Private, Public Insurance Choices Could Significantly Reduce Administrative Healthcare Costs, Report Finds
Private, Public Insurance Choices Could Significantly Reduce Administrative Healthcare Costs, Report Finds
A comprehensive private-public approach to health reform could significantly reduce administrative healthcare costs over the coming decade while achieving near-universal coverage and improving healthcare quality and efficiency, a new report from the Commonwealth Fund Commission on a High Performance Health System finds.
The report, How Health Care Reform Can Lower the Costs of Insurance Administration (issue brief, 20 pages, PDF), found that including both private and public insurance choices in a new national insurance plan could save the nation as much as $265 billion in administrative costs between 2010 and 2020, while a plan that provided a choice of private plans only would increase administrative costs by $32 billion over the same period. Savings from the mixed private-public reform approach would be realized through lower marketing and underwriting costs, reduced costs associated with claims administration, less time spent negotiating provider payment rates, and fewer or standardized commissions to insurance brokers.
The United States leads all industrialized nations in the share of healthcare expenditures devoted to administration, the report found, with the cost totaling almost $156 billion in 2007; that figure is expected to double, to $315 billion, by 2018. The report also found that 12.4 percent — or $96 billion — of the $775 billion in privately insured healthcare spending went to administrative costs in 2007, compared to 6.1 percent — or $60 billion — of the $974 billion in public program healthcare spending claimed by administrative costs.
"Health reform can help pay for itself, but both private and public insurance choices are critically important," said Commonwealth Fund president Karen Davis, who co-authored the report. "A public insurance plan can help drive new efficiencies in the system that will produce large cost reductions. Without a public plan, much of those potential savings will be lost."
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