Wednesday night, the House voted 225–209 to pass a bill that would, in the words of a Wall Street Journal editorial, “steal nearly $50 billion from Medicare Advantage, the innovative attempt to bring private competition to senior health care” in order to beef up the State Children’s Health Insurance Program (SCHIP), a program that delivers health care to poor children.
SCHIP is scheduled to expire September 30; the House bill would renew the program while expanding it to include another 5.1 million children at a cost of an extra $50 billion over five years. The bill’s backers propose to fund the legislation by increasing the federal cigarette tax by 45 cents while simultaneously paring the premium that Medicare pays private insurers who provide Medicare to seniors. The goal of the bill, reformers say, is to ensure that all children in the United States have health insurance. The Wall Street Journal’s editors see things otherwise: “Democrats apparently want to starve any private option for Medicare,” the editorial concluded.
Rupert Murdoch hasn’t yet weighed in, so I decided to take a look at the proposal. Would the legislation really make it impossible for private sector insurers to continue to offer needed benefits to seniors?
I began by looking at insurers’ finances only to discover that the health care insurance industry is, in fact, facing rough weather ahead. While the cost of providing health care continues to climb, more and more employers are backing away from providing health care benefits for their employees. Others are raising premiums and co-pays to a point that some workers can’t afford to participate in the plans. This means that insurers are losing customers.
As a result, one might expect that insurers’ profits would be falling. One would be wrong