In contravention to the claims of President Trump and DOGE staffers, Medicare is generally more efficient than private health insurance. According to the Medicare Trustees, the administrative expenses for traditional Medicare totaled $10.8 billion in 2021, accounting for approximately 1.3% of total program spending [35]. This figure includes expenses for contractors that process claims submitted by beneficiaries and their providers; In stark contrast, private insurance companies operate with significantly higher administrative burdens. The business-related insurance (BIR) costs for private insurance hover around 17% [20]. Even when comparing higher-end estimates of Medicare administrative costs to low-end estimates for private insurance, the gap remains highly statistically significant. Some analyzes place private insurance administrative costs between 12% and 18% [36], still substantially higher than Medicare’s comparatively lean operational average. Indeed, Medicare administrative costs stand at a mere 2% of operating expenditures while private insurance companies spend a staggering 17% of their revenues on administration.
This dramatic difference represents billions in healthcare dollars that could be directed toward patient care rather than overhead expenses. Moreover, the efficiency gap between these two systems continues to widen. If Medicare spending had increased at the same rate as private insurance premiums between 1997 and 2009, the difference would have cost an additional $114 billion to taxpayers —a 31.7% increase. The Congressional Budget Office projects this trend will persist, with private insurance costs continuing to outpace Medicare for the next three decades. Additionally, Medicare Advantage plans, which provide the same care as traditional Medicare but through private insurers, cost 12% more than traditional government plans
Private-sector healthcare is more expensive for consumers, which reduces access to adequate care. Medicare Advantage plans, though part of the Medicare program but administered by private companies, result in administrative costs much closer to private insurance than traditional Medicare; Medical loss ratios averaged 83% for Medicare Advantage plans in 2020, meaning administrative expenses, including profits, were approximately 17% [35]. Similarly, Medicare Part D drug plans operated with administrative expenses and profits of about 8% of total net plan benefit payments in 2021 [35]. A Kaiser Family Foundation analysis determined that total healthcare spending for people with private health insurance would be an estimated $352 billion lower in 2021 if private insurers used Medicare rates to pay hospitals and other healthcare providers [37]. These savings would be distributed among employers ($194 billion), employees ($116 billion), and the non-group market ($42 billion) [37]. One study examining imaging and procedures for individuals who switched from private insurance to Medicare at age sixty-five found that spending fell by $38.56 per beneficiary per quarter—a 32.4% reduction—upon entry into Medicare [38]. Furthermore, this decrease occurred without any reduction in the volume of services received, indicating the cost differential was primarily driven by lower negotiated rates with providers and greater systemic efficiency [38]. Total administrative expenses across the healthcare system totaled over $280 billion in 2019 [39]. The most rigorous available research estimates that converting to a single-payer system could save approximately $504 billion annually in patient and administrative costs [36], though more conservative estimates place this figure closer to $383 billion [36]. According to cross-sectional studies of healthcare spending across 3,110 U.S. counties, service utilization accounts for 65% of cross-county variation, whereas service price and service intensity explain 24% [40]. More succinctly, administrative cost disparities between Medicare and private insurance vary significantly across geographic regions and market segments.
The more a health system uses private-sector insurance schemes, the less efficient that system tends to be. Medicare privatization has resulted in higher prices for consumers. Higher Medicare Advantage penetration rates are associated with decreased utilization across multiple service categories: an 8.6 percentage point increase in Medicare Advantage coverage correlates with a 4.9% decrease in hospital inpatient utilization, 4.4% decrease in nursing facility utilization, 2.7% decrease in retail pharmaceutical utilization, and 1.9% decrease in ambulatory care utilization [40]. It is likely, but not certain, that this reduction in service utilization is a function of increased consumer costs. Medicaid managed care, individual marketplace plans, and Medicare Advantage plans all have higher administrative requirements due to more actuarially complex benefit designs [39]. The administrative efficiency gap between public and private systems is not unique to the United States, but US consumers do not recognize this fact. Among Organization for Economic Co-operation and Development (OECD) nations, the U.S. had the highest administrative costs at 8.3% of total healthcare expenditures in 2016, despite having the highest proportion of private payers and some of the least favorable health outcomes [20]. In contrast, countries with single-payer systems demonstrate significantly lower administrative costs — for instance, Canada’s administrative spending accounts for just 2.7% of total healthcare expenditures [20].
Between 1970 and 2019, total U.S. health spending grew from 6.9% of gross domestic product (GDP) to 17.7%, far exceeding international norms in single-payer models [9]. In the same timeframe, administrative costs have increased from 15% to 30% of total medical spending, which represents more than twice the sum of public and private spending on cardiovascular disease prevention and oncological care [9]. Research from the Peterson Foundation reveals that the United States spends $1,055 per capita, per annum on administrative costs—over three times more than Germany, the next highest country at $306 per capita [9].
Contrary to misleading Republican claims, the achievement of Canadian-level administrative costs would save approximately 68% of current U.S. administrative expenditures for Medicare [20]. Unlike private insurers, Medicare avoids costly marketing campaigns, underwriting activities, and does not generate profits from its operations. If the private system were made comparably efficient through legislative action on data sharing, claim assessment, and related matters, the saving to consumers would exceed three times the combined annual budgets of the National Institutes of Health ($39 billion), Health Resources and Services Administration ($12 billion), Substance Abuse and Mental Health Services Administration ($6 billion), and Centers for Disease Control and Prevention ($12 billion) [27]. Medicare’s remarkably low administrative expenses reflect its streamlined operational model. For every dollar spent in the Medicare program, approximately 1.1 cents goes toward administrative costs [41]. In absolute terms, Medicare’s non-salary administrative expenses totaled just $8.1 billion in recent years [41]. This efficiency has remained consistent over time, with traditional Medicare (Parts A and B) maintaining administrative costs of approximately 1.4% of total expenditures [36]; Moreover, this administrative allocation includes expenses for processing payments to providers, patient outreach initiatives, and targeted fraud and abuse control efforts coordinated by the Health and Human Services Department, Justice Department, and FBI [36]. Medicare Advantage (Part C) plans operate with administrative costs around 10.86% of benefits, which increases to 14.84% when including loss adjustment expenses [42]. Likewise, Medicare’s private drug benefit plans (Part D) incur administrative costs approximating 11% of their spending [41]. America’s Health Insurance Plans (AHIP) reports that 17.8 cents of every premium dollar goes toward insurers’ operating costs [43].
Private insurance is less effective and more expensive than Medicare by nearly every metric. According to AHIP’s analysis of private market data from 2018-2020, just 82.4 cents of every premium dollar goes to prescription drugs and medical services [44]. This total includes 22.2 cents for prescription drugs, 19 cents for inpatient hospital costs, 19.9 cents for outpatient hospital costs, 3.3 cents for emergency costs, 11.8 cents for doctor visits, and 3.8 cents for taxes and fees [44]. The remaining 18% includes marketing, customer service, eligibility determination, utilization controls (prior authorization requirements), claims processing, and ad-hoc fee negotiation with provider networks [43]. Furthermore, this figure excludes two significant additional forms of administrative overhead: the time patients spend dealing with insurers over enrollment and claims issues as well as the considerable expenses healthcare providers incur through negotiation with multiple insurers [43]. Private insurers tend to assert that their administrative spending helps coordinate care for people with chronic conditions and helps steer enrollees toward higher-quality providers [41].
Convincing statistical evidence for private insurers’ claims in [41] eludes my understanding at the present time, but I am not able to prove that these claims are specious: Rather, further research studies are necessary. In contrast, Medicare’s well-studied and transparent claims processing approach assesses medical necessity and explores cost-saving alternatives before granting approval for services [36][45]. It does not immediately follow from [36] that similar processing protocols would substantially reduce overhead for private insurers, although one might reason that greater efficiency would reduce overhead in this domain as well. On average, Medicare processes and settles claims within approximately 30 days [46]. For “clean claims” (those free of errors and containing all necessary information) submitted electronically, Medicare typically completes payment within just 14 calendar days [47]. This expedited timeline provides practices with predictable cash flow and reduced administrative follow-up. Providers know immediately what they will be paid and how payments will be disbursed. For example, Maryland has maintained a unique hospital payment system with standardized rates across all payers since the 1970s. The Medicare waiver that enabled this system was modernized in 2014 through the Maryland All-Payer Model, a five-year pilot project generated $1.4 billion in Medicare savings at Maryland hospitals [28]. This innovative approach exceeded all quality and performance targets established in the agreement with CMS [28]. The model incentivizes valuable care focused on patient outcomes rather than service volume [28]. By 2019, Maryland transitioned to a Total Cost of Care Model, expanding reforms beyond hospitals to the broader healthcare delivery system just before the COVID 19 Pandemic [28].
Medicare has more transparent mechanisms to handle claim denials, and these mechanisms are more efficient than private insurance, on average. Traditional fee-for-service Medicare claims require fewer interactions with providers compared to other insurance types [13]; Medicare’s electronic claims processing infrastructure has continued to improve, with many claims now processed through direct electronic submission to supplemental insurers [46]. As a result, physicians can dedicate more resources to patient care rather than administrative follow-up. In contrast, private insurers exhibit higher denial rates compared to Medicare, with some private payers denying 5.6% of claims – an astonishing number that places overhead expenses even higher than would be necessary with a central dispute resolution mechanism like Medicare’s [13].
Claim appeals in both systems are expensive, inconvenient, and problematic, but Medicare Advantage is markedly less efficient than traditional Medicare. Disturbingly, one study found the combined denial rate for home health care coverage at the first two levels of Medicare review stood at approximately 98% [22]. CMS should be ashamed by the sheer quantity of suffering and anxiety imposed by the appeals picture. After initial denial and reconsideration, beneficiaries must obtain a hearing with an Administrative Law Judge (ALJ), which provides “the first real opportunity for a meaningful evaluation of a claim” [22]. Unfortunately, older adults and people with disabilities often “go without necessary care because they’re being wrongly denied coverage and either drop out of the years-long appeals process, waiting for a hearing, or impoverish themselves to pay for care” [22]. Similarly, when private insurance denials are appealed, most initial decisions are partially or fully overturned. In 2023, although only 11.7% of denied prior authorization requests were appealed to Medicare Advantage insurers, 81.7% of these appeals were partially or fully overturned [3]. This remarkably high overturn rate “raises questions about whether the initial request should have been approved” [3]. The appeals success rate also varies significantly across the private insurance market. The percentage of appeals resulting in favorable decisions ranged from 42.4% for Kaiser Permanente to 93.6% for Centene [3]. Nevertheless, as with Medicare, the majority of the 3.2 million denied prior authorization requests were never appealed [3].
Reasonable people would build on Medicare’s strengths rather than mobilizing public opinion against citizens’ best interests. Politicians should respectfully consider reform of the reckless, torpid Medicare ALJ system rather than calling for privatization, which has even worse outcomes for patients and providers [3]. Indeed, private insurers must navigate 400-500 different payers, including TPAs and self-insured plans, each with unique billing requirements and distinct claim processing algorithms [1] [14] . When private claims require additional documentation or face pre-authorization challenges, insurance resolution can routinely stretch into months of expensive mutual miscommunication and failed deliberation [15]. Even though prior authorization is intended to ensure medical necessity, these processes “may result in administrative hassles for providers, delays for patients in receiving necessary care, and in some instances, denials of medically necessary services” [3].
Demonizing Medicare for supposedly higher claim complexity than the private quagmire is disingenuous, dishonest, and substantively without statistical merit. Private coverage denials are particularly troubling because they “may lead to delays in obtaining needed care and potentially result in adverse health outcomes” [21]. The financial consequences of billing complexity extend beyond direct staffing costs. From a physician’s perspective, there are substantial risks associated with inaccurate coding and billing, including lost revenue, legal investigations, and additional regulatory hurdles [1]. Private insurers paid hospitals 224% more than Medicare for the same inpatient and outpatient services in 2020 [17], and this gap widened to 254% by 2022 [18]. Many physicians experience negative margins on Medicare patients but compensate through higher private insurance payments [19]. Consequently, healthcare providers find themselves in a difficult position—navigating complex private insurance systems for higher reimbursement while appreciating Medicare’s administrative efficiency but lower payment rates. MedPAC’s analysis of Medicare payment adequacy found that cost-efficient hospitals maintained positive Medicare margins until 2015, after which margins became slightly negative [19]. Defunding or otherwise penalizing Medicare reimbursement rates is irresponsible, cruel, and will result in substantial monetary damage to physicians and patients alike.
Contrary to DOGE misinformation, traditional Medicare beneficiaries experience significantly streamlined administrative requirements compared to their counterparts with private coverage. Claims are transmitted electronically from providers’ computers to Medicare Administrative Contractors (MACs), where they undergo a series of systematic edits for clarity, completeness, and administrative compliance [7]. This process includes initial front-end edits to verify HIPAA standard compliance, followed by implementation guide requirement checks, and finally, Medicare coverage and payment policy verification [7]. Through this standardized approach, Medicare achieves substantial processing efficiencies that benefit both providers and patients. Clean electronic claims submitted to Medicare can be paid as soon as 14 days after receipt, while paper claims cannot be paid until at least 29 days after submission [6]. This expedited timeline incentivizes electronic submission while ensuring providers maintain steady cash flow. Currently, the Administrative Simplification Compliance Act (ASCA) mandates electronic claim submission for Medicare reimbursement, with limited exceptions for small providers, those submitting fewer than 120 claims annually, or practices experiencing documented technological barriers [6]. This requirement has driven widespread adoption of electronic processing throughout the healthcare system. Aiding the Centers for Medicare and Medicaid Services (CMS) rather than threatening it would improve government efficiency. CMS has prioritized reducing beneficiary paperwork through its “Patient over Paperwork” initiative, which explicitly aims to create “a system that gives support and compassion for their experiences, especially when faced with high stress or time-sensitive decisions” [4]. The 2019 Physician Fee Schedule rule modernized Medicare payment policies to improve access to virtual care, “saving Medicare beneficiaries time and money while improving their access to high-quality services” [4]. This initiative alone is projected to save clinicians $87 million via reduced administrative costs in 2019 and $843 million over the following decade [4]. Medicare beneficiaries still report difficulties with standardized forms and coverage confusion, but not as frequently as MAGA pundits might claim. Many beneficiaries feel “the standardized system does not serve their needs” and find “Medicare coverage confusing” [4]. This troubling trend should be addressed within the evidence-based approach used in managed care negotiations and not dissolved by political fiat. In contrast, perhaps three-quarters of consumers report being confused by medical bills and explanations of benefits from private insurers [20]. Private providers are in worse shape than Medicare on metrics of patients’ understanding of their benefits. A Kaiser Family Foundation survey of people newly enrolled in private health insurance marketplace plans found that many “were not confident in their understanding of the definitions of basic terms and concepts such as ‘premium,’ ‘deductible,’ or ‘provider network’ [20]. Private insurers and employers hemorrhage an estimated $4.8 billion annually to assist consumers with low health insurance literacy [20].
Private insurers and CMS invest heavily in technology, but the former struggle to realize Medicare’s proportional gains in efficiency. Indeed, only 5% to 10% of insurance carriers consistently capture value from their data and technology investments [23]. This inefficiency persists primarily because private insurers face challenges in analyzing new forms of data and extracting useful insights [23]. Additionally, the private insurance sector increasingly focuses technology investments on areas that may improve their competitive position rather than reducing administrative costs. Relative frequency of investment priorities demonstrates a denigration of experts in data interpretation in favor of integrated asset allocation (63%), asset liability management (61%), and regulatory capital integration (51%) [24]. 53% of private insurers view private asset modeling as an additional area to leverage technology, but they almost certainly lack the expertise to implement meaningful changes from the data [24]. Private insurers tout investments in generative AI, data analytics, and claims processing software [25], but these technologies often create additional complexity rather than simplifying administrative processes.
Increased efficiency in the private system is often achieved via the commodification of patient data. A proposed national approach for the private sector partially involves developing a centralized claims clearinghouse allowing providers to submit all claims to a single entity, much like Germany’s system [30]. Automated systems could be used to verify insurance coverage and plan-specific benefits before and at service time, minimizing manual work and human errors [32]. Potential benefits include faster claims payments with 24/7 verification availability [11]. A universal electronic medical records (EMR) system could be used to create a centralized database of patient records accessible in real-time, eliminating data silos and reducing administrative burden, but privacy challenges would be difficult to surmount [12]. If it were legally and ethically permissible, policymakers could use this data to identify intervention areas, benchmark progress, and justify systematic reforms [34]. US Providers’ lack of uniformity in data interoperability hamstring the effectiveness of Medicare and the private sector but cause proportionally more harm to the patchwork of private systems. Presently, only 45% of all US hospitals engage in the four core elements of interoperability: finding, sending, receiving, and integrating clinical information across different electronic health record systems [10].
In data utilization efficiency, Medicare again beats the private insurance market quite conclusively. Medicare has implemented standardized approaches to data exchange through initiatives like the 21st Century Cures Act [10]. Regional Health Information Exchanges (HIEs) facilitate basic data sharing but typically cannot support advanced integration across systems [10]. In response to these limitations, Medicare’s approach to interoperability emphasizes standardization and accessibility, whereas private insurers often implement proprietary systems that complicate data exchange with other entities due to a lack of expertise or unwillingness to divulge trade secrets. Cloud-based platforms like Google Cloud Healthcare API now securely process healthcare data in various formats, including FHIR, HL7v2, and DICOM [26]. Nevertheless, the complex landscape of healthcare data formats—from structured electronic health records to unstructured clinical notes—continues to impede healthcare efficiency [26]. This transition could expand employment in high-need areas like care coordination, quality improvement, and patient support services [8]. It is the private sector of which savvy consumers and honest politicians should be most critical.
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