An Analysis of Medicare Administrative Costs

b’ince Medicare is an established fawn of national health insurance for the aged, an analysis of the program’s administrative coat experience should yield valuable insight8 for discuseing administrative aspects of national health insurance. This article poids out the pitfall8 of Blindly using the commonly accepted administrative Costa-to-premiums ratios in comparing the administrative eflciency of diflering health insurers. On a ratio basis and on a per ewollee basis Medicare’s HI ha8 proven to be less expeneioe to admdnister than S&II, but &VI admM&-atlve coat8 are lower on a per claim basis. Medicare business account8 for a large proportion of the health insurance businese of the program intermediaries and carriers, but m etati8tically significant relationahjp could be found between the adminietrative costs in their regular bus&e88 and in their Medicare buSine88. There is a direct relatimhip between the proportion of extended-care facility bills handled and intermediary admi&trative costs. Because ENI claims are more amenable to data-processing handling, the level of individual carrier adminiatrative costs reflects the stage of development of their electronic data-proceseing systems.