September 18, 2009
A study recently published in the journal Health Affairs has confirmed what many have feared-that enrollment in a government-run health plan could cause premiums for private health coverage to skyrocket, as doctors and hospitals charge private patients more to compensate for low government reimbursements:
- The study followed up on earlier work conducted by independent actuaries at the consulting firm Milliman that found families with private coverage currently pay nearly $1,800 more in health costs to subsidize lower payments made by government-run health plans like Medicare and Medicaid, and attempted to extrapolate the impact of a new government-run health plan on both hospitals' finances and private health premiums.
- While the study found that enrolling previously uninsured individuals in a government-run plan paying Medicare reimbursement rates would not adversely affect hospital finances, it also concluded that any subsequent shift of individuals with private coverage into the government-run plan could have disastrous consequences on medical providers. If the government-run plan enrolled even one quarter of individuals currently with private coverage, hospitals' negative margins on patient care would rise by as much as 50 percent. And if a government-run plan reimbursing at Medicare rates plus 10 percent-more generous than H.R. 3200 as introduced-enrolled 75 percent of those with private coverage, the study "suggests a tripling of cost-shift pressures on [private] premiums."
- The study then attempted to use the government-run plan's impact on hospital finances to project how all providers would shift their costs from the government-run plan to private insurance carriers-and how premiums would rise as a result. The authors concluded that the cost-shift pressures could cause insurance premiums to skyrocket: For a family of four, "The range of increase would be...$3,024-$4,536 nationally."
- As significant as those potential increases are, the study's authors also assume that only about half of the losses stemming from lower government reimbursements would be passed on to private payers in the form of higher costs. If in fact hospitals and providers are unable to make the efficiency gains necessary to absorb 50 percent of the loss, cost-shifting-and private insurance premiums-could rise even higher than the study's projections.
Independent experts all agree that the legislation proposed would result in millions of Americans losing the coverage they have-the Congressional Budget Office believes several million, the Urban Institute up to 47 million, and the Lewin Group as many as 114 million. Given the results of this new study, many may question why Democrats insist on including a government-run health plan in their takeover of health care-since such a change could result in skyrocketing premiums for those individuals with the audacity to attempt to keep their current coverage.
For additional information, contact:
The House Republican Conference Policy Office