03 June 2009

Health Wonk Wrap-up: The Good, the Bad, and the Ugly

The Good:
Obama sent a letter yesterday to the heads of the Senate Finance and HELP committees, Sens Baucus and Kennedy, respectively, in which he strongly reaffirmed his support for a public plan option:
I strongly believe that Americans should have the choice of a public health insurance option operating alongside private plans. This will give them a better range of choices, make the health care market more competitive, and keep insurance companies honest.
It's nice to see Obama pressing for the inclusion of the public option, rather than, as before, treating it like a chip to bargain away.  Kennedy's HELP committee staked out a position well to Finance's left with its policy paper (read here: PDF), which most definitely insists on the inclusion of the public plan, and even the once-skeptical Baucus is talking more openly about the probability that a public plan will be in the final mix.  Conservadem Ben Nelson (D-BCBS) once referred to the public plan as a "deal-breaker" but appears to be softening his stance, and Arlen Specter also has found religion on the matter.   All of this seems to have put the public plan (a government-run health insurance program which consumers can opt into) right back on the center of the table, only a couple of months after it had been given up for dead.

The Bad:
The HELP committee's version of the public plan is not so great.  Of course, standard disclaimers, I've not seen all the details and the final product will be very different.  BUT.  Jon Cohn at TNR reports that the HELP plan will reimburse providers at 110% of the current medicare level.   That's a pittance.   Medicare is currently reimbursing at unsustainable levels, such that many physicians have closed their practice to new medicare patients.  Typically, docs cross-subsidize by cost shifting onto commercial payers, which, depending on many factors can reimburse at 130-300% of medicare (with 150-200% representing the median). 

If the public plan comes in at that 110% level, it's going to fail.   Either docs won't accept it, bringing us back to the old saw that "health insurance does not necessarily guarantee access to health care."  Or, especially if physician participation is mandatory as a corollary of participating in medicare, such a public plan would probably be much cheaper for its customers.   This would lead to the death of the private insurance industry (who would be unable to match the lower provider compensation) and a back-door to single payer.  Now this would accomplish the policy goal of containing the costs of health care nationally, but at the cost of severely depressing provider reimbursement (physician and hospital) to the point that, I think, the viability of the industry would be severely threatened.

For all the conservatives itching to hit the comments and say "I told you so," bear in mind that I've been on record as opposing single payor for years now, for this reason, and I agree in advance that a public option, badly designed, might be worse than no public option.

Speaking of Medicaid, I read somewhere that the HELP vision also include expansion of Medicaid up to 500% of the poverty level.  This also is a terrible idea.  If Medicare is under-reimbursing, Medicaid is a joke, a bad one.  It generally pays half (or less) of the patry sum that Medicare pays. Those docs that accept it do so either because we have to (hospital-based physicians) or out of charity alone.  I loved the Wyden health plan because it eliminated Medicaid altogether.  Any reform which significantly expands medicaid will not accomplish its goal of improving access to health care.   Worse, it's bad policy -- Medicaid is partly funded by the states and is a huge burden on their inelastic budgets, especially in recessions (see: California's cuts in Medicaid).

The Ugly:
MedPAC.  This is seriously wonky, but essentially there's this commission which advises congress on Medicare policy issues.  There are proposals, some endorsed by Obama, to significantly empower it, either by promoting it to he executive branch or to make its recommendations either binding on Congress or unamendable by Congress.  This will be opposed most vigorously by medical device manufacturers, who commonly will bypass medicare's approval process by getting friendly legislators to essentially earmark their devices as "approved," and will fear that some of their products might lose out if subjected to more stringent review.  Others fear (and hope?) that MedPac might be used to set treatment guidelines as to what it will pay for (i.e. "rationing," also known as "not paying for dialysis on demented 95 year olds").  

If this moves forward, it's going to be the nastiest, ugliest pissing match yet in health reform -- worse than the public plan.  It will be opposed by most any interests who fear their ox will be gored.  It wil be opposed even more fiercely by the paranoiacs who saw the nonexistent specter of rationing in the Comarative Effectiveness Research proposal, only now made real.  This will pit the vested interests *and* the ideologues against the good-governance policy nerds who just want to create a mechanism to control costs.   It'll be interesting to see how this develops.  I admit that I'm uncertain, but intrigued by the possibility.  It seems to have some real potential to "bend the cost curve" as the budget-types like to say.

7 comments:

  1. This would lead to the death of the private insurance industry (who would be unable to match the lower provider compensation) and a back-door to single payer. Now this would accomplish the policy goal of containing the costs of health care nationally, but at the cost of severely depressing provider reimbursement (physician and hospital) to the point that, I think, the viability of the industry would be severely threatened.

    This may absolutely be true. I am completely serious I think it may be true. But it sounds like desperate. This "you just can't find people to work for much less," is a pretty tough sell.

    I'm sure it is the fault of lawyers and I know that medical professionals can barely pay their loans and drug companies are just barely staying above water and, again, I recognize it may be true. I just thought I'd point out that the sentiment gives me pause.

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  2. Jim,

    From an industry standpoint, I worry more about the hospitals which are run on very thin margins indeed. They basically take a loss on every medicaid patient and many medicare patients. If the hospitals did not have private payers to reimburse at higher levels, they could not remain in business at the present level of service. And this is my concern about single payer or too strong of a public plan that would drive down prices the same way.

    What this means is that some hospitals would go under (or require taxpayer subsidies a la Cook County), and other hospitals would have to cut back on capital expenses, such as imaging equipment and inpatient beds. So at those places, the hospitals will have markedly reduced capacity in a system which already has too little capacity.

    As for the docs, if you hadn't noticed, they currently can't pay people enough to do primary care, and there are severe shortages of PCPs. Further depression of physician salaries will just accelerate the trend for docs to do specialty medicine and the PCP shortage will worsen. Not good.

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  3. From an industry standpoint, I worry more about the hospitals which are run on very thin margins indeed.

    I'm sure this is true. It is just very hard to understand as a consumer. When I see the bills that family members get from ER visits, and I see the bills that the insurance companies pay for hospital stays, it is really hard to understand how hospitals are about to go broke.

    The emphasis is on "hard to understand" here. I believe you. I just don't understand it.

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  4. Just as a side comment, what about those "extra" costs that hospitals try to tack on to the bill of every patient WITH insurance to make up for this? As an example, a friend's daughter went in for a breast REDUCTION, but the hospital billed her insurance for $85,000, including a pair of IMPLANTS! Worse, the insurance company just shrugged and paid it! Who's screwing whom, and why is anyone getting away with this? Reasonable costs for care should be paid, and unreasonable charges should stop.

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  6. Interesting post. With various health care reform bills floating around both the House and the Senate, President Barack Obama is pulling out all the stops to get the votes that the bill needs, which is good news for the public option. President Obama continues to rally behind health care reform. I am really concerned that the fiasco of this reform may make Obama a one-term president.

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