11/8/11

Public & Private Administrative Costs:Which is lower?

The new National Health Expenditures Trends  notes that the administrative costs arising from private sector funding are now more than three times the administrative costs associated with public sector funding (p. 31):
In 1975, administration accounted for 2.9% of total public-sector expenditure and 2.5% of total private-sector expenditure. The public- and private-sector trends differ over time. While the share gradually declined in the public sector to 2.0%  in 2009, the private-sector share has risen to 6.2%.
The increase in private sector administrative costs appears to coincide with the increased role of private health insurance discussed earlier.  That makes sense.  Private insurance incurs administrative costs while the other main form of private payment, 'out of pocket' payment, incurs very little.

The more private insurance, the more administrative costs. Just like the USA.

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