By Bob Herman
Becker’s Hospital Review, Feb. 27, 2013
Many statistics and numbers are thrown around when health care policymakers and leaders discuss Medicare’s administrative costs, but an article set to appear in June’s Journal of Health Politics, Policy and Law attempts to alleviate the confusion associated with Medicare’s overhead costs.
Kip Sullivan, JD, part of the Minnesota Chapter of Physicians for a National Health Program, wrote the article to examine the debate over Medicare’s administrative expenditures and how CMS’ figures should be used.
Here are four things to know, based on the article.
1. There are two different measures of Medicare’s administrative costs. One figure comes from the Medicare Board of Trustees’ annual report, while the other comes from CMS’ National Health Expenditure Accounts. According to the latest trustees’ report, Medicare’s overhead represented 1.4 percent of its total expenditures. According to the latest NHEA, Medicare’s overheard was 6 percent of expenditures.
2. The discrepancy between the two figures is due to Medicare Parts C and D. Mr. Sullivan wrote that the difference between the trustees’ measure of overhead and the NHEA measure “is due almost entirely to the fact” that the NHEA figure includes administrative expenses incurred by health insurers that participate in Medicare Advantage (Part C) and Medicare’s prescription drug program (Part D). In essence, the overhead associated with the private insurers involved with Medicare raise the program’s overhead by almost 5 percent, or $24 billion in 2010.
3. All groups across the political spectrum have been confused about, or misused, Medicare’s administrative costs. According to the article, conservative think tanks, liberal authors, health insurance lobbyists and others have all misrepresented Medicare’s administrative costs.
4. The Medicare Board of Trustees and NHEA figures are comprehensive. Some have criticized the government’s definition of Medicare’s overhead, but Mr. Sullivan writes that both governmental figures include other expenditures incurred by CMS, the IRS, Social Security and others to administer Medicare. When it comes to “traditional” Medicare, the trustees’ measure is the more accurate one, according to the report.
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