1. Medicare administration costs are approximately $500 per year per person cove

Question

1. Medicare administration costs are approximately $500 per year per person covered by Medicare. This is about 4.5% of the total annual health care expenses covered by Medicare. U.S. private health insurance administration costs are approximately $490 per year per person covered by private health insurance—about 8.5% of the total annual health care expenses covered by private insurers.

a. Explain carefully how it is possible for the Medicare and private insurance administration costs to be about the same per person covered. (Private administration costs are slightly less.) Yet, at the same time, private administration costs are nearly twice as high as Medicare administration costs as percentages of the insurers’ total covered health care expenses. Given the information above, what conclusion can you draw about health care expenses covered by Medicare per person covered by Medicare compared to health care expenses covered by private insurers per person covered by those insurers? Explain. Hint: Give labels to the relevant variables listed above and use algebra.

Explanation / Answer

It is possible for the Medicare and private insurance administration costs to be about the same per person covered. the reason is that there would be cost effective premium policies for the person insuring his family as well. The conclusion drawn from health care expenses covered by Medicare per person covered by Medicare compared to health care expenses covered by private insurers per person covered by those insurers is that the insured person is tension free to face emergency expenses. The family is not kept in burden to pay health ammenitites bill at the time of any emergency affecting health

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