlier, MCRD claimed to have been involved in the US military until recently. Later, MCRD claimed to have been involved in (presumably civilian) health care.
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Computer says, no.
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There are too many discrepancies in the MCRD handle’s storie about him or herself. Sorry, they don’t stand the “stink test.”
I noted this in the HCFA blog as well. Baker’s argument is that Medicare spends almost three times as much money on health care as a typical private plan. Okay, fine. Does Medicare also have three times more Dr. visits, pharma, etc. than those in private plans? Then if there is three times more activity then does that mean three time more administrative work? The only true method of determining administrative costs is doing a percentage, he’s giving half the picture and is the one who is being misleading. I’m guessing here, but my thoughts are that Medicare has more than three times the activity per member than private health plans, what does that do to the percentage Charlie (Baker)?