Posts Tagged Medicare Competitive Bidding

Most of the oxygen in Washington is currently being consumed around the debate about the “public option” in which the U.S. government, in one form or another, becomes the dominant or sole payer for healthcare services. In the past week, lobbyists for hospitals, physicians and employers have come out of hiding to decry the inevitable destruction of the private insurance market and the hospital infrastructure if a “public option” were implemented.

For the record, the predicted demise of the private insurance market brings to mind that of Mark Twain. Most of the people that I know on the payer side are very smart, are already focused on health and wellness, and have proved to be survivors over the years. Additionally, the private insurance market in the United Kingdom has proved resilient, if small, despite the presence of the National Health Service. At the end of the day, my prediction is that some facet of the private insurance market as we know it will survive.

What has not been discussed, but is much more disturbing to consider, is a “single-provider” market. In his remarks to the American Medical Association on June 15, President Obama said, “If we do not fix our health care system, America may go the way of GM — paying more, getting less, and going broke.” What is left unsaid is that the U.S. government rescued GM so that “going broke” did not turn into “shutting down”.

For those who scoff at the concept, I assume you bought options in May 2008 to profit from the insight that the U.S. government would own and operate AIG, GM, and Chrysler one year later. For those who did not do that, here is the concept.

Under the “public option” plans being discussed, a government-owned or endorsed plan would pay for services at rates slightly above Medicare. Assuming that the prevailing rate was 110% of Medicare, and assuming that most of the individuals covered under that plan would be migrating from private plans paying on average 140% of Medicare, hospitals would suffer an approximate 25% reduction in revenues for between 10-40% of their business. For the average hospital that operates at a (1)-2% operating margin, a public plan could be disastrous.

At the same time, for most members of the House of Representatives, the local hospital is one of the largest employers in his or her district. What will that Representative do when that hospital is in bankrucpty or in danger of closing? Is the U.S. government as a leading provider of hospital care a crazy one? I hope so. Is the U.S. government as the owner of GM a crazy idea? Not anymore.

So, what does that look like for those of us now called citizens? For a few views of the U.S. government as a provider, check out the article in The New York Times entitled  At V.A Hospital, a Rogue Cancer Unit, the series in The Washington Post entitled Walter Reed and Beyond, this story in USA Today about egregious quality issues captioned Testimony: VA medical gear still being mishandled, or the story in The Washington Post detailing waste in the VA system entitled VA Moves Texas Brain Laboratory After Years Pass Without Testing.