Navigation Links
Setting the record straight on Medicare's overhead costs: New study
Date:2/20/2013

The traditional Medicare program allocates only 1 percent of total spending to overhead compared with 6 percent when the privatized portion of Medicare, known as Medicare Advantage, is included, according to a study in the June 2013 issue of the Journal of Health Politics, Policy and Law.

The 1 percent figure includes all types of non-medical spending by the Centers for Medicare and Medicaid Services plus other federal agencies, such as the IRS, that support the Medicare program, and is based on data contained in the latest report of the Medicare trustees. The 6 percent figure, on the other hand, is based on data contained in the latest National Health Expenditure Accounts (NHEA) report.

The journal article, written by Minneapolis-based researcher Kip Sullivan, finds that the gap between the two measures has been growing over the last two decades as enrollment in private Medicare plans has risen.

"The high administrative costs of the privatized portion of Medicare are no surprise," says Sullivan. "What's surprising is that the high administrative costs of the Medicare private insurance companies haven't provoked a debate about whether spending more money on insurance industry overhead is a good use of scarce tax revenues."

According to Sullivan, the low attention given to this issue is caused in part by confusion about Medicare's overhead costs.

"The confusion is due partly to the existence of two government reports," says Sullivan, "and partly to claims by critics of Medicare that the government fails to report all of Medicare's overhead costs." The paper addresses both sources of confusion.

The article explains the difference between the yardstick used by the trustees and the one used by the NHEA and concludes both are accurate. The trustees' measure counts as overhead only those administrative expenditures that support the traditional fee-for-service Medicare program, in which approximately three-fourths of all Medicare beneficiaries are enrolled. The NHEA measure takes the trustees' measure and adds to it the overhead of insurance companies that participate in Medicare Advantage and that sell stand-alone Part D drug coverage.

"The issue isn't whether one yardstick is more accurate than the other," Sullivan explains. "The issue is when it's appropriate to use one measure instead of the other."

The 1 percent figure is the one that should be used to analyze several hotly debated health reform issues, including whether to expand traditional Medicare to all Americans and whether to turn Medicare over to the insurance industry, either by expanding the Medicare Advantage program of by converting Medicare to a voucher program as Rep. Paul Ryan has proposed.

"Total spending for any type of insurer, public or private, consists of medical and administrative expenditures," explains Sullivan. "If you want to know whether Medicare would cost more or less if it were turned over to insurance companies, you first have to determine what Medicare spends on medical care and administration and you have to do the same for the health insurance industry."

The proper yardstick to use to measure Medicare's overhead in analyses of issues such as these would be the trustees' measure 1 percent. The average overhead of the health insurance industry is approximately 20 percent, he said.

The large difference between traditional Medicare's overhead and that of the insurance industry has caused some conservative critics of Medicare to assert that the federal government is ignoring numerous administrative expenditures incurred by various federal agencies that should be attributed to Medicare.

Sullivan's paper, "How to think clearly about Medicare administrative costs: Data sources and measurement," describes this criticism as the second major source of confusion about Medicare's overhead. Sullivan's study reports that the 1 percent figure includes all appropriate administrative expenses incurred on Medicare's behalf, including those by the IRS, the Social Security Administration, and the FBI, as well as the cost of numerous pilot projects that Congress orders CMS to conduct.

Sullivan's notes that many liberals are also confused about what Medicare's overhead costs are. "With so much confusion on both sides of the political spectrum, it's fair to say a useful debate about whether to expand or contract the traditional Medicare program has yet to take place in this country," he said.

Sullivan is a lawyer and member of the Minnesota chapter of Physicians for a National Health Program, which had no role in funding the study.


'/>"/>

Contact: Mark Almberg
mark@pnhp.org
312-782-6006
Physicians for a National Health Program
Source:Eurekalert

Related medicine news :

1. USHEALTH Advisors Shows No Signs of Slowing its Record-Setting Growth Trajectory
2. Study Questions Importance of Triggers in Setting Off Migraines
3. Little evidence to support TB interventions in real-world, low-resource settings
4. Setting national goals to bolster patient safety with electronic health records
5. Settings standards for research into Rett syndrome
6. Magnets in iPad2 May Alter Settings on Brain Shunt Devices: Study
7. Mount Sinai is first in New York state to perform new Alzheimers imaging test in clinical setting
8. Top Hospital Electronic Health Records Vendors Rated by Client Satisfaction, Black Book Rankings Announce 2013 Inpatient EHR Leaders
9. Advanced Technologies Bring Record Growth to Charm Sciences in Its 35th Year
10. Electronic Health Record sellers face make-or-break year of client ultimatums and revolts, reveals 2013 Black Book survey
11. Teen Births Hit Record Low, CDC Reports
Post Your Comments:
*Name:
*Comment:
*Email:
(Date:12/2/2016)... Raleigh, NC (PRWEB) , ... December 02, 2016 , ... ... the Open Enrollment Period (or Annual Election Period), is ending December 7th. Currently-enrolled Medicare ... plan (Part C) or prescription drug plan (Part D) need to make changes during ...
(Date:12/2/2016)... (PRWEB) , ... December 02, 2016 , ... With the ... through rehabilitation of an injury, patients must find the one that works for them. ... pain, he created a machine that worked and decided to share it with others. ...
(Date:12/2/2016)... , ... December 02, 2016 , ... ... Beverly Hills, California, will be included in the 2016 “Guide to America’s Top ... professionals based on the amalgamation of their education, experience, and professional associations. ...
(Date:12/2/2016)... , ... December 02, 2016 , ... ... of "Cardiovascular Health" in USA Today, which covers the innovative treatments, therapeutic technologies, ... while maintaining fulfilling lives. “We are prolonging life 6 years in the last ...
(Date:12/2/2016)... Honolulu, Hawaii (PRWEB) , ... December 02, 2016 ... ... 3, 2016 at the Hyatt Regency Waikiki Beach Resort and Spa in Honolulu, ... (CME) in the field of pain management. , The demand for supplemental ...
Breaking Medicine News(10 mins):
(Date:12/2/2016)... , December 2, 2016 bioLytical Laboratories, ein Weltführer ... bei den Mitgliedern des Apothekenbundes von Kenia eingeführt. ... ... INSTI HIV Self Test! (PRNewsFoto/bioLytical Laboratories) ...      (Photo: http://photos.prnewswire.com/prnh/20161201/444905 ) ...
(Date:12/2/2016)... , Dec. 2, 2016   CytoSorbents Corporation ... commercializing its European Union approved CytoSorb ® cytokine ... surgery patients worldwide, announced that Dr. Phillip Chan ... 9th Annual LD Micro Main Event investor conference ... at the Luxe Sunset Boulevard Hotel in ...
(Date:12/2/2016)... 1, 2016  Today, Simpson Healthcare Executives, a global ... being selected as winners of multiple awards at the ... at the PLATINUM level, Blue Zones Menu at the ... GOLD Level, and our proprietary 3ConneX Platform at the ... Executives, we are excited to showcase our new Platinum ...
Breaking Medicine Technology: