Hospitals Would Get Paid 32% Less in Public Plan Compared to Private Insurers

The public health insurance plan proposed under the House healthcare reform bill (H.R. 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 the House healthcare reform bill (H.R. 3200) released by The Lewin Group this week.

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, while physicians would see a 16% drop for their services, according to The Lewin Group, which is part of Ingenix, a wholly owned subsidiary of UnitedHealth Care. The physician payment reflects an additional 5% increase in payments under the House bill for physicians and other providers who agree to treat both Medicare and public insurance plan patients.

The Lewin report disagreed with the Congressional Budget Office about its cost estimates associated with the House bill's public plan option. In particular, it said that 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% to 25% less than what comparable private insurance coverage would cost"--primarily, because the plan would pay providers "substantially less" than private plans.

If a health exchange was opened to all firms with a public option, Lewin 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 to provide insurance.