Robin’s got a great graph on the HMO revolution. HMOs held health care spending as a fraction of GDP constant during most of the 90s. Nothing before or since has managed to do the same. The graph makes me wonder what happened to non-HMO costs – especially Medicare costs – during the same period. Robin?
Update: Robin responds in the comments.
READER COMMENTS
Robin Hanson
Jun 10 2009 at 11:38am
Apparently (See Table 1), Medicare spending was held pretty low during that period as well:
fundamentalist
Jun 10 2009 at 11:58am
When the media, AMA, and Congress were bashing HMO’s, family health insurance was $500/mo. I told friends at the time that is they succeeded in destroying the HMO’s ability to rein in costs we would soon be paying $1,000/mo for the same insurance. They thought I was crazy. That would never happen. Now the same coverage is $1,200/mo.
ed
Jun 10 2009 at 2:47pm
Is Robin mixing up Medicare and Medicaid? I’m confused.
Robin Hanson
Jun 10 2009 at 3:06pm
Ed, oops, you are right. Try instead Table 1 from here, which says Medicare spending growth was also lower in this period.
Les
Jun 10 2009 at 4:07pm
If HMO’s held medical care costs to a constant percentage of GDP in the 1990’s, why is that surprising? Were HMO’s not paid a fixed annual amount per patient, which would give them a strong incentive to minimize annual cost per patient in order to maximize annual profit per patient?
Further, from a patient point of view, isn’t this a perverse incentive? Minimizing annual cost per patient would tend to skimp on patient medical care – just like rationing of medical care under single payer medical care in Canada results in lengthy waiting times.
Dan
Jun 10 2009 at 6:33pm
@ Les
Profit maximization isn’t achieved through cost cutting alone. It is also done by winning business through good service. This is the essence of competition between business models: marginal tradeoffs are decided by consumer behavior rather than by Brian Deese.
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