Blue Cross-Blue Shield Administration Costs: A Study of Non-Profit Health Insurers

Abstract

The administrative costs of Blue Cross and Blue Shield are examined in this paper. The main finding is that the Blues appear to enjoy substantial managerial slack. This striking conclusion is based upon some rather circumstantial evidence. First, no economies of scale are found which is not true of the commercial insurers. Second, the variance in costs is much smaller for those costs associated with Medicare administration than for the Blues own business. Finally, despite the cost advantages of the merged organizational form, this is not the more prevalent form.

Monopoly, Monopsony and Contestability in Health Insurance: A Study of Blue Cross Plans

“…Kass and Paultler [1981] determined that the Plans seemed to use their competitive advantage to reduce administrative costs. Blair, Ginsburg and Vogel[1975] detected no economies of scale among the Plans; if the Plans have scale economies they disappear in managerial slack. Adamache and Sloan [19831 discovered evidence of economies of scale but only tentative support for dissipation of their competitive advantage in managerial slack.…”

Contractarian model of the decline in classical liberalism

“…This paper links these two bodies of literature by explaining how a laissez-faire economy could be expected to evolve toward one with increasing governmental activity. Blair, Ginsberg, and Vogel (1975) Niskanen (1971), andTullock (1965). 3.…”

The Administrative Costs of Non-Profit Health Insurers

“…Two recent articles in this Journal, one by Blair, Ginsburg, and Vogel (1975), hereafter BGV, and the other by Vogel(l977), examine aspects of the administrative cost function of Blue Shield plans using cross section data from 1971.1 In this note, we present estimates of the same equations using data from 1976 and 1977. Our empirical results differ from the previous research and tend to weaken the arguments upon which BGV and Vogel rely.…”

“…Except where explicitly noted, we believe that our data closely parallels that used by BGV and Vogel. (1963) and Blair, Jackson, and Vogel (1975) for a discussion of scale economies in health insurance provision. present.…”