Argument: Medicare and public insurance fail to provide good fraud protection
Walton J. Francis. "Why a new public plan will not improve American health care". Heritage Foundation. May 5, 2009: "Administrative Cost and Fraud. An exception ally good analysis by Kerry Weems and Benjamin Sasse, former officials at the Department of Health and Human Services, highlights the essential flaws in one of the main arguments used by proponents of a public plan: "As the case of Medicare's anemic anti-fraud efforts painfully illustrates, less manage ment and lower administrative costs do not neces sarily mean the program is really less costly."
Davis, Hacker, and Holahan and Blumberg all argue that a public plan would cost less than private plans because its administrative costs are lower. This is a terribly misleading assertion and entirely an artifact of false comparisons that do not include all public and private costs. For example, assuming that fraud levels in Original Medicare are 10 percent of payments after spending 5 percent on adminis tration, and in private plans fraud levels are reduced to 5 percent of payments after spending an extra 1 percent on administrative costs for effective fraud prevention (some think the differential is far greater), Original Medicare's failure to have effective fraud controls raises the denominator while lower ing the numerator. On these numbers, for $100 of delivered care, Medicare seemingly spends $5 but actually spends $15 ($5 in administrative costs and $10 in fraud), while the private plan spends $11 ($5 plus $1 plus $5 lost to fraud) for the same $100 of delivered care. What is worse, the higher the actual fraud level, the "better" the Medicare administrative cost appears as a percentage of total spending. So the purported administrative savings are entirely illusory when both numerator and denominator are appropriately adjusted."