I was talking to a health system CEO the other day, who was angry at the deals being struck between leaders of industry lobbying groups and government leaders. Never mind that these "deals" are just handshake agreements not to oppose the president or Congress' idea of healthcare reform—whatever shape it eventually takes.
Angry may be a strong word. Let's just say he was dissatisfied. We talked about the $80 billion in dubious cost cuts over the next 10 years that drugmakers agreed to with President Obama earlier this year in order to buy not only their silence, but their support, in the face of healthcare reform. It's hard to argue that that deal hasn't since been exposed as a not-so-well-hidden gift to drugmakers.
We then talked about the $155 billion in cuts the main hospital lobby, the American Hospital Association, agreed to in principle in July, which doesn't seem nearly as lucrative, as I'll get to in a minute. In short, it doesn't look like hospital negotiators did quite as well.
Finally, we talked about the one big lobbying group that hasn't made a deal on healthcare reform: insurers. Predictably, that industry has become the villain du jour in the raucous healthcare reform debate we've been following all year. Hospitals have avoided that fate, but at what cost? My purpose is not to defend health insurers, but to ask whether any "deal" agreed to under pressure is really a good deal.
Take the hospitals. In return for agreeing not to oppose healthcare reform, the AHA, representative of the nation's more than 5,000 hospitals, said its members would collectively accept $155 billion in reimbursement cuts over 10 years in return for a reform plan that would insure effectively all of the currently uninsured—presumably through a combination of a mandate requiring all citizens to carry health insurance and a public option health plan that would facilitate that coverage.
The announcement of the deal came after administration heavies not-so-quietly suggested that $200 billion in cuts would be about right, causing hospital representatives to gulp—hard.
The health system CEO I was talking to was angry that there was no provision to keep such a public option from ratcheting back reimbursement further once it's in place. He was off about that. In fact, the deal contains a promise that "public option" reimbursement rates would not reach the low level of Medicare and Medicaid reimbursement rates, which, depending on whom you believe, come in at somewhere near 90% and 60%, respectively, of the cost of providing that care.
Further refinements of the bills in both houses revealed that the public option would have to negotiate rates with hospitals in a similar way that commercial plans do now. Fine. But nothing in the intervening time period has spelled out at what level the public plan might think is a fair reimbursement. Never mind the difficulties of negotiating with a payer that can effectively put you out of business, or, at the very least, make life very difficult for those who don't like what the government plan is offering.
So back to the question I asked in my headline. What if all your reimbursement came from Medicare? I'm guessing you wouldn't like it very much, considering that all I've heard over the years is how Medicare significantly underfunds the cost of care in its reimbursements, leaving hospitals to cross-subsidize by negotiating deals with commercial insurers that pay better. That's a hidden tax that we all currently pay for the fact that government reimburses poorly.
But if healthcare reform passes, and even if the public option pays you as much as 99% of costs, much higher than Medicare, you still come out way behind over time. And that was the crux of my friend's point.
And don't count on commercial insurers to continue making up the difference. Why should they? They haven't made a deal with the president, after all.