Donald W. Light, Ph.D., Professor of Comparative Health Care Systems, University of Medicine & Dentistry of New Jersey, responds on the administrative costs in health care:
When Scott Serota, the CEO of the Blue Cross and Blue Shield Association explains that 85.7% of commercial premiums go to pay medical claims, he is wrong and misleads the American public. It is not true, as he states, that “This report clearly demonstrates that the majority of premium dollars are being spent on healthcare services,” unless he means more than 51%.
After BCBSA takes its 14.3%, which is lower than many other insurers, doctors’ offices pay out 35-45% for administration, billing, collections, and related services which do not go to medical services or claims to pay for them. Hospitals take out somewhat less, about 25-28%. Then, beyond the cost of premiums are the high search and benefits costs of employers or other contracting groups as well as all the administrative costs of clinicians trying to get paid for services to sick patients who do not have insurance.
These high costs are due to a highly inefficient structure of voluntary, competitive health care in highly inefficient markets with many features of market failure that give less care and less choice for more cost. Such a system wastes money for businesses and for government. President Bush’s new plan to use state power to coerce people into a private Medicare market, will increase transaction costs further. All this waste and inefficiency, however, provides parasitic industries with their bread and butter. Inefficiency and market failures are good for health care business!
(These comments are in response to the following Quote of the Day: https://pnhp.org/news/archives/001674.php)