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ACA to add $274B in admin costs to healthcare system through 2022

Health Affairs: Private insurers to bear brunt of added overhead

The Affordable Care Act will add hundreds of billions of dollars in administrative costs to the nation's healthcare system through 2022, say two researchers writing a blog post for the journal Health Affairs. Private insurers will bear the brunt of this overhead.

The Centers for Medicare & Medicaid Services has estimated that overhead spending for private insurance, as a result of the ACA, will reach almost $274 billion. That will amount to about $1,375 per newly insured member per year.

Of the almost $274 billion in new administrative costs, $172.2 billion are for private insurers' administrative costs and profits as a result of rising private plan enrollment. The remaining administrative costs come primarily from Medicaid expansion. Most of that goes to private insurers, who will account for more than half of total Medicaid costs by 2022.

"Insuring 25 million additional Americans, as the [Congressional Budget Office] projects the ACA will do, is surely worthwhile," authors and professors David Himmelstein and Steffie Woolhandler of City University of New York School of Public Health wrote in the post. "But the administrative cost of doing so seem awfully steep, particularly when much cheaper alternatives are available."

The authors noted that, since more private insurers now administer Medicaid plans, the program's administrative overhead costs have almost doubled from about 5 percent of expenditures in 1980 to about 9 percent this year.

They also pointed out that the ACA isn't the only federal program subcontracting with private insurers and creating "bloated" administrative costs. In fact, the overhead for Medicare Advantage plans averaged almost 14 percent in 2011, about $1,355 per member. Meanwhile, billing problems have plagued Medicare Advantage for years, FierceHealthPayer: AntiFraud previously reported.

To learn more:
- here's the Health Affairs blog post

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