Lest you think I make this stuff up, I offer the following for your consideration. By mere coincidence I just read this on 7/1/2009 2:09:46 PM after I wrote several articles related to these topics. These are excerpts from a recent report prepared by the Congressional Budget Office. I have added the highlights to make my point and the point that should concern people in this debate on health care reform, especially with regard to a government run plan or option.
Key Issues in Analyzing
Major Health Insurance Proposals
“The traditional fee-for-service Medicare program does relatively little to manage benefits, which tends to reduce its administrative costs but may raise its overall spending relative to a more tightly managed approach.”
“One factor that complicates the comparison of administrative costs in Medicare and private health insurance plans is that Medicare enrollees are either elderly or disabled, so their average health care costs are much higher. As a result, the share of the premium accounted for by administrative costs is likely to be lower simply because the denominator for that calculation is larger. For the same reason, private insurers that offer Medicare’s basic benefits (known as Medicare Advantage plans) report having lower administrative costs as a share of their total costs per enrollee—about half as high as for their enrollees under the age of 65 as a percentage of the premium.”
“Effects of Managed Care on Premiums and Spending
Determining the effects of the various cost-containment tools can be difficult because health plans use different combinations of them, and plans vary along a number of other dimensions. Consequently, much of the published research has focused on comparing HMOs (which havetraditionally used more stringent cost-containment methods) with other types of plans. The evidence suggests that HMOs deliver a given package of benefits at a lower cost than PPOs and other plans. In particular, studies have found that HMOs reduce the use of hospital services and other expensive services. Because those studies rely largely on data that are more than a decade old, however, they probably overstate the differences that exist today between HMOs and other types of plans. On the basis of the available evidence, CBO estimates that plans making more extensive use of benefit-management techniques would have premiums that are 5 percent to 10 percent lower than plans using minimal management techniques.”