Money and the Public Option
In all the talk about a public option, there is little explanation of what it might look like and how it will be priced. One possible form it might take is expansion of Medicare, as in Representative Pete Stark’s AmeriCare Health Care Act of 2009, H.R. 193. Stark’s bill makes health care available to every American, using Medicare as the structure, and building on it to create a system that will work for everyone, especially children and pregnant women.
Scarecrow points to one of the emerging details of a robust public option, how much it will pay to providers. Medicare has a schedule of payments to providers so complicated that it makes your head spin. Here’s an example. How much will Medicare pay for a brief office visit for the sole purpose of monitoring or changing drug prescription in Indiana? To find out, first you have to know the HCPCS code, which you can find at this site. I only found the code by poking around, it is M0064. Part III on this site explains how to look up the amount you can charge, and what the various entries mean. It turns out that the doctor can charge $41.58 for that visit anywhere in Indiana. The charges range from $34.91 in Puerto Rico to $57.62 in San Francisco.
That’s not enough to keep a private practice doctor in business. Suppose she could see 10 patients an hour, which is ludicrous. $420 per hour isn’t going to pay for overhead in an average office, let alone leave something for the doctor. Play with the codes, and you will see that Medicare rates aren’t going to be enough to fund the public option. This is a serious problem with Rep. Stark’s H.R. 193.
It won’t do to increase the rates paid currently paid in the Medicare program. That would cause serious problems with funding for a program that already faces funding issues in the near future. It also seems like it will be a problem if people covered by the public option reach Medicare age, and suddenly become much less profitable to their regular care physicians.
The 22 Congressfolk that Scarecrow talks about say that the public option will have to have access to a provider network large enough to insure that it will be able to serve its customers. That is clearly right. The public option will have to match the amounts paid by private insurers to their provider networks.
That means that someone will have to find out how much insurance companies are paying their provider networks. Insurance companies are certain to argue that their payment schedules are trade secrets, so that problem that will have to be addressed by legislation.
The public option may be able to come in a bit lower than private companies, because over time, private insurers don’t like to pay for sick people, and wash them out. The more expensive patients then become drains on providers. There may also be deals to be done if the Medicare fee schedule could be increased in return for lower rates in the public option. This would require a tax increase to support Medicare, which is going to have to happen eventually, anyway.
The Congressionals also say that the public option will have to be self-supporting, without any subsidies that are not available to all market participants. This means that the public option will have to charge enough in premiums to pay for itself and its benefits. For reasons explained here, it seems like that should be easy, and at prices substantially less than those of private companies.
This is a very difficult problem, and one which needs to be solved transparently.