Blue Dog Public Plan Ideas Are Not What Deficit Control Looks Like
Yesterday, the House Blue Dog bloc came out with a statement on the idea of a public option in health care reform. It’s supportive but not really, as per these bullet points from Igor Volsky:
— The plan would not disrupt the ability of families to keep their health care coverage and see their doctor.
- Medicare payment rates should not be used as the basis for reimbursement.
- The public health care option would be financially stable, and that it be employed only in the absence of adequate competition and cost containment.
So the first point here is basically a red herring, but the Blue Dogs are welcome to this “concession” since nobody’s proposing anything different. The third point actually contains two different points. The point about financial stability, if I understand it, is a solid fiscal conservative argument that the public option should need to be able to float on its own bottom and finance itself out of the same premiums and subsidies that private plans work with, rather than tapping extra tax dollars. The second half of point three is this trigger business.
But it’s really point two that’s sort of at the core here. A big part of the appeal of the public plan is precisely that it would use Medicare payment rates or else Medicare-esque rates. The idea is that this would produce a plan that’s cheaper. At that point, in order to stay in business private insurance companies would either need to find ways to get costs down to Medicare-esque levels or else find ways to deliver a demonstrably higher level of quality. Now insurance companies don’t like this idea. Not, I should say, because they’re possessed by evil spirits. But because a big part of what businessmen do in the political arena is try to get the government to shelter them from competition. What progressives are pushing for in this case is for the government to create additional competition. Insurance firms don’t want that. And what the Blue Dogs are talking about here is a way to cripple the public plan’s ability to compete effectively.
There are some arguments out there for doing this on the merits. But it’s important to keep in mind that those most certainly aren’t fiscal conservative argument. If you want to expand access to affordable health care, but you’re also concerned about deficits, then clearly the best way to expand access is to ensure the existence of a low-cost public option using Medicare reimbursement rates. Both the trigger mechanism and the prohibition on using Medicare rates are “moderate” ideas, but they’re not ideas that promote the coal of fiscal austerity. They do the reverse. Which is fine. Politicians don’t need to make austerity priority number one at all times. But this reality ought to be an important part of the context as this debate plays out. Blue Dogs are basically saying they want to put aside one of our best available tools for cost control, while progressive members are fighting for measures that will keep total outlays in check.
40 Responses to “Blue Dog Public Plan Ideas Are Not What Deficit Control Looks Like”
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June 5th, 2009 at 11:34 am
I’d actually argue that cost-containment IS priority #1 when it comes to health care policy. It doesn’t matter how we are paying for health insurance (through government, through employers, or through individuals): the current growth rate in health insurance costs is simply not sustainable.
June 5th, 2009 at 11:42 am
Glassic.
June 5th, 2009 at 11:52 am
I’m burning a lot of coal in the promotion of fiscal austerity.
June 5th, 2009 at 11:56 am
Of course coal is a traditional means of fiscal austerity at Christmas.
June 5th, 2009 at 12:01 pm
The “trigger mechanism” is such obvious bullshit that it’s insulting they’re trotting it out as a trial balloon. These whores would write the law so that the “trigger” would never take place.
Also, by their logic, they’re conceding that if (in reality, when) the private sector fails to contain costs and expand coverage, then the public option will be made available. As in “yeah, we know the public plan will be cheaper and cover more people, but first we have to help them protect their profits, because, uh… look over there!”
What useless assholes.
June 5th, 2009 at 12:09 pm
If the public plan gets to use Medicare-level reimbursements and mandate that health care providers must accept that level of reimbursement, then you’ve got a de facto single payer system. No private plan can effectively compete.
Not that this is a bad outcome, but we should be honest about what it means.
June 5th, 2009 at 12:09 pm
Blue Dog Water Conservation: leave all the taps running, so that you know exactly when the pipes are dry.
June 5th, 2009 at 12:10 pm
Matt Y says:
“If you want to expand access to affordable health care, but you’re also concerned about deficits, then clearly the best way to expand access is to ensure the existence of a low-cost public option using Medicare reimbursement rates.”
While I like the overall sentiment that protecting the parochial interests of the insurance industry doesn’t line up with the “coal” of fiscal austerity, I have to take exception to this point. In reality, as the testimony of Harvard Health-Care Economist Dr. David Himmelstein before the HELP committee makes clear the most effective way to expand access and cut deficits is a single-payer system.
A public plan alongside the current Insurance-Industry Leeches can achieve some savings (more if they can use Medicare reimbursement rates), but it pales in comparison to the hundreds of billions (his figures, not mine) that we could be saving with a single-payer system.
June 5th, 2009 at 12:18 pm
Medicare reimbursements are artificially low, subsidized by reimbursements from private insurance. If you expand the population of people with care reimbursed at Medicare levels, you’ll need to increase the subsidization from private insurance, unless you’re just planning to squeeze the providers (and even if you are planning to squeeze the providers they’ll still make up some of that cost by passing it on to insurers). So the public plan does not have a level playing field, the private insurers can’t compete, and we’re left with just the public plan. “But this is great,” the single-payer supporters say, “If the insurers can’t compete it is proof that the public option is better.” But once the private insurers are gone there is no one left to make up for the inadequacy of the reimbursements, and something has to give. It only appears better because someone else is there to pick up the rest of the tab or because it is allowed run a deficit and make promises of care it doesn’t have financing in place to cover.
And what’s more, despite the artificially low reimbursements, Medicare is still unsustainable, to the tune of an $89 trillion unfunded liability, and this is driven by cost increases not demographics. Before you start designing a new plan using Medicare as a guide, maybe you ought to address the long term crisis that Medicare faces before you create another one.
June 5th, 2009 at 12:20 pm
Wait, I’m for the public option and cost containment. But I’m against coal. So, now Matt is telling me that I have to choose between health care reform and curbing climate change? So confused!
June 5th, 2009 at 12:37 pm
Medicare reimbursements are artificially low, subsidized by reimbursements from private insurance.
I’ve heard this point made many times from people arguing against national health care and it always seems thoroughly dubious to me. I’ve never seen an actual citation that purports to prove this. So I say to AB, prove this or stop saying it.
Medicare is still unsustainable, to the tune of an $89 trillion unfunded liability, and this is driven by cost increases not demographics.
True.
Before you start designing a new plan using Medicare as a guide, maybe you ought to address the long term crisis that Medicare faces before you create another one.
I think you’re missing the point here. The entire purpose of a national health care system (to most people anyway) is precisely to address runaway cost increase, which impact not only Medicare, but the health care system as a whole. The cost of employer-provided health insurance is itself increasing at an unsustainable rate. One idea is to apply Medicare-like leverage (whether you want to call this artificial is irrelevant) to the entire system. A better idea, as Sahu points out, is single payer.
June 5th, 2009 at 12:38 pm
“If the public plan gets to use Medicare-level reimbursements and mandate that health care providers must accept that level of reimbursement, then you’ve got a de facto single payer system. No private plan can effectively compete.”
That’s exactly right. With the public option, if the rates were low, many hospitals and doctors would chose not to accept Medicare. Indeed many doctors don’t accept Medicare patients today. With the public option, if you had BCBS, Aetna, etc you could go to the nice private hospital and see the best doctors. If you were on Medicare you’d have to go the run down city hospital, staffed by doctors from the some fly by night med school in Grenada.
June 5th, 2009 at 12:38 pm
AB said it well — Medicare reimbursement rates are already unsustainably low and result in cost-shifting to commercially insured patients. Most private physicians are already closing their practices to new medicare patients. So if we succeed in universal health insurance by expanding medicare-esque reimbursement, we’ll relearn what the folks in Massachusetts have already learned — providing health insurance is not the same thing as providing access to health care.
I also predict that, barring physician payment reform, medicare-esque reimbursement will serve to depress physician income, which will accelerate the flight of medical students and doctors away from primary care and towards more lucrative subspecialties.
The take home point here is that cost containment *is* essential, but simply squeezing provider compensation is a blunt and ineffective method to accomplish that goal.
June 5th, 2009 at 12:49 pm
AB’s first paragraph is exactly right. I’m a process improvement specialist for a major academic medical center and am privy to a lot of financial information. We LOSE money on virtually every Medicare patient we care for because the reimbursement rates are so low. The entire operating margin for our health system comes from private insurance. Now, because we’re a non-profit, public-minded institution, we don’t turn anyone away but a public plan with Medicare reimbursement rates would literally bankrupt us in short order. Since the recession really kicked in, out collections rate (percent of our bills that get paid) has ticked down a percent or two and it’s been a total nightmare. I don’t know how we could survive a widely adopted public plan without massive layoffs, yet demand for care would increase.
A public plan with Medicare reimbursement rates squeezes providers much more than insurers. It’s not feasible within the system as currently structure. And I say this as an avowed lefty health care wonk.
June 5th, 2009 at 1:02 pm
No, medical treatment is artificially high.
June 5th, 2009 at 1:03 pm
It’s OK if you don’t know, other people do.
June 5th, 2009 at 1:03 pm
Zach says:
“[A medicare-like public plan is] not feasible within the system as currently structure [sic].”
But that’s the point, really. As I said earlier, a single-payer is the way to go in terms of overall savings, but the point of a public option is to provide cost savings while expanding access. It is a fundamental restructuring of the system, even if it doesn’t go as far as some (myself included) would like.
Think of it this way. If a public option does push some private insurers out of the market, then that will be that many fewer distinct sets of procedures, forms, and regulations which a provider must take into account before receiving payment. As I understand it, the fastest growing segment of the health-care industry is in administrative staff dedicated to nothing but trying to negotiate this byzantine labyrinth of red-tape in order to exact payment.
Would not the elimination of this unnecessary bureaucracy help cut down on the squeeze on providers?
June 5th, 2009 at 1:21 pm
simply squeezing provider compensation
I see no evidence anyone is suggesting that we not compensate physicians for their services. Above someone suggested that Medicare rates are subsidized by private insurance. I don’t know if that’s true. But the flip side, regardless, is that doctors who provide uncompensated care are obligated to increase revenue from other sources. So if you eliminate uncompensated care, costs for insured people (in a regulated system, natch) go down.
I am amazed how conservatism has come to mean “let’s pay more than we have to for stuff–and risk our financial stability–so that other people can get rich.”
June 5th, 2009 at 1:23 pm
I’ve heard this point made many times from people arguing against national health care and it always seems thoroughly dubious to me. I’ve never seen an actual citation that purports to prove this. So I say to AB, prove this or stop saying it.
Your tone is unwarranted, it’s not as if I am making a particularly controversial claim. Your unfamiliarity with the data is no reason to imply I am asserting something which is untrue.
The most recent Milliman study estimates the amount of the subsidy at $89 billion, private insurer costs would be 15% lower without the cost shift. The typical family of 4 pays an additional $1800/year in premiums and out-of-pocket expenses due to the cost shift. More data here: http://www.milliman.com/expertise/healthcare/publications/rr/pdfs/hospital-physician-cost-shift-RR12-01-08.pdf
I think you’re missing the point here. The entire purpose of a national health care system (to most people anyway) is precisely to address runaway cost increase, which impact not only Medicare, but the health care system as a whole. The cost of employer-provided health insurance is itself increasing at an unsustainable rate. One idea is to apply Medicare-like leverage (whether you want to call this artificial is irrelevant) to the entire system.
What you’re missing is that the “Medicare-like leverage” can only exist when there is someone else to pass the costs onto, there is no free lunch.
June 5th, 2009 at 1:26 pm
Fine, so let’s do what Kennedy’s proposing – Medicare plus 5 or 10%. As far as doctor’s not accepting it, it’s one thing for them not to accept Medicare when it’s just the over 65, but what happens if, as Kaiser/Lewin think, 131 million people sign up for the plan? You can’t turn people away then, can’t shunt them off to that crappy hospital, because you wouldn’t have enough customers left.
June 5th, 2009 at 1:29 pm
Halfdan
Above someone suggested that Medicare rates are subsidized by private insurance. I don’t know if that’s true.
So you’ll admit that your woefully uninformed on the topic, but you’ll offer your two cents anyway. Thanks, that’s very useful.
But the flip side, regardless, is that doctors who provide uncompensated care are obligated to increase revenue from other sources. So if you eliminate uncompensated care, costs for insured people (in a regulated system, natch) go down.
Total costs do not go down in the situation you’ve described, you’re just getting it from somewhere else. Moving money around does nothing to solve our problems.
I am amazed how conservatism has come to mean “let’s pay more than we have to for stuff–and risk our financial stability–so that other people can get rich.”
This has nothing to do with conservatism/liberalism or anyone’s desire to get rich. It has to do with finding a way to slow the growth of medical costs and finding a sustainable way to finance those costs.
June 5th, 2009 at 1:33 pm
Whoops, should read “you’re woefully”
June 5th, 2009 at 1:38 pm
Total costs do not go down in the situation you’ve described, you’re just getting it from somewhere else. Moving money around does nothing to solve our problems.
Total costs *do* go down, because uncompensated care is more expensive to the system. You seem to think that health care is a zero-sum game, which it is not. The number of unnecessary services and procedures in this country is enormous, as is the number of cost-saving services not performed at all. Cost saving is much more than just “squeezing” people (talk about uninformed).
June 5th, 2009 at 1:47 pm
You should replace the Blue Dog in the upper corner with a French Poodle. They are the dogs that truly understand health care.
Goddamn French, I hate ‘em, but I have to admit, they are whipping our ass!
The French have an exponentially better health care system, thinner women (and men, for the other players), more leisure time, faster trains, healthier food and drink, stupendous food and drink, and even though their movies suck, they are generally better than the crap Hollywood puts out.
They even have an aircraft carrier!
June 5th, 2009 at 2:00 pm
Please explain how you’ve reduced total costs simply by eliminating uncompensated care. It is a statement that is in conflict with reality.
You seem to think that health care is a zero-sum game, which it is not.
No I don’t, but you are describing a zero-sum game. You’ve said that providers pass on the cost of the uninsured to the insured, and so providing insurance for them brings the cost down for the previously insured. You changed who is paying, not the cost (that is unless you want to cavil about collection costs which are trivial). There is no evidence to suggest that you would save any money, to the contrary this would serve to increase total costs. Maybe you’re suggesting that the “cost-saving services not performed at all” would get you there, but that ignores your previous reference to “unnecessary services and procedures” which are now being performed on more people since we’ve eliminated the uninsured. If you’ve got a proposal to fix both of those at once let’s hear it, but to only claim the benefits and ignore the costs is well, uninformed.
June 5th, 2009 at 2:17 pm
Way to go all dick, AB.
So, you linked to a study funded exclusively by insurers and providers, and it comes up with a way to increase profits for insurers and providers.
1) Fuck the insurers. Insurance for health care services is a pretty abstract concept. The Australian, British, and (I think) Canadian systems work well in terms of providing optional insurance for elective health care. I see absolutely no reason keep a robust and mandatory health insurance system–does such a system work in any other country? Because it never has here.
2) Fuck the providers. Our insanely expensive private hospital infrastructure produces no measurable public health benefit. In Southwest Ohio, at least, every hospital but one has been privatized, and all are very lucrative enterprises. Why? Because they’re all ripping all of us off. Profiteering from public health, or the lack thereof, is every bit as repugnant as war profiteering.
These two parties stand in direct opposition to public interest, insofar as they seek to maximize health costs. The creation of a non-profit public plan IS the moderate stance–those who oppose it are firmly on the right.
Keep the dog. It looks like my dog, but blue.
June 5th, 2009 at 2:17 pm
Ah, Matt Yglesias’s ever constant crusade to defend business.
Being a business does not actually exclude you from moral judgment. That these businesses seek to shelter themselves from competition and artificially inflate costs IS a sign that they are evil.
Max I like my chicks a little thick. IF you can see ribs or their spine, that’s just gross. I do give the french credit for having the most awesome euphemism/idiom for ’she has a great rack’, though. ‘the whole world on her balcony’ I swear, the french can make anything seem classy.
June 5th, 2009 at 3:15 pm
Way to go all dick, AB.
1) Fuck the insurers.
2) Fuck the providers.
Pot, meet kettle.
So, you linked to a study funded exclusively by insurers and providers, and it comes up with a way to increase profits for insurers and providers.
The study was performed by the actuaries at Milliman. If you question their methodology or their findings then provide some rationale for that other than attacking them because of who paid them to do the study. You’re essentially making an ideologically driven and completely unwarranted attack on the professional integrity of the Milliman actuaries.
These two parties stand in direct opposition to public interest, insofar as they seek to maximize health costs.
Why would insurers seek to maximize health costs? Your desire to demonize people results in you completely misunderstanding their desired goals.
a way to increase profits for insurers
And of course, the ultimate red herring. Health insurers typically earn about 5% profit margins. Clearly that is blatant and despicable profiteering. Not to mention that the profit and admin component of the costs are not the cause of the unsustainable growth, which is the real problem. Take away all insurer profits and expenses and all you’ve done is buy yourself a couple years, you have not solved anything.
June 5th, 2009 at 4:50 pm
How much would it cost to educate doctors at public expense? They would leave med school debt-free and thus not need huge incomes.
June 5th, 2009 at 5:00 pm
“At that point, in order to stay in business private insurance companies would either need to find ways to get costs down to Medicare-esque levels or else find ways to deliver a demonstrably higher level of quality. ”
Wrong. Providers would need to find a way to get their costs down, because they would no longer have the privately insured to subsidize the underpayments they are getting from Medicare.
June 5th, 2009 at 5:06 pm
AB,
You have nailed the argument. Add to this the extra surcharges that get attached to every insurance payment in states that go to fund uncompensated and you have an extra cost shift. The Kennedy idea is what the insurance companies are already doing. They price off of Medicare plus a %. This adds to the uncompensated care shortfall because Providers are not recovering the true cost of services. The unnecessary tests are caused by trial lawyers “channeling” deceased victims and winning huge lawsuits. Cost containment is so 90’s, too. The only way to reign in health care costs is to decrease utilization. Prevention is the new cost containment. Check out Dr. Dee Eddington for more information. Let’s get all those fat, lazy Americans off their butts while we are at it.
June 5th, 2009 at 6:41 pm
Re: If the public plan gets to use Medicare-level reimbursements and mandate that health care providers must accept that level of reimbursement, then you’ve got a de facto single payer system. No private plan can effectively compete.
Not on cost, no. The private plans would have to compete on quality. This is why private schools stay in business. It’s why people spend thousands of dollars on their own cars rather than relying on public transportation. Of course improving quality would also require a massive change in business model and that alone is terrifying to the industry.
Re: But once the private insurers are gone there is no one left to make up for the inadequacy of the reimbursements, and something has to give.
Yes: providers will make less. That can be cushioned by changing the malpractice system to lower those costs on them, and perhaps by a loan forgiveness program which would pay off any student loan by a provider who accepts the lower rates. But ultimately it will have to happen no matter what we do. Healthcare costs cannot increase indefinitely.
Also, maybe the providers could protect their own income by getting rid of some of the small army of paper-pushing drones that works in their offices?
June 5th, 2009 at 9:06 pm
The assertion has been made that Medicare reimbursement rates are artificially low because they get subsidized by higher rates from private insurers.
Doens’t this leave out the fact that many of the most sick people–elderly people with preexisting conditions that many private insurers would refuse to cover–get their coverage through Medicare? So one could argue that Medicare is also keeping private insurance rates “artificially” low by taking those patients with the highest expenses out of the private system entirely.
It would be interesting to see how these countervailing influences balance out. But I don’t think the countervailing influence should be ignored.
June 5th, 2009 at 11:24 pm
“Blue Dogs are basically saying they want to put aside one of our best available tools for cost control”
Yes. Because Blue Dogs have one goal in life: stake out the middle ground between Democrats who believe in rational policymaking, and Republicans who believe in corporate control of policy. So the result is a self-proclaimed swing bloc that (1) cuts into rational policymaking (Exhibit A: the mindless Nelson-Specter-Snowe-Collins stimulus scale-back), but isn’t as bugfuck insane as the GOP, and (2) orchestrates an endless loop of
circle-jerkingback-scratching between corporate interests and its members, ensuring that they can always collect money from both sides: Democrats because the Blue Dogs are nominally “Democrats” and corporate interests because they’ve made themselves an effective veto over any real progressive, substantive reform.But to paraphrase Kevin Kline’s character from “A Fish Called Wanda,” (original quote: “Don’t call me stupid!”) “Don’t call them corporate whores!!!”
(recall Jamie Lee Curtis’s rejoinder, “Oh? And why the hell not?”)
June 6th, 2009 at 3:46 am
Matt,
Actually they ARE possessed by evil spirits. Too much medicinal alcohol…..
June 6th, 2009 at 3:59 am
@Zach,
I think we need to address the supply of qualified technicians and nurses. I’m not fooling myself that we can magically generate a large number of qualified doctors — people who have a central nervous system capable of retaining all the information necessary to become a doctor AND the ability to become detached from the drama in front of them enough to deal with it already are becoming doctors.
But I expect that there are lots of people who could become health care professionals if there were more slots made available for training them and financial aid to support their education.
And perhaps it makes sense to develop a level of competence lower than full doctor but with some ability to make diagnoses and treatment plans for common non-life threatening conditions. Sometimes seeing the doctor is a waste of the doctor’s time.
June 6th, 2009 at 9:52 am
When talking about cost containment why does everyone only talk about reducing medical costs? How about the administrative costs? Health Insurance CEOs and management take in over 2 billion a year. Some ceo’s (UNH) have compensation over a billion. They spend a few hundred million on their friends in congress to be able to keep on with their oligarchy. This is an obvious and confirmable sign of wastage in healthcare.
It seems that everyone has finally woken up to the fact that primary care is just about dead and that we now basically have a high cost specialist system in america. Insurance companies will deplore the high costs of specialist but in reality it greatly benefits them. Since they maintain approximately 30% profit margin, they can go to the public and say healthcare bills are high and we need a premium increase. They pocket 30% of the premium increase every year. For private health insurance it is to their ultimate benefit to have high health care costs.
On the stand of customer service, private health insurances cannot compete with medicare. You heard that right. I can call medicare and after being on hold for 12 minutes, I can get answers to 3 questions. That is a whole hell of a lot better than calling a private insurance company over 5 days to track down the right person to answer a simple question. You would not believe how terrible it is to try to get in touch with a person that can answer questions at a private health insurer.
Reimbursement wise, most physicians in NY and a couple of other places would be overjoyed if the private insurers would pay medicare and even in some cases medicaid rates. In NY, when it comes to outpatient care, the public health plans are subsidizing the private health plans like HIP and United Healthcare.
June 6th, 2009 at 2:01 pm
“But because a big part of what businessmen do in the political arena is try to get the government to shelter them from competition. What progressives are pushing for in this case is for the government to create additional competition.”
What is the reason why Medicare can pay providers significantly less (I believe it is around 25% less per procedure)? Is it lower administrative costs, the absence of profit, or because Medicare has more negotiating power because it is much larger than the private plans? If it is primarily the latter then it is inaccurate to call this competition.
June 7th, 2009 at 12:48 pm
@Anandakos
I totally agree with everything you’re saying. I’m merely saying that there are serious business problems raised by the prospect of tens of millions of new patients at Medicare reimbursement rates. The simple fact is that the payment does not cover the cost of care. Hospitals would be bled dry in a matter of months, not making payroll, not able to replace equipment, etc. It would be really, really ugly. I work with the numbers every day.
June 8th, 2009 at 11:49 am
Please go to http://www.1payer.net — Get the facts on this issue! Single Payer — Medicare for All — is the best solution. The health insurance lobby has paid Congress MILLIONS to try to stop this bill. How long are we going to let them get away with their blatant bribes? Where is our BACKBONE?!