Quora Query: What Percentage of US Health Costs are Spent on Administration?

There are several answers to this. I am sorry to self promote, but if you go to my blog – Notes from the Southern Heartland (https://www.ajlayon.com) and look at the 3-part series “Problems in Paradise” I go over this in some detail.

The best work I’ve seen on this question is by Dr. Stephie Woolhandler (New England Journal of Medicine, 2001). She calculates that the figure is about 30%….that is 30 cents of every dollar is spent on administering health care, at least for the private companies (UHC, BCBS, Humana, etc). For the federal programs (Medicare, Medicaid), it is more like 7% to 15% (7 to 15 cents on the dollar).

It is true that the Affordable Care Act mandates that 85% of each premium dollar be spent on care – what insurance companies call perversely a medical loss – but the insurance companies are fighting this tooth and nail and are trying to re-define “care” in ways that covers administrative costs.

If we decreased the administrative costs the privates consume to the federal level, there would be something on the order of $ 290 to $ 320 billion more dollars to spend on caring for our people.

Take a look at the blog if you want more detail.


About AJ Layon

AJ Layon was, for 28 years, at the University of Florida College of Medicine, in the Division of Critical Care Medicine, in Gainesville, FL. For the approximately 10 years until September 2011, he was Professor and Chief of Critical Care Medicine at UF; In September of 2011 he became System Director and Co-Chairman of Critical Care Medicine in PA; this ended in 2017. He served as a Physician in the Surgical Group with Médecins sans Frontières (MSF, Doctors without Borders) through 2018 and is presently an intensivist in Florida, struggling through the SARS-CoV-2 crisis. While his interests are primarily related to health care, health care reform, and ethical issues, as a citizen of our United States and our world, he will occasionally opine on issues of our "time and destiny". Follow on Twitter @ajlayon
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