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Regarding payment, the public plan would likely reimburse higher than Medicare levels, which pay hospitals about 30% less than private insurers and physicians about 20% less.

Instead, the federal government would pay somewhere nearer what is seen in better Medicare and private plans.

John Waltko, vice president of regulatory and financial reporting at Quorum Health Resources in Brentwood, TN, predicts that any public plan will lead to a "squeeze out" of the private insurance market, with small employers ending coverage and Americans dropping their employer-based coverage. He worries about how an insurance market with only a public plan, Medicare, and Medicaid would affect hospital reimbursements. Waltko worries that over time the federal government would cut hospital reimbursements, especially during difficult economic times.

Waltko says he supports healthcare reform, but all parts of the industry must sacrifice—not only hospitals and doctors. "The issue gets down to: How do we get coverage extended? How do we finance it? And who pays for it? I think hospitals are willing to accept some reduced payments from governmental programs in order to achieve coverage for the uninsured," he says. "The reduced payments, however, cannot be a promise of some payment amount in some future period of some uncertain amount. Reimbursements from a public plan must be fair and equitable to hospitals and physicians and need to occur concurrently with reimbursement reductions from current governmental programs," he says.

Financial impact
In its analysis, The Lewin Group considered the impact of a public plan payment at a midpoint between Medicare and private payers and found that hospitals would benefit financially from this option because not having to provide uncompensated care would more than offset the lower payment levels. Physicians, on the other hand, would lose 0.5% in total revenue because of the lower payments.

Robert Zirkelbach, director of strategic communications at America's Health Insurance Plans in Washington, DC, warns that if the feds paid at a lower rate, the healthcare system would simply shift costs from those underpayments to consumers and employers.

"A government healthcare plan could exacerbate the cost shift and could potentially bankrupt hospitals in the country," he says.

What policymakers decide for the public plan's payment level will play an important role in whether physicians support the idea.

Kevin Pho, MD, a primary care physician based in Nashua, NH, says he hopes that doctors will have the option of deciding whether to accept public plan patients and that physicians who already accept Medicare beneficiaries won't be forced into the public plan, which Pho says could create an equivalent of a single-payer system.

"In a world where medicine is becoming more like a business, you simply can't lose money like that and stay in business," says Pho.

One of the leading proponents of the public option, Jacob Hacker, PhD, professor of political science at Yale University in New Haven, CT, has written extensively about his public plan proposal. He suggests moving Medicaid and state Children's Health Insurance Plan beneficiaries into the public plan, which would have a higher reimbursement rate. That should please physicians who accept patients with Medicaid, which has woeful reimbursement rates.

Hacker says a public plan should build on the Medicare model, but lawmakers should increase primary care payments and implement a bundled payment system. "A good public plan could be very helpful to providers and not just a threat as some perceive it," says Hacker.

Though private insurers think a public plan would destroy their industry, Hacker says private plans should focus instead on more immediate threats. "If you look at private insurers, their biggest threat right now is not the government. It's the economy and the decline of employment-based health insurance. Millions of subscribers are just disappearing from the rolls every year. I see little prospect they will come back," says Hacker.

Les Masterson

Widening Gap
The stimulus effort will fail to achieve its goal of broader utilization of HIT, instead creating greater disparity.

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