Don't tread on my entitlements!
It always befuddled me how many of the New England states, the center of the American Revolution, the home of the tough, frugal, independent Yankee ended up some of the most liberal states in the U.S. Vermont is a good example, electing a self-proclaimed socialist to the U. S. Senate. I suspect I need to bone up on my history of the region. Liberal Vermont is leading the way on health care reform these days. It is about to enact a public option (a step back from what it really wants-a public universal health plan).
According to the governor,
“For Vermont, it’s all about containing costs.” The annual cost of health care in Vermont has doubled to roughly $5 billion a year over the past 8 years, and Shumlin contends that “it’s killing small businesses” and “kicking the middle class in the teeth.”
So the solution to rising health care costs is a public option we are told (again). Perhaps we should look at the best example of a public option and see how that controls costs. Medicare, while not truly an option, is a public program so it is the best example we have. How does Medicare control costs…it doesn’t! How does Medicare propose to control costs? Well, we are told it will attack fraud and waste, it will cut physician fees by 30% and it will make health care more efficient by placing Medicare beneficiaries into Accountable Care Organizations.
Medicare has been in effect for forty-six years (46) and now it is attacking fraud and waste? If a public option is so efficient, how did fraud and waste get out of control in the first place? Could it have anything to do with bureaucratic bungling or Congressional meddling? Medicare is often touted as having much lower administrative costs than private insurance and to some extent that is true although the “much lower” part is questionable. On the other hand, what do we get for that lower administrative expense, we get virtually no review or management of claims and we get forty-six years of growing fraud and waste.
Medicare has been planning to cut physician fees for a decade and each time, including in 2010, Congress has stopped the cuts. Even the 2011 Medicare Trustee report notes that such cuts while assumed in their future expense projections, are unlikely ever to occur. Is that how you contain costs under a public health plan?
Of course there is the matter of profit; a public option will not have an insurance company’s profit factored into its premiums. Let’s say for a moment that all profit is done away with and not replaced by other government costs and inefficiency, then what? Initially you can claim that premiums are lower, but then what changes the growth of health care costs in the future? Under PPACA, Medicare has a new panel set up to address that issue, but since it is prevented from raising premiums or cutting benefits, exactly how will it lower costs? Vermonters should be asking the same question. If “For Vermont, it’s all about containing costs,” how will that be accomplished?
The most politically correct response will be by creating competition in the insurance market. That assumes that insurance companies do not need to be competitive today. However, the real fallacy is that competition among more insurers is counterproductive because under a system that relies on negotiated discounts with health care providers, the greater leverage fewer insurers have over the marketplace the higher discounts they can demand. What will a public option do, set physician fees and require all providers to participate and accept the fees with no balance willing? I assume if that is the case, the citizens of Vermont know that and have considered the unintended consequences.
The health care system needs competition, but not between more insurers but rather health care providers. Competition based on quality, efficiency and cost. Will the addition of a public option accomplish that? What has Medicare done about that in the last forty-six years?
The fact is that insurers and third-party administrators for self-insured employer plans have led the way in trying to bend the cost curve. They have initiated case management programs, nurse help lines, disease management, medical necessity review, quality initiatives, tight claim adjudication, wellness programs, extensive education programs and more. Have they worked, to some extent, but on the other hand many patients and doctors see these programs as intrusive and interfering between patient and doctor and thus avoid participation whenever possible (just as happened with HMOs).
The above programs cost money and that expense is reflected in insurance company premiums. If they were eliminated, premiums would reflect that lower expense but premiums would also reflect higher claims costs, more fraud and waste…just like Medicare.
So I ask again, how will a public option control health care costs?
Liberal politicians have an easy time attacking insurance company profit as a bad thing, especially “record profits.” However, profit motivates efficiency, innovation, competitiveness, concern for costs, customer service, etc. I submit that bureaucracy does none of that. Just look at the history of Congressional interference in Medicare, the virtual non-existent scrutiny of claims under Medicare (ignoring audit reports going back twenty-years questioning this practice) and the administration of Tricare (a program that has not raised premiums for retirees in over fifteen years despite out of control costs). Look at the management of health benefits in the various states where many are on the verge of bankruptcy in large part because of mishandling, caused largely by political interference, of health care benefits for active and retired workers.
A lot can be improved in the private health insurance industry (and yeah, some CEO salaries are outrageous although insignificant when reflected in premiums), far more efficiency is possible as is the case with the health care industry, but for those Americans and even Vermonters who think that a public option or a single payer system will control health care cost, the question remains…how?
If you know the answer and are okay with it, fine and dandy, please tell the rest of us.