The next time someone says that Medicare has lower administrative costs than private insurers, take a look at the papers by Mark Litow and Merrill Matthews at the Council for Affordable Health Insurance, and by Benjamin Zycher at the Manhattan Institute. Turns out that the lower administrative cost cheerleaders have a habit of leaving out some important costs that don’t show up in the Medicare budget.

And then consider the following: people spend a lot of money on Medicare supplemental policies because Medicare has no stop loss and does not limit financial risk. Any comparison between private policies and Medicare is comparing apples and oranges unless one also includes the administrative costs of the supplemental policies. No such study exists because data on the administrative costs of the supplemental policies are not easy to come by.

Until those data appear and the administrative costs of supplemental policies are included in Medicare administrative cost calculations, all serious current estimates of Medicare administrative cost will underestimate it.

But some estimates are not serious. For amusement, take a walk on the wild side of health care reform policy with a look at how the rabid polemicists at Physicians for a National Health Plan (PNHP) turn Zycher’s scholarly approach into a “Blatant Lie.” In the PNHP world, such things as deadweight losses from taxation are mere fairy tales, and even if they aren’t

“This concept [that of deadweight losses from taxation] ignores completely the fact that government services are an integral part of our total economy, and the (greatly exaggerated) deadweight losses from taxing the private sector are more than recovered through the higher value of services provided in the public sector (certainly a pompous statement, but no more so than [economist Martin] Feldstein’s).”

Welcome to the PNHP School for magical health care reform. Send your people there, learn the right incantations, wave your wand, and magic happens. The “Publicus expanderamous” spell is especially valuable. Take a dollar from the private sector and give it to a bureaucrat. Put a trained health care wizard on the case. He makes the proper hand motions, says the incantation just right, and that dollar automatically grows into more than a dollar’s worth of services.

Hey, it’s the Christmas Season, people are wearing “I Believe Buttons” and Santa and the Tooth Fairy are cheering in the bleachers. What’s not to like?