There’s been much talk about the pros and cons of Medicare for All as one option in a national health reform plan. Think Progress addressed the major complaints opponents of a governmental option have; Merrill Goozner’s piece last week focused on one of the major issues – the claim by some that governmental plans could set lower prices, thereby lowering reimbursement.
Merrill notes that this might not be such a bad thing. He’s right.
Alas, it’s also not likely a Federal health plan option would have much control over provider pricing.
Recall that the major reason health care costs in the US are so much higher than in every other developed country is price per service. Not rationing, or lines, or less technology, or any of the other hoary red herrings cited by those who mindlessly claim the US has the best health care system in the world. It’s price.
According to the Commonwealth Fund, “Americans do not have access to a greater supply of health care resources than people in most other OECD countries. In fact, the U.S. has fewer per capita hospital beds, physicians, nurses, and CT scanners than the OECD median.” It’s not rationing, we just pay more per service than other countries do. Again quoting the Fund “higher prices for health services such as prescription drugs, hospital stays, and doctor visits, are the main reason for higher U.S. spending.”
The logical misstep made by opponents of a government option is in thinking the Feds would have more market power than a private plan, market power that would enable them to force down prices and thus unfairly compete against private plans. Opponents claim that the Feds would have an unfair advantage due in part to their sheer size; they’re just so big that private plans could not compete.
Unlike the folks at Cato and Heritage, those of us who work in the real world of health insurance know better. Let’s start with a basic question. Exactly how would a governmental option change the market?
There’s been so much consolidation in the health plan industry that many markets are monopsonies (few buyers and many sellers).
Back in 2005, in 96 percent of MSAs one insurer had a combined market share of at least 30 percent. In two-thirds of MSAs, one insurer had market share equal to or greater than 50 percent, and in a quarter of MSAs, one insurer had market share of at least 70 percent.
Now, would a new governmental plan have an advantage over, say, Blue Cross of Alabama, which has market share ranging from 67 percent in Tuscaloosa to 95 percent in Gadsden? Or Blue Cross of Arkansas, with share from 63 percent in Hot Springs to 97 percent in Texarkana? Or the two dominant health plans in Ohio, with combined share ranging from 46 percent to 80 percent?
It wouldn’t; in fact it would be an uphill climb on a very icy slope for a governmental plan to reach market parity, much less market dominance in most of the country’s MSAs. Health plans execs spend every waking hour, and some while asleep, thinking about how they can steal share from their competition. They beat each others’ brains out on a daily basis, fighting over each employer, each member, each new contract. And most are very, very good at it.
Yes, a governmental plan could try to force docs to accept lower fees, and physicians could and would tell the Feds to pound sand. There is precedence for this – try and find a doc who will accept Medicaid in New York. Recall the revolt of physicians last summer when they were facing a dramatic cut in Medicare reimbursement. Physicians do not have to work with any health plan – governmental or private. If the Feds tried to cut reimbursement, private insurers’ provider relations pros would eviscerate them in the provider community.
There just isn’t any logical basis for the argument that a governmental option would somehow be unfair for competition, or drive out private plans, or lead to a government monopoly. Those who argue otherwise ignore the facts, relying instead on anecdotes about rationing, the horrors of lines, and instances of poor treatment in countries with national health care.
Multiple anecdotes do not equal data. If opponents of a governmental option want to stop it, they’d do well to get serious and use their JDs, Ph.Ds and extensive policy world experience to come up with real objections.
I’ll be waiting.
Jan
13
To Joe’s point: Both primary and specialty care physicians in the US earn twice as much as the median of their counterparts in the rest of the OECD. I believe that the train is too far down the track to change that in any meaningful way.