economically advanced countries—regardless of how they finance and deliver care—are concerned that their health care costs are too high or at least increasing too quickly. Furthermore, given the nation's wealth, commitment to medical research and technological development, and other factors, it is quite possible that the United States would lead the world in the proportion of national resources devoted to health care even if 20 or 40 years ago it had adopted the social insurance model for health coverage that is commonplace elsewhere.

Overall, employers' capacities and incentives to manage health benefit programs effectively are quite uneven and likely will remain so. For most employers, managing health benefits remains a secondary issue. At their best, employer skills in health benefit management can be quite sophisticated, but Chapter 4 makes clear that the deployment of these skills depends on a significant commitment of resources and that such commitment is mostly limited to some larger employers.

Although the net effect is a matter of controversy, using the workplace as the base for health benefits for most people under age 65 and granting employers extensive discretion to design and manage their health benefits almost certainly add to systemwide administrative costs.1 A competitive system based on individual purchase of insurance (through vouchers or other means) could have high marketing and other administrative costs, depending on the degree of regulation and uniformity imposed. It is generally assumed that a single national health insurance scheme similar to Medicare would generate lower administrative costs.

Today, whether a government program or a more competitive market would better control the total future cost of health care is a central question in the debate over health care reform. Some criticize this nation's decentralized employment-based system as lacking the clout to control prices and allocate resources that they say a single-payer or all-payer system would have. Others criticize both public and private payers for failing to adopt the kind of market-based incentives that they believe would result in more efficient and effective use of health care services. The evidence and arguments reviewed by members of this committee led them to no definitive conclusions, although various members had strong (and conflicting) views on desirable future strategies.

Complexity in Coverage, Administration, and Regulation

Several of the features singled out above—diversity, innovativeness, risk segmentation—contribute to another distinctive feature of the U.S. Health


The controversy involves how administrative costs are to be counted (particularly those seen as indirect or hidden), what effect they have on total spending, and what value is obtained for that spending.

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