Peter Neupert
Health Technology Executive

Peter Neupert

Peter Neupert is Microsoft’s corporate vice president for the Health Solutions Group. He led from 1998 to 2001.

Lessons From Medicare and Medicaid

Health insurance has gotten a bad rap over the years, mainly because people don't understand its purpose. Insurance companies represent a way to spread risk. Whether it's health, auto, home or life insurance, the basic premise is that you pay into a system with the hope that you will never have a catastrophe, but if you do, there are many others who have paid into the same system to help support you.

Health insurance is unique in that it is used to pay for routine as well as catastrophic needs. Health insurance companies have also tried to control costs through the creation of provider networks with which they can negotiate lower reimbursement rates, the development of communication tools and incentives to help people remain healthy, among other strategies.

Medicare and Medicaid engage in some of these same activities, except instead of allowing for a free, open negotiation of rates between payer and provider, these programs mandate physician reimbursement rates. By making this the primary means of competition, they have actually driven up prices for those paying out of pocket or with private insurance. Private sector employers and employees pay as much as 10-11 percent more for health insurance than they would otherwise to fund the provider operating deficit created by these programs. Medicare has increased access, but at a huge cost to the system because it has become the major player and crowded out innovation by private insurance companies.

While these programs began with admirable goals and are politically popular, in reality, over the past 40 years, they have done little to control costs or drive innovation. Given that the programs are guided by politics rather than economics, they've lacked the key attributes of successful capitalist systems that generate more value and less cost over time - neither reducing demand through prevention or other means nor driving flexibility or agility on the supply side.

We need to thoughtfully consider the goals behind a public option. Are we looking for real "reform" or simply to guarantee coverage for the uninsured? The public option by itself won't improve the system.

What's needed is a new framework to drive innovation, better value, improved outcomes and increased access. How will another government-managed option be better at building a health system that works for the 21st Century than the one we already have?

By Peter Neupert  |  August 4, 2009; 1:21 PM ET  | Category:  Public option Save & Share:  Send E-mail   Facebook   Twitter   Digg   Yahoo Buzz   StumbleUpon   Technorati  
Previous: Get Results Through Legislation, Not a Public Plan | Next: Getting Everyone Covered Efficiently


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Unfortunately the data does not support most of the above. There are no good studies supporting "cost shifting." The growth of Medicare has been less than the growth in insurence premiums. CEPR has a grphing calculator that shows that if we keep our present system of for profit insurance, by 2082, the deficit will be 50% of the GDP while if we adopt the health care systems of any of 23 other countries, we will soon go into a surplus which will rise to 20% - 30% of the GDP in 2082.

So government run systems in other countries can innovate; they can bend the curve. Ours cannot.

Posted by: lensch | August 5, 2009 10:29 AM
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