Overhead Costs and Bureaucratic Waste Exploding Under Obamacare, Study

Don't worry, they are from the government and they are here to make healthcare more affordable.

Okay, now you can stop laughing and get up off of the floor. The latest numbers are in on the Patient Protection and Affordable Care Act's ("PPACA's") administrative costs and the results are predictable, yet still staggering because of the sheer scale of inefficiency and waste.

Many in the industry knew that heaping a massive federal bureaucracy on top of an already inefficient, over-regulated oligopoly would only make things worse. But things appear to be getting much worse in a hurry. Administrative costs for healthcare plans are expected to explode by more than 270 billion dollars over the next ten years, according to a new study published by the Health Affairs blog.

The quarter of a trillion dollars in new costs, covering both private insurers and government programs, will be “over and above what would have been expected had the law not been enacted,” one of the authors, David Himmelstein, wrote.

• This year alone, overhead is expected to make up 45% of all federal spending related to PPACA. 
• By 2022, that ratio is supposed decrease to about 20% of federal spending related to the law. 
• In contrast, by the very rules of PPACA, large group insurers are only permitted to keep a maximum of 15% for administration and profit on any policy sold with the remainder being rebated to customers. 
• This level of administrative waste equates to $1,375 per newly insured person per year.  
• Obamacare is not out of line with other bloated administrative costs from federal healthcare programs. Medicare Advantage plans’ overhead averaged $1,355 per enrollee in 2011. 

Sources:

1. "The Post-Launch Problem: The Affordable Care Act’s Persistently High Administrative Costs", by David Himmelstein and Steffie Woolhandler at the Health Affairs Blog and 
2. "Overhead costs exploding under ObamaCare, study finds", by Sarah Ferris at The Hill.