Medicare, which is a universal health insurance program for older Americans, spends less than 2 cents of every dollar on administrative costs, leaving 98 cents to pay for medical care. By contrast, private insurance companies spend only around 80 cents of each dollar in premiums on medical care; much of the remaining 20 cents is spent denying insurance to those who need it.
If we had a universal system — Medicare for everyone — ... we’d almost certainly spend less on health care than we do now.
My guess is that most of the administrative costs in private health insurance are claims-processing costs.
One thing about Medicare for all as that you would need taxes to pay for it. In fact, our existing Medicare system needs more taxes than we now collect in order to pay for it, and the future gap between promised spending and tax revenues is projected to be in the trillions of dollars. Medicare is the fiscal Titanic, and Krugman says that it is time to add passengers.
Taxes impose what economists call deadweight loss. We tax activities like work, thrift, and risk-taking. The higher the tax rate, the less of those things we get. Most estimates of deadweight loss from the typical tax would say that it is much higher than 20 cents on the dollar. If so, then taking into account deadweight loss, financing health care through Medicare is more costly than financing it with private health insurance.
Policymakers should go beyond the promises of single-payer advocates and closely examine the performance of these systems. The empirical evidence generally shows that such a system would result in government rationing and waiting lines for care, reductions in the quality of care, chronic funding crises, slower adoption of and reduced access to advanced medical technology, labor strikes and personnel shortages, creation of new sources of inequality in access to care, expanded bureaucratic power, politicization of personal health care decisions, and a loss of personal freedom.