Whatever one's take on this Lewin Group report, we need not search far for a model "public plan" proposal built around expansion of an employee insurance pool – the “latest” proposition that seems quite promising.

In Connecticut, HB6600, or "SustiNet," just got a favorable report from the state legislature's Public Health Committee and is gaining momentum. SustiNet ensures that the state wisely uses the dollars it is already spending on state employees, HUSKY (for low-income children) and SAGA by uniting them into a large self-insured health plan. It uses this critical mass of insured residents to improve how health care is delivered in our state and to phase in the enrollment of more residents of Connecticut, including: the uninsured; people with unaffordable or inadequate insurance; sole proprietors and other self-employed people; small businesses, municipalities, and non-profit employers; and businesses of any size.

SustiNet was developed with extensive input from all health care stakeholders and with the expertise of Stan Dorn of the Urban Institute and Jonathan Gruber of MIT. They estimate that, when fully operational, SustiNet could save Connectict employers and employees some $1.7 billion/years (over the status-quo expenditures). It has the support of, among others: the Connecticut Realtor’s Association; the Connecticut State Medical Society; the Connecticut Public Health Association; and Small Businesses for Health Care Reform.

For more information about the bill, you can go to: http://www.healthcare4every1.org/site/PageServer?pagename=learn_thesolution

This is an interesting report. One major problem I see - the report notes that going to the medicare based rates would decrease physician net income by about 7%. That is more than enough to get the doctors to oppose this, especially with so many opting out of medicare as it is, which is a significant barrier to any healthcare reform.

They don't seem to talk much about the midpoint payment level - it seems to answer many of those questions and it reduces the impact on the physicians, especially. That might be enough to get the physicians on board to any plan.

BTW, has anyone run Ezekiel Emanuel and Victor Fuch's vouchsafe plan through this type of analysis (anyone have a link if they have?).

First, Lewin is owned by United Healthcare so take their analysis with that in mind.

A public plan based on current Medicare payment rates may seem great (32% savings!) but keep in mind the current Medicare payment rates have had doctors dropping out of Medicare steadily. To think we can jam a bunch more people into a public plan at those rates is unrealistic.

That takes us to the level playing field option which I think should work just fine. You still get a sizeable savings due to administration efficiencies, and the savings could grow even larger if the public plan can negotiate better rates.

This doesn't actually sound right-- I have run a small business and if I was offered 9% lower rates in one plan than the others then I'd be signing us up for that like a shot-- over several years of seeing that choice, they'd all move over. either that or the existence of that public plan would force down the prices of the private plans

Question: Are the Medicare rates better than the Medicaid rates? I have almost no experience with Medicare, but a lot of my clients are on Medicaid, and there are far too few doctors willing to accept it due to both the rates and the bureaucracy. Most Medicaid-accepting medical care ends up being county or non-profit run.

At least, that seems to be the case in California.

Ezra,

Thanks for the link.

So you've had time to think through the issue. Which public plan do you support-- rigged or not? Don't you have a view on the issue beyond reporting the facts?

Do you care if the Lewin report states that Medicare pays out 92-95% of hospital costs? That Medicare rates are subsidized by private payers, and reimbursement rates would have to go up 10% just to make providers whole? Are you confident in government's ability to set prices for a whole gamut of providers in a 2 trillion industry? Do you believe anyone, government bureaucrats or not, has such mastery of these issues that they should be the only ones making reimbursement decisions? How is not having a variety of payers a better option to ensure one organization doesn't have undue influence on the whole system? Isn't a level-playing field required to ensure that other payers besides government can exist?

Thoughts? Enquiring minds want to know.

James,

Yes.

And if Republicans were smart, they'd be attacking the public plan as a stealth "Medicaid-for-all" as no one believes the financing associated with the current Medicare is sustainable.

I think where you say "That's what you're seeing in the graph atop this post. In such a world, the private plan is expected to see enrollment of 131 million, 119 million of whom would be refugees from private insurance," you mean the public plan is expected...

Wisewon--Why, exactly, is a private plan with medicare rates rigged? Either private insurers can compete with the governmetn or they can't--why should the government not strive to cut costs as much as possible?

I don't think a public plan that pays Medicare rates is feasible. Doctors won't allow it. And they are a powerful lobby, unlike insurers.

Look at what they do when Medicare laws require a cut in their payments -- they lobby Congress. And Congress reverses the payment cut EVERY TIME.

Before I believe that a public plan that pays Medicare rates is feasible, someone will need to explain to me how they will get doctors on board with it.

MBP, a 2004 survey of Massachusetts physicians found 64% of physicians chose a single-payer system as the structure providing the best care for the most people for the money, and 67% said they’d accept a fee reduction of 10% for “a very substantial reduction in paperwork”. While this doesn’t precisely address your concern, it suggests a substantial number of physicians might agree to a public plan with Medicare rates. You could probably get even more on board if you add to the reform process a readjustment of physician reimbursement to decrease the inter-specialty discrepancies.

Jay - I remain skeptical. Massachusetts is markedly more liberal than the country as a whole (and i associate support for single payer with a more liberal/progressive outlook). And the fee reduction caused by a shift from private insurance rates to Medicare rates would be closer to 30% than 10%. I think the relevant question to docs would be, "Are you willing to accept a 20-30% reduction in your compensation to fund universal coverage". Perhaps more than 50% would answer yes. But I would guess not.

And when you mention inter-specialty discrepancies, it seems to me that you're saying that many specialist will need to take a large pay cut -- which i agree with. But will current radiologists, cardiologists, and other high paying specialties be willing to accept that? Not without a fight.

I do have to say that i've been puzzled by the AMA's support of single-payer (correct me if I'm wrong here) because it would mean a significant reduction in earnings for most docs.

The one great thing about this report coming out is that it shows the dramatic effect a Medicare-for-all type of public plan would have on all the players involved.

Leave aside whether you think that is the right outcome or not, with reports like this, we will increasingly see more discussion around the following 2nd order effects:

- are doctors ready to see a meaningful drop in their reimbursement

- are providers ready to see a meaningful drop in their reimbursement (to put it in context, 5% drop in revenues will put the net margin for most hospitals into negative territory)

- is the government itself ready/capable/willing to take on an additional 120 million into Medicare AND pay for it

Now I understand that the government won't be paying for every dollar of the care of all the 120 million that would theoretically sign up for the public plan. Presumably there would be an employer and individual mandate somehow linked to this that would generate revenues for the system. However, when you start thinking about the implications of something so vast, we can finally start moving from the vague concept of public plan to a more substantive discussion of what it will entail.

That discussion, incidentally, is I think what will kill health reform in the end. Everyone wants health reform, most would say they are in favor of universal health and many would say they would like to have a public plan "option". But once you start going over the details of the design, the real fight begins.

We all know only clueless progressives who know nothing about insurance reference Lewin group(what no longer the gold standard Ezra?) but this “study” is laughable. When they claim they have editorial freedom who knew it extended all the way to United not even allowing them to use publicly available facts?

“Also, because Medicare has no allowance for insurer profits or broker/agent
commissions, administrative costs for this population are about one-third of administrative
costs in private health plans.”

First notice how they always leave out State Premium tax? Are States going to be ok with the loss of billions in State premium tax?

http://www.wikinvest.com/stock/UnitedHealth_Group_(UNH)

“The fraction of administrative expenses to premiums is the medical cost ratio, and in 2007 it was 13.8%”

So this new public plan is going to have a cost of 4.6%? Really, Medicare is twice that, some how this new plan is going to magically operate for half the cost of Medicare, talk about economies of scale!

Figure 1 Administrative Cost as a Percent of claims costs: Small firms

Private 31.7% Public 13.2%

In case your of the mistaken belief that small group cost 2.3 times more to administer;

dbr.state.ri.us/.../070419 small group Policy Report Final.pdf

We looked at the overall average loss ratio for each carrier’s small employer business. For the study period, the average loss ratio at BCBSRI was approximately 84%, although it varies by benefit plan. For United, during the study period, average loss ratio was approximately 77%.

state.mn.us/mn/externalDocs/Commerce/Current_Loss_Ratio_Report_052104013421_LossRatio...
The total loss ratio for 2007 for health plan companies is 87%, the same as the 87% total loss ratio from last year.

In NY and numerous other states a 69% loss ratio would be illegal.

(i) For small group and small group remittance contracts, a loss ratio
of 75 percent;

Next up we have selective adjustment of contributing factors;

“Under this scenario, premiums would be only about 9 percent less than in private plans,
reflecting that the program would still have lower levels of administrative costs than private insurance.”
So they factor in the administrative “efficiency” of processing claims like recording data points but leave out the well documented and known fact it leads to 10% fraud rates. We could save a fortune on doors if we didn’t bother with locks. No more keys just think how much we could save.

Lewin Group our progressive propagandist, their studies are a joke and no one with any knowledge of the business takes them serious. If they can’t call their sister company and get accurate loss ratios and administrative cost what use are they?