Negotiated Rates vs. Medicare +5%

Scarecrow at Firedoglake explains the consequential difference between negotiated rates (in the House Health Care Reform Bill) and the Medicare +5% wanted by progressives:

CBO estimated that a Public Option available only to the uninsured, self-insured and small businesses (less than 20 employees) would have saved the federal budget $110 billion over ten years, if the PO paid health care providers at Medicare rates plus 5 percent. The savings would be only $25 billion if the PO were required to negotiate rates with providers. If Congress chooses negotiated rates, it raises budget costs by $85 billion for the limited access exchange(s).


These saving would have arisen because with lower prices for public option insurance, and pressure on private insurers to lower their premiums or lose market share, there would have been less need for federal subsidies to achieve the same level of “affordability.” So the switch from Medicare+5% rates to negotiated rates means that premiums for everyone in the exchanges, both public and private plans, will be higher, whether you get a subsidy or not, and on top of that we’ll need $85 billion more in subsidies.

More from Ezra Klein:

The House bill, it turns out, boosts Medicaid reimbursements to match Medicare levels. Taxpayers will pay more to ensure that Medicaid patients can continue being seen by doctors who have better revenue options. This is a win for Medicaid patients, in other words, but a loss for taxpayers, who are already stuck paying prices much higher than those in every other developed nation, and are about to see those prices go yet higher.

I think they are saying it's good for the very poor but not everyone else.

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    It is also good for doctors and facilities (5.00 / 1) (#1)
    by Coral on Thu Oct 29, 2009 at 12:43:48 PM EST
    that serve the poor, and for the working poor who are going to have more access to Medicaid and health care.

    Exactly its going to increase access (none / 0) (#17)
    by Socraticsilence on Fri Oct 30, 2009 at 02:22:08 PM EST
    to providers.

    It seems designed to fail (5.00 / 1) (#6)
    by cenobite on Thu Oct 29, 2009 at 01:23:54 PM EST
    I don't see how a insurance plan balkanized by state and restricted only to customers who don't have any other possible insurance options can possibly be big enough to negotiate with health providers for competitive rates against the big established insurers.

    Medicare + 5% at least made it possibly viable because the public plan wouldn't have to swim with the sharks by leveraging off medicare's monopsony power.

    And the Kucinich amendment also appears to be gone, so the states will be prevented from implementing their own single payer plans.

    Good day to be an insurance exec.

    Saw this comment (none / 0) (#2)
    by Steve M on Thu Oct 29, 2009 at 12:59:05 PM EST
    re: Medicare+5 at MyDD...

    I have to say that the Medicare +5 WOULD bankrupt rural entities.  I was a EMT in rural South Dakota and also sat on the board when it was a non-protfit.  I looked over the books with the accountant at every meeting.  Medicare, at its set rate, did not cover the cost of a mabulance run, with volunteers, for the majority of our runs that were 2-4 hr runs (Mitchell/Yankton or Sioux Falls).  We were reimbursed for our bare-bones, no frills runs at about 80% of COST.  We lost money on those runs.  We asked how we could get the rates increased and we would have to get all the ambulance services in South Dakota to increase their rates so the OVERALL rate would rise.  

    It got to the point that the ambulance became a tax-based entity to survive.  So the lost revinue ended up coming from the poor locals (I lived near the Indian Reservation near Marty, SD - Unemployment was about 50%, a fair amount of drug/alchohol abuse, and about 65% of the residents at that time lived under the poverty line).  One good point is that we had a LOT of need for the ambulance service, with 1 1/2 runs per 2 days, so we always had new EMT's who wanted to work fo rus for 6-12 months, get a lot of runs in, and then move to a much more lucrative large city service.  Kinda like how our teachers rotated in and out...

    Medicare +5 would not cut it.  I like negotitated better as it will serve the rural areas better.  Unless you change Medicare to a different model...

    I would think that pegging (none / 0) (#3)
    by MO Blue on Thu Oct 29, 2009 at 01:10:18 PM EST
    the public option to Medicare + 5 would put more pressure on Congress to fix whatever disparities exist in the Medicare payment formula.

    We could have used the difference between savings ($60 B) on Medicare +5 and negotiated rates to help fix the problem.


    this (none / 0) (#4)
    by Ga6thDem on Thu Oct 29, 2009 at 01:22:46 PM EST
    may be true to a certain extent but my best friend was an accountant for a rural hospital and she said without medicare and medicaid there would be no hospital. Most of the businesses don't offer private insurance or it's cost prohibitive. Most of the rural hosptials 1/2 or more of their gross revenues come from the government.

    Rural DOCTORS (5.00 / 1) (#7)
    by TeresaInSnow2 on Thu Oct 29, 2009 at 01:50:48 PM EST
    Rural doctors also need to take medicare patients to fill up their patient load.  Their choices to make up the cost are:

    1.  Squeeze in more patients per hour to make up for the low Medicare reimbursement.  This cuts care per patient.

    2.  Move to a Metro city where they have the choice of opting out of taking Medicare patients.

    Personally I live in a Metro area where more and more doctors are opting out of Medicare.  I would never sign up for a Medicare+5 plan.  It's already hard enough to find a doctor here who accepts Medicare.  Add essentially 25% more to the Medicare roles with a Medicare+5 plan and I really think it would devastate access to Medicare/Medicare+5 care here.  

    Yes, MAYBE such a devastated scenario would put pressure on Congress to change reimbursement rates.  However, in the interim, how many people die due to our "fix".  Oh and how long would it take to increase reimbursement while holding firm to the goal of "eliminating fraud and waste?"


    A large number of Democratic (none / 0) (#8)
    by MO Blue on Thu Oct 29, 2009 at 02:27:34 PM EST
    House members preferred Medicare + 5% to negotiated rates. The trade off could have been adopting Medicare +5% and simultaneously fixing the Medicare rate structure. It would have been a win/win. The exchange does not go into effect until 2013. Plenty of time to address and fix the problem.

    Approximately 45 million people are on Medicare. Going to negotiated rates on the small number of people who would access a public option will not fix the existing problem of Medicare rates where it exists.


    Same metro area (none / 0) (#10)
    by Inspector Gadget on Thu Oct 29, 2009 at 04:38:53 PM EST
    I never have had a doctor's office tell me they don't take medicare patients. I was my mother's medical advocate during a time when she was being sent to every type of specialist and every lab and imaging center imaginable. Same thing with my dad's medical appointments. Never have come across a medical office that refuses medicare patients, and have always anticipated running into that problem because of the belief that seems to be out there. I'm sure they exist, just not in the majority.

    Rural Aid Cars (none / 0) (#11)
    by Inspector Gadget on Thu Oct 29, 2009 at 04:47:21 PM EST
    must not be community owned and operated where he is. Ambulances don't use volunteers, so I'm assuming they are a Medic One type of group connected to the fire dept. Our Medic One vehicles are tax payer owned and operated. The only time anyone pays for a ride in one is if they are transported to the hospital, but not admitted for care.

    We got a bill for my mother's 4 mile transport on Medic One...nearly $500. But, since she was admitted we didn't have to pay.


    Negotiated rates was a must have if.... (none / 0) (#5)
    by vicndabx on Thu Oct 29, 2009 at 01:23:34 PM EST
    there was any desire for this bombshell to go over well w/providers:

    Providers are presumed to be participants in the public option unless they opt-out of participating.

    Huh? (none / 0) (#9)
    by NYShooter on Thu Oct 29, 2009 at 03:05:31 PM EST
    How can the CBO claim "The savings would be only $25 billion if the PO were required to negotiate rates with providers?" If they know what the rates will be, by definition, they won't be negotiated.

    The key word is "negotiated," which to me means it will depend on how good our Negotiators are and how innovative & efficient some of the not giant insurers will be.

    This may not be as bad as some have already decided. The cost structure may be shunned by the big slobs, used to raping us victims at will, but it may also open the door to young, aggressive, innovative insurers who may just sacrifice obscene profits for a chance to get a "foot in the door."

    Agree w/your first paragraph. Does CBO (none / 0) (#13)
    by oculus on Thu Oct 29, 2009 at 05:37:05 PM EST
    have a crystal ball?

    You can (none / 0) (#14)
    by Watermark on Thu Oct 29, 2009 at 05:44:16 PM EST
    predict what the costs are going to be roughly negotiated at from the market.  Stop being willfully ignorant.

    LOL (none / 0) (#16)
    by NYShooter on Fri Oct 30, 2009 at 10:58:50 AM EST
    You must be the new TL hall monitor.

    But, there is always hope; remedial potty training is now available through the GED program.


    I predicted early on (none / 0) (#12)
    by Lora on Thu Oct 29, 2009 at 05:30:05 PM EST
    my rates will go up following any "reform."  So far it seems to be falling that way.

    "savings" (none / 0) (#15)
    by diogenes on Thu Oct 29, 2009 at 07:41:16 PM EST
    Most hospitals and nursing homes are losing money or barely holding on.  Doctor's salaries are a small part of health costs (after all, much of a doctor's fee pays for office staff, office rent, insurance, equipment, etc).
    So where are these rate savings going to come from? If the hospital business were so good, then surely Warren Buffett would have been buying hospitals to rake in the profits.