[extropy-chat] Health Care Costs (was Extinctions)

Hughes, James J. james.hughes at trincoll.edu
Fri Jun 16 14:04:13 UTC 2006

> Do you happen to know how the private insurers compared to the HMOs?

Most managed care organizations are actually run by private insurers,
and they can have as high as 30% administrative costs (including

Managed care has two basic models, the old-fashioned group model with
all the docs working for the one HMO in its own hospitals, like in
Kaiser Permanente, and the network model in which docs can be signed up
with multiple managed care plans. The latter does require more
administration, and administrative costs are also larger for smaller
plans, which would lead a big system like Kaiser to be able to get
economies of scale. Kaiser traditionally posts the lowest administrative
costs of all the private insurers, around 3%, on par with the national
systems and Medicare.

In other words, large group model HMOs like Kaiser have lower
administrative costs (and clinical costs, and better clinical outcomes)
for many of the same reasons that single-payer national health insurance
systems do: they aren't being crushed by crippling administrative
inefficiency, and in turn are not assigning MBAs to micro-manage
physician decision-making. 

James J. Hughes Ph.D.
Lecturer, Public Policy
Williams 229B, Trinity College
300 Summit St.
Hartford CT 06106
james.hughes at trincoll.edu

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