From economist Greg Mankiw’s blog:
Advocates of government-run health insurance like to point to Medicare’s low administrative costs (which, as I noted yesterday, is a controversial claim). But even if that factual claim were true, the argument would hardly be dispositive as to the greater efficiency of a publicly run system. As I put it in my recent Times article, “True, Medicare’s administrative costs are low, but it is easy to keep those costs contained when a system merely writes checks without expending the resources to control wasteful medical spending.”
The bottom line: Low administrative costs are not to be confused with high administrative efficiency. In other words, administrators are not necessarily a deadweight loss to the system.