Saturday, June 27, 2009

The 150% Solution

Over 70% of health care innovation originates in the United States. Sen. Tom Coburn should know. He is a doctor and a 35 year cancer survivor and a 6 year cancer survivor.

Human Events recently interviewed Sen. Coburn about the debated changes in the health care system. Here are his words.

An early point he addresses in the interview is one we broached a few days ago. That is, accessibility to health care.

there is a crisis for cost, and there is a crisis in terms of access and half of that crises for access is in Medicaid because 40% of physicians 60% of sub-specialists won’t see a Medicaid patient because reimbursement doesn’t pay for their time to see them.

The most common question I hear from new clients is "will my doctor take this insurance"?

In most cases, the answer is yes. Most docs participate in all major PPO networks. But if you have Medicare or Medicaid, the numbers change drastically.

Why isn't the media and Congress addressing that? Is it because they don't want you to know just how BAD it would be to expand Medicare and Medicaid?

Say it ain't so!

Dr. Coburn also makes a point we have repeated ad infinitum at InsureBlog. That is, the lack of personal responsibility and the disconnect between the patient and the cost of health care.

As we have ratcheted up the sophistication in our healthcare system, and this disconnected the patient from the cost, we have this problem [of price inflation]. And the real problem is the unsustainable growth in cost. Now why is it there? Some people argue part of it is technology, and I agree part of it is. But most of it is because we don’t have real forces allocating scarce resources, and we don’t have real consumers who are making economic choices based on their pocket book because someone else is paying their bill.

That someone else is you and me.

When Joe has a big claim, he doesn't pay it. We do by virtue of our insurance premiums which support not only the cost of our care but that of others in the system as well.

They then address the cost of the Kennedy health care model. That plan will supposedly cover 16 million people (not all of whom are uninsured now) for a "mere" $1 trillion over the next 10 years.

How will they do that?

By expanding the qualification for Medicaid from 100% of the FPL to 150%.

Right now the federal Medicaid law is 100% of poverty. Changing that to 150% of poverty level puts all this cost on the states. And that hadn’t been scored at all in the bill. [Ed. note: Medicaid provides health care benefits to the poor and makes benefits available for people who have 100% or less than the federally-defined “poverty level” of income. The 2009 poverty level income for a family of four is $22,050].

If you have a family that meets the new guidelines and they have health insurance now, how many will drop it in favor of the free plan?

Quite a few.

We saw this in Massachusetts when they revised the children's Medicaid and SCHIP income requirements to 200% of the FPL.

And what about the expected mandate that businesses pay or play? Either they provide health insurance for their employees or pay a fine. What is the cost of that?

72% of all our jobs come from the small businesses. Sixty percent of them don’t cover insurance, so 60% of 72% of the jobs have a new cost, which means we’re going to fire people because we won’t be able to afford that.

Firing workers is just one alternative.

The other is to raise the price of goods or services sold by the business. In other words, an indirect tax. Indirect taxes shift the blame away from Washington in much the same was a the "green" cap & trade bill is supposed to help decrease our dependence on foreign energy sources.

But isn't M/M less costly to administer? Won't we achieve real savings by switching folks from private insurance to M/M?

Well, Medicare and Medicaid only cost 6% to administer, their cost of capital is 3%. Their fraud and abuse waste is 20%, so you add 20% plus 6% plus 3% and you get 29%. Compare that to the overhead plus profit of every insurance company out there, and it is under 21%. So they beat the federal government already in the two programs they already largely administer by a third.

(We will examine this again in another post).

I just gotta ask. How is this working for you so far? Is this the change you envisioned last fall?
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