WASHINGTON

Congressional Democrats say creating a new federally run health insurance program would lower costs by bringing more competition into the marketplace.
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But some health economists and health insurance industry spokesmen say reforming the existing health insurance industry could accomplish the same goal without the need for a public plan.
Advocates of a non-profit public plan say it could charge lower premiums, would spend less on marketing and commissions, and would enroll enough people to wrest discounts from doctors and hospitals. Creating a public plan that reimburses doctors and hospitals at the same rate as Medicare would save $3 trillion over 10 years, the Commonwealth Fund estimates.
Critics counter that a government health insurance plan would draw people away from private insurers, eventually putting them out of business and moving the country closer to a "single-payer" system in which the federal government would be the sole source of health care financing.
"If you look at the way government programs operate today, Medicare only reimburses hospitals about 85 percent of hospital costs," said Robert Zirkelbach, spokesman for America's Health Insurance Plans, an industry trade association. "So they are underpaying hospitals for the services that are provided to hospital patients. The only reason hospitals don't go bankrupt today is that they pass those costs along to employers and families with private coverage."
Zirkelbach said a government-run health insurance plan open to all Americans would put the health insurance industry into "a death spiral."
One possible way to reform the system from within is to borrow the approach used by non-profits such as Kaiser Permanente, HIP in New York and Geisinger Health Plan in northeastern Pennsylvania, said Karen Davis, president of the Commonwealth Fund, a health policy think tank.
Those companies keep costs down by paying providers on a per-capita basis instead of based on how many tests and surgical procedures they perform, she said.
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Only about 10 percent of Americans are enrolled in such plans, Davis said. The challenge, she said, is to make those plans the rule rather than the exception. But that approach would lower costs much more slowly than a government-run insurance plan, Davis said.
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For-profit insurers generally pay health care providers about 80 cents for every dollar in revenues they get in premiums, while non-profits pay about 90 cents, said Howard Berliner, an expert in health care organization at SUNY Downstate Medical Center in New York City. Medicare, the government insurance program for the elderly, is even more efficient, paying 96 cents on the collar.
There's other evidence that more competition isn't necessarily the solution to rising health care costs, according to Bruce McPherson, president and CEO of The Alliance for Advancing Nonprofit Health Care. Of the 16 states dominated by one or two health insurers, 15 have Medicare costs below the national average, McPherson said.
States vary according to how much one or two insurers dominate the market.
In three states -- New York, Florida and Oklahoma -- fewer than 50 percent of health insurance enrollees are covered by the two largest insurance plans in each state.
Among fee-for-service health plans and HMOs, Well Point Inc. and GHI account for 46 percent of statewide enrollment in New York.
Looking at HMOs alone, eight serve Westchester County, 11 serve the Hudson Valley to the north, and three serve Rochester, according to the New York State Insurance Department.
But New Yorkers who work for small employers usually have access to only one health plan -- if one is offered.
The insurance picture is much different in other parts of the country.
Two insurers account for 70 percent of enrollment in Illinois, 77 percent in Georgia and 89 percent in Iowa, according to a 2008 study by the American Medical Association.