Big Health-Insurance Premium Hikes, Medicaid Cuts, Defensive Medicine -- All Underscore the Need for Reform
As President Obama and congressional Republicans prep for their big healthcare summit tomorrow, you don't have to look far for news that underscores the urgent need for reform.
In the wake of Obama's call to let the federal government cap insurance rate hikes, Connecticut's insurance department revealed that individual medical-plan premiums jumped 20 percent. The state is one of two dozen that regulate insurance prices. In the previous two years, premiums rose 17 percent and 11 percent.
Connecticut Insurance Commissioner Thomas Sullivan told the Hartford Courant that he allowed the rate hikes after seeing actuarial reports on how much covered patients will cost the insurance companies. Apparently, other insurance commissioners generally do the same. Robert Reich notes in an NYT op-ed that even states with the power to limit rates "don't seem to be holding insurers back much."
Insurers blame underlying health costs for their rate increases, and Republicans attribute much of that to malpractice suits. A new survey of physicians buttresses this argument -- although since it was conducted in association with Newt Gingrich's Center for Health Transformation, that doesn't exactly count as a surprise.
In the Gallup poll, physician respondents said that "defensive medicine" accounts for 26 percent of the nation's health costs. In contrast, the nonpartisan Congressional Budget Office estimates that malpractice liability -- which includes the cost of defensive treatment -- accounts for only about two percent of costs. Since no one knows how much defensive medicine really costs, the wide disparity between these estimates suggests that physicians are either exaggerating their malpractice fears or simply don't know how much the tests and treatments they order cost. Such rapidly rising costs, together with higher enrollment and declining tax receipts, are forcing many states to cut back their Medicaid programs. More than half of the states are reducing Medicaid services and/or provider payments, and bigger cutbacks are threatened unless Congress extends a temporary boost in federal Medicaid spending through 2011. Thanks largely to the bad economy, Medicaid enrollment rose by 3.3 million people, or 7.5 percent, from June 2008 to June 2009, according to the Kaiser Family Foundation.
Hospitals and doctors have a lot at stake where Medicaid is concerned. HCA, the nation's largest for-profit hospital chain, said its fourth-quarter profits dropped to $216 million from $276 million a year earlier, even as revenue rose 4.7 percent. The main culprit was apparently rising charity care and discounts for the uninsured, which together totaled nearly $1.5 billion, compared to about $1 billion in the fourth quarter of 2008. So, like other hospital chains and individual hospitals, HCA stands to gain if healthcare reform expands Medicaid coverage.
In Massachusetts, the state that elected Scott Brown to the Senate and thus stalled the healthcare reform bills now in Congress, various labor, consumer, business and healthcare groups are now demanding that Congress pass those bills. Even though Massachusetts already has a reform law that has expanded insurance coverage, these stakeholders say that national legislation could help tens of thousands of more people obtain access to health care.
They note that the Senate bill would provide more generous subsidies than the state does to help the uninsured obtain coverage and that the proposed federal tax credits to small businesses would encourage more of them to offer insurance to their workers. Several groups also support Obama's idea of having the government limit insurance increases, which mirrors a similar proposal by Massachusetts Governor Deval Patrick.