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Tuesday, November 10, 2009

What's Medicare Got To Do With It? Part I

Everything. Health care reform and Medicare are inextricable as our legislators attempt to construct or deconstruct how we as a nation are going to afford health care in the coming decades. Even if you are too young for Medicare benefits and currently have insurance, and yes, even if you don't have insurance at all, Medicare is key. It is key for a number of reasons, the most important being it is the pay schedule that private insurance companies use to tie what it pays to doctors and hospitals. Forget everything you have been told about private insurance 'negotiating' with doctors and hospitals about what to pay them. Commercial or private insurance has been using Medicare as a basis for payment for years. Typically they will pay 20 to 30% over current Medicare rates. I have currently seen this rate drop to 15% over Medicare. But never more than 30%. This is the range of 'negotiation', and unless there is a compelling reason given why an insurance company should pay a particular doctor or hospital more than what they are offering, they state the % of Medicare they are willing to pay and that is the end of the conversation. That 'compelling reason' may be that there is only one physician offering a particular service. That may get the doctor a percentage or two more than what was initially offered. But the take away is that doctors and hospitals aren't 'driving the bus' so to speak, on what they get paid - Medicare is.

As a government social program, Medicare has always been, as it should be, the lowest payor for health services. Most physicians regarded accepting Medicare patients as their responsibility to care for our country's aging population. The doctor's patients who had private insurance made up for the low payments of Medicare. But Medicare has been been reducing what they pay doctors and hosptials for the past twenty five years. Private or commercial insurance companies wised up, and tied their their wagon to Medicare. Subsequently, insurance companies have been able to steadily reduce their payments to doctors and hospitals over the past fifteen years.

It is for this reason I don't really understand how the public option will work in increasing competition among the private insurance industry, as our politicians so emphatically posture . Perhaps commercial insurance companies will have to lower what they are charging businesses/individuals for their plans since they will be competing with the public option. I understand that. But that is what we pay for insurance, not what is paid to our health care providers. There is no competition driving what is actually paid out for our health care services, ie what we pay the doctors. For medical practices struggling to stay in business, their payments from private insurance will continue to plummet because, as explained, they will continue to be paid based on Medicare and/or the so called public option. Because private medical offices, or self employed physicians have no control over what they are paid (no negotiating with the insurance companies) and their costs of doing business (rent, staff, technology, medical malpractice premiums) continue to rise, they will not be able to stay in business. Private medical offices, or self employed physicans will cease to exist and a single payor system will emerge. Insurance companies win in either scenario.

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