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Conservative Criticism of the Public Plan, Part II

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Critics on the right claim that:  

The introduction of the public plan will drive private insurers out of business; and

Using Medicare-level reimbursement rates will restrict access to care for public plan enrollees; and

The overall quality of healthcare plans will decline with the introduction of a public plan.

We countered the first of these criticisms on Monday, click here to read more.

As for the other two:  

Question: Would using Medicare reimbursement rates for the public plan reduce patient access to care?

Private insurers and other critics argue that using Medicare reimbursement rates will result in the same problems that exist with the Medicare program:

  • Doctors and hospitals will either refuse to see the enrollees; or
  • Providers will lose precious dollars on each public plan patient.  Hospitals and other providers will shift the cost of paying for the public plan patients to private insurers, which will drive up premiums.
    • In response to the second point: A study published in Health Affairs in 2006 found that a 1% relative decrease in the average Medicare price paid to hospitals results in a $.17 increase in the corresponding price paid by privately insured patients.
    • This means that cost-shifting from the Medicare plan contributed less than 10% to the overall increase in hospital prices charged to private payers between 1997-2001, the period of the study.  

We’ve already shown that low Medicare reimbursement rates are a problem, especially when it comes to the field of primary care.

  • Stagnant reimbursement rates have forced primary care physicians to pack in as many patients as possible to keep their revenue stream steady.
  • Legislators are currently considering raising Medicare fees to primary care physicians, at the expense of specialists.
  • More on the proposals being considered to reform the Medicare pay schedule to come.

That said, there are those who argue that the problems created by low Medicare reimbursement rates are exaggerated, and that folks with Medicare are both happier and healthier than they would be otherwise.

  • While physician reimbursement reform is necessary, the current fee schedule has not resulted in a mass physician exodus from the Medicare program, according to MedPAC- Medicare’s Payment Advisory Commission.
  • 97% of Medicare physicians were accepting some new Medicare plan patients, with 80% reporting that they accepted all or most new applicants, according to MedPAC’s most recent analyses.
  • Folks with Medicare are also more likely to say that they have never waited for a doctor’s appointment than those aged 50-64 with private insurance; and
  • 9 out of 10 Medicare patients said they had “no problem” finding a doctor or specialist to treat them.
  • AARP has found that 80% of people with Medicare are either “extremely,” or “very satisfied,” with their healthcare and access to physicians.

Low reimbursement rates are not a valid reason to rule out the public plan.  Instead, tough discussions will have to take place about appropriate reimbursement levels, and coverage policies, as the issues arise.

Question: How will the public plan impact the quality of private health insurance?

Critics argue that the public plan will diminish the quality of private insurance because:  

Insurers will be forced to cut benefits and increase co-pays and deductibles to keep up with the lower premiums available through the public plan option.   

The Urban Institute’s Health Policy Center reports that while some insurers may cut benefits to keep up, good business practice will focus on making care delivery systems more efficient as a way to cut costs. 

If anything, private insurers will have to work to improve their plan options so they can be competitive with the public plan.  They may also offer extra or supplemental coverage that is not provided by the public plan, as a way to find their market niche.  

Tomorrow we’ll see what critics on the left have to say about the public plan.

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