The Battle Over SCHIP: Helping Those Who Can’t Fend for Themselves
No, I’m not talking about kids in low and moderate income families – this is Washington. I’m talking about the insurance industry. While the efforts to overturn President Bush’s veto of a compromise bill went down to defeat, the insurance industry had already won its big battle. The compromise bill eliminated the provision of a House passed bill that would have eliminated more than $10 billion a year in overpayments to the private insurers operating in the Medicare Advantage program.
The basic story here is straightforward. The insurance industry is too inefficient to compete head to head with the government in the Medicare program. If they have to compete on a level playing field, the industry loses. They can’t cover their marketing costs, the bloated salaries for CEOs and other high executives, and the dividends to shareholders.
We know that the insurance industry can’t compete in a free market because beneficiaries voted with their feet against the private insurers. The Gingrich Congress created the Medicare Plus Choice plan back in the mid-nineties, which opened the door for private insurers to compete with the traditional government-run Medicare program. While many beneficiaries did originally opt for the plans offered by private insurers, the insurance companies soon fled the program in droves, complaining that they couldn’t make a profit with the standard Medicare payment.
By 2003, only 11 percent of Medicare beneficiaries were still with the private insurers and the number was dropping rapidly. That was when the Republican Congress came up with the Medicare Advantage plan to rescue the insurance industry. This plan enhanced the role for private insurers by providing them with large subsidies. The Medicare Advantage subsidies were slipped into the bill that established the Medicare prescription drug benefit. The media chose not to pay attention to this subsidy program (it’s not like giving money to poor kids), so no one other than DC policy wonks noticed.
While there will undoubtedly be some good politics around further efforts to extend the SCHIP program, eliminating the subsidies for the insurance industry in the Medicare Advantage will ultimately be far more important. If Medicare costs are not contained, then we are not going to have the money to pay for SCHIP or indeed for much of anything.
Of course, the same holds true for health care costs more generally. The traditional Medicare program provides the best model for an efficient health care system that can contain health care costs. This is why the insurance industry is so anxious to destroy it and why they are willing to spend almost anything buying politicians to accomplish this goal.
If we are ever going to reform our health care system, or even keep the current level of SCHIP coverage, if will have to eliminate the subsidies in the Medicare Advantage program. It’s long past time to tell the insurance companies and their CEOs and shareholders, "you’re on your own.
Heck, let's not tell them "you're on your own." That seems so cruel.
Instead, lets tell them about how competition will make their businesses more profitable while providing better insurance for all. Let's invite them to compete with the federal government. Surely, private industry isn't afraid of competition?
Oh, wait... they are afraid of competition. When I need to confront my fears, I pay a therapist. The healthcare industry pays lobbyists instead.
thosethingswesay.blogspot.com
October 21, 2007 8:32 PM | Reply | Permalink
"Of course, the same holds true for health care costs more generally." That's just what I was thinking from your first paragraph. The success of the Edwards or Clinton plan hinges on forcing the private insurers to compete with the public option, so that the public sector isn't forced to subsidize the population at greatest risk and with the highest costs.
Both plans try to ensure that by limiting private options, such as the option to deny patients with preexisting conditions. Even so, we can expect the less well off to grab the public-sector option, so long-term cost containment will work a lot better if, basically, the private options wither away or end up as higher-cost luxury plans.
I can see a GOP push to subsidize the private sector, just as here. And, as Dean notes, I can see the media rolling over and playing dead. I hear there's another side to the story, even a whole party other than the GOP, and maybe they'll get press. One day?
John
http://www.haberarts.com/
October 22, 2007 7:57 AM | Reply | Permalink
Thanks Dean Baker for emphasizing cost containment-A hard pill to swallow for most Americans (to use a worn out cliche).
I consider myself a progressive but I recognize the reality of the imperative for cost containment. Many liberals or progessives don't?
As you may know I believe our ONLY way to really drive down costs is through individual (health behaviors) AND institutional (public health) prevention. If that is done dollars $ will be freed up for those who have non-preventable conditions.(Most "accidents" are preventable)
The insurance companies don't like prevention because health care premium incomes would plummet if we got serious about prevention as a nation.
Doing what actually works in medicine(efficacy) will also help to contain costs.
Thanks again for a good post,
Be Well,
Dr. Rick Lippin
http://medicalcrises.blogspot.com
October 22, 2007 8:43 AM | Reply | Permalink
Now that graft and payola is a formalized and accepted part of government, stand aside and watch as the US plummets as a country for anyone but the rich and priviliged to live.
But the media drumbeat propaganda continues. Greatest country in the world...Oldest democracy...Everyone wants to come here...the American dream..and on and on.
Look around.
I wonder what point we have to reach or what event will be significant enough to turn this around, or are we doomed to sink into an immoral (or at least amoral), exploitative cesspool.
The 4th estate is no more. There is no informed electorate.
October 22, 2007 11:25 AM | Reply | Permalink
Without defending the health insurance industry, is it not the case that the two plans, Medicare and Medicare Advantage HMOs, really do not occupy the same playing field.
Under Medicare health care providers receive relatively low rates. By statute, Medicare reimbursement of health providers is tightly controlled, the rest of us subsidizing the program by paying higher fees than, in the absence of Medicare, we otherwise would.
But when insurance companies sign up "plan providers," they must offer reimbursement rates higher than those offered by Medicare. Thus, insurance company costs will be higher than Medicare's costs. Given that health insurance companies must pay providers higher rates than Medicare will pay, those companies must be offered subsidies or they won't participate.
In the end the subsidy is going to the 65+ participant in the Medicare Advantage plans whose costs are lower in those plans than they are in traditional Medicare.
Who's really being subsidized -- the companies or the retirees?
October 22, 2007 11:31 AM | Reply | Permalink
I think we'd all like a subsidized program like SCHIP to take the edge off basic health coverage, and I think Bush represents a minority of Americans who would rather not have in common such things as good health and access to good care. I don't trust a Bush appointee to choose the best vendor, but I'm okay with this technical giveaway to the insurance industry because it means those insurers continue to underwrite the daily operations of the US health system, and the doctors continue to get paid, hospitals staffed.
Of course Health insurance is a basic protection scam. I see my doctor every 8 to 40 months. I haven't filled a prescription in years. Super healthy right now. I toss $4,000 into the chipper every year, fair and square. I just don't want to be ruined if I break a leg and can't work for a few weeks.
Health insurance gets the financial industries involved in your care. Doctors get paid a lot, but they should. They shouldn't screw up so much for this kind of money, but never mind that. If every one of us had to go to the emergency room today for a histamine shot the entire system would fail. We need more doctors, more local clinic type places.
All this money and these redundant bureaucracies and infrastructures and salaries, and millions of tons of drugs, the free market has yielded a stable, corrupt healthcare system. Several industries would be gutted if we nationalized it wholesale, and a whole lot of money would be withheld.
But giving contracts to the present field of insurers to cover these kids, we may eventually be able to look at the real cost of covering them, and we would could start to guage the real cost of a national health care system. My insurance premiums go up almost 20% every year.
October 24, 2007 7:11 PM | Reply | Permalink
Dean--
I think you may have put your finger on why certain Republicans were so strongly opposed to the original SCHIP legisation. I'm not convinced that it was because they didn't want to insure more children, or because they didn't want to tax cigarettes.
The deal-breaker in the original bill was the provision that would have eliminated the $10 billion a year overpayment to private insurers. I doubt that anyway would try to re-introduce that provision during the current negotiations, but I wonder what would happen if they did.
Finally, I'm wondering about Ellen's comment that when private insurers sign up health care providers they "must" pay higher rates than Medicare does.
First , Medicare reimbursements vary by region. In some regions, and in some specialties they are not that low.
Secondly, is it true that private insuers have had a hard time signing up providers to take Medicare Advantage? That doesn't seem to be the case in Manhattan . . . Many doctors won't take Medicaid but they will take Medicare and Medicare Advantage.
Does anyone have any numbers on Medcare Advantage reimbursements vs. Medicare reimbursements state by state or nationwide?
October 25, 2007 7:53 AM | Reply | Permalink
And does anyone have any numbers on how much extra -- over and above reasonable fee-for-service rates -- non-Medicare patients (both insured and uninsured) pay to subsidize the doctors and hospitals who, were they to rely upon Medicare reimbursement rates for their livings, would soon depart the health care field for greener pastures?
The payroll tax rate for Medicare Part A -- employee and employer -- is 2.9%. But that's not all those under-65s "pay" for the health care of Medicare participants. And -- the payroll tax may be the smallest part. Quien sabe.
October 25, 2007 1:12 PM | Reply | Permalink
Actually, under one part of Medicare Advantage, the fee for service providers actually get the same reimbursement schedule that Medicare pays. That's the law -- pure welfare.
If insurers can't secure the same charges from providers, so what? We want good health care at reasonable prices. I can see no rationale for subsidizing private insurers that can't compete.
btw, I love all the doctors that whine over compensation that averages $200,000 a year, net of their costly malpractice insurance. I would love to know what "greener pastures" these underpaid people will seek.
October 26, 2007 3:36 AM | Reply | Permalink
Let me make my question a little simpler for you, Mister Baker.
What percentage of all health care services provided by hospitals and doctors go to Medicare beneficiaries? Not the charges -- the SERVICES.
What percentage of all health care payments received by hospitals and by doctors are derived from payments made by the Part A and Part B trust funds?
If they're not the same, someone's subsidizing someone, eh wot?
October 26, 2007 5:28 AM | Reply | Permalink