Health Care Reform:

Proposals Have Potential to Reduce Administrative Costs

HEHS-94-158: Published: May 31, 1994. Publicly Released: Jun 29, 1994.

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Pursuant to a congressional request, GAO reviewed how various health care reform proposals would affect administrative functions in a single-payer or managed competition health insurance system.

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.

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