High ObamaCare Administrative Overhead Costs

Why are health costs so high? The answer is obvious: high administrative costs. In a May 27 Health Affairs Blog “Post Launch Problem: The Affordable Care Act’s Persistently High Administrative Costs,” David Himmelstein, M.D. and Steffie Woolhander, M.D., a house and wife team out of Cambridge, Massachusetts and liberal long-time advocates of single-payer, give these reasons for these high costs:

“Most of this soaring private insurance overhead is attributable to rising enrollment in private plans which carry high costs for administration and profits. The rest reflects the costs of running the exchanges, which serve as brokers for the new private coverage and will be funded (after initial startup costs) by surcharges on exchange plans’ premiums.”

“Government programs—primarily Medicaid—account for the remaining $101.4 billion increase in overhead. But even the added dollars to administer Medicaid will flow mostly to private Medicaid HMOs, which will account for 59 percent of total Medicaid administrative costs in 2022. (The subcontracting of Medicaid coverage to private HMOs has nearly doubled Medicaid’s administrative overhead, which has risen from 5.1 percent of total Medicaid expenditures in 1980 to 9.2 percent this year).”

In other words, it’s the private insurers fault/ Medicare and Medicaid, the two like to say, could run a single-payer system with a 2% overhead cost rather than the 22.5% it now costs

Peter F. Drucker (1909-2005), the father of modern management, had another explanation, the government itself is responsible

“Government is a poor manager. It is, of necessity, concerned with procedure, for it it also, of necessity, large and cumbersome. It must administer public funds and must account for every penny. It has no choice but to become ‘bureaucratic.’ Every government is, by definition, a 'government of forms.1 This means high costs. For ‘control’ of the last 10 percent of phenomena always more than control of the first 90 percent.”

“No, no, it’s neither” , say the Internet gurus, such as Jeff Bozos of Amazon, it’s those ubiquitous middlemen. Remove them from the equation, buy directly from us online, and you’ll cut costs dramatically.

Concierge and direct primary care physicians, have yet another explanation, and it’s right in front of our noses. ObamaCare and insurers make up ,more than 50% of physician overhead costs and are mostly irrelevant to caring for the patient. Deal directly with patient, cut out the 3rd parties – insurers and government – and do away with those nuisance regulations and costs will go down. Pull out of ObamaCare, and you can reduce your staff, the need for coders , close down your electronic health record system, and spend your time with the patient rather than collecting data for the government. And you will save taxpayers money. According to Sara Ferris in The Hill, “Overhead Costs Exploding under ObamaCare, “ the government now spends $270 billion in administrative costs – 45% of all ObamaCare costs.