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Private contracting in Medicare, and health care more generally

I promised to return to this subject after I'd dug into the details a bit more, so here we are. The rumor going around that the health-care bills won't let you pay your doctor for services that your insurer won't provide is simply false. It relies on a misunderstanding of what private contracting means in Medicare, and then a misunderstanding of how it's been applied -- or not applied -- to the health-care bill.

Let's begin with Medicare. At issue here is a provision of the 1997 Balanced Budget Act. This provision is being sold as some liberal plot, but it turns out to be an amendment by Jon Kyl, a Republican senator from Arizona. It was then put into a bill that was passed through the Republican Senate and then the Republican House. It's a pretty safe bet we're not dealing with liberal overreach here.

What the provision does is regulate how much your doctor can charge Medicare for services Medicare covers. Let's say you need a stent. Medicare will pay $10,000 (I've made this number up) for the operation. But your doctor doesn't want to take $10,000. He wants $20,000, and you want to cover that out of your own pocket. In that case, your doctor has to withdraw from the Medicare program for two years. The intent here is to ensure that doctors don't begin routinely overcharging patients for covered services.

If Medicare, however, had refused to allow your stent, then you could indeed have paid out of pocket. Non-covered services are up to the patient and his or her doctor. Eddie's concern was about the times when "healthcare insurance won't cover something," and in those times, the private contracting rules are inoperative.

Private insurers have similar rules. If I have insurance through Kaiser, and I go to a doctor, the doctor can't ask me for $500 above what Kaiser reimburses for the service. If Aetna agrees to pay a hospital $900 for an MRI, the hospital can't ask me to give them another grand. Insurers -- both private and public -- enter into contracts with providers, and those contracts have to be honored or the insurance wouldn't be worth much.

According to multiple Hill staffers, for the purposes of the health-care bills, the private plan's rules are all that would matter. The extension of Medicare's rules was to the public plan. Private insurers continue to use their own rules, whatever they are. And now there's no public plan, so there's no issue here at all. So the summary: Private contracting rules have nothing to do with times when Medicare won't cover a service and they are not being extended into private plans in the bills.

By Ezra Klein  |  February 11, 2010; 2:58 PM ET
Categories:  Health Reform  
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Comments

"The intent here is to ensure that doctors don't begin routinely overcharging patients for covered services."

Wait, you mean a Republican (Kyle) actually amended a bill so that an actual person would not be gouged by a service provider?

There has to be more to the picture here. What was his real motivation?

Posted by: onewing1 | February 11, 2010 3:47 PM | Report abuse

BTW: Thanks for clearing that whole FASTEDDIE thing up. Now if you could get him to stop yelling at us, that would be appreciated too.

Posted by: onewing1 | February 11, 2010 3:49 PM | Report abuse

THANKS Ezra!

Posted by: FastEddieO007 | February 11, 2010 4:16 PM | Report abuse

Again, at some point people in Washington have to learn that "moderate" is not the same thing as "uncontroversial."

Especially when it's this easy to gin up heartfelt outrage over a policy which is genuinely bipartisan, which has existed for more than a decade, and which serves only to protect the consumer.

At a certain point, you'd think facts have to be more important than feelings. But I guess you'd be wrong, since everybody keeps reacting to feelings, not facts.

Posted by: theorajones1 | February 11, 2010 4:23 PM | Report abuse

"The intent here is to ensure that doctors don't begin routinely overcharging patients for covered services."


anybody out there want to help those of us in the private market of this??? You know that whole UCR fiasco that no one understands correctly???

Posted by: visionbrkr | February 11, 2010 4:27 PM | Report abuse

Thanks Ezra - have you posted anything on the 10th amendment claims that have been made? It seems like there might be something to it, especially given the conservative majority in the court, and the Printz case.

Posted by: jduptonma | February 11, 2010 4:33 PM | Report abuse

Thank you Ezra, you are consistently a voice of reason and a really, really good writer!

I also wish facts counted for more during this debate. It's hard not to become cynical.

@jduptonma asks about Tenth Amendment arguments. I found this post of yours from December that mentions the possibility of such issues, with a lot of research around it!

http://voices.washingtonpost.com/ezra-klein/2009/12/max_baucus_the_individual_mand.html

Posted by: billkarwin | February 11, 2010 5:27 PM | Report abuse

Thanks for your research and clarification. I had been wondering about this. And, interesting to know the clause in question/discussion is so thoroughly a Republican creation

Posted by: vklip1 | February 11, 2010 8:08 PM | Report abuse

You assert that docs can't ask for more than coverage allows but it happens. Our insurer is the largest in Texas. My wife's chemo pegged the insurance at a tidy sum. The month before surgery the surgeon's office called and said the insurance company wouldn't pay enough for her services. We would have to go elsewhere unless we paid an additional $1000. We reluctantly agreed. After surgery the surgeon sent us a bill for an additional $2000. To top it off, the lab used refused to accept the largest insurer in Texas. Best system in the world, eh?

Posted by: Nat_51 | February 12, 2010 12:18 AM | Report abuse

Follow-up: If this is true (and I am respectfully taking you at your word) what is to stop middle class families & private insurance companies & doctors from simply ignoring this whole Obama-Pelosi-Reid federalization effort and simply go about their business on their own.....that is a middle class family privately contracts with a private insurance company to pool their risk with other middle class families and then the insurance companies effectively private contract with doctors----all outside this heavy-handed federal system.....this would seem to be good way for middle class decisions to maintain sovereignty over what kind of healthcare they want without having to surrender control to the federal government---which many of us don't trust......I think many of us trust a federally controlled healthcare administered by the powers of Obama-Reid-Pelosi as much as many of you supporters will trust it if Palin & Cheney were in charge.

I prefer the modularity of insurance companies over the insurmountable disputes I have with a federal government that is too big to fail.

Posted by: FastEddieO007 | February 12, 2010 8:51 AM | Report abuse

Do you think the powers of Obama-Reid-Pelosi would ever consider breaking up this comprehensive reform into small edible pieces that can by themselves offer incremental improvements....

For starters, what if they offered a very simple bill that passed the tax-writeoff for insurance purchases (that employees of healthcare prioviding employers get)---if thyey simply gave that write-off to every one!

One simple bill that suddenly and dramatically de-couples employment from healthcare.....my guess is that that would offer a tremendous release of pressure on the whole joblessness crisis!!!

Are Obama & Pelosi simply too ideolgically rigid to open themselves up to an idea like that?


This isn't the end----merely a first step---a sign of good faith to all Americans that they are more interested in solving a problem than enacting an agenda.

Ezra!!! What do you say? Can you make it happen?

Posted by: FastEddieO007 | February 12, 2010 8:57 AM | Report abuse

PS: Do you acknowledge that Hillary's effort at healthcare reform included a 2 year ban on contracting outside the system?

Posted by: FastEddieO007 | February 12, 2010 9:29 AM | Report abuse

FastEddie, per your question of whether families could pool their resources and contract privately with doctors, it already goes on. Google the term "concierge medicine" and you'll come up with some resources. Unfortunately, it is mostly the province of wealthy purchasers and elite doctors, though there are a fair amount of them that work in middle class areas. I've even read about a doc in New York who has a concierge practice with no office. All of his services are conducted at the patient's home, and he runs his practice out of his laptop.

Unfortunately, this also only works with patients who are either healthy, or have conditions that are relatively well managed. A middle-class family and their concierge doc (and presumably the other middle-class families in this "risk pool") would not be able to cover the costs of a cancer diagnosis or a closed-head injury with their annual stipend to the doc. At best you would need a catastrophic-coverage plan as a backstop for hospitalizations and specialist visits, probably one with a high deductible, which would then put the sample middle-class family on the hook for an amount that could exceed a middle-class ability to save. Which brings us back around to why we have insurance.

Posted by: Rick00 | February 12, 2010 11:39 AM | Report abuse

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