The Health Affairs article [gated, but with abstract] by Peter J. Cunningham and Ann S. O'Malley first discussed here by Devon Herrick, contains two nuggets of information that deserve more discussion. First, most of the proposed health care reform plans under discussion will slow payments to physicians and hospitals. Second, any reform plan that relies on putting more people into Medicaid will make it much more difficult for people to actually get medical care.
Medicaid already pays much more slowly than commercial payers. In Kansas, which had the shortest average time for Medicaid payments, the government paid in 36.9 days. Kansas commercial insurers paid in 29.0 days. In Pennsylvania, the government reimbursed in an average of 114.6 days. Commercial payers paid in 26.8 days. Of the 21 states surveyed, commercial payers took the longest in New York and Louisiana at 54.2 days and 54.9 days, respectively.
Given that net thirty days is the standard commercial bill payment requirement, even the worst commercial payers don't do too badly. Payment guidelines at McDonough District hospital in Macomb, Illinois say the hospital will hold private payers responsible for all payments if their insurer takes more than 45 days to pay. Illinois Medicaid averages 103.4 days to pay, the commercial equivalent of foreclosure.
In addition, Medicaid payment rates are absurdly low. Cunningham and O'Malley list Medicaid physician fees as a percentage of Medicare physician fees for the 21 states surveyed. The ratios range from 100 percent in North Carolina to 36 percent in New York. Five states have percentages between 80 and 90. Five states have percentages between 70 and 80. Six states have percentages between 60 and 70.
Medicare rates are already below cost by some estimates. In 2005, Margaretann Cross of Managed Care Magazine compared commercial allowable charges for specific hospital services to those of Medicare. The commercial plans paid 20 to 50 percent more. [link]
Expanding government programs like Medicaid encourages people to drop private plans to take advantage of it. For children in the SCHIP programs, as many as 60 percent of new enrollees will be previously privately insured. [link] Moreover, public plans typically couple uncontrolled demand for free services with very low payments to providers. This creates shortages that make it difficult or impossible for people covered by public plans to access health care. Following the 2006 health care reforms, shortages limiting access have become common in Massachusetts. Some physicians are now scheduling group appointments in which patients sit around a table waiting to be examined. A physician examines them one by one, through their clothing, and discusses their medical details aloud. [link] A medical privacy fig leaf is provided by requiring that group appointment patients sign agreements promising not to disclose information about others in the group.
Do lower payments reduce total expenditure? Not necessarily. According to StateHealthFacts.org, New York, the state with the lowest Medicaid reimbursement rates, also happens to have had the highest Medicaid spending per enrollee of any state in the nation ($7,733 in 2005). It also has the highest total spending ($44,712,222,361 in 2006), even exceeding California, which has twice as many Medicaid enrollees.