The 10 year increase in worker contributions in premiums is 128% total (some math whiz will have to figure out what that would be in annual increase, compounded yearly … I come up with about 3% annual increase over ten years, compounded annually, to reach a result that is 134% higher).

Wait for it…

t the end of the series, you end up with 4,653.98. Divide that by your original “3000? and you get 155% of the original cost over 10 years.

A result that is 134% higher would not be the same as 134% of the original cost. If you have $100, then 134% higher is $234. 134% of $100 is $134.

A useful factoid to hold onto is that a quantity will double in a decade with annual growth of just over 7%, about 7.2%.

Nick, are you open to an honest discussion on admin costs or not? Private firms have their own internal fraud investigators, and medicare doesn’t. Is it really hard to believe that there’s a cost difference associated with that? I don’t have a hard time believing that the cost gap is smaller than what medicare’s accounting suggests.

One area where medicare probably has way lower costs is in marketing and recruitment. At least they don’t spend money on cheap crap like free mousepads and water bottles pens and coffee mugs to hand out at open enrollment fairs.

On the math … that’s how its done in many of the articles. Its compounded annually. In an Excel spreadsheet, put “3000″ in a cell (say, B4). In C4, put the formula “=B4+(B4*.05)” and the result is 3000 plus 5% (3,150). Copy the formula over the next 8 cells and you have the cost plus 5% compounded annually. At the end of the series, you end up with 4,653.98. Divide that by your original “3000″ and you get 155% of the original cost over 10 years. That is the way many of the articles express the rise in premiums, I think in an effort to make it sound worse than it is … “premiums are 155% of 10 years ago”.

The Kaiser Family Foundation has better charts that really show the increase in terms of dollars, and employee share of costs (not always the same).

I’m not getting your math. a 3% rise every year for a decade leads to 134%. That’s only a 34% increase. Regardless it’s not a great idea to base your projections on one or two years increase. There’s just too much variation between years for it to work well.

In terms of total expenditures these probably will increase under the new system. But they increase anyway, and hopefully this will reduce hose increases to a more manageable level.

As for young invincibles remember they get the same subsidies everyone else does. And the taxes that pay for those subsidies don’t automatically go up just because costs go up. That means that it will be virtually impossible for anyone to pay 12% of their income on health care without further Congressional action. And IMO future Congressional action will probably be a lot stronger on cost controls because the Progressive caucus will want to protect their hard-won universal plan.

As for Medicare costs, do you guys mean to tell me that in your states no state police ever investigate insurance fraud? Because I just googled state investigates insurance fraud and got loads of hits. They seem to be either run-of-the-mill cops or special departments paid for by taxes on insurance companies. And last time I checked a tax was not an administrative cost.

@Tully:
You want a single national market, with one set of regulations, to increase competition? You’ll get it. It’s called the Exchange.

I started the article with a bit about Medicare fraud, as the Miami Herald has been doing a great job of investigating it, resulting in increased enforcement there. But I couldn’t validate some of the stats, such as that for every $1 spent on fraud investigation, $1.55 is saved. Medicare’s expenditures on fraud investigation are masked by, as Tully said, being hidden in other departments such as the FBI. But they take notice when the Miami Herald tells them that Dade County represents 1/2 of all Medicare costs for durable medical equipment provided for diabetic home health care. You would think someone would notice that.

Fraud prevention and investigation is part of the “administrative cost” a private insurer incurs, and they have a much lower incidence of fraud. But its hard to get at the core numbers with the government’s method of accounting.

Frank is spot on re: admin costs. Medicare admin costs are not what I would call honest. Among other things, Medicare can (and does) farm out fraud investigations (and cost of same) to other branches of government for criminal investigation. And they figure their admin on a group population which has heavier usage (elderly), making more of the admin cost directly applicable to usage rather than to planning or wellness and such. And….well, it’s just not a true figure for comparison with private companies, non-profit or otherwise. Apples and oranges.

Cut costs? Once again, I can’t see how putting greater demand on a program that’s already running in the red is going to lower costs or improve service.

The 10 year increase in worker contributions in premiums is 128% total (some math whiz will have to figure out what that would be in annual increase, compounded yearly … I come up with about 3% annual increase over ten years, compounded annually, to reach a result that is 134% higher).

Nothing in this effort will result in lower total expenditures (more people covered will mean more expenses). It may result in lower costs due to reductions in emergency room visits and advances in preventative care, but that remains to be seen. Most people seem to agree that we want to cover those that cannot provide their own coverage, but I doubt that “feeling” will persist when young people are compelled to enroll in a medical plan and pay 12% of their income to provide it. The tax impact on the rest of us will be much less than the “young, invincible” workers, many of whom elect not to pay for health insurance.

It may make some of them into conservatives in the end!

Where do you get a 5% number for large employers? I’ve found references that put it as low as 7%, but none that say 5%. Regardless it’s pretty clear the main determinant in administrative costs for a plan is it’s size.

IMO it’s clear we could have done a lot better in terms of cost-control with this bill. The cheapest would be simply merging Medicare and Medicaid, forcing everyone whose job doesn’t provide coverage to by in, and subsidizing those who can’t afford it. That would be a huge plan, so admin costs would be low (probably 5-6%), and it would be non profit which reduces costs a little more (most for-profit insurers have margins of 3%).

Trouble with that is the moderates and conservatives consider free-market rhetoric to be more important than cutting costs. And in this case they chose to call the market an Exchange.