So the America’s Health Insurance Plans (AHIP) released a new report this weekend on the rising cost of health insurance premiums. As the New York Times reports:
The report says that the cost of the average family coverage, now $12,300, will rise to $18,400 in 2016 under current law and to $21,300 if the Senate bill is adopted. Likewise, it said, the cost of individual coverage, now $4,600, will average $6,900 in 2016 under current law and $7,900 under the bill.
So for both family and individual plans the status quo shows a 50% increase or under the Senate plan a just over 70% increase in seven years. That is a crazy increase, and it sure makes the Senate plan look bad compared to the status quo. For those progressives, like myself, we have thought that the Baucus plan was kind of crappy, partially because it didn’t include a public option.
The funny thing is that the Lewin Group came out with a report in April 2009 that talked about the value, not that they thought it was a value, of a public option. The Lewin Group is owned 100% by United Health Group, which is a large health insurance group. So what did the report say?
If Medicare payment levels are used in the public plan, premiums would be up to 30 percent less than premiums for comparable private coverage. On average, the monthly premium in the public plan for a typical benefits package would be $761 per family compared with an average of $970 per family in the private market for the same coverage.
If as the President proposed, eligibility is limited to only small employers, individuals and the self-employed, public plan enrollment would reach 42.9 million people. The number of people with private coverage would fall by 32.0 million people. If private payer reimbursement levels are used by the public plan, enrollment would be lower, with only 10.4 million people switching to the public plan from private insurance.
If the public plan is opened to all employers as proposed by Senators Clinton and Edwards, at Medicare payment levels we estimate that about 131.2 million people would enroll in the public plan. The number of people with private health insurance would decline by 119.1 million people. This would be a two-thirds reduction in the number of people with private coverage (currently 170 million people). Here again, if the higher private payer levels are used, enrollment in private insurance would decline by only 12.5 million people.
Medicare premiums would be lower than private premiums because of the exceptional leverage Medicare has with providers. Medicare pays hospitals about 30 percent less than private insurers pay for the same service. Physician payments are about 20 percent less than under private coverage. Also, because Medicare has no allowance for insurer profits or broker/agent commissions, administrative costs for this population are about one-third of administrative costs in private health plans.
So under a public option that pays Medicare provider rates, we could see our premiums 30% lower, sign me up. Seriously what is wrong with allowing Americans to see that savings? When families are losing health insurance coverage, do we really need to worry about protecting profits? Protecting broker commissions? No we need to worry about our friends, family, and neighbor not having health insurance, not the profits and commissions.
Now they will say that Medicare underpays the health insurance providers, since they pay a lower rate. But isn’t that exactly what Wal-Mart gets credited for, using its size and clout to extract lower costs from the manufacturer that proivdes their product? Why is it good when Wal-Mart does it, but not when the US government is doing the same for its citizens? Well you could say that we are going to put the health care providers out of business. Yet, the government gets deals that we don’t get based on their size. Are you aware that hotels give a government rate? Why shouldn’t there be government rates for health care procedures? Well they do and it is the Medicare rate.
I think this week’s AHIP report in combination with this Lewin Group report this past spring make the case that the public option is the only way to go for American citizens. After all the US government is We the People, not We the Insurance Industry. So will Congress do what is right by us, not for their corporate masters?
-Josh
