How Much Does It Cost the Government to Administer Its Own Health Plans?

Greg Dattilo and Dave Racer, based on CBO reports, calculate costs of administering health care:

  • When the federal government administers its own health programs, it spends twice as much – 26% on administration, compared to 12.7% in the private sector. 
  • When government contracts out administration, as it does with Medicare, the cost is only 5.7%.
  • However, the 5.7% number hides public sector costs that are included in private sector accounting.

Comments (3)

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  1. Bret says:

    Fascinating. Thanks for this post.

  2. Bruce says:

    This needs to get broad distribution. The idea that government administrative costs are low is an article of faith on the left.

  3. John R. Graham says:

    It is a very compelling analysis. Unfortunately, the government has figured out how to trick people into thinking that Medicare has good administrative costs and procedures because the Medicare beneficiary does not see that the back-end of Medicare is run by private contractors.

    I think that one “optical” reform we should advocate is that the beneficiary should not receive a Medicare card that is “branded” by the Social Security Administration, but one that is branded by the contractor for his region.

    Another fine analysis of the true costs of administering a single-payer system is by Ben Zycher, formerly of the Manhattan Institute, Zycher addresses the implicit assumption the single-payer extremists make, that collecting taxes is “free”, and decomposes that error.