Why is it such a bad example? The federal government is always outsourcing work. Also if it is only efficient because it is outsourced why is Medicare's overhead about 1/2 to 1/3 the amount of the private insurance companies. Shouldn't in that case the private insurance companies have lower overhead? I know that you think government is inefficient but in the case of Medicare you have not proven anything (just that you dislike government).
I'm not going to get into opinions about ACA or Single Payer; just wanted to clarify a few things on this point, because it's been tossed around with increasing regularity over the past few years.
Medicare's overhead is
not 1/2 to 1/3 that of private insurers. Its reported admin costs are lower
as a percentage of total costs. There are numerous reasons for this; I want to get cover the biggies so we can start to get our arms around what's really going on here (and we can only just start; the actual figures are too intertwined with other parts of the federal budget and private insurance policy decisions to tease out a true comparison):
1)
It really is more efficient in some ways. When you have a captive audience, you get certain benefits. Marketing is one that I would expect to come readily to mind. Your concerns about member entry and exit are far more uniform and predictable. Their needs, though complex, are relatively homogeneous. Etc. Anyone who tells you there aren't a number of efficiencies is either uninformed or blinded by an agenda.
2)
Private insurance administrative costs are higher as a percentage of total costs because private insurance total costs are lower. This reality is so dramatic it casts a bit of a pallor over the remainder of the pro-Medicare argument. Medicare per-beneficiary admin costs are, in fact, fairly similar to private per-beneficiary admin costs (and were actually somewhat higher last I looked). The reason they are so dramatically different as a percentage of total costs is that the total cost of an average Medicare recipient is dramatically higher than that of the privately insured. We're talking about a population that's elderly and frail compared to the general public. Although we should expect that population to have higher admin costs overall, I don't know of a good reason to expect those admin costs to track strongly with total costs. Medicare would need to spend 3-4 times more administratively than private insurance per-member per-period in order to achieve comparable administrative cost percentages.
3)
Much of Medicare's "Admin" does not actually appear in its admin costs. Tax collection and premium deductions are collected by IRS and SSA, respectively, and are not accounted in the reckoning of Medicare's administrative costs, while the equivalent functions in private insurers are absolutely included. Many HHS functions related to Medicare are located in non-CMS offices (or outsourced to private insurer contractors, like the Blues) and are not included in Medicare admin costs. Much of fraud & abuse, actuarial services, legal/litigation, and policy oversight are external to CMS. If you include these, you're probably talking about an admin cost closer to 6-8%. That's actually about in line with large-group plans (again, as a percentage of total costs).
4)
Much of private "Admin" does not represent what we'd think of as admin. Care coordination is an administrative cost. Disease management? Admin. Phone-based practitioner availability? Often admin. Wellness programs? Admin. Also, premium taxes paid by insurers count as an admin cost (this is part of the reason large-group plans tend to have far lower admin costs than do small-group or individual plans).
5)
There are claims that private insurers have far stronger price controls and fraud & abuse countermeasures, meaning that much of their spending on admin goes to reducing total cost. The basic claim would be that Medicare is simply outsourcing some of its admin cost into its total cost and paying a premium for the privilege. This component of the discussion is
heavily politicized, obviously. I'm merely noting it because I think there is probably something there; it's just too entangled with other issues to tease out the actual effect.
