Short answer: No.
Long answer: Here it goes.
I love the notion that by offering a public plan it will inject competition and reduce costs. The problem with medicine is a SUPPLY problem, not an economies of scale problem. There is a short supply of medicine, and by offering artificially low priced "public option" you are effectively increasing demand. The supply remains fixed (unless you have magic beans that grow doctors, nurses, medical centers instantly) and demand skyrockets on an already strained system. This can only result higher prices.
What's going to happen is there will be two segments of medicine created. Whether it's a government agency or a coop a new org is created, and they will have to recruit doctors that will accept their low payout insurance. This attracts the lowest common denominator doctors. So what it does is creates a two tier medical system: public option doctors (probably poor performers), and private insurance doctors.
As with most under-priced goods and freebies, there is an immediate shortage and the public option is at over capacity. I predict private insurance will probably remain the same, but the prices will go up (PO competes for doctors, demand increases, prices/wages increase). They will not be accepting PO patients. Workers will see reduced pay in order to compensate for the increases in premiums; after all, all-in compensation should not be increasing.
Then the cluster-fun begins. The media will start broadcasting propaganda showing waiting rooms and hospitals of the PO system in disarray. Politicians will claim that it is discrimination for any doctor to reject PO insurance and will pass a law that disallows doctors that accept insurance to deny PO patients. The private system will now be combined with public and all medicine becomes public/private hybrid. Of course since we have a supply problem the system is further strained.
Meanwhile the rich of course will keep their doctors because they can just pay cash.
And because of the lack of funds there will be low PO payouts and more and more doctors will get out of medicine (career change and early retirement) and future candidates for MDs will seriously reconsider it as a career. The best of the best will consolidate and create the cash market and more doctors will migrate away from the PO. Maybe politicians will make private health practices illegal? Regardless, what ultimately will happen is long waits and rationing. Who knows, in order to curtail costs maybe we will get the death panel the right has been "misinforming" the public about.
Private insurers' profit margins will deteriorate because doctors will charge more for private to subsidize public. Customer migration to the PO and price controls will reduce revenues and will make managed health providers take huge losses from their traditional 4% profit margin. They go bankrupt. The public option will be a money pit because poor people won't pay anything and unhealthy people will contribute significantly less. Then the ones on the private plans will realize it makes no sense and all will get dumped on public and eventually evolve to UHC.
Fact Check
FACT: There were only 13 Health Insurance companies in the Fortune 1000 in 2008
FACT: There were only 7 Health Insurance companies in the Fortune 500 in 2008.
FACT: Health Insurance corporate profits accounted for less than 1% of the total U.S. healthcare expenditures in 2008.
FACT: The average profit margin for Health Insurance companies was a measly 3.3% in 2008.
FACT: These profit numbers are on course to stay roughly the same in 2009.
Healthcare debate: will the "public option" lower costs?
Wednesday, August 19, 2009
by
Ronestar
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1 comments:
All I hear is that this public option won't work, will fail, blah blah blah. How come I don't hear why the current system is failed?
Why don't I hear any analysis on why public-private system in other countries work? If it was so bad over there, don't you think their would be an uproar for reforms like there is here? Or maybe its a big conspiracy where evil socialist media in those countries don't report peoples' discontent about their healthcare plans, paid for by their own taxes?
Why don't we hear about the obvious and inherent conflict of interest in the current for-profit HMO system, where these companies act as both insurance and provider? Will addressing this issue in UHC discussion strengthen the need for reform in the healthcare industry?
What about people with pre-existing conditions who lose their jobs and no private insurance will cover them? What recourse do they have if they don't qualify for Medicare because of age or Medicade because of their respective states' laws? What is the compassionate conservative solutions to these real American problems? If you say these people are shit out of luck because of their genetics predisposition, maybe anti-UHC proponents should be more honest and make this principle clear to the American public so they are better informed on whether to vote for these compassionate conservatives in the next election.
You cite how insurance companies' profit margins are only 3.3%. In 2007, with record oil prices, Exxon Mobil profit margins were a measly 10%. This net margin stats is misleading b/c these companies are racket for the executives. Why didn't you include the compensation level of insurance executives relative to other non-levered industries (excl financials, REIT, commodities)? Will those stats nullify the net margin stats and perhaps paint a different picture on the cost dynamics of the private insurance industry?
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