AMA: Please Don't Touch Our Business Income
In a public statement, the American Medical Association argued that a public option would be attractive enough to drive out private insurers, causing a "...surge in public plan participation would likely lead to an explosion of costs that would need to be absorbed by taxpayers." While they are wrong in principle about the second point, higher costs, they are likely right about the first. My guess is most primary-care physicians would encourage their patients to shift, in order to reduce the paper and phone calling those offices need in order to collect from the private companies.
But the large number of specialists that are partners with
labs and clinics, who see lots of extra income from tests and procedures that
are not prescribed in similar situations elsewhere in the country, will in fact
earn less. In this I am not wholly sympathetic to their plight. Since most
civilized countries have satisfactory staffing levels at hospitals and in
offices for visits, there is not an apparent need for this business model. And
it is precisely this approach that drives costs beyond the needed into the
wasteful range, as exemplified by studies that showed huge cost differences
between an expensive town in Texas
But the claim that costs will go up after a surge in
participation in the public plan is worth thinking about. One way in which this
could happen is if the public system were less efficient. This is known to not
be this case, although it is reflexively mentioned all the time. Perhaps the AMA means that federal taxes would
have to rise to cover costs that are paid by local taxes now, in county
hospital emergency care. Maybe they mean it will cost the system more to take
care of people that now just die. Or perhaps they mean that once a government plan exists it
will become a corrupt channel for money to flow to cronies. How would they be
familiar with that? Hmmm. Ever wonder why the conservatives are so sure
government bureaucracies are corrupt? The howling irony in the debate is that the usual cudgel of
government being inefficient compared to private enterprise is reversed now,
with it being unfair for private insurers to have to compete with the big bad
government, presumably because of the lower price of the latter. Medicare as
Wal-Mart. Since a large part of the business class is used to making profits by
simple cheating and defrauding they expect that government will be fraudulent
and wasteful, too. They just can't believe that a government program will simply
outperform the private sector. So the low price must be a fake, hiding true
costs (or fraudulent ones) elsewhere, which will be paid by taxpayers,
translate those poor beleaguered upper-bracket worthies. Good news is that not all doctors are entrepreneurs, and
their group, Physicians for a National Health Program, is in favor of
single-payer. I think the AMA is correct in worrying about the public-option
dodge, since it really will drive private insurers out, and we will end up with
single-payer. The sooner the better, because then we can choose our own doctors
and treatment plans.
Any thoughts on Tyler Cowen's take on the public option, Tom?
http://www.marginalrevolution.com/marginalrevolution/2009/06/the-public-plan.html
and as an aside, it would be nice to have someone spell out what the public option actually would look like. Will it be subsidized? Will it be directed primarily at high-risk clients (or rather, patients)? Will fee-structure be based on that of Medicare? etc. For the moment it really just sounds like a magical name for progressives' dream-path to single-payer. It seems to me this can all go terribly wrong if people just get attached to a name for something that may well turn out to be an indirect give-away to private insurance corps.
June 11, 2009 10:44 AM | Reply | Permalink
It is tricky, yes. We have a related situation in public school, where the system that has to take everyone is at a disadvantage compared to the one that can cherry-pick. Balancing that is the lack of need for profit margin in a public system, which would otherwise siphon off the savings of low administrative overhead.
But even competitively-priced private plans might suffer if the headache of in-plan, out-of-plan, pre-approval clunkiness pisses off people who see friends getting good care without headaches. I just want my kids covered without them having to buy a $5,000 deductible plan, like now.
As to the kind of comment that show up on the linked blog, rats in VA hospitals and such, we can dispense with the factual error easily---VA is not a paid system, which Medicare is, and it is always an orphan for funding. It's often run badly, with some political supporter getting a low-effort sinecure. Also consider some vets swear by their care---the particular hospital matters, as does the year in question.
June 11, 2009 5:43 PM | Reply | Permalink
Any further word on the bad "trigger" idea going around the Senate?
Also, kind of off-topic, but is it me or is your blog's font just really hard to read?
June 11, 2009 12:38 PM | Reply | Permalink
Font is regular for me with firefox. And you are aware of the control + function, right?
June 11, 2009 1:23 PM | Reply | Permalink
While some small-business groups have been against requiring companies to purchase health insurance for employees, the Small Business Majority ( http://smallbusinessmajority.org/ ) has a new report concluding that “proposals now being considered by the Obama administration and Senate leaders could save small companies tens of billions of dollars a year in health care costs — even if there is a mandate for employer coverage.” http://www.nytimes.com/2009/06/11/business/smallbusiness/11insure.html
June 11, 2009 12:55 PM | Reply | Permalink
I got mad at the AMA again. But I knew it was too much to accept that they would jump on the bandwagon for a public alternative.
We have our own doctor here, as you know, who is part of the alternative group you refer to.
Ickyma makes a good point here also. Business cannot afford this anymore. Or rather, a lot of businesses cannot afford this anymore.
June 11, 2009 1:27 PM | Reply | Permalink
American Medical Association tries to walk back its public-plan opposition.
The New York Times reported today that the American Medical Association (AMA) is opposed to the creation of a public health insurance option, telling the Senate Finance Committee that it “threatens to restrict patient choice by driving out private insurers, which currently provide coverage for nearly 70 percent of Americans.” Facing considerable attention (and criticism), AMA is now trying to spin its opposition:
Today’s New York Times story creates a false impression about the AMA’s position on a public plan option in health care reform legislation. The AMA opposes any public plan that forces physicians to participate, expands the fiscally-challenged Medicare program or pays Medicare rates, but the AMA is willing to consider other variations of the public plan that are currently under discussion in Congress. This includes a federally chartered co-op health plan or a level playing field option for all plans. The AMA is working to achieve meaningful health reform this year and is ready to stand behind legislation that includes coverage options that work for patients and physicians.
This statement really isn’t any better; AMA is still not committed to a robust public option. As Igor Volsky notes, “A public plan that lacks the ability to negotiate cheaper rates with providers and push private insurers to do the same is a public plan in name only. While it may provide a repository for individuals who don’t trust private insurers, it will be unable to significantly lower health care costs.”
Update
Dr. Chris Coy, Policy Chair for the National Physicians Alliance, quit AMA today over its public plan announcement.
Dear American Medical Association,
I recently had the opportunity to read your response to the Senate Finance Committee proposal [pdf] for health care reform, and it is clear to me that I cannot remain a member in your organization. Please remove my name from your membership rolls, effective immediately.
In reading the response, I was frustrated and disheartened by the fact that you couldn't get through the second paragraph before bringing up the issue of physician reimbursement. This merely highlights how the AMA represents a physician-centered and self-interested perspective rather than honoring the altruistic nature of my profession. As a physician, I advocate first for what is best for my patients and believe that as a physician, as long as I continue to maintain the trust and integrity of the profession, I will earn the respect of my community. The appropriate financial compensation for my endeavors will follow in kind.
I encourage the AMA leadership to read Atul Gawande's recent article describing how physician culture drives up the cost of health care without benefiting patient outcomes. At the heart of this problem are physicians who have a vision of themselves as money-generating profit centers rather than professionals serving the public good. The AMA represents, and encourages, this mindset with its single-focus on physician reimbursement over all other health care reform issues.
However, the most disappointing aspect of the AMA's response to the proposed .....
June 11, 2009 3:17 PM | Reply | Permalink
I believe costs are a secondary concern for the AMA. Their primary concern is maintaining doctor's fees. Their fear that the government would be in a position to dictate what doctors can charge drives their opposition to government insurance.
Tom, I tend to doubt your statement that doctors would choose the public plan. The doctor pool for seniors is lower than for the general public because many doctors won't accept medicare.
June 11, 2009 5:17 PM | Reply | Permalink
There is a range of acceptance re Medicare, depending on fee structure, I guess. I've been hearing call-ins from doctors' staff people explaining how easy dealing with Medicare is, and how much time is soaked up dealing with the insurance companies. The NYT piece on AMA mentioned the physicians' group that is supporting single-payer.
My own doctor is probably not unique in gaming the insurance system, listing appointments as "follow-up" even if they are a well-patient yearly physical, since some companies will cover the former but not the checkup. It's not healthy, especially the fee-based system which rewards excessive testing when expensive machinery is involved, but not lower fee simple tests.
The Mayo Clinic is noteworthy because their staff pool the income, drawing salaries instead of charging fees. The result is average expenditure per patient of half of what McAllen patients' insurance companies spent, while having higher performance stats like speed of recovery and fewer complications. Downright communist, those treasonous Mayo docs.
June 11, 2009 5:32 PM | Reply | Permalink
Yeah, and ain't it amazing how the Reagans and Bushes wind up getting healthcare in Minnesota from these blue state communists.
June 11, 2009 5:46 PM | Reply | Permalink
I read that New Yorker article. Didn't it say that there are some rumbles of discontent at Mayo? The clinic sounds like a patient's dream though.
I am on Medicare with an HMO advantage plan. It's interesting to me that beginning June 1, the primary care doctors don't have to get authorization for referring a patient to a specialist. I guess it's an experiment, but it will certainly simplify the process. I've wondered if having the single payer possiblility breathing down their necks inspried the change.
June 11, 2009 5:59 PM | Reply | Permalink
We should be providing incentives to primary care physicians which we need and disincentives to the specialists who are making a fortune doing unnecessary procedures.
If they want to sell MDs on the plan I'd say raise the reimbursements to physicians providing primary care - internists, family practice, pediatricians, OB/GYN.
If the plan is underfunded which I'm afraid it is, I don't blame the docs for opposing it.
June 11, 2009 5:51 PM | Reply | Permalink
You're right. Something needs to be done. The number of med students opting for primary care, etc., is way down while those going into specialties is up.
June 11, 2009 6:02 PM | Reply | Permalink
Read this:
http://www.huffingtonpost.com/bob-cesca/the-health-insurance-mafi_b_214098.html
One tid-bit:
Compensation packages for the elite of the insurance mafia:
These are just the top honchos; never mind the stockholders who had to get big bucks for these obscene compensation packages to go through; never mind the lesser execs in each of these insurance mafias.
Raise your hand if you think that these multi-millions could be better used if they were actually spent on, um HEALTH CARE!
June 11, 2009 7:37 PM | Reply | Permalink
Glad you posted about the insurance co's. They whine about malpractice claims causing high premiums which must be charged to physicians. I say BS. Ever try to get an attorney interested in a malpractice suit? You pretty much have to be crippled in some way or dead to get them to take your case. The big insurers point to the few cases where they lost the initial judgements against their clients and raise the rates for every physician in the specialty as a result. This is one of the main reasons why so many gynecologists are moving to 'safer' areas and away from delivering babies.
Actions in this vein are also taken by the drug companies. They whine and cry about the high cost of research, but if you can get the figures, which I have, they only spend ~5 to 8% of revenue on R&D. Most of their cash is spent on advertising.
Really a perfect scam. Pick something to elicit public sympathy and make the best of it.
Plastics make it possible.
June 12, 2009 12:36 AM | Reply | Permalink
Hear! Hear!
June 12, 2009 10:29 AM | Reply | Permalink
I need affordable health care!
Help me guys!
I don't wnt to be an example of how lives are affected without insurance; I don't want to be a statistic.
31 yr old Diabetes type 1, high A1c levels, 3 kids, and no help, no medicaid.
June 12, 2009 2:13 AM | Reply | Permalink
On more than one occasion, I have written on the Cafe that I know doctors that were/are very much against the type of single-payer health care systems proposed.
What I got from the "open minded" individuals here were chants that I just knew the "GOP doctor fat cats".
Well, now the AMA has spoken. Doctors are *not* behind these schemes as several have posted here in the past.
I know that many people here think that doctors earn a lot more then they do, but they also have a lot more training -- and a lot more debt out of school. The fact is that becoming an MD is less and less attractive: you are locking your future into something that may not be there when you arrive. This is already affecting the trends of who is applying to med schools.
People may think this is all about money if they wish, but then again, many here think in terms of conspiracies all the time. Instead, it's about making sure that the people who are investing years of their life as well going into significant debt for their training will see compensation on the other side.
One of the reasons for the expensive health care is simply that many older people will cling to life at all costs and demand the most high-tech (and costly) machines to prolong life -- at the cost of others. This is foolhardy. I prefer to think of Albert Einstein's solution:
"When he did become ill at the end and he was hospitalized, surgeons suggested that he undergo emergency surgery and he said, 'No, I've done enough. I've been here. I've made my contribution. I want to go elegantly and now is the time,' says Shara."
We should live each day so as to be able to say that at our own end. That would go a long way to reducing some of the burden of health care costs.
June 12, 2009 3:43 AM | Reply | Permalink
Hey BlowHarder. McKinsey (in their big study, Accounting for the Cost of Health Care in the US) says doctors extra pay is NOT explained by their additional training years, or additional debt, or malpractice premiums. McKinsey says that US docs make on average twice as much as docs in other countries, and that at least $100,000 of that gap cannot be explained by length of training, US GDP, insurance, etc.
So before you come in and announce, factfree, what the facts are and how "many here think in terms of conspiracies all the time," why don't you first try to provide some traction on reality. You know, facts.
Or did you just come on here today to call people names and then whine and cry about being a victim if they respond?
June 12, 2009 9:42 AM | Reply | Permalink
I will start responding to you if you can post like the adult you are.
June 12, 2009 2:50 PM | Reply | Permalink
We should live each day so as to be able to say that at our own end.
I find talk like that cheap and easy unless you have experienced telling a close 70-something family member that desperately wants that operation in order to live another few years that they shouldn't have it and should die instead. What you would chose to do yourself doesn't really apply when you are facing a loved one that wants to live longer.
For example, are you volunteering to go and tell Ted Kennedy that he shouldn't be spending all those expensive resources on his brain cancer and should have gone off to hospice once he was diagnosed? If not, why is his life more valuable than say, my parent?
Or where do you want to cut off the explosion of heart bypass surgery which is quite expensive? No bypass surgery for you if you're over 65? 70? 75?
Do you realize that this is a "choice" issue not dissimilar to the situation with abortion? Do people get choice here, or is the choice rationed because they can't access it, just like some can't easily access abortion? You think it's immoral for people to want to live a few years longer, well, others think it's immoral to have easy access to abortion and it's best to have a situation where only the wealthy can manage to do it.
People who like to push this argument can preach about it all they want, but I don't think you are going to change a single mind. Some people just have a stronger will to live as long as possible than others. It just looks to me that those that say they are willing to go off and die on the iceberg when it's time, like the old Eskimo legend (sorry, quinn :-)) are merely bragging about some supposed moral superiority, because they simply are not going to change a will to live longer if someone has it. All they are trying to do is create guilt.
And those who start bringing up the "quality of life" argument, puhleez, that's such a dangerous argument, as that argument can just as easily be applied to that 20-something with severe cerebal palsy. You may not think that a life worth living, but maybe they do.
It simply doesn't accomplish anything to argue this point. We may indeed always have "rationing" of certain life-saving procedures, where only the wealthy can access them, but lording it over people for wishing for it, that they should take their death graciously when they don't want to die, is whole 'nother thing.
June 12, 2009 10:56 AM | Reply | Permalink
I am serious about the Ted Kennedy being a perfect example even posted on it when he was diagnosed. He was 76, and this last year of his life probably cost hundreds of thousands in treatment, if not reaching 7 figures by now. I haven't seen a single person say he should have gone off to hospice instead, but I do see lots of people suggest other theoretical 76-year olds should go off and die with dignity when they have a terminal cancer diagnosis. Sure, it's real easy when you don't know the 76-year old or don't care about them.
June 12, 2009 11:17 AM | Reply | Permalink
Let's put it this way: Kennedy isn't going elegantly.
That's not a political statement though many here will take it as such.
And it's not doing the people in MA any good to have an incapacitated Senator. But that's their issue.
June 12, 2009 12:17 PM | Reply | Permalink
You know what? Many people don't want to die. The concept is scary. But it's inevitable.
The wealthy have always had an advantage. That's why it's good to be wealthy. It's a different situation when you are asking for public funds.
Why is the 70 year old grandmother dieing of natural causes (cancer, heart problems, etc of a lifetime of use of organs) more important than the 30 year old diabetic?
Americans are like children -- with finite resources, you must prioritize. There will always be some cut off point.
You can play the heartstrings all you like, but yes, old people die.
And you know what? Those are the lucky ones -- they got to be old.
June 12, 2009 12:07 PM | Reply | Permalink
It is not the dying or the disease, it is the unequal access to reasonable intervention.
June 12, 2009 1:56 PM | Reply | Permalink
I think the real issue is that some people confuse "health care" with "death prevention". Lots of those expensive (and needless) tests and exams aren't being done on 20 year olds. But if you don't do all that is possible, you run the risk of lawsuit.
The cultural question is not simply access to health care. Part of the problem of costs is intimately linked to what do we except of our doctors in this litigious society? A lot of the health care costs are merely CYA. (Yes, there are grossly out of proportion profits as well, but it's not the only story.)
June 12, 2009 2:25 PM | Reply | Permalink
I would also add that I don't think that people are deluding themselves about the amount of money doctors make. They routinely top the lists of highest paid professions.
I find this a strange statement. Doctors, who do put much time and expense into training, should see compensation on the other side. And yet, you equate the issue of money as a conspiracy. ?Motivation is a funny thing, you know. All the research we have shows that external rewards have the ironic effect of reducing, often erasing, intrinsic motivation. Why is compensation the only reward? Or maybe I should say, the most important one?
But yes, I live in the real world, and know it is the most important motivator for many. Maybe that's why we ended up with a bunch of 23-year-old-Gordon-Gekko-wannabes playing around with people's retirement funds like it was Monopoly money. I know we still operate in a society that is largely structured on outdated models of behaviorist thinking. I just don't always agree with it.
Oh. I would also add that the majority of doctors are not members of the AMA. So I'm not sure their say constitutes the final word on the medical profession and public health care. Also, I'm not terribly surprised that you know many doctors who are opposed to public health care, as do I: there are many of them. Approximately 40%.
June 12, 2009 11:25 AM | Reply | Permalink
Hilary: good to see you again.
I'm not equating earning money with conspiracy... only pointing out that often here we hear about the big "them" and "they" who are "running the system". I clearly didn't express myself well on this point.
I'd also add to your list engineers and scientists. Who in their right mind would go get MS and PhD degrees in an area that with a sudden change of technology you are left drifting in the wind.
Contrary to what Obama has preached, the country does not presently need more engineers and scientists and many are out of work and need jobs. What employers want are cheap engineers and scientists. ;-)
When the world is changing on a nearly yearly basis and no jobs are secure, it's difficult to justify an additional 5-10 years worth of post-graduate training when it (a) prevents earning potential early on and (b) may box you in later on.
This is one of the reasons for the AMA's philosophy and, as you point out, it applies to more than just doctors.
June 12, 2009 12:13 PM | Reply | Permalink
You too CT.
Think about this for a second though. (And sorry Tom for the bit of a tangent here.)
Do we, societally, really determine salary by educational investment? Hours worked (on and off-site)? Is there any "formula" you could think of that would actually apply without exception? Or at least without many exceptions?
June 12, 2009 3:51 PM | Reply | Permalink
I believe we do as a society, not directly, but through a myriad of social pressures.
If you want to attract the most ambitious people, you have to make rewards commensurate with effort.
Salaries of teachers go up on exactly this reasoning.
To a large degree, you do get what you pay for (on an individual, not corporate, scale).
We live in an age where people have mistaken what "all men are created equal" means. Every individual has worth as a human, but not all individuals provide equal value to society. Cleaning toilets is very painful and non-desirable work, but the person who does it can be easily replaced. Not so with doctors, or other skilled professionals.
The true costs of society are being driven by the maddening trend of bloated bureaucracies every where you look. As a society, we are closer and closer each day to making humans mere drones in a system. Once upon a time, not every apartment building, not every grocery store, not every bank, was run by some corporate office somewhere. I hear doctors used to even make house calls. ;-)
June 12, 2009 6:45 PM | Reply | Permalink
Here we distinguish between the amorphous "doctors" and the specific AMA. The argument concerns the business model of fee-based care, especially combined with ownership interest in MRI clinics and such. Have you read the New Yorker article? Obama referenced the main fact, the huge disparity in actual billed costs for worse results when comparing McAllen, Texas, and other areas.
Let's keep on track. Plenty of doctors like being in business. Fine, it's legal. But we may have a different priority, which the country may choose to emphasize if it wishes to reduce wasteful fee inflation.
Plenty of doctors like delivering care, too. Let's not paint them all with the same brush.
June 12, 2009 2:01 PM | Reply | Permalink
Most doctors want to deliver care but at some point you ask yourself, "I'm intelligent, I can be doing many things, why am I killing myself without any reward and sacrifice my personal life."
Doctors really don't get to leave their problems at the office. And while bedside manner is important, competency is more so. You really do want this profession to continue to attract the best and brightest.
June 12, 2009 2:28 PM | Reply | Permalink
There are so many professions you could apply this entire statement to CT, and many of them make nowhere near the avg. salary of a doctor.
I'm not arguing that doctors should be making pennies, either. But the point here is that it's not surprising that the AMA is opposing this, as it's completely in line with their history of opposition to any public health care reform. They are lobbying in favor of their interests, which they tend to define primarily as their pocketbook. But they do not represent all doctors (and apparently not all their members agree with this position), and tend to be the most conservative of the medical associations.
The cost of higher learning, while not a wholly different issue, is somewhat divergent from the topic at hand. If the public plan lowers health care costs, whether through market forces or because it ends up being a path to universal public health care, it will likely inevitably eat into some of what doctor's are making. (Personally, I'd like to know how much. Anyone seen estimates?) And so "our" interests differ from that of the AMA. Still other medical associations define patient interests and physician interests as essentially one and the same.
June 12, 2009 3:48 PM | Reply | Permalink
I agree that many professions of highly skilled labor can be in the same position. I wish someone would cover the interests of engineers and scientists like the AMA does for doctors.
The cost of the education isn't just money -- it's time. No one talks about this. Believe it or not, these same people who go on to med school would rather be "enjoying" life like the more typical 20 year old. But they are making a significant investment in (time and money) based on some assumptions that society says are reasonable.
If you lose a generation of the best and brightest for your average internist, you may well wreak havoc with the US medical profession for years to come. Already there are plenty of doctors who are specializing into most the cash side of health care -- and are being advised to do so. These people are not greedy, they are skilled. When you set the boundary conditions in an odd way, you will find whole populations being skewed. One only needs to look at how long it took the Chinese to recover from the cultural revolution to understand this.
Few go into medicine anymore for the money these days (at least I don't know any) -- it's not like it was in the 50's or even 70's. But if you are a trained professional rather than a common laborer, you aren't going to put up with the BS that many who aren't skilled will career-wise. And that's because the doctors are entitled to the extra attention because they have invested years of their lives into something (via training). In other words, doctors don't have jobs, they expect careers and given the effort and sacrifice it takes to become one, that's not an unreasonable demand.
June 12, 2009 5:54 PM | Reply | Permalink
Medicare reimburses providers at lower rates than do many private insurers. Providers often take a loss on their Medicare patients, which they make up by collecting more from their privately insured patients. So Medicare is actually subsidized by private insurance. This "stealth" subsidy hides the true cost of Medicare.
If we go to a public plan, providers will be forced to live with lower revenues, or the reimbursements provided by the public plan will need to rise above Medicare rates (increasing the cost of the public plan). Some of the cost increase may be offset by reductions in insurance costs (the amount now skimmed by insurance companies for administration and profits), but it's not clear whether these potential reductions will be large enough to keep provider revenues from dropping or public plan costs from rising.
I'm increasingly in favor of a government health plan (so-called single payer), but I also think that too many supporters of public health care talk about it as if it were a panacea. The reality is that health care is increasingly expensive because the care we provide is expensive. A public plan may allow us to finance the cost of that care more efficiently, but I'm not sure it will significantly reduce the underlying cost of the care patients receive, at least without also changing to some degree either the amount or nature of that care. Many such changes in the amount and nature of care are likely to be desirable (there is some expensive, inefficient, and unnecessary care that may be weeded out)--but some reductions are likely to be painful as well. We just need to be realistic, I think, as we look at the possible solutions. Nothing is perfect, so we need to consider the trade-offs carefully and be sure we're comfortable with them before we attach ourselves to any particular solution just because we like it in the abstract.
June 12, 2009 7:17 AM | Reply | Permalink
I agree w/ the need to be balanced, and am also warming to the single pay idea. Part of the problem for people like me is that I have always had health insurance. I have always gotten what limited care I've needed. I need to remember, whenever I am tempted to be afraid that might change, that many, many people are not so fortunate, and if I need to give up some of my benefits to make sure they get even basic health care, it needs to be done.
June 12, 2009 10:09 AM | Reply | Permalink
One of the most enlightened comments I have seen here at TPM, Stilli.
June 12, 2009 12:19 PM | Reply | Permalink
Purplestate, you've hit on something that I don't clearly understand. I have heard before that Medicare pays less than private insurance, so I get the subsidy aspect. But wouldn't those of us who are able be paying premiums for a public plan?
If my understanding of that is correct, it seems to me that since the government has a 3% overhead in their healthcare programs and private insurers have something like a 35% overhead, doctors' fees don't have to drop all that much and those of us who are currently paying premiums through our private insurance would then be paying them into the public plan, making it, at worst, a wash.
June 12, 2009 2:46 PM | Reply | Permalink
There are a few large differences that come to mind:
a) it's much tougher to sue the government on healthcare
b) government doesn't pay taxes
While I'm not an expert on this issue, I think these points need to be taken in.
Also, having worked in large federal bureaucracies, I don't buy the 3% overhead, which is essentially zero. Government agencies are masters of hiding costs. A 3% overhead means a nearly perfectly efficient system - something the government is not. You may want to Google "Full Cost Accounting" to track the government shenanigans in this regard.
June 12, 2009 2:57 PM | Reply | Permalink
A good question Orlando. Certainly, if we all continue to pay what we're paying now, then the amount of money being pumped into the system will stay the same and the amount dedicated to actual care might even increase once the insurance overhead costs are removed. However, I think most people are assuming that one of the advantages of a public plan is that it will hold costs down by reducing reimbursements to providers to Medicare-like rates. If all the cost-saving objectives can be met by reducing insurance overhead costs only, then there's no problem. But I don't think that's realistic. I think that there's a bit of exaggeration both of how much insurance companies "waste" in profits and administrative expenses and how efficient Medicare is. By taking private insurers out of the equation, I'd expect costs to drop by 10% to 15%--significant, but not transformative--and the savings would quickly be wiped out if health care costs continue to rise at double-digit or near double-digit rates each year. The growth in costs has little to do with insurance-company inefficiency--it has to do with the underlying cost of care. Medicare handles that growing cost by simply not reimbursing the full cost of the service. If all insurance programs did what Medicare does, providers would be forced to cut their revenues, become more efficient, or limit the care they provide. The first of these three possibilities has pluses and negatives. While reducing excess profit-taking and excessive wages is good, if revenues drop too much, health care becomes an undesirable business and profession, which will, over time, affect quality. The second (improving efficiency) is all good, I think. The third (limiting services) most people will find bad, though I could argue that we spend too much on certain types of care for the very ill that have low probability of actually curing them of their diseases -- and maybe that type of care should be limited.
Anyway, I think the situation is complex--and while the insurance companies deserve a lot of the criticism they get, they are not really the mother of all evil, either. They are part of the problem--but just one part. The overall problem is much bigger and I think has a lot more to do with the underlying cost of care than with the mechanisms (private or public) we use to finance that cost.
June 13, 2009 9:52 AM | Reply | Permalink
Very, very good analysis, Purple State. Thank you.
June 13, 2009 11:50 AM | Reply | Permalink