Summary

Americans today receive health insurance from a multitude of sources, including more than 1,200 commercial insurers; 550 health maintenance organizations; 69 Blue Cross and Blue Shield plans; thousands of self-insured plans run by private employers; and government programs, such as Medicaid and Medicare. Many believe that the complexity of this insurance system contributes to the nation's high per capita health care costs. One of the aims of health care reform is to enhance administrative efficiency. To the extent that reform simplifies insurance administration, it may be able to cut costs. Any savings in administrative expenses could be applied to other valuable ends, such as expanding access and improving quality. This report examines the administrative cost implications of alternative reform proposals, including a single-payer plan and three managed competition plans, and compares their administrative cost savings potential.

GAO found that: (1) each health care proposal would shift many private insurance-related administrative functions to the public sector, reduce administrative costs, and improve access and efficiency; (2) all four proposals include provisions to develop electronic health care information systems, expand coverage, subsidize premiums, and standardize benefits packages; (3) single-payer and managed competition approaches would increase federal and state governments' regulatory and data collection responsibilities and have major cost implications for governments, health plans, hospitals and physicians, and employers; (4) adoption of a single-payer system would increase public-sector administrative costs, decrease health care providers' costs, eliminate health plans' administrative costs and supplemental coverage, and eliminate the need to enroll employers and individuals in benefits plans; (5) adoption of a managed care system would increase insurance purchasers' economies of scale, create new public or nonprofit health insurance purchasing pools, standardize benefits and claims processing, and increase the administrative costs for eligibility determinations; and (6) although all of the proposals seek to streamline billing, collections, and benefits management, some providers are concerned that health care reforms will impose new information collection and sharing requirements and significantly increase administrative costs.