Public Plan - Health Reform by ns42j3

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									Is A Public Plan A Necessary
   Part of Health Reform?


          The Alliance for Health Reform
                   April 27th 2009

                 John Holahan
               The Urban Institute



 THE URBAN INSTITUTE
 The Argument For A Public Plan

• Reduce the rate of growth in health care
  spending by addressing problems caused by
  increased concentration in the insurance and
  hospital markets

• Cost containment is necessary to make low
  income subsidies affordable

• Public plan would also help assure access for
  those with serious health issues
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   THE URBAN INSTITUTE
       The Evidence on Market
            Concentration
• Insurance Markets – three or fewer insurers account
  for 65 percent of commercial market in 2003; 34 states
  considered highly concentrated (Robinson 2004)
• Hospital Markets – 88% of large metropolitan areas are
  highly concentrated (Vogt and Town 2006)
• Concentration has contributed to higher hospital prices
  and increased hospital profitability
• Provider consolidation, especially among hospitals,
  makes it hard for insurer competition to be effective in
  controlling system spending

                                                             3



    THE URBAN INSTITUTE
             The Public Plan

• What would it look like?
• How much in administrative cost savings?
• Would the plan use Medicare’s provider
  payment rates?




                                             4



   THE URBAN INSTITUTE
    The Arguments Against a
          Public Plan

• The level playing field argument
• The misuse of monopsony power
• The cost shifting issue




                                     5



   THE URBAN INSTITUTE
   Private Insurance Plans Will
             Survive
• Public plan won’t use all its market power
• Private plans more effective at managing
  utilization
• Not all private plans will survive but the best
  will
   – Likely to provide better service and better access
     than public plan at a somewhat higher cost
   – Will become more aggressive in provider
     negotiations because of public plan
                                                          6



   THE URBAN INSTITUTE
          The Likely Outcome

• Public plan will not end the private insurance
  market but will make it more effective
• Competition from private plans will constrain
  the use of market power by the public plan
• Public plan can be part of a comprehensive
  cost containment strategy but is not all that
  will be required

                                                   7



   THE URBAN INSTITUTE

								
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