Kevin Knauss, Independent Health Insurance Agent.
First, let me clear that I support the concept of a single payer plan for health insurance coverage. It has worked relatively well for Medicare beneficiaries and a similar concept could be mirrored nationwide. However, proponents of Senate Bill 562, the single payer legislation, are long on promises and short on details. If we have learned anything from the launch of Covered California to serve as the market place for ACA health insurance it is that the best laid plans are far harder to execute than anyone could imagine.
The best illustration of the marketing hype for SB 562 comes in the form of an editorial by Deborah Burger, co-president of the California Nurses Association, published in the Sacramento Bee, June 7th. In Burger’s viewpoint titled Health-care-for-all can work, and it will cost you less, she offers all the projected upsides of single payer without mentioning any of the nitty-gritty details. One of the glaring omissions of SB 562 is the actual bureaucratic structure and implementation of a massive bureaucracy to administer a single payer program.
Burger claims a family’s health care costs would drop by up to 9%. But she also mentions the sales tax would increase by 2.3% to pay for the administration and claims of a single payer plan. Nothing in life is free.
She touts businesses would see the cost of their health care benefits drop by 6% to 22%. But there would be a new 2.3% tax on gross receipts on businesses. This might actually be a larger cost to businesses than the health benefits. Plus, employee health insurance premium contributions are pre-tax. This means the employee’s pay would increase, but their withholding amounts would also increase.
Is Single Payer PPO or HMO Plan?
She states, “One medical card would ensure you could go to the doctor, hospital or clinic of your choice.” But in her viewpoint she also states, “And patient care would improve through a coordinated, more rational system based on primary and preventive care.” In her first argument she paints the picture that single payer is a big PPO plan. But her second argument points to a HMO style of health plan. In an effort to contain and drive down the costs of Medi-Cal, California counties track people into HMO plans where the care is coordinated. Kaiser has been able to limit their rate increases because they are an HMO and coordinate the care of their members.
The proponents are sadly mistaken if they think the majority of medical groups and hospitals will just accept Medi-Cal low reimbursement rates for all their patients. Providers, such as doctors, hospitals, and therapists, realize several different reimbursement rates for the same service they provide. There is the lowest for Medi-Cal, then Medicare, next are individual and family plans, and finally small and large group reimbursement rates. The different provider groups and hospitals manage their budgets with the understanding that for the exact same service they will receive different reimbursements.
The trick is to have the right mix of higher reimbursement rate patients relative to lower reimbursement rate consumers. Hence, that is why we see doctors showing as in-network for a health plan, but they have stop accepting new patients because they can only have so many lower reimbursement patients in the mix.
Blue Shield of California dropped Stanford Health Care from all their insurance plans. Why? One reason is that Stanford wanted reimbursement rates that were higher than what Blue Shield was paying other providers. Blue Shield has been in several public fights with the Sutter hospital and medical groups over the reimbursement rates. If you want a Sutter doctor in an individual and family plan through Covered California, Blue Shield is the only plan that has them in-network. The other carriers don’t want to pay the high reimbursement rates that Sutter demands.
If the vision of the California single payer system is it will be giant PPO plan where people can go where ever they want, where do you think they will go? They will go to the most prestigious and name brand hospitals and doctors. Why would people, currently on Medi-Cal and visiting a downtown urban health clinic, not flock to Stanford, Cedars Sinai, UCLA, or any other prestigious health care providers?
What make Ms. Burger think that Stanford, Sutter, Cedars Sinai, Hoag, and many other hospital and medical groups that are commanding a premium for their services will suddenly acquiesce to lower reimbursement rates and be flooded with patients at the same time?
Hospitals in rural areas that have a large proportion their revenue derived from Medi-Cal reimbursement rates have a tough time keeping the doors open. Many of these provider groups just can’t alter their business plans and budgets when single payer comes along and drops the overwhelming majority of their revenue down to Medi-Cal levels. I suppose one option would be to pay the nurses less money to balance their budgets.
Burger also states that insurers reject one-fourth of all health care claims. She says, “That would be a thing of the past.” Rejected claims aren’t always because the insurance companies are trying to save money. Ms. Burger, have you ever heard of fraud, waste, abuse? Some of these claims are denied because some providers try to game the insurance system through billing for extra services, non-authorized services and fraudulent invoicing. That won’t stop with single payer and may only increase. There are also billing code errors that lead to a claim being rejected. Finally, people try to submit claims for services that are not covered by health insurance such as plastic surgery or fertility treatments.
Where Are The Plan Details For California Single Payer?
When you decide to build a house, you don’t do it based on a picture in a magazine. You need a plan. You need detailed drawings of the framing, roof, plumbing, electrical, and HVAC system. You need to understand how you are going to hire and pay the contractors, how you are going to finance the construction, and perhaps most importantly, how the family will actually live in the house.
Covered California spent over $200 million dollars to build their online software program to enroll people into ACA health plans. In 2013, after it was launched, it virtually crashed with bugs. To the credit of Covered California they worked diligently to get the enrollment system up and running and the 2015 open enrollment period was much smoother. But there were larger issues with Medi-Cal, The 58 California counties along with the Department of Health Care Service were not prepared to handle the influx of new Medi-Cal eligible individuals and families. This created months of nightmares for thousands of families.
My point with the Covered California experience creating a new online market place for health insurance is that a bureaucratic undertaking to enroll 1.3 million consumers in private insurance and another 3 million in Medi-Cal was not easy. The envisioned single payer plan for California would be dealing with 40 million people in the state. All Covered California was trying to do was sell health insurance and apply any Advance Premium Tax Credits to the consumer’s enrollment.
The single payer plan will attempt to take over the functions of every health insurance company and health plan for enrollment, processing claims, negotiating reimbursement rates, and regulating drug prices. This makes building the Delta Twin Tunnels or High Speed Rail look easy.
It is just false advertising to lead Californian’s to think that rolling out a single payer plan will be all chocolate and roses, especially without a detailed plan for its implementation. The proponents are fond of promoting the fact that all private health insurance will go away. No! The state is supplanting the role of health insurance companies. A single payer plan, just like Medicare, is still a giant insurance pool of people and must be managed accordingly. That means claims will be denied. It means that not all doctors and hospitals will participate. It means that the people who have the money will seek care from a doctor or hospital that is not overwhelmed with patients.
The proponents of SB 562 are blind to the basic economic principles governing consumer behavior and they have conveniently ignored the infrastructure needed to put a single payer plan into reality. I know that they like to throw up the argument that health insurance companies may make too much money and the CEOs get large bonuses. But have they stopped to consider the cost of state employee payroll and pension plan benefits for those employees working on the single payer administration? No they haven’t.
Has there been any consideration that California would become a magnet for people in other states that can’t get health insurance? Aunt Betty and Uncle Bob will gladly let their nephew sleep on the couch, make their home his residence, so he can get free health care. In between his doctor visits, which actual California residents will be paying for, he can take trips to Lake Tahoe and Disneyland. This will be the new medical tourism in California.
A single payer plan could operate and function in California. But not with SB 562. We need a real plan. We need a design. We need to know the structure of the actual health plan and how people will use it. Not some fairytale that you can see any doctor you want. We need detailed plans on how the bureaucracy will be built with the different functions of claims, reimbursements, enrollment, providers, and this drug price negotiation scheme. And we need a time line. It will take a minimum of two to three years, once approved by the voters, to be actually implemented. But the proponents of SB 562 lead Californian’s to believe it will happen next month.
If the California Nurses Association wants Californian’s to support a single payer plan, show us the detailed blueprints of how they think it will work. If they can’t design the system from the ground up and present it to us, then they are not qualified to propose a single payer plan for California.
Medicare Advantage Health Plans As Blueprint For Replacing Affordable Care Act