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How the House health-care bill saves money

Shailagh Murray reports:

A previous version of the House bill carried an estimated cost of $1.04 trillion over 10 years, but House negotiators were able to lower the price tag in part by expanding Medicaid coverage to a broader slice of the population, the equivalent of all individuals who earn about $16,200 per year. The original House legislation had sought an increase to 133 percent of the federal poverty level, or about $14,400 per year, the same level proposed in the Senate bill.

The adjustment reflects findings by congressional budget analysts that covering the poor through Medicaid -- which pays providers far less than Medicare -- is far more cost-effective than offering subsidies for private insurance policies, something the bill would provide to middle class individuals who lack access to affordable coverage through their employers.

Telling, no? Medicaid pays less than Medicare. Medicare pays less than private insurance. Given a scenario in which the government has to pay full freight for someone's health-care insurance, the most cost-effective option is Medicaid.

Now, most experts agree that in the current system, Medicaid pays too little. Given how much more money doctors can make by focusing on Medicare patients, and then on private patients, it doesn't make much sense for them to spend time with Medicaid patients. But by the standards of other countries with advanced health-care systems, wealthy doctors, and comparable outcomes, Medicaid pays quite generously. Indeed, if the system was used to subsisting on what Medicaid spends, then Medicaid's payments would be just fine, as we'd have something of a different system -- and the evidence suggests that health outcomes would be no worse.

As it is, providers have other options that ensure them quite a bit more profit, and Medicaid, because it's one of many insurers, has to compete for their business, and will eventually have to pay something closer to their prices. As, of course, will taxpayers.

Update: 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.

By Ezra Klein  |  October 29, 2009; 8:44 AM ET
 
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Comments

So just to be clear, your point is that doctors and hospitals will have to be paid less, period. The only way the system that is being created survives or "saves money" as your headline implies is if Medicaid rates--which most experts agree pays too little--becomes the prevailing rates. And the only way this can possibly be accomplished is through a doctor-mandate to take medicaid/public option patients or completely eliminating private insurance altogether. If not, doctors will continue their practice of refusing medicaid patients and the "uninsured" will become the de facto "untreated", with longer wait times and lower quality care.

If this "doctors-across-the-board-will-have-to-make-less-money" position is the only way the public option survives, consider it DOA.

Posted by: Philly213 | October 29, 2009 9:04 AM | Report abuse

So, are you saying the largest cost in Healthcare is Provider wages?

So that specialist over there making $600,000 a year is making too much? Really?

I don't know... I think his/her Bently Azure, 6,000 sq ft mansion, beach home in Hawaii, and bi-annual month-long trips to Europe are in par with the benefit they provide to society, don't you?

;-)

Posted by: JERiv | October 29, 2009 9:05 AM | Report abuse

Actually, I do admit they deserve it more than folks in Wall Street do!!! Those guys provide ZERO benefit to society!!! Would be ashamed I worked in Wall Street.

Posted by: JERiv | October 29, 2009 9:10 AM | Report abuse

So then why not just fix prices for all medical services? That's basically what you're advocating albeit in a roundabout and inefficient way.

I think Congress should write a letter to Santa and ask for a magical solution to all of their problems. That would probably be more effective and much less damaging then all of their current proposals.

Posted by: fallsmeadjc | October 29, 2009 9:32 AM | Report abuse

more and more I like what I see coming down the pike in Massachussetts. Their commission over the summer unanimously believed that providers need to be moved slowly as to not affect access to a system based more on results and a capitation model than the current fee for service model. If you want to resolve the cost issue that will come with insuring 30-40 million more Americans that's the way you'll need to go. But again, go slowly so that you don't incent providers to retire so as to avoid that system and make sure that you simultaneously reduce the costs to doctors entering and going through medical school now. The burden needs to be less on them in the beginning if the financial gains to them are going to be blunted later on in their professional life.

Posted by: visionbrkr | October 29, 2009 9:38 AM | Report abuse

"So then why not just fix prices for all medical services? That's basically what you're advocating albeit in a roundabout and inefficient way."

Works for the Japanese, if I'm not mistaken?

Posted by: adamiani | October 29, 2009 10:05 AM | Report abuse

Let's look at some figures. Let's suppose a doctor finishes training with $200,000 debt which is way higher than the average. Let's suppose he want to pay it off in 10 years at 6%. His monthly payment is about $2,200.

Now look at the Allied Physicians survey, or bls.gov for doctors adjusted gross income. GP's start at about $200,000. The average for cardiologists is $450,000. Is it any wonder that there are 4 qualified applicants for each place in medical schools? I'd take that deal anytime.

Posted by: lensch | October 29, 2009 10:08 AM | Report abuse

lensch,
Then you should get good grades in high school, go to a good college, be in the top of your class in the hard sciences, score high on the GMAT, graduate from medical school, make $20k-$30k per year during your internship and residency period for a few years in an expensive, urban-area hospital, amass something more like $250k-$300k for the combined college/med school/credit card debt, AND work 80-90 hours per week during your internship and residency. That's the deal; you're free to take it "anytime".

Unfortunately, incentives matter for highly motivated, well educated people. First year lawyers can make $150k/year after 3 years of law school and I-bankers can make much, much more after 18 mos. and an MBA. You want to fix wages at an artificially low "government scale"? Go ahead. The law of unintended consequences will run amuck throughout the system.

Posted by: Philly213 | October 29, 2009 10:28 AM | Report abuse

I am not a physician. My background is from the health insurer side in contracting for all products; commercial and governmental. Medicaid payments for deliveries is substantial, for preventive child care codes it is substantial. This is the lion share of what gets done in Medicaid as it treats woman and child. I've had physicians ask to be reimbursed at Mediciad preventive rates from a commercial insurer. I am not sure this reimbursement is a problem, rather people want a rationale to ask for more money.

Posted by: reddog3 | October 29, 2009 10:38 AM | Report abuse

Philly - First, care to document your figures?

Actually, I got good grades in HS, went to MIT, graduated in 3 years, got a Ph.D. from Columbia in 3 years. Taught at good schools. Worked at a government funded think tank and never got more than $135,000 gross. My first job was $6,000. I consider myself lucky. I don't have a McMansion like my physician friends. I have one small car. But I certainly live better than the average Joe.

Sure I could have been a doctor, but I wanted to do something interesting with my life, and let me tell you my mathematician friends are a lot brighter tha my physician friends even if they earn much less.

Posted by: lensch | October 29, 2009 10:45 AM | Report abuse

Philly - I just checked one of your figures. The average salary for interns and residents is $48,000.
http://www.simplyhired.com/a/salary/search/q-committee+of+interns+and+residents

Posted by: lensch | October 29, 2009 11:00 AM | Report abuse

Once again- we have a cost problem in this country, not an insurance problem. The problem is that the democrats want to treat this as an insurance problem because the insurance companies are easier to demonize and they don't want to worry about the cost problem whatsoever.

Increase the number of nurse practitioners and let them do more primary care, allow drug reimportation, give patients more reason to care how much they spend on healthcare- do SOMETHING to address the core cost problem and this bill would be a whole lot more palatable.

Posted by: spotatl | October 29, 2009 11:06 AM | Report abuse

States have to chip in on Medicaid.

I don't know about your state, but mine is singing a very sad song about money these days.

Just because the Feds don't raise taxes to pay for this expansion doesn't mean the States won't.

A tax is a tax...

Posted by: RedBird27 | October 29, 2009 11:10 AM | Report abuse

There are problems with directly comparing what single-payer countries pay versus what Medicaid pays. The Medicaid population tends to skew sicker, more rural, more obstetric and pediatric care.

Medicaid can work pretty well in urban areas where there is high HMO penetration. It can be hard to stay in business if you are a rural solo provider. One doc I know in Cheyenne takes home about $50,000 as a full time Medicaid provider. That is pretty hard to do if you aren't independently wealthy.

Also for reasons I don't understand Medicaid spending *per beneficiary* is 10 times higher in some states than in others. It seems that good Medicaid benefits encourages more services which in turn encourages more spending, etc etc. This is why I am concerned that the plan to expand to Medicaid--which I support ideologically--may end up costing a lot more than people think.

Posted by: bmull | October 29, 2009 11:14 AM | Report abuse

1. The bill also shifts the Medicaid Fed to state ratio to 75% Fed. So Medicaid will essentially no longer be a state program in a decade or so.
2. Wouldn't a simpler solution to physician incomes be to: 1. make med school free? 2. provide Federal no-fault malpractice insurance. Hence, you drop income, but you also drop costs, so real income doesn't change.

Posted by: StevenAttewell | October 29, 2009 12:59 PM | Report abuse

Ezra, for your own research pick up the phone and call 10 doctor's offices and tell them you need an appointment. Tell the receptionist you have Medicaid insurance and see if they will see you.

Posted by: kingstu01 | October 29, 2009 1:16 PM | Report abuse

Ezra, can you explain how reimbursing less for something does anything to lower the actual cost of providing the service? I can't possibly understand how you think cuts in Medicare which will never take place are going to pay for this $1T program.

When has Medicare ever been cut?

Posted by: kingstu01 | October 29, 2009 1:36 PM | Report abuse

The boost in Medicaid payment rates only applies to primary care. But I agree that any increases should be offset by cuts in areas that are over-reimbursed. To do otherwise is not real reform.

Posted by: bmull | October 29, 2009 1:38 PM | Report abuse

How the House health-care bill saves money? By PRETENDING it saves money! That's how Castro, Chavez, and the rest of the Obama-like Marxist thugs achieve PRETEND "SAVINGS" and "MIRACLES."

The Obama-like Marxist thugs lie, manipulate, intimidate and coerce people into PRETENDING they believe the thugs' PRETEND "MIRACLES" and "achievements" while they destroy their economies and their countries, just like Obama is destroying our economy and our country.

Posted by: AntonioSosa | October 29, 2009 11:07 PM | Report abuse

Using more Medicaid lowers CBO estimate of the cost of health care because CBO's estimate only looks at the Federal level of costs and does not include the state share of Medicaid. If the US passed a health care law mandating the states provide the medical care and that the states bear 100 percent of the costs, CBO would estimate the cost of health reform at $0.

It is much more reasonable for a cost analysis to treat a state like a subsidiary of a company and consolidate the states' health care reform costs with the federal estimate.

Posted by: MiltonRecht | October 30, 2009 3:09 AM | Report abuse

any analysis on how many doctors will continue to drop medicaid when it pays so little and its rolls are swelled so much?

Oh ya, I didn't think so.

Posted by: visionbrkr | October 30, 2009 11:36 AM | Report abuse

The comments to this entry are closed.

 
 
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