As Bob Laszewski points out here.
This is just a bad idea on so many levels, and you need to stop and think about the implications. This means hospital reimbursements will crumble. Hospitals who are struggling will close. Hospitals who aren't, will still have to drastically reduce services offered. This pay cut won't just affect physicians. Hospitals will be faced with an unpleasant, and possibly unsafe choice.
1. Cut staff by 20-30%, not ideal, and could lead to patient safety issues.
2. Cut staff salaries by 20-30%...can we say revolt? Also, it's one thing to cut a spine surgeon's salary who is making 850k by 20%, but quite another thing to take an RN making 50k and cut her salary by 10 thousand dollars. And anyone who knows ANYTHING about hospitals will know that they will. They will do everything possible to keep the physicians happy and keep patients flowing through the doors, yet the nurses, and floor workers will get SCREWED.
Initially, the report indicates that reimbursements will only fall 5-7%, but that is only in 2010, as the program progresses, and more people switch to the "government" plan, and abandon private insurance, the reimbursements will fall even more. Private insurers will need to reduce their payments or raise rates dramatically to make up for the loss of volume. This will have an economic tsunami effect, and patients will suffer for it.
I understand Mr Obama's intentions, and I think they are admirable, but this is just not the right way to go about this. Cost controls need to be implemented, and those providers/institutions who are billing fraudulently, and/or providing unnecessary services SHOULD see their reimbursements cut, but this will create a blanket effect, that will affect everyone.
Basically, there are better ways to go about this.
Oh yeah, and Bob's right, what the hell is up with democrats wanting a two-tiered plan? I thought that was anathema to them?
The respected and non-partisan Lewin Group recently issued a report evaluating the idea, “The Cost and Coverage Impacts of a Public Plan: Alternative Design Options.” It looks to me to be a credible job. They made the assumption providers would be paid at Medicare rates—a logical conclusion if the objective is lowering costs.
Among Lewin’s findings:
“If the public plan is opened to all employers…at Medicare payment levels we estimate that about 131.2 million people would enroll in the public plan. The number of people with private health insurance would decline by 119.1 million people. This would be a two-thirds reduction in the number of people with private coverage (currently 170 million people).”
The study also examined what the proposed plan might do to provider reimbursement rates. Lewin says that if current Medicare payment rates were to be used for a public plan option, physicians would see their net income drop by $33 billion (-7%), and hospitals would see their revenue fall by $36 billion (-5%) in just 2010.
“If Medicare payment levels are used in the public plan, premiums would be up to 30 percent less than premiums for comparable private coverage. On average, the monthly premium in the public plan for a typical benefits package would be $761 per family compared with an average of $970 per family in the private market for the same coverage.”
“If as the President proposed, eligibility is limited to only small employers, individuals and the self-employed, public plan enrollment would reach 42.9 million people. The number of people with private coverage would fall by 32.0 million people. If private payer reimbursement levels are used by the public plan, enrollment would be lower, with only 10.4 million people switching to the public plan from private insurance.”
Medicare premiums would be lower than private premiums because of the exceptional leverage Medicare has with providers. Medicare pays hospitals about 30 percent less than private insurers pay for the same service. Physician payments are about 20 percent less than under private coverage. Also, because Medicare has no allowance for insurer profits or broker/agent commissions, administrative costs for this population are about one-third of administrative costs in private health plans.
This is not a good idea. I am for a realignment in payment structures, and providing primary care physicians with better reimbursements. I am also for reducing the reimbursement for certain procedures which are obscenely reimbursed when compared to others, but a 20-30% reduction across the board will cause many struggling hospitals to simply close their doors. Physicians will bail en masse. It would not be pretty, and I'm afraid, would be unsustainable. It's one thing to talk about reducing ALL salaries by 2-5%, it's one thing to reduce outrageous reimbursements that allow some specialists to make 7 figures, but it's a whole nother thing to take a primary care physician who is making 150 per year, and tell them that their salary is going to drop by 30k per year.
Here's a link to the Lewin Report if interested.