Why the New Public Option is Better for Physicians

HealthLeaders Media Staff, November 12, 2009

Physicians may have dodged a bullet with the House of Representatives' passage of healthcare reform legislation on Saturday. Instead of tying provider payments to Medicare rates, the public insurance option in HR 3962 requires the government to negotiate with physicians, which could have a big impact on the final levels of reimbursement.

Set aside for a moment the debate over whether or not a public option should be included in the first place. Even among proponents of the public option, there has been disagreement for months about how such a program should be structured and, specifically, how it should pay providers.

Some wanted to tie reimbursement levels to Medicare rates, which, as you already know, often don't cover the costs of care and are generally much lower than rates paid by private insurers. The idea was to keep premiums and costs for the plan low by paying providers a little less, but most physicians weren't too keen on the idea of having more of their payer mix affected by the Sustainable Growth Rate formula and annual payment cuts like the pending 21% reduction set to take effect in January. The AMA and some other physician groups lobbied against this method, and early on it looked like the only concession they had earned from the House was a promise to pay 5% higher than Medicare.

But the thing to keep in mind about the healthcare reform process is that most of the debate over healthcare from July until fairly recently has only been committee work. The public option that physicians thought they were getting in August has turned out different from the public option in the final House bill, and it may still change before all is said and done. The Senate still has to pass its own bill, and then the House and Senate versions will be merged into a final piece of legislation.

At this point, I would say the odds are good that if a public insurance option is included in a final bill, it will retain negotiated payment rates. The House was always expected to produce the more "robust" public option, which would then have to be pared down when it came time to merge with a Senate bill that was expected to contain a more watered-down version, if it included a public plan at all. Now that the House is entering into the final stages with a public plan based on negotiated rates, it's unlikely that the Senate will break character and pass some kind of plan that's tied to Medicare.

So physicians have not only avoided one of their worst fears related to reform, but they may also get a little boost. The bill is expected to cover 96% of the population. While some of the people who are currently showing up at the ED without insurance may end up on Medicaid, which pays even lower than Medicare, some may end up using a public insurance option that will now pay closer to rates established by private payers. Uncompensated care should become rare.

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