Medicare, Medicaid Far More Cost-Efficient Than Private Insurance
The New England Journal of Medicine reports that Medicare and Medicaid spending has decelerated in recent years, and not just because of the Great Recession. The public programs have seen their cost growth slow significantly compared to private health insurance. And this is expected to continue for the coming decade.
This is so important because, as Paul van de Water of the Center on Budget and Policy Priorities explains, the public debate has focused on transforming Medicare and Medicaid in the coming years, constraining cost in the very programs that are the most cost-efficient. If anything, the opposite should be true, and more and more of the system should be converted into public programs to increase the risk pool, allow for greater bargaining leverage on prices, and provide stability.
These data belie the claim that spending for Medicare and Medicaid is “out of control” and that the programs must be fundamentally restructured by adopting Medicare premium support or converting Medicaid into a block grant.
Medicare and Medicaid spending per enrollee will grow at rates of 3.1 percent and 3.6 percent, respectively, over the next ten years — well below the projected growth rate of 5.0 percent for private insurance and somewhat less than the growth of gross domestic product (GDP) per capita. (See figure.) John Holahan and Stacey McMorrow of the Urban Institute, a nonpartisan research organization, base these estimates on the latest projections of national health expenditures prepared by the Office of the Actuary at the Centers for Medicare & Medicaid Services.
Republican plans – and that of the likes of Erskine Bowles – betray their real agenda by focusing on “runaway health costs” in Medicare and Medicaid, when the real runaway costs come from private insurance (and yes, this ends up affecting the budget because of the large employer deduction on health care plans).
Sarah Kliff tries to pinpoint the cost growth and when, precisely, it slowed. But while we can argue about that, we cannot argue this fact: the cost growth in Medicare and Medicaid, relative to private insurance, is much lower. So any reasonable look at the data would suggest that even if your prime objective was to bend the cost curve, your goal should be to increase Medicare and Medicaid rather than creating a lasting market for private insurance.