NCPA - National Center for Policy Analysis

Managed Care's Cost-Controlling Promises Fade

December 12, 2000

A decade ago, managed health care was seen as a way to control spiraling medical costs. For a time, that worked out. But costs are on the rise again and it doesn't look as though managed care can repeat the trick this time.

  • Health insurance premiums are expected to rise 10 percent to 13 percent next year for larger employers and 20 percent or more for smaller ones.
  • The cost of today's $218 billion Medicare program is expected to double by 2010.
  • Causes of the projected rise are an aging population, expensive new drugs and treatments, consumer demand and a growing ability among doctors and hospitals to resist managed care payment cuts.
  • Spending on health care is creeping toward 14 percent of gross domestic product and some projections show that by the end of the decade nearly $1 out of every $5 could be spent on medical services.

Some experts predict that fewer employers will offer health benefits in the future, probably at the point when unemployment rises. Or they may decide to offer their employees money to purchase their own insurance or medical services.

Some observers speculate that insurance companies will offer an increasingly wide spectrum of insurance -- from expensive full-coverage plans to basic plans that include only catastrophic coverage and some preventive services.

Sources: Julie Appleby, "HMO: Medical Costs are Rising and Insurance Premiums Could Jump 20 Percent -- Signs that Managed Care Isn't Working," and "Future Will See New Cost Controls," USA Today, December 8, 2000.


Browse more articles on Health Issues