Congresswoman Craig is politically posturing regarding health insurance



 By Rick Olson


Congresswoman Craig proposing “Medicare for all that want it” is simply political posturing by appearing to do something about health care costs.

Minnesota Congressional District 2 Congresswoman Angie Craig is playing the Democrat political strategy of exploiting the public angst about access and affordability of health care by taking what, on its face, appears to be a “moderate” stance, but in actuality is simply the camel’s nose in the tent for a government sponsored, universal, single payer health care plan that would eliminate the option of purchasing private health insurance. Once the nose is in, before long, the whole camel is in the tent.

The Medicare-X Choice Act of 2019 introduced in Congress

H.R.2000 - Medicare-X Choice Act of 2019, (known as the “Medicare for all that want it”, was introduced on April 1, 2019 and referred to two committees. It was co-sponsored by Representative Craig on June 26, 2019. No Congressional Budget Office cost analysis is yet available. 

Rep. Craig, in a Prior Lake American article “Letter: I will fight for affordable health care” says:
“That’s why I’m a champion for a bill in Congress that would finally allow Medicare to negotiate drug pricing and would create a public health insurance option for Minnesota families to compete with large insurance companies. The legislation is called the Medicare-X Choice Act of 2019.

This bill would expand choices for coverage for Minnesota families and increase competition in our existing system. These are essential steps we must take if we are serious about reducing costs for Minnesota families, and if we are serious in our commitment to reduce the cost of healthcare.”

The bill is described as giving people who do not qualify for Medicare the opportunity to sign up in the Medicare system by including the health care plan on the federal exchanges set up under the Affordable Care Act (aka “Obamacare”). However, the bill provides for the establishment of new government silver and gold plans, and the setting of premiums. So, this is not simply allowing people to sign up for Medicare coverage [1], despite the innocuous sounding “Medicare” in its name.

New Government Health Insurance Policies Would be Created. Would they reduce costs?

The bill would create government health insurance policies that directly compete with private health insurance companies’ policies. Simply putting a new government plan on the exchange is not the only solution. We will need to do the hard-technical work to make the health care system more efficient. What one needs to prefer the Democrat solution is the belief that government can do things more efficiently than private enterprise. There appears to be conflicting evidence that that belief is accurate. The proposal, however, does attempt to exploit the populist sentiment that “private insurance companies are exploiting the public by making profits”.  Whether private health insurance companies’ profits are excessive is debatable. [2]

What is not so debatable is that there is much more fraud committed in Medicare/Medicaid than in private insurance plans. Having new government plans would open up additional ways to defraud the government. [3]

Democrat Strategy towards a comprehensive, single payer government health care plan

A good analysis of the current Democrat proposals can be found at Medicare-for-All and Public Plan Buy-In Proposals: Overview and Key Issues, October, 2018 and the update at Compare Medicare-for-all and Public Plan Proposals, May, 2019 by the Kaiser Family Foundation.

“Key policy differences relate to eligibility, the size and scope of the public plan, covered benefits and cost sharing, premiums, subsidies for premium and cost sharing, cost containment strategies, and the likely interactions with current public programs and private sources of coverage.”


What is clear is that “Medicare for all that want it”, is simply a Democrat strategy as a first step towards a single payer health care plan that sounds more palatable than “Medicare for All”, which would eliminate private health insurance plans. See Teixeira: Medicare for All (Who Want It), from the The Democrat Strategist. In the post, they say:

“First, I think we should differentiate between Medicare for All as a campaign slogan and these various plans. As a slogan I think it’s got a great deal of power. But it is important that the plan to which such a slogan is linked be perceived by voters as a clear advance and not as a threat to their current situation.

Fundamentally, I think this comes down to whether the plan is Medicare for All Who Want It or Medicare for All, Whether You Want It or Not. This, in turn, comes down to whether the plan is a vast expansion of Medicare-like availability or simply replaces the existing system, including private health insurance, with a government-run system based on Medicare.

There is a strong case that the political sweet spot–what the public is really ready for–lies in the former not the latter.”

The post goes on to say that a survey

“found much more hesitation, even among Democrats, when respondents were told that such a plan [i.e., Medicare for All] could mean higher taxes, longer waits for treatment, and the elimination of private insurance companies. Support among the general public in the Kaiser poll plummeted to just 37 percent when respondents were told it could eliminate private insurance companies.”

This implies we should not let the best be the enemy of the good. It is quite possible to have a Medicare for All Who Want It-type plan that really does provide universal coverage, would contain costs and all the rest, but does not immediately wipe out private insurance [emphasis added]. These probably make more sense to push at this stage of the game.”

Thus, it appears that “Medicare for all that want it”, is simply a Democrat political ploy that appears to solve a problem, that has less political backlash, and is simply a first step towards a comprehensive, single payer government plan based on Medicare. We need to expect more from our Congressional representation than political posturing. If  this is what we get from Congresswoman Craig’s “20 years working in health care”, this shows a very poor return on investment.

Notes:
[1] Medicare includes the following:

  • Part A: hospitalization coverage (free to those who had 40 quarters of qualifying employment for which they paid Medicare payroll taxes during their careers or are married to a spouse who did so. Those who don't qualify have to make premium payments). Deductibles and co-pays (co-insurance) apply for those who use this service.
  • Part B: medical coverage (doctor visits and most outpatient procedures and services.)$135.50 per month in 2019, with higher monthly premiums for those who are considered to be high-income individuals. 

  • Part D: prescription drug benefit, an optional federal-government program to help Medicare beneficiaries pay for self-administered prescription drugs through prescription drug insurance premiums (the cost of almost all professionally administered prescriptions is covered under optional Part B), with a wide variety of policies available at policyholder cost.

[2] It is true that private companies attempt to make a profit. Profits are the return on capital investing in the companies. To assess whether the profits have been “excessive”, one needs to look at the Return on Capital (ROC). According to the accounting firm Deloite:

“Health plan returns were cut in half—from 13.2 percent in 2011 to 6.8 percent in 2015—in the wake of policy and market turbulence. ACA provisions, including the establishment of health insurance exchanges, the individual mandate, and guaranteed issue, resulted in losses in the individual line of business, which affected the overall profitability of health plans.7 However, performance in this line of business, as well as other business lines, has improved. As of 2017, health plan underwriting profitability has recovered to pre-ACA levels, and ROC has rebounded to 12 percent.
. . .

As in many other businesses, size has been an important predictor of profitability for health plans. In our earlier analysis on profitability, we found the largest health plans by revenue captured a disproportionate and growing share of sector wide underwriting profits. Of the 200 or so health plans in the United States, the top three captured about 80 percent of the total industry underwriting profits in 2017. At 16 percent, the average ROC for the top five health plans was almost double that of the rest of the health plans (9 percent) in 2017.”  Return on capital performance in life sciences and health care, April 30, 2019. 

Whether 16% is “excessive” is a matter of opinion and could be compared with other sectors of business. However, under free market economics, one theorizes that competition among the companies will drive down the ROC to levels competitive with other sectors with similar risk profiles. Whether there is sufficient active competition in specific geographic segments to achieve this theoretical result is a debatable question. What levels might be deemed “excessive” in one time period may simply be transitory, as the variation from 2015 to 2017 is illustrative. Or not.

What other evidence is there to show that government health care programs (Medicare at the federal level and Medicaid administered at the state level) are more efficient than private insurance companies? According to HealthAffairs.org, the Congressional Budget Office concluded that Medicare is more cost effective than private insurance companies. Medicare Is More Efficient Than Private Insurance, September, 2011. However, The Myth of Medicare's 'Low Administrative Costs', June, 2011 rebuts the myth, focusing on the administrative costs per enrollee. After analyzing both articles, I would put more faith in the non-partisan CBO analysis. This sense is supported by Medicare, Medicaid contain costs better than private insurers, study says, February 11, 2019, which focused on the growth in all costs per enrollee. But, bottom line, this evidence is debatable.

[3] Medicare Fraud vs. Fraud in Private Health Insurance Companies

According to AgingInPlace.org, the most common types of Medicare Fraud are:
  • ·   “The Healthcare Provider Bills Medicare For Services The Patient Never Received. For example, charging for an appointment that the patient failed to keep.
  • ·   Healthcare Provider Bills Medicare For More Expensive Services Than The Ones The Patient Received.
  • ·   Performing Services Not Medically Necessary In An Effort To Pad Billing.
  • ·   Overprescribing Medically Unnecessary Medications To Patients.
  • ·   Misrepresenting Unnecessary Procedures As Medically Necessary.
  • ·   Falsifying A Diagnosis To Obtain Payment For Additional Tests And/Or Treatments.
  • ·   Billing For Each Individual Step Of A Procedure As If It Occurred In Separate Sessions.
  • ·   Waiving Unqualifying Medicare Copays And Deductibles.”
  • ·   Receiving Kickbacks.”


Good estimates for the total amount of Medicare fraud is hard to find, but recent efforts to fight this fraud is included in “Medicare Fraud & Abuse: Prevent, Detect, Report, from the CMS (Centers for Medicare and Medicaid Services). However, in a conversation with an auditor for an insurance company fighting Medicare fraud, I was told that it might be happening in two-thirds of claims filed. (I will follow up to dive deeper into this comment.)

What would be interesting to know is even if fraud were rampant in Medicare, is this any better or worse than with private health insurance companies? In the United States, which has a greater percentage of fraud committed Medicare/Medicaid or private insurance? attempts to answer that question. David Chan, the author, says, “Without a doubt, there is much more fraud committed in Medicare/Medicaid than in private insurance plans. . . There are numerous estimates of Medicare fraud accounting for 5-10% of annual payments. . . How much Medicare and Medicaid fraud is there?  No one knows for sure.  In 2010 the Government Accountability Office (GAO) released a report claiming to have identified $48 billion in what it termed as “improper payments.”  That’s nearly 10 percent of the $500 billion in outlays for that year.  However, others, including U.S. Attorney General Eric Holder, suggest that there is an estimated $60 to $90 billion in fraud in Medicare and a similar amount for Medicaid. . . .“


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