Why It Matters: A Strong Public Plan, Medicare Rates, and Affordability

Let’s start from the end. You want health reform. Republicans say they want it. The insurance industry wants it. People who pay individually for health insurance want it - they can’t afford coverage. People with insurance want it – they too often have their claims denied – 1 in 5. 44,000 people die every year because they are uninsured. Medicare is going broke because prices are going up outside of the Medicare system, and lots of families are going bankrupt for the same reason.

To put the middle in the middle: Getting there means finding 218 members of the House of Representatives, plus 51 Senators, to convince the White House they will vote for reform.

Keeping it there after it passes means we all need to be able to afford it, and still get the care we need.

Here is the part to nail down this week: A strong public option, that pays Medicare rates and uses Medicare providers, is the only way to make the plan affordable.

There are 2 parts to making insurance affordable. The first part is limiting how much we pay providers – hospitals, doctors, drug companies. Basing payments on Medicare rates is the key here.

The second part is making sure these limits get passed back to you, in the form of lower insurance company premiums.

We need a strong public option for both.

The Congressional Budget Office says using Medicare rates saves $110 billion over 10 years, $85 billion more than a public option that doesn’t use Medicare rates.

Medicare already establishes payment rates to hospitals and doctors on behalf of 40 million Americans. These rates are accepted by all hospitals and most doctors, but aren’t susceptible to the hyper-inflation that has driven prices in the private sector over the last 10 years. Adding millions of enrollees to this system will help put the brake on payment rates.

So if the public plan limits payments to providers, how will that translate into lower premiums? The public plan won’t pay profits or bonuses, and will benefit from lower overhead than private plans. All the savings go right back to you, in the form of lower premiums.

Private insurance companies on the other hand can charge whatever they want, even if they are paying providers less. They have to charge higher premiums, to pay their shareholders and executives. This is true even if they paid less to hospitals and doctors – they have no reason to pass those savings on to you, in the form of lower premiums, and every reason to just do what they always do: hold onto the money themselves. Unless, of course, they have to compete with a public plan.

A public plan will charge lower rates, be affordable for people who need care, and set a standard on prices that both providers and insurance companies will have to compete with.

Will doctors still treat you if you are on the public plan, even if it pays less than private plans? For those who think Medicare rates are too low, the version of the public option linked to Medicare rates gives plenty of flexibility. First, we’re not talking about today’s Medicare rates. The bill will require changes in rates to address regional differences, including adjustments for rural areas, and ways to promote quality. Second, it provides an extra 5% (Medicare +5) for individual providers. Third, it allows any provider to opt out – and the decision can be made (and reversed) each year. Finally, it gives the HHS Secretary authority to go higher than Medicare rates if necessary to attract doctors, hospitals and other providers based on local conditions.

Why not negotiate the rates the new public plan will pay providers? Simple: They'll be higher. That's why providers and insurance companies want them. A new plan, with new enrollees, needs to build on the strongest platform we have. That's improved Medicare rates, with a cap of 5% extra. (Even a public plan with negotiated rates saves $25 billion more than relying solely on private insurers.)

Again: A public plan will charge lower rates, be affordable for people who need care, and set a standard on prices that both providers and insurance companies will have to compete with.

So here we are with the beginning for this week:

We need a public plan.
That pays Medicare rates plus 5%.
And includes Medicare providers.

Pass it on to 218 of your friends in the House, and 51 Senators.