I typically don’t talk about my travels on this blog but something happened this week that bears reporting.

Whether the federal government should or should not offer a public health plan alternative to compete with private insurers in the under-age-65 market is a hot topic in Washington and in the market.

I recently posted on it in detail: The Public Plan Option for the Under-Age-65 Market—The Biggest Health Care Controversy on the Hill

This past week I met separately with two health insurance CEOs—both well-known leaders in the business and both from highly regarded not-for-profit plans.

They read the Lewin Group analysis of the proposal for a public health plan. They both concluded the Lewin analysis made sense. Lewin projects the public plan would gain two-thirds market share in what is now the private health insurance market because it would pay Medicare-like provider reimbursement levels that are 20% to 30% lower than they pay. Simply, if one player has “raw material costs” 20% to 30% lower than everyone else that’s a game changer—that player will win.

They both see having to go up against such long odds and compete with a public plan as a life and death issue for their organizations.

They both believe the provider community does not understand what this would mean—much lower reimbursement in what is now the under-age-65 market and nowhere to shift Medicare and Medicaid costs to.

The both believe the only way for their health plans to survive in this scenario is to just unilaterally whack the providers with the same payment cuts that the government would impose—chop existing reimbursement 20% to 30%. In short, get their “raw material” costs down to the same level so they can compete on a level playing field.

The providers won’t like it. They will threaten to refuse to provide care under those terms. So what? It’s life and death for these health plans. “Them or us.” If someone is going to have to get clobbered it won’t be them. Just what would a health plan have to lose?

And these guys are the not-for-profit fellows.

It would be billion dollar corporations desperate to survive up against doctors and hospitals and all the other providers.

During the past 10 years (post the "patients'/provider rights rebellion") there has been a truce of sorts between providers and payers. There is a tension and neither is ever very happy—but there is equilibrium between them because everyone understands the other has to survive and make a decent living.

A public plan would end it.

I am not going to predict which side would win. But I will tell you it would be one bloody mess way past anything we have ever seen.

We are already seeing it.

From my blog:

http://physasst.blogspot.com/2009/04/internist-shortages.html

AND, the NY Times..

http://www.nytimes.com/2009/04/02/business/retirementspecial/02health.html?_r=3&scp=4&sq=medicare&st=cse

Not good, anyway you shake it. Most providers cannot survive on medicare type reimbursement. Patients need to start realizing that medical care COSTS money, it is not imaginary, and that they will need to be responsible for an ever increasing share.

Add this to the fiasco in California over the balance billing issues, where the courts stuck their noses in something that they shouldn't have, and it's going to get REALLY messy.

As usual Bob, your take is right on.

If these speculations end up becoming reality, watch the concierge/cash model take off. I don't think the wonks realize how many docs are close to the breaking point. not just financially, but mentally too.

Might end up being a good thing for physicians if they are forced to wean themselves from their dysfunctional relationship with third party payors.

pcb

Bob

What is your opinion as to how this will fall out as providers refuse to participate and opt for cash only practices?

Mandatory participation as a conditiom of liscensure?
The pool of providers is goimg to dry up pretty quickly either way and those that are left will be employed doc who will see a third of patients private practice docs will. What is your opinion on how it will thresh out

"I'm not going to predict which side will win"?

Sir, neither the payers nor the providers will win: The government will win.

add patients to the list of non-winners

Bob,

Your coomentators state that patients will be losers with a public plan but are they including the 60-70 million uninsured and under-insured? How do they count the 50%+ health-related bankruptcies? For these disenfranchised populations -- Mutually Assured Destruction has already arrived. The search for the correct business model for the health care industry is fundamentally flawed -- all the right answers to all the wrong questions still leaves us nowhere.

The Wall Street crowd is arguing that the financial services industry should not be blown-up but only minor modifications made to the companies that caused the current financial diaster. US health care, by any objective measure, is also a diaster and minor modifications won't work. If anyone is going to purport to speak for "American patients" they should carefully qualify their statements -- otherwise they come off sounding like the Wall Street Journal claiming to represent the poor.

Primary care providers will end up doing at least as well as they do currently but neither payers nor providers in general will "win".
The country will win as some of the 16% of GDP currently flowing to healthcare is available for other pressing national needs, public and private. Maybe the farm programs and military purchasing can follow suit.

With a public plan low income Americans win. Why is that so distasteful?

As a person who has only recently started looking into the health care issue, doing research and reading, I can think of several ways to compete with a public plan.

1. Private (non and for-profit)health insurance companies should streamline their operations - reduce administrative costs. Every other business has to do this in a capitalist system.

2. Reduce CEO payouts.

3. Pay doctors less.

4. Drug companies reign in their profits.

I realize the devil is in the details, but one glaring generality should not be ignored. The haves don't like giving to the have-nots.

Can the big money concerns in this health care debate please accept the reality that reform means change. They are going to have to give in order to get.

Americans without health insurance include people who own property and small businesses, as well as low income people with little more than a rented apartment. We are all one serious illness or car accident away from catastrophe.

And we are all as much a part of this economy as big business.

It's time to stop the debate and get down to figuring out a way to make it happen!

There are no winners here -- at least if you're not a politicians. Some of these folks think this will give them a much larger political clientele, which will insure their re-election. In the end, however, gov't won't "win" either.

One of the Anons is right -- this will cause a rapid growth of high end services. Niche. Docs in small serivce areas.

Others are right too -- aren't docs and hospitals paying any attnetion to this? How can they wind? Do they think they have powerful enough lobbies to force the government to pay higher fees? If Lewin's projections pan out and most people end up on gov't plans, maybe their arrogance has a basis in reality. Pretty pig gamble though.

Everybody seems to be forgetting that human beings are dynamic, not static.

They will RESPOND to changes.

If you systematically pay docs less, there will be fewer of them. Some will quit, some will retire. But most importantly, you will recruit and train fewer of them.

Bright and talented people who may have gone into medicine can find greener pastures elsehwere.

Further, there is the motivation issue. If you pay docs like BMV employees, they will behave like BMV employees...VA docs already do.

"Too bad you are sick, it appears to be 5pm" or "I'm on my break" will become the norm.

In the UK docs view patients as huge nuisances rather than customers.

I can hardly wait for that. That has to do wonders for the doctor-patient relationship.

When docs are few and far between, how can patients be winners?

And if we got the number of docs down to zero, just think how much money we would save!

I agree that many physicians are close to the breaking point, but that access to health care is a priority for most of the family physicians I know.

For the comments about physicians needing to have lower salaries, I would just like to say that is quite a generalization, as there is wide variation among different specialities. The only way a single-payer or universal system is going to work is with a strong primary care base which we are never going to have with the current reimbursement system. Here is an excellent review of the situation and how we got here:

http://www.thehealthcareblog.com/the_health_care_blog/2007/12/bad-medicine-ho.html

Payment reductions to health care professionals and other providers as a primary method of controlling costs is a big concern to me. And if history is any guide, it is likely to result in some short term savings, but bigger costs in the long term. What is needed is a payment method that drives what we want: cost-effective, quality health care. Clearly the fee-for-service system has failed in achieving those goals. Simply paying providers less while retaining the fee-for-service payment system will fail to rein in costs because providers seek to retain current income levels. This will be done by avoiding Medicare and Medicaid patients, ordering more unnecessary diagnostic tests, and increasing the number of "necessary" follow-up visits.
We need to pay for efficiency and quality. That is a messy topic but it needs to be addressed in terms of standardized quality measures, comparative effectiveness research, and payment to health care providers for getting it right.
I don't believe we can afford to provide universal access to care without simultaneously implementing a cost and quality strategy.

Well, time to make the hard choices. Every other sector is feeling the pinch of this deep recession, can not imagine a better suited time to approach this bitter pill. All specialists agree that primary care is under reimbursed but the same notion is not believed of procedure oriented specialists. The way they may need do this is split the herd throw a few carrots to some and go after the rest.

And we haven't even TOUCHED on the 800 pound gorilla sitting in the corner...

rationing of care.

Reduction in expenditures, and an improvement in end of life care.

I've read somewhere that 80% of a persons healthcare dollars are spent in the last 2 years of life.

Question is why?

No one seems to want to discuss that part.