Advocates of a government-run health care system often maintain that administering private health insurance wastes health care dollars. Administrative costs in private insurance range from 12 percent to 20 percent. By contrast, Medicaid and Medicare appear to have administrative costs of 5 percent and 2 percent, respectively.

However, much of the true cost of providing government health care is hidden under a complex, bureaucratic reporting and tracking system. Public accounting of administrative costs fails to include many of the resources the legislative and executive branches devote to managing and directing Medicaid and Medicare. It also excludes interest on the part of the debt that funds the programs. When the true costs of both private and public systems are considered:

• Medicare and Medicaid spend 26.9 cents for every dollar of benefits versus 16.2 cents for private insurance.

• Thus government spends 66 percent more than the private sector per dollar of benefits paid.

Source: Mark Litow and the Technical Committee of the Council for Affordable Health Insurance, "Rhetoric vs. Reality: Comparing Public and Private Health Care Administrative Costs," March 1994, Council for Affordable Health Insurance, 112 S. West Street, 4th Floor, Alexandria, VA 22314, (703) 836-6200.

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