Wed, 13 May 2009 14:28:33 +0000 – By James R. Edwards Jr.Principal, The MITA Group/Former Senior Speechwriter, Republican National Committee
As Congress mulls health reform, a key proposal on the table would establish a Medicare-like "public program" -- a new government-run health-insurance program.
Advocates of a public program say that creating such an option alongside private insurers would enhance competition. People could choose to stay with their current private insurer or opt for the public plan. It would be open to those who don't qualify for an existing government health program like Medicaid. Either way, proponents say, this would generate more competition, constraining costs.
But would such an arrangement deliver the benefits expected? Could a government-operated health insurance plan even compete fairly with private plans?
A look at the government health programs we already have suggests otherwise.
Medicare insures 40 million seniors and some disabled Americans. For those in conventional, fee-for-service Medicare, the program doesn't cover all the services or pay adequately for needed care. Most Medicare beneficiaries must buy supplementary Medigap insurance.
Medicare poses problems for providers, too. It consistently underpays hospitals and doctors. Hospitals receive a 71 percent rate of reimbursement from Medicare. Doctors collect only 81 percent of what private payers pay.
Medicaid, the federal-state health program for the poor, pays providers even smaller amounts than Medicare. Medicaid reimburses hospitals just 67 percent of charges, while paying doctors only 56 percent of their fees.
Plus, Medicaid has become a serious cost-driver straining state budgets. State governments must make hard tax and spending choices, in part because of rapidly rising Medicaid costs over which they have little control. Medicaid spending increases on automatic pilot.
Medicare, for its part, is nearly broke. Its trustees have warned, "Medicare's financial difficulties come sooner -- and are much more severe -- than those confronting Social Security. While both programs face demographic challenges, rapidly growing health-care costs also affect Medicare." Part A of the program is on the verge of paying out more than it collects.
Medicare's and Medicaid's predicaments augur some unhealthy consequences. For taxpayers and the private sector, these underpayments force cost-shifting. Providers pass along the difference to private payers, which means many Americans pay more for their private health coverage.
The research group Milliman found that Medicare and Medicaid underpayments cost the average family $1,788 a year in extra health costs. This "hidden tax" hits both employers and employees through higher premiums, deductibles and coinsurance.
In addition, underpayment by government-run health care causes many practitioners to stop seeing patients in these programs. The Medicare Payment Advisory Commission last summer found that 29 percent of seniors now have trouble finding a doctor willing to take Medicare patients. Medicare's underpayment and paperwork burdens explain why.
Then there's lagging quality. One third of Medicare patients return to the hospital within 90 days of discharge, the New England Journal of Medicine said. A fifth of patients are readmitted within 30 days. This added $17 billion to Medicare's costs in 2004.
These facts signal problems with the public-health program route.
First, the costs of medical care will continue to rise, regardless of whether the government pays what something really costs.
Second, government budgets always will strain under the demand placed on its insurance system.
The only real tool the government has to constrain costs is price controls. In places like Canada, these lead to direct rationing of coverage, timely access and treatment for patients.
We don't like to call them that, but federal and state governments use price controls. That's what Medicare and Medicaid underpayments are.
The government plan would enjoy the ability to dictate terms. It could offer a generous initial set of benefits at artificially low prices --making it more and more difficult for private insurers to remain competitive. The Lewin Group has estimated that the proposal could displace the private coverage of more than 118 million Americans.
At some point, the "public plan" might be the only health plan. No more competition. No more consumer choice. Then, there's only government-run health care. That would be a botched procedure.
James R. Edwards Jr. is a principal at the MITA Group, a Washington, D.C., government relations firm whose clients include health care industry groups. The views expressed are his own.