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Public Option Drives Up CostThis "competition" will drive up cost. How can that be? Didn't you learn in school that competition drives down cost and removes inefficient companies from the marketplace?The current debate on the government healthcare plans often focuses on the "public option". This is a short keyword for essentially having the government control a major stake of the health care delivery in the United States by controlling the payer side of healthcare. Just like Medicare provides the payer side of health care for patients age 65 and older, this public option seeks to become the sole payer of healthcare for patients covered under it. Why do we need this, you may ask? Well, proponents call for the government to create some competition for private insurance companies and they make you believe that "competition" would drive down cost. Before forming an opinion on the topic, you must realize that competition can only drive down cost if the introduced competition goes up against a monopoly. We have seen this some twenty years ago when AT&T was broken up by the government into regional bell companies and allowed for newcomers to the market to offer long distance, and eventually local phone services. This drove down cost dramatically for consumers. However, the health insurance market is already full of healthy competitors. Some 1300 insurance companies, thousands of doctors and hospitals. Patients have choices - choose their doctor, their hospital and in many cases at least between two or three insurance options, even if they are provided through their employer. So, how can the introduction of one additional piece to the puzzle drive down cost? Well, you're right - it can't. That's why the current healthcare debate in Washington D.C needs to include additional pieces: Over time, more an more people will be forced into the public insurance option (more on that on another day), and then the government will drive down cost by paying less and less to doctors and hospitals. Mission accomplished. Now, back to the original question: How does that now drive up cost? The only way cost savings are achieved by reducing re-imbursements to doctors. According to this article in the Wall Street Journal Medicare reimburses at about 7% below cost. Now, if you were a doctor and the government will give you less money to treat a patient than it actually costs you to provide quality care, you may chose not to accept any government patients and simply practice on your own. You think I am kidding? Well, this is already happening in Germany and other places. Good doctors only work for cash or for patients who have a pricey private insurance. They cannot provide premier health services under the government plan and still make a living. That's why - under the currently debated public option - healthcare cost will actually shoot up dramatically. If you can afford it, you'll have to pay a lot more for your health care while others will be left behind and suffer from a diminished quality of life. That's why this "competition" will drive up cost for you - especially if you're a senior and rely on complex procedures to keep your current life style. If you have any questions on how complex the public option is going to be, just think on how complex the different parts and procedures of Medicare coverage are going to be. In some pieces you will be enrolled automatically, for some you have to pay extra. Read all about Medicare, the enrollment, Medicaid etc in our manual here. |
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