Downward Spiral to Single Payer System
According to The Wall Street Journal, it looks as though the Senate is positioned to take two major steps on Health Care Reform legislation. Step 1: Unveil the hybrid legislation cobbled together by the democratic Senate leadership and White House senior aids – primarily from the Senate committees on Finance and the Health. Step 2: Submit the proposed legislation to the CBO for scoring [1]. Sen. Reid began Step 1 this afternoon by announcing that the Senate version of Health Care Reform will contain something called an “Opt Out, Government Option” – something Reid called a compromise but critics say is nothing more but yet another shell game by Senate Democrats.
We know precious little of what really is in the Senate HealthCare Reform legislation to date. The Wall Street Journal reported this morning that the Senate version is including a stiffer fine of $750 per employee for employers with more than 50 employees who do not provide health insurance coverage – an increase from the $400 fine in the Baucus legislation markup that came out of the Finance Committee [1]. The bill also would provide a sliding-scale subsidy for those over 150% of the Federal Poverty Limit (FPL) and expand Medicaid coverage to those earning up to 150% of the FPL. This expansion would result in upwards of 14 million more people being covered by Medicaid – a huge expansion of that system [2]
Therein lays the rub. Expanding Medicaid coverage will fuel a downward spiral toward a so-called single payer system. According to Guy Boulton of the Journal Sentinel [3], the average cost of family health care benefits is now $13,375 annually. That works out to be $1115 monthly. The fine for an employer opting not to provide coverage is $750 a month. You don’t have to be an expert financial analyst to see that there is an incentive for the employer to opt out. As more employers opt out, more people are forced into the Medicaid system or other government option with will control “costs” by reducing physician/hospital reimbursement rates. As physicians/hospitals treat more patients with lower reimbursement rates they will be forced to increase their fees for services to make up for the loss. As physicians/hospitals increase costs, private insurance premiums will rise. As premiums increase, more employers will be forced to consider dropping health insurance benefits. This self-perpetuating, downward spiral is described in the graphic below:
It is not the Medicaid Factor only that will contribute to higher premiums for private health care insurance. The so-called Baucus bill would impose a $121 billion tax on the drug companies and medical device makers over a 10 year period [4]. The problem with Congress is they think these taxes an business are not paid by the consumer. If you impose a $121 billion tax increase on the drug/medical equipment products, that increase will be paid by the insurance companies. Those companies in turn will have to raise their premiums. This will simply add to the downward spiral described above.
In addition to Medicaid expansion not being healthy for the overall financial viability health care system, it is not going to be the panacea its supporters are proffering for those who would be covered by this program. Because of Medicaid’s aggressively low reimbursement rates, which pay doctors pennies on the dollar for claims submitted (if they pay at all), many physicians are refusing to accept Medicaid patients. By adding 14 million more patients to an already overwhelmed system is going to make it difficult if not impossible for a Medicaid recipient to get the treatment they need.
Okay… so, what is the big deal about a single payer, government run, health care insurance system – AKA: Socialized Medicine – anyway? Well, the biggest complaints are that while socialized medicine does cover everyone (for the most part), it does not live up the claims of its supporters of providing better care at lower rates. In fact, the opposite holds true when you look at attempts in socialized medicine both here and abroad. In addition, many opponents to socialized medicine fear that the government would have too much say in our medical care. Of course, politicians that support socialized medicine claim that we should trust the government and not be concerned with the government overstepping its constitutional/traditional limits. Tell that to the executives of the companies that accepted T.A.R.P. funds and are now having their income slashed by 90% and tell that to the banking industry that is facing government intervention with wage and salary limits.
When considering how the government might act under any proposed legislation we have two choices. We can evaluate what the government says or we can evaluate what the government has done or is doing, I choose evaluating what the government has done or is doing as the best indicator of what to expect the government will do in the future.
Footnotes:
[2] The Heritage Foundation: Why Congress Wants to Force More Americans into Medicaid
[3] JS Online: Health premium rise 5%, beating inflation again; Sept. 15, 2009 by Guy Boulton