Medicare remains more efficient than private insurance

In September 2011, in a post first published in Health Affairs, I explained why Medicare is more efficient than private insurance. You can read that post, with working links, here. Today, Medicare remains more efficient than private insurance. Yet, Republicans in Congress want to dismantle Medicare, essentially denying health care to millions of older adults and people with disabilities who will no longer be able to afford needed care and handing more profits to the private health insurance industry. Here’s the most current data from the Kaiser Family Foundation on Medicare’s rate of growth and spending compared to commercial Medicare Advantage plans:

Medicare’s annual average growth in total spending has fallen since 2010: Medicare’s yearly spending rose 9 percent annually between 2000 and 2010. Average Medicare spending rose just 4.4 percent annually between 2010 and 2015, even though Medicare experienced faster growth in enrollment since 2011.

Medicare’s per person rate of growth has been slower than commercial Medicare Advantage health insurance over the last 25 years: Between 1989 and 2014, Medicare per person spending rose by an annual average of 5.5 percent, 0.8 percent less quickly than private insurance per person spending, which rose by an annual average of 6.3 percent.

Medicare’s per person spending has been substantially slower than commercial health insurance over the last five years: Between 2010 and 2015, Medicare per person spending rose by an annual average of 1.4 percent, less than half the growth rate of commercial Medicare Advantage insurance, 3 percent.

Medicare’s per person spending is projected to grow more slowly than commercial Medicare Advantage insurance: Between 2015 and 2025, Medicare per person spending is projected to rise by an annual average of 4.3 percent, 0.5 percent less quickly than private insurance per person spending, which is projected to rise by an annual average of 4.8 percent.

Medicare’s administrative costs remain far lower than private insurers’ administrative costs: According to the Medicare Trustees in 2015, Medicare’s administrative expenses are 1.66% of total expenditures. In sharp contrast, CBO finds average administrative expenses of private insurers to be 13% of total expenditures.

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