Perhaps. Where are you getting the 5% administrative costs?

All numbers I've seen have been far higher than that.

* Canada 12%

* Britain 16%

* Netherlands 20%

https://www.commonwealthfund.org/sites/default/files/___medi...

Bigger hospitals can afford to have a modest administrative cost because there are fixed (as opposed to variable costs that scale with patients served and departments funded) that scale and amortize in huge organizations. Small hospitals (let's say somewhere in Iceland) either have to do without fancy tech/better staff that usually command more $$$, or have to spend more, increasing their overhead. In reality and to be fair, it's better to compare their patient outcomes and financials in-depth rather than looking at the overhead percentages only.

Your link is provider admin costs. IIRC insurer admin costs are 3% for UK and 5% for Canada.

You're correct; good clarification on which admin costs we're talking about.

Right, I was only talking about insurance administrative costs.

That just means you have to increase costs to increase profits. It's NOT a solution, as a century of ballooning cost-plus government contracts have shown.

I’m not saying that the solution is to close this gap. It’s just another sign of the failure of our system. Seems like there is plenty of evidence around the world that insurance companies can be non profit and work quite well. In fact in the US this was the case until the 80s.

I'm just pointing out that the specific structure you specified has truly perverse incentives that have historically raised costs in every industry in which they've been applied (which includes not just healthcare and other insurance markets, but also defense spending since WW2).