[September 14, 2007 @ 11:46 pm] David Catron

Anyone with a clue how Medicare works will be amused by Ezra Klein’s recent post on the subject. Desperate to add something pithy to a Jonathan Cohn observation concerning that program’s huge cost, he delivers himself of the following howler:

And let me go a step further and mention the huge cost private insurance imposes on Medicare. Medicare is a Very Expensive Program for the same reasons that American health care is Very Expensive. So long as it operates within a fragmented, patchwork system that largely exists to amp up insurance industry profits, Medicare will largely act as a private insurers [sic] whose costs are borne by taxpayers. It will suffer from most all the inefficiencies endemic to the system, save the few where Medicare can act in a self-contained manner (i.e, administrative costs, where they pay 3% compared to the 14% of your average private insurer).

What the hell is the boy talking about?! Private insurance doesn’t impose costs on Medicare. In fact, precisely the reverse is true. If one believes, as Klein apparently does, that the phenomenon of “cost shifting” is a reality, it is perfectly obvious that Medicare’s Byzantine price control strategy places a considerable burden on private insurance. In other words, providers offset Medicare-imposed losses by overcharging insurance companies.

And Klein’s tired talking point about administrative costs has been repeatedly debunked. For example, this study shows that Medicare’s administrative costs come to a minimum of 5.2%. Moreover, when the administrative costs associated with its numerous fiscal intermediaries are factored in, the percentage is probably twice that. Meanwhile, the actual administrative costs for private insurance are about 8.9%.

Finally, the “fragmented, patchwork system” that is American health care has not resulted from a conspiracy to “amp up insurance industry profits.” It is rather the result of a regulatory morass created by the federal government and exacerbated by an additional layer of red tape imposed by the various state governments. The notion that “Medicare for All” will be less expensive and more efficient than our current (admittedly dysfunctional) system is laughable.

Klein’s contribution to the debate over health care reform would be easier to take seriously if he would take the time to do his homework.

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