Medicare is a bargain. What America can't afford is private health insurance.

By Brett Arends

Private insurance costs way more for the same results - or worse

"Did you get your 10% cut? Can I treat the patient now?"

Don't buy the baloney that America cannot afford more Medicare, or even the Medicare we have at the moment.

Medicare is a bargain. What America cannot afford is any more private health insurance.

My apologies to all those running the private health insurers. It's nothing against you personally. But you simply cannot compete with Medicare. You cost us way more for the same results, or worse. We just can't afford you anymore.

Private health insurance is the major reason healthcare in America costs so much. Most other rich countries use a public insurance model, like Medicare. And as a result, they pay way, way less for their healthcare - even though, in many cases, they actually get better healthcare than we do.

And this is without even touching the other big argument for "Medicare for All" - namely, that it would cover the nearly 30 million Americans who today don't have health insurance.

Forget that compassionate argument for a moment. Medicare for All would be cheaper, a lot cheaper, for the rest of us.

Those who insist that a government-run insurance program must be more expensive, in the face of all the evidence, are simply putting blind political ideology ahead of facts.

The numbers aren't even open to dispute. Last year, both Medicare and America's private health insurers spent about the same amount on healthcare for their beneficiaries.

Medicare (line 10, "total expenditures," on page 12 of the most recent Medicare trustees' annual report here) spent $1,210.1 billion, or almost exactly $1.2 trillion.

Meanwhile America's private health insurers (see line 6 on page 1 of the latest U.S. Health Insurance Industry Analysis Report from the National Association of Insurance Commissioners here) spent $1,194 billion, or, again, almost exactly $1.2 trillion.

But that's where the comparisons sharply diverge. That's because, to fork out this $1.2 trillion, Medicare spent $12.3 billion on administration while the private insurers spent $136 billion - or about 11 times as much.

That is a straight cost to us, the consumers, of $124 billion. It's either 10 cents on the dollar of premiums or 13 cents, depending on which measure of premiums you use.

Do you like paying an extra 10% for things? I don't. Once again, my apologies to the people in the health-insurance industry, but your mortgages and car payments and college funds and holidays really aren't my problem. I don't see why I should be paying for them.

So when someone says - as South Carolina U.S. Senate candidate Darline Graham did recently in a debate - that Medicare for All would "bankrupt" us as a country, I have to ask: Do they not possess a working calculator? Can they not do basic arithmetic? Private insurance costs 10% more.

According to the Bureau of Labor Statistics, health insurers employ around 600,000 people.

It's crazy, because it makes no sense. Insurance is money in and money out. Why, exactly, should I have to pay a middleman 10 cents or 13 cents to hand a dollar to the doctor who is treating me?

It doesn't end there, either. That's because our crazy, ridiculous, overly complicated patchwork of health-insurance payment systems - private, Medicaid, Medigap, Medicare and so on - also drives up the costs for all of America's doctors and hospitals. They are spending a ton of time filling out forms - these days, online - trying to get their money back, or trying to settle arguments between different payers about who is ultimately responsible for what.

One research study, conducted by medical and law professors from Duke University and Harvard University and published in the Journal of the American Medical Association, estimated that all these "billing- and insurance-related" activities wasted 14.5% of the money we (or our insurers) paid for the average primary-care visit, and 25% of emergency-department visits.

A research paper published in Health Affairs, a leading peer-reviewed journal, found that our hospitals blew far more on admin than the hospitals in other rich countries. The headline of the article pretty much says it all: "A comparison of hospital administrative costs in eight nations: U.S. costs exceed all others by far." Researchers reckoned that 25% of the money paid to U.S. hospitals is blown on administrative costs. That is twice the rate in Canada, which presumably being "bankrupted" by its single-payer, Medicare-style health-insurance system.

Amazingly, the researchers found that hospital administration - not the doctors or the medical care, but the administration - soaks up 1.43% of U.S. gross domestic product.

It isn't just hospitals, either. Another research paper found that small doctors' practices in the U.S. spent - or wasted - nearly four times as much dealing with insurers as they do in Canada, with a single-payer system.

And it isn't just Canada. Doctors and hospitals across the developed world, including rich countries with advanced medical systems like Germany, the Netherlands and Singapore, spend far less time and money dealing with insurance than their counterparts here in America. While their health-insurance systems vary, all use some sort of universal healthcare model.

These studies were all conducted in the last 15 or so years. So, to be fair, the numbers may have changed somewhat. But there is no reason to think they have changed in America's favor.

Ironically, the system is so complex that getting exact data of this sort is time-consuming and difficult.

But data compiled by the federal Bureau of Labor Statistics tells a story. As of May last year, there were 597,000 "medical- and health-services managers" working in America, earning an average annual wage of $140,970. But there were also 961,610 "medical secretaries and administrative assistants." And both of those figures have doubled since 2010.

How many would we need if we had a single-payer system? Nobody can say for sure, but it would be a lot less. Oh, and while this adds up to about 1.5 million people working in healthcare administration - not counting all those working for the insurers - the actual number of physicians is only 750,000.

No wonder you can't get a doctor's appointment. ("Well, if the doctors are all booked, can I see a bureaucrat?")

This isn't the fault of the individuals within the system. Most of them are probably working pretty hard. But the system has effectively pitted them against each other. Economists call this "the costs of complexity." The phrase isn't as well known as "the economies of scale," but it should be.

There are many ways of replacing our nightmare of private health insurance. But what is not open to dispute are the facts: Private health insurance costs us, the consumers, a lot more than public health insurance. We know for a fact that it spends more than 10 times as much on administration. And because it creates a labyrinth of different payers, it also drives up the administrative costs of the doctors and hospitals as well.

As Americans, we pay far more for our healthcare than people in other rich countries - thousands of dollars more per year for each of us. This is driven by private health insurance. That, not Medicare, is what we can't afford.

-Brett Arends

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10-21-26 1234ET