• Medicare vs. private insurance physician services spending

    Looks like the very simple analysis I presented in my prior post is consistent with published work, albeit covering a different time period. The following figure appears in Comparing Medicare And Private Insurers: Growth Rates In Spending Over Three Decades, by Cristina Boccuti and Marilyn Moon (Health Affairs, 2003; ungated here).

    Growth in payments by private insurers for physician services outpaced that of Medicare in the decade of the 1990s. In case you’re wondering, the paper shows Medicare with roughly the same cumulative growth rate as private insurers for hospital payments. See:

    Putting all comparable services together, Medicare achieved a lower growth rate in the 1990s than private plans (figure not shown; it’s in the paper). It’s important to note that Medicare may control costs better than private plans on average, there are specific plans in specific markets that outperform Medicare. A competitive bidding system that included both private plans and FFS Medicare would obtain the best of both worlds (where “best” is defined in terms of cost control).

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    • Does this account for the fact that cost sharing went down considerably for private plans in the 90s but not for Medicare?

    • There are three things that can be hidden by looking only at growth in dollars per enrollee. Number one is changes in covered services and effective insurance rates (suggested by Jonathon, above). From the NHE in 1960 private health insurance covered 28% of health expenses; 72%was out of pocket. By 2008 that was exactly reversed. Other things being equal premiums had to increase 2% per year just to keep up with the depth of coverage. Two involves persons served. Medicare Part B is virtually saturated at 90% or higher wrt persons served per bene. Private insurance is lower but increasing (and sometimes decreasing). Three: the absolute dollar amounts are very different with Medicare much higher. Should this affect percent changes–not clear, but worth considering.