NCPA - National Center for Policy Analysis

Private Plans Will Have a Major Role in Reshaping Medicare

May 6, 2003

Private health plans usually pay doctors and hospitals about 15 percent more than Medicare pays, raising questions about whether greater use of private plans would save money for the program.

Despite such findings, Bush administration officials and Republican members of Congress say that private plans could improve the quality of care.

Rep. Nancy L. Johnson (R-Conn.) says Republicans decided to give private plans a major role, not just in administering pharmaceutical benefits under Medicare, but in coordinating care for those with chronic conditions like asthma, diabetes and heart disease. According to Johnson:

  • A prescription drug bill will result in overmedication of seniors, at great cost physically and monetarily, if we don't coordinate care for people with multiple chronic conditions.
  • Preferred provider organizations are much more capable of managing care than a fee-for-service plan.

Preferred provider organizations have become popular in the commercial market -- they serve 52 percent of workers with private health insurance, up from 38 percent in 1999.

Preferred provider organizations typically have a network of doctors. Patients can visit any doctor in the network, usually without seeing a primary care doctor, or gatekeeper, and for an extra charge, they may see doctors outside the network.

Source: Robert Pear, "Critics Say Proposal for Medicare Could Increase Costs," New York Times, May 6, 2003.  


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