While Sen. John McCain (R-AZ) has claimed that his health care proposal would reduce administrative costs, a new study released by the Center for American Progress Action Fund suggests that his plan to shift coverage from the group market to the individual market could generate as much as $20 billion in new administrative costs — which represents an increase of more than 20 percent in 2007 dollars.
The study flips McCain’s small government rhetoric on its head. Since McCain’s plan seeks to shift enrollment from the employer-based insurance market to the individual market, insurers would have to spend much more money marketing and processing individual plans and waste premium dollars on the medical review and legal costs of underwriting and rescission. These costs are significant and are the fastest growing part of health care, as shown in the below chart:
Administrative costs are what insurance companies use to deny coverage for individuals with preexisting conditions. We need to spend less on administration, not more. Senator McCain takes health care in the wrong direction.
Read the full report.