First, insurance company profits have nothing do to with it, as Gimein, having set up this particular straw man, gets around to pointing out.

Second, overhead does have something to do with it. As Gimein says, the overhead of a typical health insurer runs about 20 percent. (He should add to that the overhead of doctors' offices and hospital billing departments that are devoted to dealing with these insurers--but that's another issue.)

But, instead of simply comparing this number to the overheads of, say, medicaid, the VA, or Ontario, Gimein chooses an obcure medicare related program. Why?

Well, here's why.

The overhead of these other programs is on the order of 1 percent. And, if Ontario is anything to go by, this difference is enlarged by a distinct absence of bookkeeping staff in doctors' offices and hospitals.

Now, admittedly, 20 percent is not as big as it sounds, because privately insured medical bills in the US are well short 16 percent of US GDP. For instance, medicare and medicaid account for 7 or 8 percentage points of that.

But, the fact is, to answer Gimein's question, yes, single payer systems absorb far less overhead than the US private insurance system does.

I talk about Medicare Advantage because it lets you do an apples-to-apples comparison of a government run program (Medicare--that's not obscure) with essentially the same program run by private insurers (Medicare Advantage). Many, many people have used this same comparison -- for the same apples-to-apples reason -- to try to prove that a government run program is cheaper.

If you want to compare private insurance with not just a government insurance program, like Medicare, but an entirely government run health system, like the VA or the UK's, that is a totally different issue. For better or worse, nationalizing the entire health care system is not and will not be on anybody's agenda in the US.

I don't know what a comparison with Medicaid would look like. Medicaid may indeed be cheaper. Maybe much cheaper. That's because Medicaid's reimbursement rates are much lower. You can find any number of stories in the press that will detail how that results in many places in sub-standard care and lack of any reasonable access to specialists. The fact that many children get this sub-standard care because they are poor and rely on an underfunded program is a genuine scandal.

MG

Thanks very much for replying (and sorry for the, well, provocative subject line--you have to get noticed here somehow!).

But, Medicare Advantage (not Medicare) is pretty obscure. And the fact that others use it is little excuse.

And, the issue is not precisely whether Medicare is "cheaper" overall. As you say, there are many variables. Still, I would ask the obvious questions: Why does Medicare pay less? And are you really right in dismissing that as a real advantage of a government run program?

The issue, which you correctly (if not immediately) highlighted in your column, is overhead costs. And there it is easy to make comparisons, and not just with a fully nationalized system. Take the VA, Medicaid, and Medicare, all of which are home-grown American products and all of which have overhead costs that are far less than 20 percent.

The case seems to be closed. If you want to greatly reduce overhead, just go with the government.

The reasons for the difference in costs are clear, too.

Private health insurers, like other insurance companies, must advertise to attract customers, must have customer service agents, and typically offer a wide range of insurance products (including things like billing services for companies enrolled in their programs).

While none of this is wasted in a normal commercial sense, a lot of it is unnecessary, and is not borne by government programs.

On the other hand, you could also argue that the government provides less, and that people (or maybe companies) like the extras and are willing to pay for them. (Polling data on customer satisfaction suggests otherwise, though.)

Lloyd,

Is this a belated response or what? Anyway, late or not, I think you can't just say, "Hey, Medicare has lower overhead." That's not the question. You can set up a system in which doctors and hospitals charge whatever they want for anything they want to do, and somebody (whether the government or insurers or some new entity) picks up the bills. That will have zero overhead. But it won't get you to lower health care costs.

That said, I do think insurers' overhead can be lower. And it is in fact much lower for big companies that self-insure but have a UnitedHealth or an Aetna or whatever administer the plans (if I understand correctly, this is a common arrangement for large corporations)