Even as Congress debates overhauling the nation’s health care system, industry insiders are concerned about the implications of proposals being considered in Washington, D.C.

Hospitals are concerned about costs; doctors about reimbursement rates and insurers are worried about competition with a lower-cost government plan.

The plan under consideration only provides coverage for uninsured and under-insured people – about 46 million individuals – not the universal plan that President Barack Obama touted as a candidate.

Discussions have centered on changing the threshold to be eligible for Medicare and Medicaid to 150 percent of the federal poverty level, allowing more people to take advantage of the program. And that alone presents a problem, said Steve Berkshire, professor of health care administration at Central Michigan University.

“What is not clear right now is how they intend to find the money to pay for it,” he said. “It could be coming from a number of sources, so the funding mechanism is a concern. It doesn’t address the cost overruns of Medicare or Medicaid – so we’re going to have to figure out a way to meet those while increasing who’s on its rolls.”

Money for the proposal – estimated at $76.8 billion during 2010, in addition to current Medicare and Medicaid money – could come from an employer tax, Berkshire said. Current estimates from the Senate Finance Committee show that health care costs could increase to $4.4 trillion by 2018.

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“Or it could come as a tax on insurers,” he said. “There’s been some discussion of ending the non-tax benefit on insurance premiums that employees pay – that was one of John McCain’s ideas.”

The tax code includes about $194.2 billion in health care expenses built into the 2008 budget – more than 17 percent of all federal tax expenses. The Senate Finance Committee’s white paper about the bill said that ending employer sponsored health care tax exemption would provide $132.7 billion in new money.

Other suggestions: remove hospitals’ nonprofit status and make them pay taxes.

Memorial Health System, a municipal nonprofit, would take a hit, said John Suits, associate administrator for government affairs at the hospital.

“Typically, our profit margins run from half a percent to 4 percent,” he said. “Taxing us would take a big bite out of that profit, even if uncompensated care ends.”

Another proposal includes taxing soda, alcohol and other products deemed to be unhealthy.


The biggest problem for hospitals and doctors is the reimbursement rate.

“Hospitals provide a great deal of uncompensated care,” Suits said. “And, this will end that – all care will be compensated. But at what level? If it’s at the same level as Medicare and Medicaid currently reimburse – then it won’t be enough. Doctors won’t be able to stay in business.”

The plan also doesn’t improve access to care, he said. If reimbursement rates do not improve, it could hinder access.

“A doctor can’t do business if all his patients are reimbursed at the same levels of Medicare and Medicaid,” he said. “There’s no way to keep his doors open.”

Cost shift

And the cost shift of doing business that way is a concern, said Mohit Ghose, spokesman for Aetna.

“Right now, people with insurance are subsidizing about $89 billion in federal programs,” he said. “We’re already heavily subsidized; we don’t want to create a plan that will increase that.”

The government could create a federally run insurance plan for people who don’t have insurance. But Berkshire said small firms that are paying for high-cost premiums could see the government plan as a way to cut costs.

“The private plans are going to have to compete with the government plan,” Berkshire said. “And there’s some risk there that no one will want to have private plans, if the government plan is cheaper. It’s something insurance companies will be looking at closely as debate continues.”


Insurance groups are already responding. America’s Health Insurance Plan, an industry nonprofit, issued a statement saying that insurance plans are competitive – and using competition to create a federal program is unfair.

“Studies over many years have shown clearly that rising health care costs are the result of increases in hospital costs, increases in physician expenses and increases in the cost of pharmaceuticals,” the statement said.  “A recent letter from American Hospital Association to the Department of Justice asks the department to take a ‘more aggressive role in understanding how health plan market power and consolidation harm hospitals and other providers.’ This letter uses erroneous data to draw an erroneous conclusion that, unfortunately, is being used today by advocates for creating a public program in health care reform to justify their position.”

Ghose said that the way to reform is to streamline the process and to create an individual mandate for health insurance.

“We said in 2005 that we have to build on the employer-based insurance plan – the way most people get insurance – and have an individual mandate for health insurance,” he said.

As insurance companies have streamlined their administrative costs, the rate of premium increases has dropped during the past five years, he said.

“The private sector can make this shift, and we are moving that direction,” Ghose said. “We just believe that it can be done within the employer-based system, with a system that is uniquely American – not following other plans that might not be sustainable in the long run.”

Time to change

United Healthcare CEO Stephen Helmsley said that it is time the nation “modernizes” the health care system.

“The escalating costs of health care cannot be attributed to one or two items or areas in the system – it is not all doctors’ fees and hospital rates or insurance premiums or tax policy or new drugs and diagnostic testing,” he said. “The problem is systemic.”

But Helmsley said he believes the system should build on the foundation of employer-based health coverage, as well as modernize the way care is delivered. In that, Suits is in agreement.

“We need to look at more efficient, effective ways of delivering care, of providing access,” Suits said. “And we need to start working toward those goals now.” n CSBJ