03 Apr The legislature wants to mandate health care price cuts
Sounds good, but what about…
By Grant Dattilo
What is the predictable effect of cutting reimbursements to medical providers to less than today’s Medicare rates? The propsed Minnesota public option health plan is built on that idea.
Squeezing a balloon: A metaphor for health care price reform
Access – Quality – Price. These are the three key main considerations in health care reform. Let’s use a balloon to explain the challenge of trying to balance these three.
As you press down on one end of a balloon the other end expands. As you press in the middle, both ends expand. But if you press on both ends and the middle, the balloon explodes.
With health care reform, think of the two ends of the balloon as access and price – the middle is quality. The trick is to keep all three under the most effective and balanced pressure.
Squeezing prices down makes health care more affordable but results in an increase in the number of people wanting access to care. The supply cannot go up because prices are too low.
Trying to squeeze access means that for many, quality goes down. Squeeze access and price together, quality for everyone goes down – or the system implodes.
Today’s legislature is trying to squeeze the health care reform balloon in just the right way but finding it’s tougher than they hoped.
Squeezing prices through a mandate
Based on a new 2023 Minnesota law, during 2024 the legislature is to decide on how to structure a “public option” health plan. Public (government-run). Option (you still can choose other plans).
The idea is that everyone would have the option to sign up for government-run health insurance, for most likley, expanded MinnesotaCare. This rich health plan would be made affordable by reducing provider reimbursements by 20-30% or more compared with Medicare’s reimbursements.
If the public option becomes law, then providers accepting those plans must cut their “prices” by as much or more than 50% compared to today’s private health insurance plans. They must survive on less than the Medicare rates today, which is already a major challenge for them – and has cost-shifted those losses to enrollees in private health insurance.
Today, many providers who are free to choose, often refuse to see Medicaid patients, or use creative scheduling to limit their appointments. What might happen when many Minnesotans enroll in the public option plan that pays providers less than that which will make it affordable to stay in practice?
Demand for care will increase, but the supply of care will decline, given low provider reimbursements.
Will the strategy then be to reduce quality by delaying scheduling, cutting services for non-“value-based” care, or setting longer wait times for elective but necessary surgeries?
Truly, there is a strong and urgent need for effective strategies to reduce the price of health care and cost of health insurance. Is a public option, made available to hundreds of thousands, that artificially reduces provider reimbursements, the best answer?
Today, however, it is too costly for government
As the public option bill made its way through legislative committees in recent weeks, one thing became apparent – there is not enough money in the state budget to pay for it. As of now, Governor Walz and legislative leaders are planning to push this plan into a new budget year – it must wait. (No bill is ever dead until the legislative session ends.)
Market-based health care reforms are on the table, too, but are stalled. Lack of bipartisan agreement on reforms to increase access, reduce prices, and expand quality always seem to stall out. The usual parties – Big Medicine, Pharma, unions, advocacy groups that never get along – continue to undermine good reforms.
At Dattilo Consulting, Inc. we have invested time, energy, and funding to research, write, and work to influence legislators and the public about private, market-based options. We will continue to do so. We do not support blowing up the health care balloon and putting our clients at risk.
