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Hospitals would see 32% payment drop with public plan

The public health insurance plan proposed under the House healthcare reform bill (HR 3200) would have “a substantial price advantage” over private insurance because it would pay providers using current Medicare payment methodology, according to an analysis of HR 3200 released by The Lewin Group in Falls Church, VA, part of Ingenix, a wholly owned subsidiary of UnitedHealthcare.

In particular, hospitals that accept Medicare and public plan reimbursements would see their payments for services reduced by an average of 32% below what private insurers pay for the same treatment, whereas physicians would see a 16% drop for their services, according to The Lewin Group. The physician payment reflects an additional 5% increase in payments under the House bill for physicians and other providers who agree to treat Medicare and public insurance plan patients.

The Lewin Group report disagreed with the Congressional Budget Office (CBO) about its cost estimates associated with the House bill’s public plan option.

In particular, it said the CBO assumed that the public plan would only be about 10% less costly than private coverage. The Lewin Group said it estimated that the public plan would be able to “offer an insurance product that would be 20%–25% less than what comparable private insurance coverage would cost.”

If a health exchange was opened to all firms with a public option, The Lewin Group estimated that the number of uninsured people would be reduced by 32.6 million people (from about 49 million in 2011).

Enrollment in the expanded Medicaid program would increase by 12.6 million people, which would include about 15.5 million newly enrolled people minus about 2.9 million current enrollees who would become covered by employers who would offer coverage in response to the bill’s employer mandate.

The Lewin Group analysis examined two scenarios that would result from decisions by the Commissioner of Health Choices, who would determine (as proposed under the House bill) who is eligible to participate under the health exchange with a public plan option.

In the first scenario, the commissioner would limit eligibility to individuals and employers with fewer than 20 workers. In the alternative scenario, the commissioner would permit all individuals and employers to enroll.