For years, it has been conventional wisdom in health-policy circles that government-run, Fee-for-Service Medicare is more efficient than private insurance. It is said that Medicare, America's single-payer health-insurance system for the elderly, has lower administrative costs than private insurers do. Single-payer advocates argue, therefore, that the United States would have a more cost-effective and affordable health-care system if Medicare were expanded to encompass all Americans.
However, recent studies have shown that private insurers are more efficient, with lower administrative costs, than Medicare is. As a result, private insurance–based reforms of the Medicare program, such as those proposed by Senator Ron Wyden and Representative Paul Ryan, have gained renewed interest among policymakers. While the Wyden-Ryan proposal and similar ones contemplate giving future retirees the choice between private insurance and the traditional Medicare "public option," there are also opportunities to make government-run, Fee-for-Service Medicare more efficient.
