Medicare_08

Medicare_08 - The Future of Private Health Insurance and...

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The Future of Private Health Insurance and Medicare PAM 435 February 26, 2008
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-2 0 2 4 6 8 10 12 14 16 18 90 91 92 93 94 95 96 97 98 99 '00 '01 '02 '03 '04 '05 '06 '07 Source: Kaiser Family Foundation, Employer Health Benefits 2007 Annual Survey. Percent Change Average annual % change in private health insurance premiums Health Insurance Premiums Grew Rapidly Throughout 1980s and Early 1990s 6.1% 13.9% Height of managed care Backlash begins
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0.91 0.62 0.44 0.25 0.14 0.08 0.07 0.03 0.03 0.01 0.21 0.26 0.26 0.34 0.41 0.48 0.60 0.57 0.00 0.00 0.08 0.16 0.22 0.22 0.22 0.13 0.13 0.08 0.17 0.22 0.3 0.29 0.23 0.2 0.21 0.33 0.05 0.04 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 1984 1988 1992 1996 1998 2000 2001 2006 2007 High Ded HMO POS PPO Indemnity Enrollment by Type of Insurance Plan at Firms With 200+ Employees Source: KPMG Surveys of Employer-Sponsored Health Benefits, 1984-1998. Foster Higgins, HIAA, AAPPO; Kaiser/HRET Survey. Managed Care Had Less Than a 10% Share of the Health Insurance Market in 1984
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Summary of 2/21 Lecture Indemnity insurers did little to prevent health care costs and premiums from rising faster than inflation year after year Managed care took over the insurance market by offering a lower premium than indemnity plans, made possible by: receiving large discounts from providers employing utilization management tactics reducing use of hospitals Managed care worked in the 1990s: medical costs and premiums grew very slowly. Costs and premiums returned in the 2000s to the historically large growth rates due to: managed care backlash providers regaining bargaining power failure of utilization management to ration medical technology in long run
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Strategies That Managed Care Plans Used Successfully to Control Medical Costs in the 1990s are Unlikely to Work in the Future 1) Consumers don’t like health plans that place restrictions on which providers they can see. 2) MDs and hospitals got smart: by forming larger groups and systems, MDs and hospitals regained bargaining power over health insurers, causing fees to rise. 3) Other than reducing hospital length of stay, managed care plans have not substantially slowed down the use of expensive medical technologies among their enrollees, and technology is the engine behind long-run increases in medical costs. Managed care changed the level but not the growth rate of medical costs.
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Consumers Faced Fewer Incentives to Price Shop 0 20 40 60 80 100 120 1960 1970 1980 1990 1995 2000 2001 2002 2003 2004 2005 Prescription drugs Total health spending Out-of-pocket spending as proportion of total spending Source: CMS. 13%
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This note was uploaded on 09/12/2008 for the course PAM 4350 taught by Professor Nicholson during the Spring '08 term at Cornell.

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Medicare_08 - The Future of Private Health Insurance and...

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