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Healthcare fragmentation’s high cost

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The Fiscal Times reports on a HealthAffairs analysis on the  vast administrative costs associated with the Affordable Care Act.

The analysis in HealthAffairs found that the ACA would add about $273.6 billion in administrative costs in  2014-22, including $172.2 billion in higher private insurance overhead.

David Himmelstein, M.D., and Steffie Woolhandler, M.D., professors at the City University of New York School of Public Health and lecturers at Harvard Medical School, cite  rising enrollment in private plans, the law’s Medicaid expansion and the cost of setting up and running health-insurance exchanges.

Instead of the ACA, it would have cheaper, easier and more efficient to simply extend the traditional Medicare program to everyone — but that was seen as ideologically and politically impossible. So we have a system whose fragmentation and contradictory incentives and disincentives maximizes costs as each constituency demands its cut.

The latest estimate means about $1,375 in extra administrative costs per newly insured person per year, according to the report. That’s “over and above what would have been expected had the law not been enacted,” Dr. Himmelstein wrote on the Health Affairs blog.





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