Which better controls spending – Private insurance or Medicare/Medicaid?

Before you read further, cast your vote…

Okay, a couple initial thoughts.

First, when comparing health care systems’ ability to control cost over multiple years, the best metric is the cost trend per member; this accounts for differences in demographics and membership growth.

Second, this only accounts for cost growth; not outcomes, patient or provider satisfaction, or efficiency.

That said, cost growth is the best metric to use when thinking about long term cost control, governmental budgets debt and deficits, and tax implications.

Drew Altman at the Kaiser Family Foundation has a simple graphic here that tracks cost growth over time.  The net – from 2007 to 2013, private insurance costs increased 29%, more than twice Medicare’s growth and five times higher than Medicaid.

(side note – the most recent data indicates Medicare has higher member satisfaction than private insurers…)

What does this mean for you?

If your goal is cost control, the answer is obvious.  However, personal and policy decisions are never simple.

3 thoughts on “Which better controls spending – Private insurance or Medicare/Medicaid?

  1. This is a fairly simplistic view of the delivery systems. On the demographics point, I did not see any mention of the shift of acute and traditionally non-covered insured that are now being handle by insurance companies. I also did not see any mention of how insurance companies are regulated to spend on members through the government imposed MLR caps which are not on government programs. With such a seismic shift in who is covered I can’t see how this graph provides any meaningful long-term comparison. We will need at least another two years to fully understand the impact of the ACA on not only the access to care, but also the quality and effectiveness of the care. With the raise of the ACO model’s the data they will have, will be very useful in comparing deliver systems in the future. Bottom line, both are needed to ensure our medical delivery system is measured on prevention, effectiveness and efficiency.

    • Matt -thanks for the comment. Several of your points on the dramatic changes occurring in the delivery systems are valid.

      re the MLR cap, I don’t see how that is an issue; MLR is a function of spend AND premiums; as we are seeing every day private payers on the Exchanges are doing everything possible to keep premiums low. As premiums are primarily driven by health care costs, payers are tightly focused on costs as well – ACOs being one example.

      re the long term comparison, one could make a strong argument that from 2007 – 2013 insurers had the advantage over governmental programs as Medicaid and Medicare rolls grew (particularly after 2008 for Medicaid). Of note, Medicaid rolls are growing dramatically as well, with many formerly uninsured now covered by Medicaid.

      yes the future is uncertain, but we can learn much from the past. And, as I noted thruout the post, if one is primarily concerned with debt, deficits, and tax support, the graphic is quite instructive.

  2. When looking at this one statistic, it definitely seems private insurance is the better option – but just for this one metric. There’s a lot more to insurance than just this!

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