Potential public expenditures under managed competition

This DataWatch estimates the public cost of providing universal coverage under a managed competition model. First, a uniform benefit package is specified; next, the lowest-cost premium for this coverage is estimated, based on average costs in a well-managed health maintenance organization (HMO). Based on these estimates, the cost of premium subsidies and tax revenue effects are determined. It is estimated that if coverage is extended to currently uninsured persons using these estimates and assumptions, spending for these persons will increase 73.9 percent over current levels. The authors estimate a net increase of $47.9 billion in 1993 health spending under a managed competition program with low patient cost sharing. This includes savings of $4.5 billion from wider use of managed care and $11.2 billion in administrative cost savings.