the federal government should or should not offer a public health plan
alternative to compete with private insurers in the under-age-65 market
is a hot topic in Washington and in the market.
I recently posted on it in detail: The Public Plan Option for the Under-Age-65 Market—The Biggest Health Care Controversy on the HillThis
past week I met separately with two health insurance CEOs—both
well-known leaders in the business and both from highly regarded
They read the Lewin Group analysis of the proposal for a public health plan. They both concluded the Lewin analysis made sense. Lewin
projects the public plan would gain two-thirds market share in what is
now the private health insurance market because it would pay
Medicare-like provider reimbursement levels that are 20% to 30% lower
than they pay. Simply, if one player has “raw material costs” 20% to
30% lower than everyone else that’s a game changer—that player will win.
both see having to go up against such long odds and compete with a
public plan as a life and death issue for their organizations.
both believe the provider community does not understand what this would
mean—much lower reimbursement in what is now the under-age-65 market
and nowhere to shift Medicare and Medicaid costs to.
believe the only way for their health plans to survive in this scenario
is to just unilaterally whack the providers with the same payment cuts
that the government would impose—chop existing reimbursement 20% to
30%. In short, get their “raw material” costs down to the same level so
they can compete on a level playing field.
The providers won’t
like it. They will threaten to refuse to provide care under those
terms. So what? It’s life and death for these health plans. “Them or
us.” If someone is going to have to get clobbered it won’t be them.
Just what would a health plan have to lose?
And these guys are the not-for-profit fellows.
It would be billion dollar corporations desperate to survive up against doctors and hospitals and all the other providers.
the past 10 years (post the "patients'/provider rights rebellion")
there has been a truce of sorts between providers and payers. There is
a tension and neither is ever very happy—but there is equilibrium
between them because everyone understands the other has to survive and
make a decent living.
A public plan would end it.
not going to predict which side would win. But I will tell you it would
be one bloody mess way past anything we have ever seen.