Sorry -- you guessed wrong!  (But who would know about this stuff without looking it up?)  Minnesota's largest HMO uses 19% of it's revenue to support overhead, compared to Medicare's 2%.   Although private enterprise is supposed to function more efficiently than anything connected with government, private-sector health insurance companies seem to be an exception.  The normal range for administration and overhead costs for these firms is 15-35%.  Government-run health insurance is much more efficient. Medicare's mission is to help older people receive medical care as a right), and has established fixed reimbursement schedules for medical services.  In contrast, for-profit private health insurance companies have a motivation to dispute as many charges as possible, to improve the bottom line.  In order to control payments to service providers, private health insurance companies maintain much larger administrative staffs than Medicare, to challenge, question, and (when possible) refuse reimbursement for services.  This forces hospitals and clinics to maintain larger staffs, as well, to respond to the reluctance of private health insurance companies to pay.  Costs are increased on both sides. The level of waste detailed above accounts for a large portion of the gap between excessive American health care spending and the uneven performance of the American health care system.  For this reason, it may be impossible to achieve "Universal Health Care" in the U.S. without changing the basic way that money is raised and spent. That's why the "Single Payer" idea has been gaining support.  A "Single Payer" system would basically expand Medicare coverage to everyone, add some budgetary restraints on hospital spending, and act to limit drug prices. Sources for overhead percentages:  Medicare annual reports; for Medicaid, Minnesota Office of the Legislative Auditor, The Financial Impact of Alternative Health Care Models on Administrative and Benefits Costs in Minnesota, 1995; for Medica, Chapter 6, "Administrative Expenses", in an untitled report by Minnesota Attorney General Mike Hatch.  All as cited in notes of Kip Sullivan of the Minnesota Universal Health Care Coalition.