Devil Dwells in the Details of Health Care Reform Compromise

A critical health care reform compromise seems to have emerged from negotiations between five liberal and five moderate Democratic Senators (the so-called “Gang of 10”). They are putting forward a compromise that eliminates (or at least postpones) the creation of a government-run health plan while allowing Americans 55 through 64 years of age to purchase Medicare and tasking the Office of Personnel management to administer a program offering coverage through non-profit, private health plans. Of course, as with anything as complicated as health care reform, a solution or compromise on one issue creates new ones elsewhere – think of trying to flatten a partially inflated balloon. Push down on one part and the air pops up in another.

As I noted the other day, expanding Medicare is an idea that appeals to both liberals and conservative Democrats. For example, former Governor Howard Dean, a leading and vocal advocate for a government-run health plan called the compromise “a positive step forward” on the CBS’ “The Early Show.” Meanwhile, Senator Joe Lieberman, who had threatened to support a filibuster of any health care reform plan containing a public option signaled the compromise might be acceptable. According to MSNBC Senator Lieberman said he was “’open- minded’ about the deal” and indicated he was encouraged by what he’s heard so far about the compromise. In other words, he’s pretty much on board.

Senator Reid will be submitting the Gang of 10’s compromise to the Congressional Budget Office where its financial impact will be determined. In the interim, it’s worthwhile asking some questions about the impact of elements of the health care reform compromise as it is in the details that the devil likes to linger.

For example, how will allowing 55 through 64 years old enroll in Medicare impact private health insurance premiums?  It is widely accepted that Medicare often pays doctors, hospitals and other providers less than the actual cost of the care they provide. For example, “payment levels for hospital services under Medicare are equal to only about 71 percent of what is paid by private health plans for the same service,” according to a study by the Lewin Group. Medical care providers make up for the Medicare reimbursement shortfall by charging more to their insured patients. This cost shifting is reflected in higher health insurance premiums.

To the extent the 55-through-64 year olds signing up for Medicare previously were insured by private carriers the amount of dollars being shifted to private insurance will increase and the number of privately insured consumers absorbing this cost will decrease. The result, upward pressure on health insurance premiums.

However, to the extent that these new enrollees were previously uninsured it will reduce the cost of private coverage. Right now virtually all the costs incurred by the uninsured are shifted to private carriers. If Medicare pays for 71 percent of these expenses that’s 71 percent less in losses providers need to shift to their insured patients. How these two consequences balance out is as yet unknown – and may not be knowable until after the fact. But lawmakers should be aware of these consequences.

There’s another detail of the compromise potentially offering affordable housing to the devil.  Alison, a regular reader of this blog, pointed out a provision that would require private carriers to spend at least 90 percent of premiums on medical care. Forcing carriers to spend a high percentage of premiums on medical costs is one of those proposals that: 1) sounds great; and 2) emerges with the regularity of ground hogs in Pennsylvania in February. And it’s a seriously flawed proposal.

Consider: requiring carriers to maintain a specified medical loss ratio (as the percentage of premium spent on claims is called) could reduce the availability of low cost plans. It costs just as much to process claims for a plan costing $300 per month as it does for one with a monthly cost of $100. If these fixed costs amount to $15, they represent 15 percent of the lower cost plan’s premium, but only 5 percent of the premiums for the more expensive plan. Need to get your medical loss ratio (as the percentage of premium spent on claims is called) to 10 percent? Raise your premiums. It’s counter-intuitive, but do the math and you’ll see the danger.

There are several other potential dangers from requiring a high and specific medical loss ratio. Economic swings or flu outbreaks (or the lack of expected flue outbreaks) can greatly alter the percentage spent on claims. So can government-imposed mandates to cover certain conditions. Private carriers pay taxes and need lawyers to deal with government regulation. These costs are beyond their control, but they tend not to increase over time (taxes and regulations have a nasty habit of piling up), meaning these uncontrollable costs are likely to absorb funds needed for truly administrative costs – like answering the phone. Answering the phone, of course, speaks to customer service, a likely victim of mandated loss ratios.

And setting the medical loss ratio at 90 percent would certainly eliminate broker commissions. Brokers would either need to charge fees directly to clients (if that’s permitted) or go away, leaving consumers bereft of independent advocates and counselors.

The good news is that just because a provision is in the compromise doesn’t mean it will be part of the final legislation. Or that it can’t be improved upon before reaching President Obama’s desk. When California Governor Arnold Schwarzenegger proposed an 85 percent medical loss ratio in his 1997 health care reform plan, lawmakers recognized the potential pitfalls. The provision was amended to make clear, for example, that taxes and disease management programs would be part of the claims side of the ledger. Eventually a workable compromise was was reached. (The bill did not pass the Legislature, however).

Of course, fixing California’s version of a mandated medical loss ratio didn’t happen of its own accord. Many interested parties, including the California Association of Health Underwriters, expended considerable effort to educate lawmakers about the implications of this provision. An effort of similar magnitude will be required to make sure that the devil is unable to take up residence in the details of the health care reform compromise shaping up in Washington.

41 thoughts on “Devil Dwells in the Details of Health Care Reform Compromise

  1. Over the last 40 years, the national cost of health care has changed from between 6 & 10% of the gross domestic product to between 16 and 19%. Most recently, most of the other developed countries of the world were still 10% or less. Conflicts of interests, fraud, profiteering, and medical liability all contribute to the excess costs. Assuming that we translate our mantra of entitlement to the cost of health care at 12% rather than 10% of the GNP, the difference between 12% and 17% represents approximately 600 billion dollars a year. For sure, the main problem with our health care system is its very poor level of efficiency. On top of that, its not very effective as well. According to the World Health Organization, our country ranks 36th WORST among the 43 developed countries of the world for MATERNAL MORTALITY.

    And so! We are developing a new social entitlement program during a recession with no clear strategy to improve the financial efficiency of our health care system. Go figure! Fundamentally, there has been a paradigm shift in the character of health care in this country. Literally, the complexity of health care has developed so rapidly in the last 40 years. During this time, we have not developed the capacity to manage it for the need of every citizen. When a pregnancy goes bad, it often occurs rapidly. Our nation’s maternal mortality rate is a reflection of inequities that exist in accessibility to health care. A strategy necessary to promote equitable accessibility at all levels of health care will be necessary to improve the efficiency of health care. What then is necessary to do accomplish this?

    In 1914, Congress created the Extension Service for each county. The Extension service connected the land-grant universities with local farmers regarding to improve agricultural productivity and quality. Our country has the most efficient farming industry in the world. “A new federal entitlement program for health care in the midst of a recession” will certainly improve financial accessibility to health care. Will the resulting health care actually improve their health? Maybe not.

    Paul Nelson, M.D.

  2. When talking about the cost of hospital writeoffs, keep in mind that is based on the hospital’s billed charge for that patient. As pointed out in this article (http://health.usnews.com/articles/health/bernadine-healy/2009/09/15/to-cut-healthcare-costs-lets-start-with-the-secret-prices_print.htm)
    the cost of a procedure can vary wildly from hospital to hospital as well as by the patient’s level of insurance. I’m not suggesting the government mandate flat fees by service, but there needs to be some mechanism that makes it possible to be a responsible medical ‘consumer’ – like extending this proposed price exchange to show the average cost per medicare DRG for other healthcare plans or even no insurance by healthcare facility – but it needs to be easily accessible and understandable.
    On the issue of extending Medicare, most estimates show Medicare fraud being approximately 10% of Medicare spending…shouldn’t we work on that before extending Medicare rolls?

    • Dear Rants…

      I think it’s great that Medicare has a 10% fraud factor. That means if Medicare fraud is eliminated, then Medicare will pay only 64% of the cost paid by the private insurance carriers.

      Since Medicare pays only 71%, why wait to start reducing medical costs? The sooner we expand Medicare, the lower medical costs will be. Then eliminating Medicare fraud will be an extra bonus.

      • Rick, I suspect you are pulling our legs a little, but here’s another item for the discussion. Medicare Advantage plans probably don’t have a 10% fraud factor; at least the predecessor plans (M+C) I was responsible for didn’t. But our administrative expenses were higher than those claimed by Medicare. If we net the fraud from the Feds plan and private expenses, private plans come in around 5% for admin and profit.

        • From an economic view, fraud creates inefficiency just like late paying customers, over staffing, over capacity, poor information systems and the like. All of these add cost into the system.

          It seems to me that our health care system has many inefficiencies. To single out only fraud is disingenuous.

        • Your logic…. Medicare gets paid 29% less, thus they must be 29% more efficient.
          Way off base and quite simplistic.

        • I agree that fraud is only one of the many inefficiencies in our healthcare system. I listed it primarily because we have to start somewhere. I don’t agree with these giant bills being passed in an attempt to fix everything at once when in reality it may take years to fully understand which changes made by the legislation helped and hurt the system in the long run. By making incremental changes in the system we can more effectively identify if the outcome is positive or negative. I also mentioned fraud specifically because whether you’re for or against the public option and for or against expanding medicare and whether you’re a Democrat or Republican, I think most people agree that fraud is BAD.
          If the conversation starts on common ground, maybe discussion will run a little longer before deteriorating into angry rants.

  3. Alan:

    This statement requires more explaining: “Medicare often pays doctors, hospitals and other providers less than the actual cost of the care they provide.”

    There is a big difference between “often pays less” and “always pays less”. If it is true that Medicare often pays less, that doesn’t necessarily mean that heath care providers subsidize Medicare at large. It could simply mean they provide “loss leaders” common in free market activity.

    It makes no free market sense for health care providers to negotiate contracts where there is a net loss of money. These providers are getting some economic benefit for delivering these services. Otherwise, they would not sign the contracts.

    • Depending on the discipline under consideration, physicians often take care of Medicare patients at least in part out of a moral commitment to take care of the seniors within their local communities, or to be promote a favorable reputation within that community, with Medicare service considered “part of the cost of doing business.” For those professionals who rely on Medicare for their livelihood, there has to be an adequate net financial gain to justify the financial and personal costs of being in business. The past decade has demonstrated fewer and fewer medical school graduates pursuing careers in General Surgery in particular, and the United States is already experiencing a significant shortage of general surgeons, and this could soon present a public health emergency. With no ability to negotiate fees with Medicare, some surgeons have already closed their practices in favor of working as locum tenens employees of hospitals in particularly under-served areas–a move that has frequently increased their net incomes while lessening their workloads and improving their overall qualities of life.

      • Most doctors are wonderful people and it’s very credible that they discount services to deserving seniors in their community. However, good hearted doctors are a very small piece of the overall medical economy.

        In FY2009, the Medicare budget is $413 billion dollars. If they paid “rack rate” like the private insurers do, then the budget would be $590 billion. That means the annual Medicare savings is $177 billion.

        Are you saying that well intended physicians subsidize Medicate to the tune of $177 billion per year? UPS and FedEx combined don’t have revenues of a $100 billion per year.

        The truth is that Medicare lowers health care costs the same way Wal-Mart reduces the cost of retail products. It’s a more efficient way of delivering health care services — period.

        • You have forgotten hospitals and DME among other things. Impose Medicare rates on all healthcare providers for all the population in the USA and Atlas may indeed shrug.

        • Underwriterguy:

          Please tell me why the US medical economy is willing to subsidize Medicare to the tune of $177 billion per year? Are there certain regulatory pressures that motivate big hospital compaines and big pharma to pay huge subsidies? Who or what is forcing there experienced business people to deliver services at significant losses?

          Are there no Ted Turner’s or Donald Trump’s in the big health care service companies? Mssers. Turner and Trump did not build their empires by subsidizing customers.

          Futhermore, are you saying that Medicare does nothing to reduce overall costs? Are you saying there is nothing to learn from the Medicare model that would reduce health care costs for all?

        • Here’s how I understand the economics.
          Once a pharma company has developed a unique pill it has a limited number of years to recover those development costs before a generic clone reduces the market price. Manufacture of the pill costs next to nothing. Therefore accepting price controls in a market, say Canada, makes economic sense if the price covers manufacture and some contribution toward overhead (including R&D). Selling a large number of pills, even with limited profit, beats selling fewer.

          The same concept holds true for hospitals. If Medicare reimbursement covers the unloaded expense of the bed day it makes sense to fill the bed with a Medicare patient if that bed would otherwise go empty. The uninsured and private insurance patients get the “loads” shifted to them. Attend a hospital board meeting and you will hear discussion of the mix of Medicare vs. full pay patients and, perhaps more importantly, the need for a full census; that is, a patient in every bed.

          The principle lesson I take from Medicare is that it will bankrupt the American economy, and I see no reason to expand the program and accelerate the failure.

        • Underwriterguy:

          Thank you for providing a good reason why hospitals provide service to Medicare as a “loss leader”. It’s very credible that hospitals shift the cost load from Medicare to other payers.

          But does that account for the all of the 29% less cost — the $177 billion? If load shifting is the only reason why Medicare pays 29% less, then we have a serious over capacity problem with hospitals and other providers.

          When there were over capacity problems with airlines, they mothballed airplanes. If hospitals have too many beds to fill, why don’t they just close some hospitals? Is the health care delivery system really that inefficient?

          Doesn’t a single payer system reduce the inefficiencies of over capacity?

        • In my personal experience as a board member, hospitals like to expand. “Build it and they will come.” So we do probably have too many beds, but the distribution is not uniform. Some areas of the country may have too many, some too few. Also, cost accounting in hospitals is complex; does the OR make money? Well, it depends on how the overhead is allocated. How about the pharmacy? MRI?
          On the other hand, if I need admission I want there to be vacant bed pronto. These are difficult questions, but I think local action is better than the central planning that single payer systems foster. I also firmly believe that there is unlimited demand for free goods; and that means rationing.

        • Underwriterguy:

          Thank you for your post. Your experience as a hospital board member is very valuable to the discussion. You have shown me that hospitals and other providers have extrememly difficult decisions to make. It’s very credible that hospital bed distribution is very inefficient in our country.

          It’s much easier to open or close a Wal-Mart than to do the same with a hospital. By their very nature, hospitals are linked to their communities much closer than a retailer. When a K-Mart is closed, lifestyle is hardly affected.

          I agree that allocating overhead is probably very difficult for a hospital. It’s credible that coming up with the true cost of delivering services is very hard.

          However, the bottom line is that the American health care system has too many inefficiencies. The costs of health care is increasing too much. I run a 20 person software company and I’ve had some challenging decision making, too. We have continued to provide good health care plans for our staff, but I’m concerned about the future.

          In my company, I have to allocate costs over departments. I have to make decisions about how much to charge small customers and large ones. I agree it’s not easy. But all industries do this. Why should health care be immune from the market demands the rest of us face?

          And by the way, you keep raising your rates.

        • Not sure if the “you” raising rates is the hospital or the insurance company, but I was (retired) both. Anyway here’s my take on lowering healthcare costs.
          1)Make employer paid insurance premiums taxable as any other compensation.
          2)Preempt state mandated benefits with nationally approved plans or by allowing plan sales across state lines.
          3) Encourage HSA type high deductible plans with catastrophic coverage. Employ reinsurance to spread risk among the cat plans.
          These types of changes (and this is a simplified solution) would de-link insurance from employment, de-emphasize third party payment (get consumers in the game), encourage healthcare providers to compete at the retail level, but offer the kind of protection that guards against banckruptcy. Just some thoughts.

        • Perhaps unfortunately for the public, Mr. Crawford, is the reality that physicians and other health professionals are not consumer goods that can be made in China, and cannot be outsourced to other countries without the patients physically leaving the U.S. Your comparison of Medicare to Walmart leads me to ask the question, “What is the caliber of health professional Americans are going to demand?” Do we want individuals who graduated at the top of their college classes and had to choose between careers in medicine and law, technology or business, or are we going to be satisfied with lesser candidates? Then there is the question of which individuals would choose to pursue the more labor-intensive and time-consuming fields in medicine were Medicare the only payer–we would certainly be hard-pressed to find a general surgeon, neurosurgeon or anesthesiologist based on current Medicare fee schedules.

          As I have stated before, once the “to heck with it point” is reached, i.e., the point at which private practitioners no longer find the physical, emotional and financial requirements of maintaining the small business worth the financial and personal rewards, the small businesses will close and the practitioners will look to work under a different business model–employment under a larger system, presumably through hospital networks that then have the job of getting reimbursed by the government. Yes, fee-for-service can be eliminated in this way, but the public needs to be careful about what it wishes for. A large physician workforce would likely unionize in order to pursue collective bargaining, rendering the Medicare fees irrelevant.

          My preference is to maintain a high caliber of health professional, and to pursue cost savings not through the elimination of the over-utilization of health care resources.

        • Dear Nosedoc:

          I’m the health care buyer for 20 families, because I run a small company. I didn’t ask for this responsibility, but this is the way that the American health care system works. Business people like me make the buying decisions — we are the ultimate consumers of the health care system.

          Based on the attitude conveyed in your comments, I’m seriously considering firing my agent and moving all of these families to Kaiser. Then with all the money I’m saving, I will give it the Democrats so they can work against your anachronistic worldview.

          Please remember that this member of the “public” doesn’t ASK for services, I PAY for services.

        • First a correction. My last line obviously should have read “…to pursue cost savings through the elimination of the over-utilization of health care resources.”

          I don’t believe I really said anything to reflect an “attitude” in my above comment, Rick. I agree with everyone else that Americans are getting less than what they are paying for with their cumulative health care dollars. Your above comments give me the perception that you somehow believe that America can legislate itself into receiving more health care than it is willing to pay for. Of course, you can never get more than you pay for, particularly in a service industry, under any circumstances. The best you can do is to get exactly what you are willing to pay for. Therefore, to enact wishful thinking into law without realistically projecting the consequences of the legislation carries with it the danger of grave unintended but entirely predictable consequences.

          So let’s look at what health care professionals, physicians in particular, are facing these days. First of all most physicians enter their years of practice at age 29 (3 year internship/residency) or older with a six figure debt from medical school alone. Responsibilities include patient care, maintaining up to date professional credentials, and providing the office staff wages and benefits that are competitive with the non-health care sector, all while remaining in compliance with a myriad of state and federal mandates that include providing, free-of charge, translators for non-English-speaking patients and the hearing impaired when Uncle Sam is the payer, the cost of which often exceeding the reimbursement for the entire patient encounter. And of course, while this is all going on, the providers need to practice in a manner that would minimize the risk of any patients ever starting the litigation process (i.e., better safe than sorry when my neck is on the line), and with perhaps a 0.5% annual increase in Medicare fees once Congress again votes to put off the SGR-mandated reimbursement cuts. Clearly, a point has to exist where it no longer makes sense for our country’s private practitioners to remain in charge of their small businesses–i.e, once the costs outweigh the revenues, or there is simply not enough revenue left at the end of the day and you can do better through an alternate business model, there will be a shift to the other business model. I am very leery (confident in fact) that a Medicare-based single payer system would be the impetus for such a tectonic shift in the practice of medicine in the United States.

          Additionally, my views on how to achieve savings in health care are pretty much in line with those of Victor Fuchs, perhaps the preeminent health care economist in the U.S. (from Stanford U.). His essay from the December 9 Journal of the American Medical Association concludes that physicians will be the ones who need to be the agents through which cost savings are to be achieved. Of course, this requires both tort reform (to eliminate defensive medicine practices) and health professionals who have an adequate mental grasp of what they are doing, so that only the necessary tests and other forms of health care services are utilized. This is why I am adamant in my position that health professionals cannot be compared to Walmart employees.

        • Correction #2: “…health professionals cannot be compared to Walmart merchandise suppliers.”–rather than “employees.” at the conclusion of my above comment.

      • Rick,
        Underwriterguy brought up DME – Durable Medical Equipment. Just do an internet search for Florida Medicare Fraud (Florida is in there because of the large number of retirees who flock there, but other locations have a major problem with medicare fraud as well). Knowing the money is being spent on someone who needs the equipment or service is one thing, but knowing that we the tax payers are subsidizing thieves and organized crime? Some fraud is unavoidable, but some is the result of poorly designed safeguards.

    • Sorry for the imprecision Rick. Medicare pays based on an extremely long schedule of services. I don’t know if the reimbursement rates are below actual costs for all of those services, so I hedged. As the source I cited in the post points out, on average Medicare pays about 71% of what commercial plans pay. Given that hospital profits tend to run in the low single digits, this would indicate that, on average, Medicare pays considerably below the true costs of services. Hope this clarifies things.

      • Alan, I believe that you have made a bad assumption. In order for your argument to be sound, a hospital must have the same cost to deliver services to privately insured patients as well as medicare patients.

        The well established axiom of “economies of scale” dictate that delivering services in larger quantities lowers the cost of delivering those services.

        For example, steamlined billing procedures can significantly reduce administrative and financing costs.

        There are many components to the cost of delivering hospital services to patients. Obviously, the hospital administrators understand their costs very well and they know how to negotitate with Medicare to deliver those services at lower cost. Business people do not sign big dollar contracts knowing there there is negative economic benefit.

        I suggest that you focus on why Medicare is 29% more efficient than private insurance. Instead of coming up with fantastic reasons why the health care economy is subsidizing Medicare, focus on the postive ways that Medicare reduces health care costs. Obviously, Medicare is doing something right.

        • Hospitals don’t negotiate with Medicare. They either accept the fee structure or they don’t participate. Same with other providers. What you can tolerate for part of your daily census will not be tolerable if there is no one left to shift costs to.

        • Medicare is not “29% more efficient” than private insurers, because the private insurers are much more diligent about making sure clinical indications exist before expensive diagnostic tests or operative interventions are performed. Yes, this work requires higher administrative costs, but I suspect this surveillance saves much more money than it costs. With Medicare, the provider just needs to make sure that the diagnostic codes match up with the proposed procedure codes and the service gets reimbursed. So naturally, Medicare’s percentage of revenues going toward administrative expense is very low, and as a result its percentage going toward unnecessary consumption of services and fraud is certainly much higher.

        • A case in point:

          http://www.nytimes.com/2009/12/16/us/16fraud.html?ref=health

          Note that only 26 people were able to bilk Medicare of $61 million before the scam was finally discovered. I think a few more bucks spent on oversight over utilization would have gone a long way in preventing this mess. I can’t help but assume that for every on of these scams that are discovered, there are numerous others that go undetected.

      • Exactly, with Medicare you like or lump it. And, more doctors are starting to leave it – the trend of concierge doctors is growing where you pay a flat fee every year (say $1500) just to have access to the doctor, but you are less likely to have to sit in a crowded waiting room.

        http://www.physiciansnews.com/business/204.kalogredis.html

        Are all of the high quality doctors going to move to concierge service? Ok, probably not but some will, and what if your Primary Care Physician of 15 or 20 years is one of them? Another issue with Medicare is flat fees – all physicians are not created equal. I love my PCP now, but one of my prior PCPs left me feeling ripped off just paying the $15 copay. I don’t think the answer is flat fees, but rather providing tools to help consumers weigh the cost of the healthcare with the quality they receive. We need to be able to easily compare the cost of service between medical facilities and insurance companies.

  4. Alan, insurance is presently State regulated, therefore does that 90% loss ratio provision apply only to plans sold through the Exhange?

    • Rick: We haven’t seen details yet. While the CBO does its analysis lawmakers are keeping those details pretty much under wraps. My guess, however, is that it would apply to all plans. Meaning the states would be required to enforce a 90% MLR. That assumes, of course, that an administrative cost cap of 10% becomes law, which I very much doubt. My personal opinion is that the Senate putting forth a 90% MLR requirement is a negotiating ploy. If there is a cap, it’s likely to be closer to a more reasonable 80%-to-85%.

  5. The possibility of anything that increases the cost of premiums has to be looked at carefully. This is the problem that we have now. People and employers not being able to meet these costs as they stand now. People in Washington need to bite the bullet and stop taking the easy way out. Addressing the cost of medical care in this country should be the primary focus.

    • Unfortunatly, Congress does not have the political will to truly tackle this MOST IMPORTANT issue and to really bend the cost curve. Tort Reform-No. Comparative Effectiveness (see mammogram uproar)-No. Medicare Commission-No. Pilot Project, such as coordination of care-No. etc…

      Anyone out there…thoughts on the 90% amendment??

  6. I can’t understand why anyone would think that our current congress could possibly legislate healthcare reform and it work efficiantly.

    Lets look at the history of the “new” Part D subsidized drug plans available to Medicare beneficiaries. These plans have been available since 2005. The cost of medications and Part D drug plan premiums have inflated at an incredible rate since these plans began. I have no confidence that this current congress and administration could possibly construct legislation that would “reform” healthcare for the better. Plus, this country can not afford anymore entitlement programs.

  7. . . Right now virtually all the costs incurred by the uninsured are shifted to private carriers.

    In looking at the OSHPOD data http://www.oshpd.cahwnet.gov/ it appears thatthe majority of hospitals run at single digit unreimbursed (charity) care vs. approximately 50% of their care being under reimbursed by government providers like Medicare and Medicaid. This uptick in under reimbursed membership could cause a significant surge in trend for private plans.

    Thoughts?

  8. Alan, any thoughts on the non-profit requirement? To the best of my knowledge the plans in FEHBP are not all non-profit. I can see the nationals scrambling to set up not-for-profit subs to participate. Could be a way to spread some fixed costs and enhance profitability of the rest of the book.

    • For-profit plans are involved in the FEHBP and similar state programs (like Cal-PERS here in California). I don’t know why they’d limit this new program to non-profits, but at least two of the news reports I’ve read about it specifically state the carriers involved will be non-profits. We won’t see the details until the CBO finishes it’s analysis of the compromise, which should be next week. We’ll know then where they’re headed with this.

  9. Alan….do you know if the 55-64 group will be eligible to purchase PartD, MA, or Med Supp plans based on the compromise?

    • Alan- As usual, an exceptional take on the most recent developements.
      A few questions for anyone that wishes to get thr crystal balls out.
      Concerning ages 55-64 buy-ins- wouldn’t that REDUCE health care costs to the under Medicare age group? That new “under” population now has a much healthier (younger) population, and could result (in a pooled) lower costs for this “under” crowd.
      Any thoughts about the impact on Medicare Advantages plans? It seems like an easy target to squeeze $ out of. If there will still be Med Adv plans, would this new age group be eligible for it? This could be a substantial new market for brokers selling Med Adv.
      Concerning the 90% medical loss ratio- I’m hoping this won’t remain in the final bill. This provision would kill the private insurance companies and brokers. Thoughts?

    • Rob and Allen: Thanks for your comments and questions. I haven’t seen the details of how the Medicare buy-in proposal would actually work. Those details may be out there, but I haven’t seen them. My expectation would be that the 55-to-64 year old cohort would be able to buy into any flavor of Medicare — I don’t see why they’d be excluded. That would seem to defeat the purpose. It will be interesting to see what price they have to pay and whether premiums will vary by state or within a state. Once the CBO weighs in we’ll have a lot more details to examine.

  10. I hope all NAHU members have responded to NAHU’s latest Operation Shout, which communicates our concerns with the proposed medical loss ratio of 90% to U.S. Senators. NAHU welcomes anyone wishing to participate in Operation Shout that shares our desire to keep health care private and consumer-driven. For more information, log onto http://www.nahu.org, and click on “Operation Shout” on the top toolbar.

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