Simplified Administration Could Save Over $500 Billion Per Year

“Around one-third of U.S. health care dollars are spent on administrative functions, including insurance company overhead; administrative costs of hospitals, practitioners, nursing homes and other providers; and costs incurred by employers in managing their workers’ benefits.20 Studies have routinely found that the United States has the highest rate of administrative health care costs among wealthy countries.21 Excessive administrative spending is wasteful because it doesn’t do anything to treat patients or improve public health. Through simplified administration under Medicare-for-All, some researchers have estimated that we would save more than $500 billion a year.”22

Increased administrative costs are one of the key reasons that health care costs have risen sharply over the past 40 years. Costs relating to managing health insurance are a major component of these rising administrative costs. Private insurers spend around 12 percent of their annual budgets on administration. 23 Traditional Medicare is much more efficient, spending only around two percent on administrative costs.24 In a seminal study published in the New England Journal of Medicine in 2003, researchers concluded that administrative functions consumed 31 percent of U.S. health care costs, compared to just 16.7 percent in Canada.25”

“The Case for Medicare for All.” Public Citizen, February 24th, 2019, p. 12. The_case_for_medicare-for-all_-_february.pdf

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