Patterico's Pontifications

8/22/2009

AP: Government Care Will Promote Competition

Filed under: Obama — DRJ @ 3:55 pm



[Guest post by DRJ]

Turning the theory of capitalism on its head, this AP article highlights ObamaCare supporters who claim subsidized government care will promote more competition:

“Proponents of a government plan say it could restore a competitive balance and lead to lower costs. For one thing, it wouldn’t have to turn a profit.

A study by the Urban Institute public policy center estimated that a public plan could save taxpayers from $224 billion to $400 billion over 10 years by lowering the cost of proposed subsidies for the uninsured, while preserving private coverage for most people.

“Right now, there’s no incentive for insurers or big hospital groups to negotiate with each other, because they can pass higher payments on through premiums,” said economist Linda Blumberg, co-author of the report. “A public plan would have the leverage to set lower payment rates and get providers to participate at those rates.”

“The private plans would come back to the providers and say, ‘If you don’t negotiate with me, you’re going to be left with only the public plan.'” Blumberg continued. “Suddenly, you have a very strong economic incentive for them to negotiate.”

Targeting insurance companies because they earn profits? Health care profit margins are far down the list — #86 according to University of Michigan Professor Mark Perry — which means 85 other industries should be targeted first. (Of course, Obama is targeting some of them, too.)

But if we assume the AP article is right that health care providers will agree to reduce costs, this is government forcing health care providers to accept lower payments. In my experience, that will leave providers with three choices:

  • Keep providing the same service for lower rates and wages;
  • Cut back on services in response to lower payments; or
  • Leave the market.
  • Of course, some altruistic people will provide more services for reduced rates but most won’t, which will leave society with fewer caregivers and less care. And, as Prof. Perry mentions, another approach would be to reduce regulations that prevent or make it harder for insurance companies to compete:

    “And isn’t one reason for a lack of competition that competition for health insurance across state lines is prohibited, creating in effect 50 state health insurance “cartels.”

    That sounds too much like a conservative solution so there’s no hope that will happen.

    — DRJ

    47 Responses to “AP: Government Care Will Promote Competition”

    1. Sheesh, this is unbelievable logic.

      SPQR (26be8b)

    2. “A public plan would have the leverage to set lower payment rates and get providers to participate at those rates.”

      duh…. the public plan can set lower rates because the government will simply make up the shortfall through taxes.

      she’s lucky breathing is autonomic, ’cause i doubt she’s smart enough to do it on her own.

      redc1c4 (fb8750)

    3. “A public plan would have the leverage to set lower payment rates and get providers to participate at those rates.”

      We already have some experience with plans like these. They’re call Medicare and Medicaid. A quick Google search:

      “Medicaid reimbursement rates continue to lag behind costs, with some states posting shortfalls nearly 20 percent of what they need to make ends meet, according to a new survey by BDO Seidman.”

      “Declining Medicaid reimbursement for physician services has significantly influenced the financial stability of Temple University Physicians. Medicaid reimburses TUP at approximately 30 percent of costs, creating a significant reimbursement shortfall.”

      “In 2008, for every dollar of allowable cost incurred for a Medicaid patient, the Medicaid program reimbursed approximately 93 cents.”

      “States continue to rely heavily upon provider taxes to fund nursing home reimbursement.”

      “The poor economy is causing hospitals and clinics to see a dramatic increase in uninsured, underinsured, Medicaid and uncompensated care, said Kevin Vernier, director of Contracting and Network Development Healthcare Resources NW, a service of Adventist Health.
      “This is forcing hospitals to ask for more reimbursement from commercial payers in order to make up the difference,” he said.
      Cole called it “cross subsidy.”
      “It’s a hidden tax,” he said.
      “Medicare pays 87 percent of the cost of a procedure, while
      Medicaid pays only 74 percent, Cole said.”

      My only quibble with your post: We don’t need to ask what happens, because we already know. Providers leave the market, limit exposure to the low-paying options, and stop practicing.

      The fundamental problem with assuming that “more efficiency” or EMRs or what-have-you will lower costs is that medicine and surgery are time-consuming. I can only see a certain number of patients per hour, I can only do a certain number of procedures per day. Cutting my reimbursement below what it costs to run the office simply puts me out of business – it doesn’t make me more streamlined.

      orthodoc (ab7cd7)

    4. The same reporter in another story depicted Obama as a centrist among Democrats.

      Now it’s become the dividing line. Most Democrats insist any legislation must include the choice of federal coverage, while nearly all Republicans view it as a step toward a government takeover. President Barack Obama, eager to get a bill that can pass Congress, seems to be squirming in the middle.

      No mention is made of Obama’s long-time support of universal health coverage and single-payer.

      Brother Bradley J. Fikes, C.O.R. (0ea407)

    5. Good catch, Bradley.

      SPQR (26be8b)

    6. orthodoc:

      My only quibble with your post: We don’t need to ask what happens, because we already know. Providers leave the market, limit exposure to the low-paying options, and stop practicing.

      I think that’s true for most doctors and some other providers, but I’m not sure it’s true across-the-board. In my experience, providers such as home nursing services are constantly honing their client base to weed out less profitable patients, although some have a surprising definition of “less profitable.” For instance, I’ve had nursing agencies refuse to serve one of my family members even though we have higher-paying private pay insurance, because their billing staff is only trained to process Medicaid and Medicare claims. They are willing to take less money over a longer period of time to avoid hiring more billing staff. It makes sense in theory but it doesn’t appear to work in practice.

      In addition, not every health care provider can afford to quit or change careers so some unprofitable businesses and providers hang on for some time via multiple job changes, refinancings and bankruptcies. And it’s not uncommon for the same people who ran those failing businesses to end up in charge of other new health care provider businesses, too. Will they go belly-up in the long run? Almost certainly, but the long-run can be a very long time.

      DRJ (3f5471)

    7. Bradley,

      You are always the source of a wealth of information … and I suspect Obama is a centrist in this reporter’s circle.

      DRJ (3f5471)

    8. Cutting my reimbursement below what it costs to run the office simply puts me out of business – it doesn’t make me more streamlined.

      Sure it does…

      If you close up shop, that’s less paper work for the Govt.

      See? Streamlined!

      Scott Jacobs (d027b8)

    9. ““Right now, there’s no incentive for insurers or big hospital groups to negotiate with each other, because they can pass higher payments on through premiums,” said economist Linda Blumberg, co-author of the report.”

      That’s some fuzzy logic there Linda and symptomatic of why liberals have a hard time understanding business. When businesses put their health plans out for bid at renewal (Linda must assume they just accept the renewal quote offered and don’t seek competing bids), how does she think competitors are able to differentiate themselves on price if they don’t have an incentive to negotiate the best prices with providers and the providers to offer the best prices to those insurers to generate a given volume of patients. Linda seems almost as obtuse as imdw.

      daleyrocks (718861)

    10. and I suspect Obama is a centrist in this reporter’s circle.

      If Obama is a Centrist compared to the reporter’s circle of friends, who would be to the left of them?

      Pol Pot?

      Scott Jacobs (d027b8)

    11. “If you close up shop, that’s less paper work for the Govt.”

      Scott – That’s one reason administrative costs are so low for Medicaid and Medicare compared to private insurance!!!11ty!!!

      /sarc/

      daleyrocks (718861)

    12. Their view of “competition” is absolutely divorced from reality.

      And you are all racisty racist what act like racists.

      JD (9f8068)

    13. Scott, Rosa Luxembourg.

      SPQR (26be8b)

    14. Speaking of racists…

      JD, you still wanting to head to the Sept 12th rally in Quincy? I’m bringing a laptop and digital video camera for youtube uploads. 🙂

      Scott Jacobs (d027b8)

    15. How much competition did Los Angeles County King-Drew Medical Center create?

      Michael Ejercito (833607)

    16. ObamaTards would have an easier time pushing this through is they simply said

      1. We think Health Care should be FREE.

      2. Gov.t will Nationalise all Medical Insurance under the Medicare model.

      3. We will pay for this with taxes.

      4. All US Citizens are part of it.

      HeavenSent (01a566)

    17. Holy horse s**t!! How many dumb pills do you have to ingest on a daily basis to be that dense? How is that “public option” called Medicare and Medicaid working right now? There already is a 5.4% tax on wages right now for that monstrosity and it cannot pay costs for procedures and is already bankrupt. The list is growing daily of care providers that will no longer accept M&M patients.

      Since that is such a success, let’s ramp it up and take the other 50% that carries private insurance by inducing employers to drop their sponsored coverage by simply undercutting the premium costs, mandate that private policies cover pre-existing conditions from a shrinking healthy pool and then see how long they stay in business.

      Oh, yeah, we also need to tax individuals simply because they exist! Or you could call it a tax on breathing!

      I predict that we would see the fastest decline of an industry since buggy whips faded when Henry Ford opened his first plant.

      rls (e58293)

    18. http://news.bbc.co.uk/2/hi/health/8214713.stm

      I loved this one … the wonders of socialized medicine.

      HeavenSent (01a566)

    19. DRJ,
      You are always the source of a wealth of information … and I suspect Obama is a centrist in this reporter’s circle.

      *blush*

      Brother Bradley J. Fikes, C.O.R. (0ea407)

    20. Linda Blumberg: In her circle of friends, Leon Trotsky would have been a raging, right-wing fanatic.

      AD - RtR/OS! (48b300)

    21. No can do, taking clients to the Ohio St/ USC football game.

      JD (7cdb18)

    22. I’m trying to think of any other area where we have introduced a government-subsidized competitor that would serve to lower the price of the private competitor.

      There are public and private schools, but public schools don’t force private schools to have lower rates. Look at Sidwell Friends or Stanford University.

      Ok. I can’t really think of anything else. Can anybody? Where did this idea come from? And why is it suddenly the only thing that makes sense?

      MayBee (c0e046)

    23. MayBee – The trend is to privatize or contract out government operations to make them more efficient and save money, not the reverse. Obama’s approach defies logic unless savings will achieved through rationing, price controls and other mechanisms of government fiat and even then they are questionable. People are not stupid and understand this. It’s about control for Obama.

      daleyrocks (718861)

    24. Maybee,

      There is an argument that the Euro-subsidized Airbus forced Boeing to cut costs:

      Faced with aggressive spending by Airbus – estimates of the A380 cost range as high as $20 billion – Boeing executives have been forced to concentrate on the 7E7, the replacement for the 777. Even in that segment the Boeing board has set tough targets, requiring the 7E7 to be designed for no more than 40 percent of the cost it took to develop the 777, and built at no more than 60 percent of the earlier model’s cost.

      It’s not directly analogous but it’s still informative. Specifially, Boeing’s cost reductions may have come at a steep price since there is “concern that Boeing is not making the investment necessary to keep up with Airbus.”

      DRJ (3f5471)

    25. DRJ – The Airbus example is interesting to think about, but as you indicate, not directly analogous. It crosses national boundaries and governments.

      daleyrocks (718861)

    26. Just when the bank failures were starting up last year (spurred intentionally by Chuck Schumer IMHO, but that’s another story) and in the thick of the campaign, I was in a cubicle next to a die-hard dyed-in-the-wool Pelosi Democrat who said she was hoping for universal health care like Obama promised.

      I replied that it would devastate the health insurance industry. Her quick knee-jerk response: “Who cares?” Me: “We ALL should — how many millions of jobs would be lost?”

      Her: [silence].

      L.N. Smithee (00c1ad)

    27. DRJ “In addition, not every health care provider can afford to quit or change careers so some unprofitable businesses and providers hang on for some time via multiple job changes, refinancings and bankruptcies. And it’s not uncommon for the same people who ran those failing businesses to end up in charge of other new health care provider businesses, too. Will they go belly-up in the long run? Almost certainly, but the long-run can be a very long time.”

      Agreed; it’ll probably take 1-2 decades to get to the point where there are obvious shortages. That’s certainly my experience from Quebec, Canada – the pipeline for physician training is so long that stupid decisions made in the early 90s (cutting med school spots, paying senior MDs to retire early, and refusing to issue billing numbers to new MDs trying to practice in metro areas) are coming to a head now, where it’s essentially impossible to find medical care in Montreal unless you’re almost in extremis.

      Of course, by then the architects of said disaster are retired, promoted, and/or writing their memoirs….

      orthodoc (ab7cd7)

    28. Here’s an Airbus analogy:

      Nearly 1,000 aircraft from the A330/340 series of long-haul airliners are in service. None had killed a passenger before. However, pilots and experts focused on what some see as a fatal chain of events that highlights flaws in the highly automated flight system on Airbus airliners.

      In modern aircraft, particularly the ultra-automated Airbus family, pilots have less direct control. With defective computers in the heart of a tropical storm, the crew of the stricken Air France jet may have lacked the information to keep it flying.

      So Airbus performs fine as long as there’s no problems outside the ordinary – Just don’t get caught in a storm in one, or so I’ve been informed by numerous pilots. (If it ain’t Boeing, I’m not going.)

      In other words, the plane is programmed to respond in a specific way to a specific set of circumstances by people far away from the actual flight conditions. The individuals (pilots) at the scene have control removed from them because a committee somewhere believes it understands every possible maneuver necessary to fly in every possible situation. When this fails, people die.

      I can’t think of a better analogy for Obama’s healthcare takeover.

      Apogee (e2dc9b)

    29. I don’t remember hearing of the Urban Insitute ever, so I went to its website. Here’s what’s found in the “About Us” section:

      Our History
      In the mid-1960s, President Johnson saw the need for independent nonpartisan analysis of the problems facing America’s cities and their residents. The President created a blue-ribbon commission of civic leaders who recommended chartering a center to do that work. In 1968, the Urban Institute became that center.

      L.N. Smithee (00c1ad)

    30. DRJ-
      That is indeed an interesting example. I’m going to assume, though, that AirBus wasn’t introduced to push Boeing’s prices down and make it competitive, but would instead be happy to drive it out of the market.

      Governments often subsidize industries to knock out the products of other countries (look at China!).
      Imagine China telling us they are subsidizing their exports to keep our companies competitive.

      MayBee (c0e046)

    31. Legendary civil libertarian Nat Hentoff has something to say about ObamaCare — it frightens him.

      I was not intimidated during J. Edgar Hoover’s FBI hunt for reporters like me who criticized him. I railed against the Bush-Cheney war on the Bill of Rights without blinking. But now I am finally scared of a White House administration. President Obama’s desired health care reform intends that a federal board (similar to the British model) — as in the Center for Health Outcomes Research and Evaluation in a current Democratic bill — decides whether your quality of life, regardless of your political party, merits government-controlled funds to keep you alive. Watch for that life-decider in the final bill. It’s already in the stimulus bill signed into law.

      Brother Bradley J. Fikes, C.O.R. (0ea407)

    32. As for health care profits- a quick reminder that last year at this time Obama wanted to go after Oil Company profits. He proposed an excess profit rebate that would go to people and then be paid for by windfall profit taxes over the next 5 (?) years. He seems to operate on the principle that profits are for the people to share(but not book royalties!).

      I’d imagine Obama would look at the list of 85 industries with more profit than insurance, and consider it a ‘to do’ list.

      MayBee (c0e046)

    33. MayBee – Was trying to email you. It keeps getting kicked back to me. I am beginning to think there is someone else in your life 😉

      JD (2e1461)

    34. Oh no, JD! I don’t know why that is happening!
      When did this start?

      MayBee (c0e046)

    35. Message me on facebook. I can’t hide from you there. 🙂

      MayBee (c0e046)

    36. Brother Bradley- President Obama no longer wishes to discuss those panels. They have become a lie and a distraction and possibly an outrage. A good citizen would turn Henthoff in to fishypatrol@whitehouse.gov.

      MayBee (c0e046)

    37. Maybee,

      Agreed, but I didn’t say it was an analogy that would help Obama!

      Apogee,

      The pilots in my family express the same concerns about Airbus, especially the use of composites in the vertical fin, rudder and elevators. And they are consistently known to say, “If it ain’t Boeing, I’m not going.”

      DRJ (3f5471)

    38. MayBee – Just today. Prolly the fact is am quite a way from civilization.

      JD (2e1461)

    39. The primary problem with the Airbus series is that the flight computer WILL NOT allow the pilot to take control of the aircraft in an emergency situation – it will only allow the controls to be manipulated in a manner that is consistent with its’ program. This conflict has caused more than one crash of test aircraft, with the loss of many lives. It is a completely fly-by-wire aircraft with no physical link between the flight deck and the control surfaces or engines.

      AD - RtR/OS! (48b300)

    40. MayBee – Just today. Prolly the fact is am quite a way from civilization.

      You’re in Canada?

      Scott Jacobs (d027b8)

    41. Tennessee?

      daleyrocks (718861)

    42. Odd that, given the fondness of progressives for figures, they shy away from giving us a figure for these proposed subsidies to the uninsured. HR 3200, as I understand it, will allow a family of 4 to earn up to $88,000 a year, and still be eligible for a subsidy.

      The AP article is typically mixing apples and oranges. In addition to the usual flack about “excessive” insurer profits, we are invited to reflect upon excessive provider profits. There can be little doubt that some serious “overutilization” issues require attention. It is intolerable that the healers of Mcallen, Tx, should be billing Medicare, per patient, almost twice as much as the national average (Atul Gawande, The Cost Conundrum, New Yorker, 6-01-09.) Medicare and Medicaid, rather than develop mechanisms to control “overutilization” and billing abuses (why on earth should physicians be allowed to own diagnostic clinics?) have chosen to rain down cuts upon the just and unjust alike. This has given us a situation where the more ethical are withdrawing from Medicare practice altogether. And I don’t see anything in HR 3200 to take this bull by the horns.

      It’s all just a smokescreen, to obscure the excruciating costs of these individual subsidies.

      Flint (6fdd8d)

    43. NO CO-OP’S! A Little History Lesson

      Young People. America needs your help.

      More than two thirds of the American people want a single payer health care system. And if they cant have a single payer system 77% of all Americans want a strong government-run public option on day one (86% of democrats, 75% of independents, and 72% republicans). Basically everyone.

      Our last great economic catastrophe was called the Great Depression. Then as now it was caused by a reckless, and corrupt Republican administration and republican congress. FDR a Democrat, was then elected to save the nation and the American people from the unbridled GREED and profiteering, of the unregulated predatory self-interest of the banking industry and Wallstreet. Just like now.

      FDR proposed a Government-run health insurance plan to go with Social Security. To assure all Americans high quality, easily accessible, affordable, National Healthcare security. Regardless of where you lived, worked, or your ability to pay. But the AMA riled against it. Using all manor of scare tactics, like Calling it SOCIALIZED MEDICINE!! :-0

      So FDR established thousands of co-op’s around the country in rural America. And all of them failed. The biggest of these co-op organizations would become the grandfather of the predatory monster that all of you know today as the DISGRACEFUL GREED DRIVEN PRIVATE FOR PROFIT health insurance industry. And the DISGRACEFUL GREED DRIVEN PRIVATE FOR PROFIT healthcare industry.

      This former co-op would grow so powerful that it would corrupt every aspect of healthcare delivery in America. Even corrupting the Government of the United States.

      This former co-op’s name is BLUE CROSS/BLUE SHIELD.

      Do you see now why even the suggestion of co-op’s is ridiculous. It makes me so ANGRY! Co-op’s are not a substitute for a government-run public option.

      They are trying to pull the wool over our eye’s again. Senators, if you don’t have the votes now, GET THEM! Or turn them over to us. WE WILL! DEAL WITH THEM. Why do you think we gave your party Control of the House, Control of the Senate, Control of the Whitehouse. The only option on the table that has any chance of fixing our healthcare crisis is a STRONG GOVERNMENT-RUN PUBLIC OPTION.

      An insurance mandate and subsidies without a strong government-run public option choice available on day one, would be worse than the healthcare catastrophe we have now. The insurance, and healthcare industry have been very successful at exploiting the good hearts of the American people. But Congress and the president must not let that happen this time. House Progressives and members of the Tri-caucus must continue to hold firm on their demand for a strong Government-run public option.

      A healthcare reform bill with mandates and subsidies but without a STRONG government-run public option choice on day one, would be much worse than NO healthcare reform at all. So you must be strong and KILL IT! if you have too. And let the chips fall where they may. You can do insurance reform without mandates, subsidies, or taxpayer expense.

      Actually, no tax payer funds should be use to subsidize any private for profit insurance plans. So, NO TAX PAYER SUBSIDIZES TO PRIVATE FOR PROFIT PLANS. Tax payer funds should only be used to subsidize the public plans. Healthcare reform should be 100% for the American people. Not another taxpayer bailout of the private for profit insurance industry, disguised as healthcare reform for the people.

      God Bless You

      Jacksmith — Working Class

      Twitter search #welovetheNHS #NHS Check it out

      (http://krugman.blogs.nytimes.com/2009/07/25/why-markets-cant-cure-healthcare/)

      (http://www.youtube.com/watch?v=IbWw23XwO5o) CYBER WARRIORS!! – TAKE THIS VIRAL

      jacksmith (7f2f61)

    44. Interestingly, healthcare information services is #24 on the list. Yet, President Neophyte wants to increase this sector. Maybe they should take a pay cut, because they are robbing the American people blind. Or, have they just been big Obama donors?

      Anyhow, remember what happened with drug companies when the government started getting heavily involved, as well as allowing frivolous lawsuits? Yup, less drug companies. Higher research costs. Less competition. And then Obambi comes out and blames Big Pharma for wanting to make money.

      William Teach (d23c01)

    45. So do the ALL CAPS MESSAGES help get your point across? Because I’m not really sure what you were trying to say.

      steve miller (c5e78c)

    46. My brother in law, who flies for American, calls the Airbus, the “scarebus.” He also says,”If it’s not Boeing, I’m not going.” He is also planning to quit soon. The airlines will see a trend that health care is about to see. The ex-military pilots are all looking for alternate careers as he has seen a 40% pay cut in five years. Soon the major airlines will have the flight school, low hours pilots flying the major routes and the big planes instead of the commuter flights like the one that went into Buffalo last winter where neither the pilot or the co-pilot knew how to operate the de-icing gear.

      I was off having a life the past few days.

      Doctors, unlike pilots, can do a private alternative that even the government cannot ban, as is seen in Canada the past couple of years. They will opt out and even a ban on private practice will not work for ling.

      Mike K (2cf494)


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