Costs of Government Administration of Health Care to Almost Double in Ten Years
This week’s report by staff of the Office of the Actuary of the Centers for Medicare and Medicaid Services concluded that the last few years of muted increases in health spending will soon be ending. Health spending will resume its upward march:
The combined effects of the Affordable Care Act’s coverage expansions, faster economic growth, and population aging are expected to fuel health spending growth this year and thereafter (5.6 percent in 2014 and 6.0 percent per year for 2015-23). However, the average rate of increase through 2023 is projected to be slower than the 7.2 percent average growth experienced during 1990-2008. Because health spending is projected to grow 1.1 percentage points faster than the average economic growth during 2013-23, the health share of the gross domestic product is expected to rise from 17.2 percent in 2012 to 19.3 percent in 2023.
While there was nothing very surprising in the report, there was at least one things that was underreported by the media: The astonishing increase in “government administration” of health care.
Government administration cost $35.1 billion in 2013 and will cost $66.7 billion in 2023 — an increase of 90 percent overall and a compound annual growth rate of 6.63 percent. To put that in perspective, those costs were $29 billion in 2008, so they grew at a compound annual rate of only 3.61 percent in the subsequent five years. That is: The increase in bureaucratic costs associated with the introduction of Obamacare will pale in comparison with their future costs. Government spending on actual public health will increase by a significantly smaller compound annual rate of 4.84 percent, or 47 percent overall.
The cost of private bureaucracy will also increase. “Net cost of health insurance” will increase from $174.5 billion to 341.0 billion, a compound annual growth rate of 6.93 percent. The rate from 2008 through 2013 was only 4.62 percent. As for spending on actual medical care, that will grow at a slower rate over the next ten years. Spending on physicians and hospitals will grow at compound annual rates of 5.78 percent and 5.95 percent.
Supporters of centralized federal control of health care tout its supposed efficiencies. For that to happen, the costs of administration would have to grow at a slower rate than spending on actual health care. The opposite is happening. Government control of health care has grown well beyond its optimal span and scope.
The growth of administrative costs is partially due to the increased beneficiaries who need the services
I understand administrative costs are low compared to the private sector
My primary concern is the growth of health care costs
While the rate of growth has decreased we are also working from a larger base
If a family group plan is $15,000 a year a five percent premium increase is $750
Don Levit
I don’t believe government administration costs are cheaper than the private sector. We would never spend $300 million to enroll 500 people on insurance like Oregon did.
My partner just emailed me with information how Governor Rick Scott spent $1 million dollars to hand out 30 Rx discount cards. These cards cost like $9 a piece. That’s right, the government guy in charge is earning(?) $120,000 per year. Plus, this guy has a staff of people. Lee is into opposition research. Lee said, “They spent over $30,000 per $9 card to hand them out!”
Hold the phone, Lee just called me and it’s a whole lot more than $1,000,000! Everything is online and way too stupid. Charlie Crist signed the program into law 7 years ago and Governor Scott is now at the helm. The last report they have spent millions and the accounts receivables are $7. I’m rolling on the floor here. Now they are spending money hand over fist on Google Ad Words. You can’t make this incompetence up. Truth is much stranger than fiction when it comes to government waste.
We think the whole thing is illegal too. You think you have heard of incompetency before but you haven’t heard about real incompetence and wasting of tax payer money until you here what the state of Florida is doing. They are now even calling themselves the [Florida health insurance Marketplace].
Lee says it would take a hundred pages to write up all of the fraud, waste and illegality by tomorrow when I go to the Wyllie Campaign Kick-Off party.
Of course Wyllie and Roe don’t know the law in insurance like Lee and me so it might take a few minutes before they bust out laughing, too funny.
Government Administration – what an excellent post to put this under. There is a God.
“I understand administrative costs are low compared to the private sector My primary concern is the growth of health care costs.”
Then you also understand that the one is helping to push the other along. And you are certainly correct that the cost of medical care is the more fundamental problem.
btw, it’s unlikely that the admin costs of government programs are less than their private counterparts. Medicare is the often-cited example but it’s not hard to show Medicare is quite likely more expensive than most private insurance, on a per-member, per- month basis.
Robert Book and Ben Zycher have both studied this (but unfortunately not for NCPA). Because, for example, the cost of collecting taxes is borne by employers and individuals, the cost of government financing is artificially low. Furthermore, government does not fully impute overheads to its programs, e.g. the imputed rent of its offices.