Getting tens of millions of people newly insured is an expensive proposition, and one that is
costing $273.6 billion in additional insurance overhead, according to a new report.
The $273.6 billion in additional insurance overhead represents an average of of $1,375 per newly insured person, per year, from 2012 through 2022.
The overhead cost equals a whopping 22.5 percent of the total estimated $2.76 trillion in all federal government spending for the Affordable Care Act programs during that time, the authors of the report in the journal Health Affairs noted.
In contrast, the federal government's traditional Medicare program has overhead of just 2 percent, according to the report.
"Insuring 25 million additional Americans, as the [Congressional Budget Office] projects the ACA will do, is surely worthwhile," the authors of the Health Affairs blog post write. "But the administrative cost of doing so seems awfully steep, particularly when much cheaper alternatives are available."
A whopping $172.2 billion of that total new Obamcare overhead spending, "will go for increased private insurance overhead," which means insurance company administrative costs and profits. There are mechanisms in the law to make sure that overhead and profits are restrained by making sure 85 percent of premium costs go to actual health care, but bringing millions of people into private health insurance—which is already bloated with administrative overhead—means that much more. The rest of the new administrative costs is mainly coming from other Obamacare programs, but includes the costs of Medicaid expansion that's managed by private Medicaid HMOs.
That 2 percent overhead cost for Medicare looks awfully appealing, doesn't it. Obamacare has been effective in reducing costs—primarily through Medicare. And the competition is helping to keep premiums reasonable, for the most part. But it's still an inefficient way to deliver universal healthcare. Centralized, single-payer healthcare has alway clearly been the cheaper alternative. That means transitioning to Medicare for everyone. It wouldn't have to happen all at once. It could go first to people left in the Medicaid gap. The eligibility age could be reduced to 55, then 50, helping out near retirees who are looking at shaky futures. The experience of the rest of the developed world demonstrates that if this country is ever going to have universal healthcare and sustainable healthcare costs, Medicare for everyone is the way to go.
