Medicare Is Still More Cost-Efficient Than Private Insurance
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2 AT 06:30 PM PST
Medicare is still more cost-efficient than private insurance
byJoan McCarter
Last year, both the Congressional Budget Office and Standard & Poor's reported that the growth of costs in Medicare has slowed significantly, much more slowly that the growth of costs for private care.
Turns out, it's not just a one-year trend.
Despite competition and choice in the private insurance system, Medicare spending has grown more slowly than private insurance premiums for comparable coverage for more than 30 years.
From 1970 to 2009, Medicare spending per beneficiary grew by an average of 1 percentage point less each year than comparable private insurance premiums. Between 2000 and 2009, Medicare’s cost advantage was even larger—its spending per beneficiary grew at an average annual rate of 5.1 percent while per-capita premiums for private health insurance plans grew at 7.2 percent, according to the Center on Budget and Policy Priorities. [...]
In inflation-adjusted terms, Medicare spending per beneficiary increased more than 400 percent between 1969 and 2009 while private insurance premiums increased by more than 700 percent.
What explains Medicare’s sustained cost advantage over private insurance? Medicare has much lower administrative costs than private insurance (administrative costs account for about 14 percent of health care spending, or a whopping $360 billion a year).
And Medicare has considerable negotiating leverage with providers as a result of its huge enrollment.
Which proves the problem with plans like Wyden-Ryan, or just plain old Ryan, which has been embraced by just about every House Republican, and most GOP presidential candidates. In four decades of data, there's no evidence to suggest that competition in health care has done anything to bring costs down. Rather than working to figure out how to make Medicare work more like private insurance, policy-makers need to be figuring out how to get more people in Medicare.
