Healthcare Reform and Medicare Coverage
While most everyone believes we need healthcare reform, including columns since 1990 by this writer, care must be taken not to ruin the good aspects of our current system.
Our current healthcare system works reasonably well and there is not enough room in this column to coverage all aspects of this system, so this column will detail one aspect this month. That aspect is called “cost shifting”.
For those on Medicare are often amazed when they find that Medicare has approved such a small amount of a medical expense. To keep this explanation simple, let’s say a provider charged $10,000 for a medical procedure. It is not uncommon that Medicare may approve (dollar amount their fee schedule allows) only 20 – 30% of an expense. So, if Medicare approves $2,500 and pays 80% of that expense, most often the provider could only bill his/her patient $2,500 (the amount Medicare approves).
However, as a business matter, the provider may need $5,000 on each of these procedures to pay his/her business costs (e.g. his employee wages, taxes, mal-practice insurance etc). So how does the provider make up this deficit to run his/her business? The provider would shift costs – or raise the cost for his/her patients that are privately insured.
Continuing with this example, if a person not on Medicare and privately insured incurs that same procedure, he/she would be charged the same $10,000. That person’s private insurance company may have negotiated a price of the procedure to 80% of the actual charge, so the provider would then receive a total of $8,000. When these reimbursements are averaged together the provider makes the money he/she needs to keep providing medical services to patients.
On the date this column is written, our government is considering allowing people age 55 – 65 to go onto Medicare. Is that a good idea? In many cases, Medicare sets its fee schedules below a provider’s cost of doing business. Therefore, what will be the effect?
Our government’s budgetary people say that Medicare is only solvent until 2017. Adding people 55-65 would hopefully add a number of healthy people to the Medicare system and hopefully extend this date of solvency. However, the cost shifting will become more dramatic as less people are covered privately and more people by Medicare. The question then becomes, how much private insurance companies will need to raise premiums to cover the additional costs negotiated by the providers? Premium increases will cause a greater number of people to leave private insurance for Medicare. As our medical professionals make less money, our good young people will choose other professions, therefore leaving us a shortage of providers. Limited services, also known as rationing, would soon follow.
A “public insurance” plan would likely have the same flaw. Since the Medicare fee schedule is already in place, it would make sense that it would also be used in any public insurance offering; once again creating the same cost shifting situation as above.
Dependents under age 26
If you have a dependent child that has been declined coverage under a medical policy in Illinois, you may be able to add them regardless of health during the open enrollment period. (Blue Cross’s open enrollment is in January). Illinois Public Act 095-0958 may offer other advantages for coverage. Feel free to contact the office below for further information.