Roger’s Rules

Anthony Weiner's fuzzy math

New York Democratic Congressman Anthony Weiner precipitated a raising of the eyebrow yesterday when he appeared on the Jon Stewart comedy show and, in response to Stewart’s question “is [Senator Joe Lieberman] a dick?” said “Yes, Jon.”

Yuck, yuck. What a card! It’s nice to see another Democratic politician do his utmost to combat “the erosion of civility” that President Obama lamented the other day in a speech.

Congressman Weiner’s appearance on The Daily Show provided ample grounds for an elevated supercilium, but his acquiescence in Stewart’s juvenile vulgarism wasn’t the most objectionable part if his performance. That came a bit later (at about 2.40 in this clip) when Weiner dilated on the merits of the Democratic efforts at “health care reform.”

“We’ve had this experiment for the last 45 years,” Weiner said, “we’ve had Medicare, a single-payer government run health care plan that’s really worked well.”  The Congressman went on to assert that medicare operates with a one percent overhead while private health care insurances companies operate with “about a 30 percent overhead” and it is they, the private insurances companies “are the ones that are causing all the problems.”

Your eyebrow should now be up around the middle of your scalp.  Leave aside the contention that Medicare “has really worked well.” Focus instead on the lie, the damned lie, the statistic that Congressman Weiner proffered to viewers of The Daily Show: that Medicare operates with 1 percent overhead while private insurance companies operate with “about a 30 percent overhead.”

The supposed discrepancy between administrative cost for Medicare and private health insurance has long been a canard among those who think you are incapable of looking after yourself and wish to hand the federal government another large slice of the economy. Usually, though, the  discrepancy is said the be from 3-8 percent overhead for Medicare as compared with 14 to 22 percent for private insurance.

In fact, as the Heritage Foundation’s Robert Book explains in a must-read memo on the subject, “Medicare’s administrative costs are actually higher than those of private insurance–this despite the fact that private insurance companies do incur several categories of costs that do not apply to Medicare.”

Book makes the follow points:

1) Medicare patients are by definition elderly, disabled, or patients with end-stage renal disease, and as such have higher average patient care costs, so expressing administrative costs as a percentage of total costs gives a misleading picture of relative efficiency. Administrative costs are incurred primarily on a fixed or per-beneficiary basis; this approach spreads Medicare’s costs over a larger base of patient care cost.

2) In the case of private insurance, administrative costs are measured by the difference between premiums collected and claims paid. The result is that this includes some costs that are not really “administrative.”

For example, many private insurers provide disease management services for patients with chronic conditions and/or on-call nurses for patients to consult by phone. Because these services are provided directly by the insurance company, they do not result in a claim being paid. In addition, most states impose a “premium tax” on health insurers; this tax is obviously not a health benefit claim. However, because all non-benefit costs are defined as “administrative,” these and other similar expenditures are reported as administrative costs.

3) Medicare beneficiaries are by definition elderly, disabled, or patients with end-stage renal disease. Private insurance beneficiaries may include a small percentage of people in those categories, but they consist primarily of people are who under age 65 and not disabled. Naturally, Medicare beneficiaries need, on average, more health care services than those who are privately insured. Yet the bulk of administrative costs are incurred on a fixed program-level or a per-beneficiary basis. Expressing administrative costs as a percentage of total costs makes Medicare’s administrative costs appear lower not because Medicare is necessarily more efficient but merely because its administrative costs are spread over a larger base of actual health care costs.

Bottom line?

4) Medicare administrative costs per beneficiary have substantially exceeded those costs for the private sector, this despite the fact that, as critics note, private insurance is subject to many expenses not incurred by Medicare. Contrary to the claims of public plan advocates, moving millions of Americans from private insurance to a Medicare-like program will result in program administrative costs that are higher per person and higher, not lower, for the nation as a whole.

The fact that Anthony Weiner either 1) doesn’t know this or 2) knows it and refuses to acknowledge it is one more reason that public skepticism about health-care reform is widespread and growing. More and more people understand that they are being sold a bill of good by a coterie of politicians whose chief interest is not in serving the public but in enlarging their own political prerogatives.  And that recognition is yet another reason that politicians like Anthony Weiner should start thinking seriously about career counseling.