Thursday, July 23, 2009

A Federal Health Board Would Raise, Not Lower, Health Care Costs

“If You Like The Plan You Have…You Will Probably Lose It Anyhow”

 

The Administration has advanced various proposals to create a new, Presidentially-appointed board empowered to make recommendations on Medicare reimbursement levels as one way to lower the growth of health care costs. However, an analysis of the bills’ provisions demonstrates that each could have significant unintended consequences that could undermine individuals’ current coverage:

  • The proposals being discussed would empower government boards to make recommendations on reductions in Medicare payment levels—the White House bill through its new Council, and a separate bill proposed by Sen. Jay Rockefeller (S. 1110; H.R. 2718) through a revamped Medicare Payment Advisory Commission (MedPAC).
  • The Congressional Budget Office has testified that Medicare already pays doctors 20 percent less than private health plans; hospital reimbursement rates are “as much as 30 percent lower.”
  • Independent actuaries at the consulting firm Milliman, analyzing current reimbursement rates, found that below-cost payments by government-run plans like Medicare and Medicaid result in private coverage—primarily employer-sponsored plans—paying nearly $90 billion more a year to offset below-cost reimbursements from Medicare and Medicaid.
  • Milliman also found that this cost-shift increases health costs for families with private coverage by nearly $1,800 per year.
  • Non-partisan actuaries at the Lewin Group, in analyzing the House Democrat health bill (H.R. 3200), found that this cost-shifting phenomenon would result in as many as 114 million Americans losing access to their current coverage, as employers would drop coverage in order to enroll workers in a government-run health plan.
  • Empowering a board of federal bureaucrats with the power to reduce Medicare payment levels still further beyond their current below-cost levels would likely exacerbate cost-shifting from public to private payers—leading many employers to drop their current coverage and raising insurance premiums for those employees lucky enough to retain their existing plan.

As many as 92 percent of Americans with health coverage are satisfied with the plan they currently hold. However, permitting a government board to reduce Medicare payment rates could result in yet more individuals losing access to their current private plans, placing millions of Americans in a government-run health plan. Members may view this cost-shifting dynamic as yet another reason to be concerned by proposals to give unelected and unaccountable bureaucrats power to micro-manage the doctor-patient relationship and deny life-saving treatments to millions of American seniors.