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Savings seen in adding budget caps to managed competition.

A health care reform plan combining managed competition and payroll tax or "premium" financing could achieve universal coverage and save approximately $3 trillion over a decade, if the payroll tax is used as a budget limit, according to a report released by the Economic and Social Research Institute (ESRI) a non-profit research organization in Washington, D.C.

The report, commissioned by the Kaiser Family Foundation, is entitled Managed Competition in Health Care: Can It Work? It evaluates two leading plans that contain elements likely to be incorporated in President Clinton's blueprint for health care reform.

The report was written by Jack A. Meyer, Sharon Silow-Carroll, and Elliot Wicks. "This report demonstrates that a mixed approach to health policy reform combining managed competition with firm spending limits can achieve the twin goals of universal access and cost control, while improving the efficiency of the U.S. health care system," said Dr. Meyer, President of the Institute. "But some sacrifices will be needed to achieve these goals."

Managed competition may be an effective tool for gradually reducing waste and inefficiency in the U.S. health care system, according to the report. Managed competition alone, however, will not achieve universal coverage or substantial cost control, particularly in the short term. To achieve these goals, government will need to add requirements for insurance coverage and a true national budget limit for health care.

The managed competition models being considered by President Clinton and others all include grouping Americans into large regional purchasing cooperatives or "alliances," changing insurance rules to inhibit insurers from discriminating against people with medical conditions, and encouraging enrollment in lower-cost health plans that may limit consumers' choice of doctors and hospitals. The proposals differ dramatically, however, in their approaches to cost control and access expansion.

The plan offering the largest savings is one proposed by California Insurance Commissioner John Garamendi. By combining market-based incentives with strong regulatory features, the plan would lead to significant cost savings and expand access to health coverage. The Garamendi plan would effectively establish one pot of money to pay for basic health care for most Americans, while limiting its size and growth to a fixed percent of wages through a payroll tax. This could result in tighter control of resources, as well as a slower rate of growth. Under the Garamendi plan, overall health spending could be lowered by $2.7 to $3.1 trillion over a decade.

Another managed competition plan proposed by Congressman Jim Cooper and the Conservative Democratic Forum (CDF) in the U.S. House of Representatives, relying on market efficiencies but without the budget caps, would result in smaller and less certain savings, with estimates ranging from $250 to $860 billion from 1994 through 2003.

Copies of this report are available from: ESRI, 1820 Discovery Street, Suite 340, Reston, Virginia 22090; (703) 709-6604.
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Publication:Health Care Financing Review
Date:Jun 22, 1993
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