I think you are reading too much into the editorial.

The strongest argument against government management is not that it would be “bumbling” or “inefficient” but that it would not be different from the private sector. “Oh, wait – private companies DO administer Medicare”. That’s important because it raises the question: What would change in a “government” system”? Answer: nothing important. The controlling bureaucracy – the government remains the same. The administrator – major insurance companies – remains the same. You are free to believe what you like, but I hope you don’t bet your livelihood on a different outcome.

“Other countries are able to do it cheaper and more efficiently than the US.”

True. And cheaper means less money is going into those systems. For example, physician incomes are much less in those countries, fewer high-tech treatments are performed, and the introduction of new technologies is carefully restricted. Reducing the amount of money going into the U.S. system necessarily requires lowering provider incomes. Do you advocate reducing physician incomes in the U.S.?

“I think that would generate enormous political momentum.”

OK, but why? Political momentum comes from the general public. What will the general public see? How much of a reduction in medical costs? How much will their personal insurance cost be reduced? How will that be achieved? I say, if fundamental reforms do not significantly reduce the cost of insurance, the public will quickly fall out of love with them and there goes political momentum. Besides, if there is no meaningful reduction to insurance costs, how can the problem of the uninsured be solved? IMO, insurance costs will not reduce unless (a) medical costs decline or (b) the government subsidizes those costs and charges them to taxpayers. The first of these alternatives addresses the cost of health care, the second addresses the cost of insurance. IMO, only the first will yield a long-term solution.

“A single-payer system would also eliminate the cost shifting”

True, but please recognize that this construes the problem as an insurance problem (who pays for what expenses) vs a cost problem (why does care cost so much). Eliminating the cost-shift will not change the level of overall cost, it can only reallocate that cost. This illustrates a fundamental reason why looking at this problem as an insurance problem will fail. Insurance is only the mechanism for sharing the costs. The problem is the cost of health care and that is what must be addressed.

This is correct. However it isn’t the main argument. I liked the article because I think it pokes holes in the free market argument that a government system would be a bumbling, inefficient bureaucracy.

If a single-payer system would be able to utilize the enormous economies of scale you point out, insure everyone who files taxes, and still be able run equally efficient as current private health insurers, I think that would generate enormous political momentum. A single-payer system would also eliminate the cost shifting of larger emergency type visits from the uninsured and provide a more efficient system of catching those conditions before they develop into large claims.

Will it really work that way? Other countries are able to do it cheaper and more efficiently than the US.

Probably best to ask The Rocky Mountain News, but I think their number is a good one.

I manage a large employee-benefits plan and our medical cost this year for active employees and their families is running about $3,000 annually per capita; we have an unusually rich plan and are located in a high medical-cost area. So the $2,700 national average cited by the newspaper for the privately-insured, non-Medicare population sounds right to me.

BTW, the administration cost for the plan I manage works our to about 5% of the medical expenses we pay. That is far less than the “15%-25%” that is often quoted in the press as representative of private insurance admin cost. The reason that my plan costs so much less than 15% is that we have a very large enrollment and thus capture significant economies of scale. Medicare has much larger enrollment and captures even more economies of scale, which helps Medicare keep its percentage costs low. Of course, if private companies administered Medicare, they would benefit from the same economies of scale.

Oh, wait – private companies DO administer Medicare, under contract with CMS. If their costs were anywhere near “15%-25%” how could Medicare costs be so low as 5%? Answer is obvious: private insurers’ costs for a large-enrollment, single-benefit plan like Medicare reflect significant economies of scale and drop to the range of 5% of medical costs – just like the plan I manage.

(Also, I would not agree that the prevalence of high-cost medical services in Medicare drives Medicare administration costs higher as a percentage of medical costs. In fact, the reverse is true, which supports the point I make in my first post above.)

Jay, I think there are some very good arguments to be made for fundamental reform of health care delivery in the U.S. including reform of health care financing and insurance arrangements. But I think “administrative savings” is among the weakest arguments for doing so because there’s not enough admin savings to make much difference in the average person’s insurance cost. The average person will be very disappointed with an insurance saving of maybe 3%. A 3% reduction tominsurance costs will have negligible effect on the uninsured. If the reforms generate only 3% reduction, the political wind behind reform will evaporate.

Go back and read carefully the statement you quoted from the Brown University professor. He refers to “various” private insurance plans. Does he include my plan and other group insurance plans like my plan? Who knows? He is being vague.

There’s more – but this is enough. The Rocky Mountain News editorial hit the nail right on the head and IMO has performed a valuable public service.

“The Council for Affordable Health Insurance, a free-market think tank, pegged the actual cost of Medicare compliance at 5.2 percent. And since Medicare spends more than twice as much per recipient as the average private health provider, $6,600 vs. $2,700, the gap shrinks even more.”

I think you miss the significance of the second sentence above. 5.2% of $6,600 per Medicare recipient is equivalent to about 13% per person insured in the average private health insurance plan. You seemed very pleased to fasten on the 5.2% finding from an organization you consider to be “obviously biased”. I presume you will be even more pleased now that you have gained a proper understanding of the CAHI finding.

BTW, this is not a trivial point. It is important always to bear in mind that comparing administrative costs only as a percentage of the medical expenses necessarily produces a much lower answer for Medicare than for private insurance. This is because the “denominator” is so much higher for Medicare. (approximately $6,600 per capita vs. $2,700)