In the study, nearly all the computed savings comes from two sources.
1. Decrease in pharmaceutical costs as a result of better bargaining power.
2. Decrease in administrative overhead, calculated by extrapolating the overhead in medicare to the entire US healthcare economy.
I don't have an informed opinion on either of these estimates, but my intuition is that #1 seems reasonable while #2 seems unlikely. The justifications they give include lower executive salaries and decreased fraud. From what I have been told by healthcare professionals, medicare has less incentive to negotiate cost, less incentive to investigate fraud, and therefore lower administrative cost.
1. Decrease in pharmaceutical costs as a result of better bargaining power.
2. Decrease in administrative overhead, calculated by extrapolating the overhead in medicare to the entire US healthcare economy.
I don't have an informed opinion on either of these estimates, but my intuition is that #1 seems reasonable while #2 seems unlikely. The justifications they give include lower executive salaries and decreased fraud. From what I have been told by healthcare professionals, medicare has less incentive to negotiate cost, less incentive to investigate fraud, and therefore lower administrative cost.