The health-care puzzle
Vail, CO, Colorado
I must start this letter with a disclosure. I worked in various managerial and executive capacities in the private sector of health care for 36 years.
That said, everyone will be hearing a great deal about health-care reform over the coming months.
The arguments will center on two interrelated themes: (1) whether there will be a public sector option (similar to Medicare) to choose from in addition to the offerings from private health insurance and managed care plans; and (2) how to pay for benefits for the under-insured and the uninsured (the latter about 46 million and growing).
I hope to address the how-to-pay-for question in a future letter.
Republicans in congress and the private health-insurance industry have drawn a line in the sand in opposition to the public-sector option idea. And well they should. Here are the issues:
First, a public option could dictate fees to all providers (physicians, hospitals, ancillaries such as lab, etc.) like Medicare does and put private firms who must negotiate fees at a cost disadvantage.
There are several ways to address this concern. The public sector option could be required to negotiate and not mandate fee schedules.
However, if the public sector option attracts a substantial market share enrollment, providers might feel compelled to accept a lower fee schedule than offered by the private sector plans.
Another method would be to require the public sector option to accept a fee schedule that is indexed to some private sector average fee schedule.
Second, Medicare enjoys an immense advantage over private-sector health plans in the amount of money spent on health care services versus administrative costs (and profit for the private sector).
Medicare spends roughly about 95 percent of its funds on paying for health services versus about 75 percent for the private sector.
Where does the difference go in the private sector? To marketing, underwriting and higher salary expenses, as well as the burden of complying with a federal regulations and a maze of various state regulations.
True health-care reform must get the states out of the business of regulating health care.
We need national standards and to do otherwise just promotes high administrative (including lobbying) costs.
The public sector plan should have the same national regulatory requirements imposed as the private sector plans.
Third, the public sector plan doesn’t carry the burden of a profit motive and shareholders.
The argument has always been that the private sector can function more cost effectively than government bureaucracy, but private sector insurance company behavior of late demonstrates that they don’t want to test that theory in this debate. Shareholders and company viability are at stake.
Lastly, Republicans in congress and the private sector view a public sector option as the “camel’s nose under the tent” leading to a single-payer system and extinction of the private sector health insurance industry.
These fears are well founded. If the private sector can’t compete, they’re gone. No bailouts in this industry.
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