Medicare vs. private sector

Ezra has a fantastic post deconstructing Robert Samuelson's WaPo column. From Sameulson:

Now, some say that because the "market" has failed, greater government control is the answer. Private insurance has high overhead costs and generates too much paperwork. True. Still, there's not much evidence that over long periods government controls health spending any better. From 1970 to 2003, Medicare spending rose an average of 9 percent annually, reports the Kaiser Family Foundation. In the same years, private insurance costs rose 10.1 percent annually. Part of the gap reflected private insurance's greater generosity. It covered drugs while Medicare didn't.

And Ezra lays down the smack:

First, Samuelson didn't read the study. It evaluated "common benefits," or benefits provided by both Medicare and private insurers.  Prescription drugs were not included.  Moreover, the apparent closeness comes from the so-called "managed care revolution", where private insurers switched from traditional insurance to HMO's, creating a one-time drop in growth during the mid 90's. Where growth had previously hovered between 10-12 percent, it plummeted to the low single digits through the 90's.  As the decade closed, however, growth, well, grew.  Between 2000 and 2003, private spending has grown at an average of 8.8%, with increases each year (2003 hit 9.6%).  Medicare averaged out 5.9%, with 4.7% growth in in 2003. 

Comments

[Martin]

you are always going to see these one-time blips in growth rates whenever the organizational structure of health care is changed. The far more interesting issue is what is the growth rate in costs, because over the long term that can swamp any other differences between two health care plans. If you don't believe me, plot exp(2x) and 2*exp(x) and you will see what I mean.