Very likely you have heard that only a “tiny group” of Americans will be eligible for the public plan. But if you read the House bill approved by three House committees (HR 3200) carefully, (this is the proposal that provides the most detail on the public option) it appears that 20 percent to 25 percent of all Americans would be eligible to sign up for the public plan in 2013. In the years that follow, the Exchange will be open to all Americans.
The notion that only “10 percent of the population” will be eligible to enter the Insurance Exchange and choose between private sector insurance and Medicare for Everyone is fast becoming an urban myth. Some commentators are using the number to minimize the importance of the public plan.
In fact, the uninsured, the self-employed, the owners and employees of small companies, and those who are temporarily uninsured will be able to sign up for the public plan, if they choose, in the very first year of reform. The Census Bureau reports that over 15 percent of Americans are uninsured, while 10 percent (including the self-employed and early retirees) pay directly for private health insurance. Together, they comprise 25 percent of the population.
Those who buy their own insurance are now paying very high individual rates; in the Exchange, they will become part of a group, and eligible for much lower premiums. While some of the uninsured might not be eligible to shop the Exchange (illegal immigrants, for example) we’re still looking at 20% of the population—or more. Add the owners and employees of small businesses, and the number grows. (In 2013, the Exchange will be open only to very small firms; the next year, companies with up to 30 employees will be eligible)
Finally, it is important to note that anyone who becomes uninsured during the course of the year can join the Exchange. And even if their circumstances change (for instance they find a job that offers insurance), they can stick with the plan they chose in the Exchange. So it’s not just “the uninsured,” but those who are “uninsured for some part of the year” who will be eligible for the public plan. In the current economy, the public plan will offer safe haven for many families that find themselves in between jobs.
Make no mistake; we are not talking about a “government take-over” of health care. At most, I’d estimate that 25% of the population will be able to choose the public plan in 2013. And many may well choose more familiar private sector plans.
These are the people who will be able to shop in the Exchange during the first year of reform. At a later point—probably four or five years later, the House bill makes it clear that its aim is to make the Insurance Exchange open to everyone. Many Americans will stick with their employer-based insurance, and even if they go into the Exchange, I predict that many will choose very popular private sector plans like Kaiser Permanente in California or Colorado.
Why not let everyone join the Exchange in 2013? There is no way of predicting how many Americans would choose to drop the insurance they now receive from a large employer. The logistics of moving them into the Exchange in a single year—without totally disrupting employer-based insurance for those who choose to stick with it—are mind-boggling.
I just read a related article about the default in the Reid Bill. There is evidently a big difference between a default State position of no public plan and a default position of the State being in the public plan unless they actively opt out. Here is the link to the article:
http://news.yahoo.com/s/time/20091028/us_time/08599193278900
Thanks for crunching the numbers. I wonder if the suggestion that very few people would be eligible is part of a scheme to try to make it seem less scary and less like a “government takeover” that people seem to be scared it will be.
this is still a game in progress. first, we’re reasonably certain the House bill won’t prevail. Conference committees generally yield compromises. Second, the more relevant number, used by those who score, is the takeup rate. No one believes any iteration under discussion will give the public plan a double digit marketshare anytime soon. In medical economics, as in some other endeavors, bigness matters.
Does anyone have any figures on what the insurance is estimated to cost for a family?
I saw on another blog today that the family premium was over $15,000 per year, not including a large deductible and co-pays.
Subsidies were to go as high as 400% of poverty, which is probably too low.
Don Levit
I am a contract administrator for a large health plan.
To have the public plan not be tied to Medicare rates, even a Medicare plus X% arrangement, creates a tremendous contracting project.
Once the rates are negotiated setting up the claims paying infrastructure to administer the various rates negotiated will be a time consuming and expensive process.
The ability of the public option entity to negotiate good rates with providers will depend on how many individuals actually sign on, which from your numbers looks considerable, but that remains to be seen.
Jim,Carl, NG, Sharon, Don
Jim —
“No one believes”?
“We’re reasonably certain”?
If I recall, you were reasonably certain that there wouldn’t be a public option.
No one knows how many people will pick up the public option, but, given how unpopular private insurers are (no one trusts them) and how popular Medicare is, there is a good basis for hoping that many Americans will take up the option.
And my numbers are conservative. I’m suggesting that only about 2/3 of the 16% of the population that is uninsured will be eligible (I don’t know how many legal immigrants are included in that 15% and whether they will be eligible).
Probably that number will be higher.
And I’m not trying to estimate how many Americans work for small businesses with fewer than 30 employees (haven’t been able to find a number) but I know it must be huge.
All in all, it’s likely that over 25% of the public will be eligible for the public plan by the second year.
Carl–
This had occurred to me. What a mess. How are they going to negotiate fees service by service?
I think that ultimately they’ll compromise on a
Medicare plus x% formula.
They almost have to.
You may not see that in this legislation. That’s okay. We have 3 years to think these things through and work them out.
But this seems an obvious place where, once you start thinking about it, you realize they have to have a formula.
I would add that over the next 3 years, Medicare will be lowering fees for many procedures (while raising fees for others.) But net, net, it will be spending less because it will be lowering fees for some of the most expensive (and least beneficial) procedures.
This means that Medicare plus X% won’t necessarily be so expensive.
Finally, as we approach 2013, it will become increasingly apparent that we must keep a lid on fees– Americans just can’t afford such expensive healthcare.
NG– excellent article. Thanks for passing it along.
I think very very few– if any –states will utlimately opt out, assuming the public option is an attractive plan– less expensive, and comprehensive.
How does a state explain to its citizens: we’re not going to make this plan avaialble to you?
Also, in terms of opting out. If I recall, at least one of bills says that it will be assumed that providers that take Medicare will also take a public plan– unless they opt out.
(They’re free to refuse the public plan and still keep Medicare patients–but they have to do the opting . . .)
Sharon–
Certainly some people aren’t questioning the 10% because they don’t want to stoke fears of a public takeover.
But it seems to me it’s important to empahsize that the public plan will be big enough to have clout.
If it’s open to 25% of the population and, say 15% take it, that’s a big plan, but hardly a takeover.
Don– Today, a family plan averages $13,500– with a fairly low deductible and co-pays.
If private insurers reimbursemnts to docs, hospitals and patients continue to rise by 8% a year, as they have for the last 10 years, by 2013, that number would be roughly 25% higher.
Clearly this is too expensive for many people who won’t qualify for subsidies (say a couple earning $80,000, joint.)
But I don’t think the answer is to raise the level at which you get subsidies.
The goal of health care reform is to REDUCE wasteful spending on care.
So, rather than lifting hte threshhold for subsidies, we need to reduce fees in some areas.
As I have written, Medicare is already beginning to do that–annoucing that it is slashing fees for CT scans, MRIs and any diagnostic tests done in the docotr’s office with his own equipment (we know this leads to over-testing, doubling the volume of tests.)
Medicare has also announced that it won’t be paying for an excessive number of preventable hospital readmissions.
Over the next three years, we’ll see Medicare trimming in many areas.
We know that a public plan wil cost $2,000 less than the average private sector family plan because it doesn’t have the administrative costs of marketing, advertising, lobbying, huge excec salaries or providing profits for shareholders.
In addition, the public plan can save money by following Medicare’s cuts. (Of course private sector plans can also follow Medicare’s cuts –and many will. This will be all to the good.)
Could those savings reduce premiums by another $2,000?
Over the next 3 years, will we see overall reimbursements for health care flatten (with reimbrusements for primary care rising while reimbursements for some specialists services and some inefficent hospitals fall)?
Will Medicare finally begin to negotiate for discounts on drugs?
(If this doesn’t survive in the current legislaton, I can well imagine it passing as a separate piece of legislation sometime in the next three years. )
first… the ‘public option’ is not ‘medicare-for-everyone’.
medicare is a taxpayer-funded program where tax money goes directly to health care providers and [though privatization has been sneaking in and growing over the years] and everybody has, for the most part, the same basic policy. medicare beneficiaries can also pay premiums to buy supplemental insurance, but that’s not the primary funding source.
the ‘public option’ on the other hand, will be sold through a specialized marketplace and will require people to pay full premiums [with some help from taxpayer-funded subsidies] and to choose among several insurance policies, both ‘public’ and private.
as for the 10%, there’s no telling what’s going to end up in the final version, but in the early versions of the legislation that were making their way through various committees, people who were uninsured but eligible for medicaid were going to be enrolled in medicaid, and not even given the alternative to buy insurance through the exchange[s]. iirc, this accounts for about 5% of the population. add to that the estimated 5% who aren’t going to be able to afford insurance, even with the offered subsidies, and that subtracts out 10% of the population from the pool that is otherwise been ‘eligible’ for the public option.
Maggie:
I agree with you that reducing fees will help with the affordability.
However, I don;t think the providers are willing to agree to this, on the whole.
Just look at how Medicare reimbursements have not been lowered according to legislation already passed!
The primary way to attack excessive fees, in my opinion, is by demonstrating the market is charging more than the typical person can bear.
Comprehensive insurance coverage masks this inequity.
In that sense, health insurance is actually hazardous to our health!
Don Levit
Wait a minute … 10% is a tiny fraction?
That’s “only” 33 million people. A simple job to sweep them under the rug, I don’t think.
Boneheaded commentators.
Noni
The primary way to attack excessive fees, in my opinion, is by demonstrating the market is charging more than the typical person can bear.
Comprehensive insurance coverage masks this inequity.
In that sense, health insurance is actually hazardous to our health!
Don Levit
———–
I think 47 million uninsured is already showing this, but still the market crowd fight reform. What do they want 147 million uninsured?? Does this caveat emptor market crowd think that pitting the clueless individual patient, in life and death situations no less, against powerful providers (with the power over life and death) will result in lower costs?? Do you believe this?
I think that the Canadians see the reality of healthcare power much more clearly than we do. They allow the providers to group together and bargain with a monopsony payer for the fee schedule used for all at least regionally. Some variation of that will be the only way to reduce costs coupled with some social accountability for effectiveness of what is done using pooled payments.
“Wait a minute … 10% is a tiny fraction?”
it is if you’re talking about using that fraction as ‘competition’ in a ‘market’.
http://pnhp.org/blog/2009/11/01/what-role-insurance-companie/
Hipparchia
Hipparchia–
Thanks for your comment.
Atually Meciar.
hipparchia NG,and Don ,
hipparchia–
Thanks for your comment.
Acutally, it’s fine that the public plan has to pay its own way.
The Commonwealth Fund has projected that the public plan premiums will still be $2000 less expensive than private sector family plans (because of lower adminsitrative costs) –and this assumes that the publc plan can’t just pay Medicare fees but has to negotiate fees with providers.
The Oommonwealth Fund is basically non-paristan and tends so be very straight and trustworhty on the numbers.
Also, as I explained in the post, 20% to 25% of Americans will be able to sign up for the public plan in the first year. More in the second year.
I’m told (by one of the House committess) that in 4 or 5 years, everyone will be eligible.
Meanwhile, even in the first two years the legislation gives the public plan the potential size it needs to have clout when negotiating–up to 25% of the population.
OF course not everone who is eligible will sign up for the pubic plan, but when you combine the strength of the public plan with Medicare . . .
NG–
I think that what you describe in Canada will happen here, with the public plan and with Medicare.
See what the state of Maryland is doing now.
Meanwhile, Medicare will be reducing fees for procedures that provide little benfit to the patient.
Medicare is already slashing fees by up to 38% for diagnostic testing–beginning next year.
I’ll be writing about this in my next post.
Noni– Yes, enough people will be selecting the public plan to give it real clout.
Don–
This is not about providers “agreeing” to fee cuts.
Medicare has just announced that it is cutting fees for caridiolgists by 6 percent next year.
It’s also cutting fees for onocologists by 8% to 10% over the next 4 years.
And Medicare is hiking fees for primary care docs –4% next year, just the first in a series of increases.
Private insurers have said that they will follow Medicare’ fees (as they do now shadowing the Medicare fee scedule while adding __% ) Private insurers’ fees wil cardiologists, and oncologists will also come down.
Finally, Friday the WSJ announced that Medicare is cutting fees for diganotic tests by up to 38%.
Private insures have said they will follow Medicare cuts (earlier WSJ stories.)
Also, private insurers told MedPAC thet they would follow Medicare cuts.
Private nsurers just want political cover.
Finally, on the cuts to cardiologits and oncologists that Mecicare has announced for next year: Congress has just 60 days to oppose these cuts before they automaticlally go into effect Jan. 1
I doubt Congress will do oppose them. It’s much easier to do nothing. Conservatives will try ot get something started but . .
And private insurers will follow Medicare’s lead on the cuts to most specialists.
Private insurers desperately need to trim reimbursements.
Don–
Medicare isn’t opposed to cutting costs
But during the 8 years of the Bush administration, Bush was committed to privatizing Medicare.
He refused to let Medicare implment any of MedPAC’s recommendations..
Medicare (CMS) director Mark McClellan has talked publicly about this.
Now, everyone realizes, Medicare’s hands are untied.
And reform has already begun to make changes– announcing signficant cuts
in cardiologists
and oncologists’s fees, as well as major cuts in fees for diagnostic testing
Medidcare also is going to refuse to pay for an excssive number of preventable hospital readmissions.
Look for more cuts to come.
And private insurers have said they will follow Medicare’s lead. They just want political cover.
Maggie:
Why do you think Congress will do nothing in that 60-day period?
Each year for the last several years, the pay cuts have been stalled by Congress.
And, if the pay cuts do go through, don’t you think the providers will find a way to provide for themselves, to make up their losses?
I am not suggesting third party payments being reduced, although that will help rein in costs.
I am suggesting that if co-pays were increased, as well as deductibles, we will see that the average insured American cannot afford these expensive fees, and that the providers will either voluntarily lower their rates, or some of the more expensive procedures will simply not be available due to a lack of demand (demand being defined as the ability to pay, if supplied).
Don Levit
Don–
This is completely different from teh pay cuts of the past.
The SGR cuts were across the board cuts for all docs (including primary care) and they were huge– 20%.
The idea of cutting all doctors fees is a crude and dumb solution.
By contrast, these cuts are targeting two areas where we have a huge amount of overtreatment–cardiology and cancer treatments.
On cancer treatments, see the post titled “A Very Open Letter From An Oncologist”.
As for cardiology, more than half of the by-passes and angioplasties that we do provide no lasting benefit for the patient.
Sure the cardiologist and oncologists will howl, but the family practioners will be happy–as will the many people who realize that they are underpaid.
As MedPAC has explained: Medicare cannot afford to
hike fees for primary care unless it cuts fees elsewhere.
MedPAC has been recommending that we cut some specialists fees for years.
Anyone who says no to these proposals is saying “no” to primary care. (The cuts and hikes are all part of one package.)
HR3200 is not the bill being voted on, so what it says means nothing. The final version of the bill says 3% and that’s from a representative who’s seen it, so that figure is to be accepted.
Edward Virtually–
There is no final bill.
The House and Senate bills stil have to be passed, and then merged in a final conference
We don’t know how much of either bill will wind up in he final bill.
Also, I’m afraid I don’t know what you are talking about when you say 3 percent.
Three percent of what???