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Wednesday, December 9, 2009


Multiple sources this morning are reporting that Senate Democrats, behind closed doors, have reached agreement on several key matters associated with the “public option” debate – getting them closer to the necessary 60 votes. It will be sent for a Congressional Budget Office score today, which is expected to take two days, and the details will not be released until after the score is completed, so the compromise can be “tweaked” if deemed desirable at that time.

One reported agreement has come on a proposal to expand eligibility for Medicare to those 55 or older (currently one must normally be 65).

The American Medical Association (AMA), American Hospital Association, and Federation of American Hospitals (FAH) quickly charged that the proposal would harm the availability of treatment because Medicare reimbursement rates to health care providers are significantly below the cost to them of treating Medicare beneficiaries, something that is possible only because providers “cost shift” by charging privately insured individuals more than it costs to treat them and using the resulting surplus to make up for what they lose when treating Medicare patients.

AMA President Dr. J. James Rohack, noting that “the AMA has longstanding policy opposing the expansion of Medicare given the financial projections for the future. Currently, . . . 28% of Medicare patients looking for a new primary care physician are having trouble finding one.”

The American Hospital Association noted, “Medicare pays hospitals just 91 cents for each dollar of care provided, yet the proposal being considered would allow people 55-65 to enroll in Medicare instead of the insurance exchange . . . “

According to, FAH says that “[t]he buy-in policy would „crowd-out‟ private insurance, would be controlled by CMS [the federal government‟s Centers for Medicare and Medicaid Services] and would only pay Medicare rates. The FAH also suggested that members point to MedPAC, which has “„documented negative and declining Medicare hospital margins for seven years.’”

The agreement also reportedly incorporates a provision from Sen. Jay Rockefeller (D-W.V.) which would require insurers to spend at least 90 percent of premium money on medical care, rather than on administrative costs or profits. This is known as a medical loss ratio.

Although no language from Sen. Rockefeller‟s proposal has emerged, generally speaking, a medical loss ratio is the ratio between what the company actually pays out in claims or medical services and what it has left over to cover sales, marketing, underwriting, taxes, and other administrative expenses and profits.

This would occur at the same time as other provisions in the health care bill impose significant additional administrative expenses on insurers involving reporting on quality and efficiency as well as “managing” care to achieve greater “value” for the funds expended. With a narrower margin for administrative expenses, this restriction could lead to is the inability of insurers to operate in the black and have the effect of driving many of them out of the market.

Despite press reports describing a “breakthrough,” these consequences and the opposition they stir may mean that the end of the Senate‟s battle over health care restructuring may not be as imminent as Majority Leader Senator Harry Reid (D-Nev.) would hope.

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