HMOs to Cost Medicare $2.75 Bln Extra in '04- Rpt
Thu May 20, 2004 12:06 AM ET

By Kim Dixon
CHICAGO (Reuters) - A new law encouraging private health insurers to bid for Medicare business will cost the government $2.75 billion more this year than a fully government-run program, a nonprofit group reported on Thursday.

The Commonwealth Fund's study suggests that the government may be better than private insurers at managing health care costs for the elderly, the authors said.

"It suggests that private health plans don't save more money," said Brian Biles, professor of health policy at George Washington University, an author of the study "The Cost of Privatization" in Medicare.

The analysis of government data found that payments to the private plans in 2004 will be an average 8.4 percent higher than the costs in traditional Medicare, the study found. That comes out to $552 more per recipient.

Biles said the study controls for the fact that private insurers tend to cover healthier people, while Medicare must cover everyone.