Critical Condition

The Problem of Bureaucratic Bloat

Part of the reason the Democrats’ health-care plans don’t add up is that the proposed bureaucracies will drive up costs, reports the Washington Times:

The health care reform plan proposed by House Democrats would create at least a dozen new federal programs, boards and task forces, contributing to the proposal’s hefty price tag that has drawn criticism from Congress’ official scorekeeper.

Democrats say the bureaucratic infrastructure is necessary to administer the expansion of health care benefits to the tens of millions of uninsured Americans while creating more competition for private insurers to drive down out-of-control costs.

The health care reform bill, which is expected to cost roughly $1 trillion over 10 years, would create a public health insurance plan and a health insurance “exchange,” a clearinghouse where consumers will be able to shop for public or private coverage. The programs will require a massive undertaking by the federal government that analysts say likely will take years to fully implement.

“All of the new authority that could potentially come of the legislation have very detailed specifications to work through and they will also continue to have significant political overlay,” said Elizabeth A. McGlynn, associate director of Rand Health in Rand Corp., a nonprofit think tank. “Think of it a little bit like the [presidential] transition. Look at the challenges to just these boards that will probably have appointees.”

But aren’t administrative costs lower for government health programs than for the private sector? Not when the costs are properly assessed and compared, as the Heritage Foundation’s Robert Book observed last month:

Advocates of a public plan assert that Medicare has administrative costs of 3 percent (or 6 to 8 percent if support from other government agencies is included), compared to 14 to 22 percent for private employer-sponsored health insurance (depending on which study is cited), or even more for individually purchased insurance. They attribute the difference to superior efficiency of government, private insurance companies’ expenditures on marketing, efforts to deny claims, unrestrained pursuit of profit, and high executive salaries.

However, on a per-person basis Medicare’s administrative costs are actually higher than those of private insurance–this despite the fact that private insurance companies do incur several categories of costs that do not apply to Medicare. If recent cost history is any guide, switching the more than 200 million Americans with private insurance to a public plan will not save money but will actually increase health care administrative costs by several billion dollars.