In all the talk about a public option, there is little explanation of what it might look like and how it will be priced. One possible form it might take is expansion of Medicare, as in Representative Pete Stark’s AmeriCare Health Care Act of 2009, H.R. 193. Stark’s bill makes health care available to every American, using Medicare as the structure, and building on it to create a system that will work for everyone, especially children and pregnant women.
Scarecrow points to one of the emerging details of a robust public option, how much it will pay to providers. Medicare has a schedule of payments to providers so complicated that it makes your head spin. Here’s an example. How much will Medicare pay for a brief office visit for the sole purpose of monitoring or changing drug prescription in Indiana? To find out, first you have to know the HCPCS code, which you can find at this site. I only found the code by poking around, it is M0064. Part III on this site explains how to look up the amount you can charge, and what the various entries mean. It turns out that the doctor can charge $41.58 for that visit anywhere in Indiana. The charges range from $34.91 in Puerto Rico to $57.62 in San Francisco.
That’s not enough to keep a private practice doctor in business. Suppose she could see 10 patients an hour, which is ludicrous. $420 per hour isn’t going to pay for overhead in an average office, let alone leave something for the doctor. Play with the codes, and you will see that Medicare rates aren’t going to be enough to fund the public option. This is a serious problem with Rep. Stark’s H.R. 193.
It won’t do to increase the rates paid currently paid in the Medicare program. That would cause serious problems with funding for a program that already faces funding issues in the near future. It also seems like it will be a problem if people covered by the public option reach Medicare age, and suddenly become much less profitable to their regular care physicians.
The 22 Congressfolk that Scarecrow talks about say that the public option will have to have access to a provider network large enough to insure that it will be able to serve its customers. That is clearly right. The public option will have to match the amounts paid by private insurers to their provider networks.
That means that someone will have to find out how much insurance companies are paying their provider networks. Insurance companies are certain to argue that their payment schedules are trade secrets, so that problem that will have to be addressed by legislation.
The public option may be able to come in a bit lower than private companies, because over time, private insurers don’t like to pay for sick people, and wash them out. The more expensive patients then become drains on providers. There may also be deals to be done if the Medicare fee schedule could be increased in return for lower rates in the public option. This would require a tax increase to support Medicare, which is going to have to happen eventually, anyway.
The Congressionals also say that the public option will have to be self-supporting, without any subsidies that are not available to all market participants. This means that the public option will have to charge enough in premiums to pay for itself and its benefits. For reasons explained here, it seems like that should be easy, and at prices substantially less than those of private companies.
This is a very difficult problem, and one which needs to be solved transparently.
Related posts:
- Three Public Option Amendments Submitted For Baucus’ Bill
- More House Democrats Push for Robust Public Option
- Harry Reid’s “Corporate” Public Option: Not Public, and Not an Option
- CMS: Public Option Much Cheaper Than Private Insurance, and Would Make Private Plans Cheaper, Too
- Should the Public Option Use Medicare Payment Rates?
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There’s another funding stream here, and that’s the subsidies. Any plan in the exchange, public option included, would get subsidies when it takes on a patient who can’t pay full premiums. The subsidies would be larger if the patient was a bigger risk, or lived in a more expensive area of the country (though these incentives could change over time to change doctor behavior).
no subsidies for the public plan?
why not
it is no secret but the private plans get 14% more to do Medicare than the public plan.
the entire part D is subsidy.
Underfunding has historically been the mechanism by which even the best programs get choked off.
The only area of the government that can claim not to be underfunded is DoD (even though the MIC whines about being underfunded all the time). I guess killing and the war machine is more important than helping those less fortunate.
Meanwhile Bacus says that we will get real reform on the twelth of never
http://www.helenair.com/articl…..health.txt
This Diane Rehm Show on single payer with Dr. David Himmelstein of PNHP has him saying that single payer will save $400B per year, allowing covering for everyone, from dollar one, from day one. No deductibles, no copays.
Fold Medicare into a national single payer plan or expand Medicare to Medicare for All.
$400 Trillion over 10 years can do an awful lot of good.
Now what it can’t do is offer pols the big donations from the BHIP* folks….
Gee…maybe that’s a deal breaker? Ya think?
*BHIP–Big Healthcare Industry Players
Want to bet Americans will get a really good law here?
The whole micromanaged fee-for-service system is dysfunctional in accounting and in auditing.
The HELP public plan constrains payments to the average fee-for-service in a given locality; now there need to be some protections against provider collusion to increase those average figures, but that is a good benchmark for a market price.
But that doesn’t answer the question about what the menu of services looks like nor whether administrative costs are charged as indirect costs for each service (a source of the $10 aspirin). Some form of bulk pricing of services would reduce administrative cost and facilitate rapid billing, but what would be the basis of negotiation for each type of provider. For example, the public plan could cover all hospital expenses for an acutuarially determined pro-rated number of patients each year, with adjustments carried forward from year to year. One check per year for everyone who is covered. Primary care providers could have a negotiated number of patients from particular zip codes, with adjustments made from year to year. The savings in administrative expense would make up for the loss of cost accounting control consolidated at the federal level. The fixed dollar amount would provide a provider a budget to work within during the year without the nonsense of five-minute provider visits.
And HHS as the plan administrator should have the flexibility to develop these alternative means of pricing. And if they come up with a winning combination, it should be extended to Medicare and Medicaid, with a view of folding those eventually into the public plan.
Medicare became underfunded and the micro-managed fee-for-service schedule was implemented by the Reagan administration to “control Medicare costs”. Neither of these “reforms” have served anyone well.
$400 billion times 10 years is $4 trillion, not $400 trillion
just a nit
Book Salon upstairs with Ryan Grim’s This Is Your Country ON Drugs hosted by Will Wilkinson
Subsidies would mostly likely initially come in to pay for or to subsidize those making too little to pay the established public option insurance premiums. That’s likely to change over time if the public insurer is credibly established, as more and more people opt to use it over privates. Predictably, they will intentionally be slow to adapt, though they are likely to putt out plans that make it appear they are adapting.
But you’re right. It is old school nonsense to say that all subsidies be available to public and private businesses alike. Not all insurers are equal, nor all insurance contracts. Some are legalized financial rape.
A far better standard would be that they are available in connection with insurance products that provide equivalent coverage to all insureds: no exclusions for pre-existing injuries or routine preventive care; no undue procedural bottlenecks or reimbursement waits; equivalent reimbursements to care providers; and no pattern of dropping insureds solely because they use their insurance.
Just as important, public plan insureds must have access to the widest variety of service providers AND privates must be prohibited from imposing penalties on care providers who accept public plan patients or incentivizing them to turn them away.
As always, the devil and the opportunity for good or ill lies in the details. This will take several rounds of legislation and years of trial and error to get right. It’s a marathon, not a sprint. Persistence and a valid plan are what’s important, not passing just any old legislation by September or December 2009.
The problem with the subsidies is that the Blue Dogs want a revenue neutral plan.
That’s not necessarily a problem, just means we have to find ways to pay for our subsidies. Seems like the House is going to pay for them by taxing the rich. I can’t argue with that! :)
Honestly, that will likely alleviate many of those Blue Dogs’ concerns.
Yes, medical billing is a Byzantine process. In addition, as a practicing physician, tell me how I can see the 10 patients an hour mentioned in masacchio’s piece. If you are in primary care, or a specialty as I am, then patient visits take time. Even 5 patients per hour amounts to a 12 minute office visit, not sufficient for many ill or elderly patients. The public option will push reimbursements down even further and may drive out the private insurance carriers (as intended). http://www.MDWhistleblower.blogspot.com