Doctors vs. Insurers: Prelude to Healthcare Reform?

Although the news was overshadowed by the dramatic return of Sen. Ted Kennedy, the Senate's veto-proof approval today of a complex Medicare bill represents a striking political victory by doctors over health plans -- one that could bode badly for insurers if healthcare reform becomes a priority after the presidential election.

For a detailed rundown of the issues presented by the bill, you're probably best off checking out Robert Laszewski's recent -- and long -- piece at the Health Affairs site. In the meantime, though, here's the shorthand version:

• Under a 1997 Medicare provision called the "sustainable growth rate" formula, doctors faced a 10.6 percent fee cut as of July 1.
• Congress, as it has done every time such a cut loomed, promised to block it.
• To make up the revenue lost by restoring physician fees, congressional Democrats targeted the Medicare Advantage program -- a system set up in the 2003 Medicare reform under which the government pays private insurers a subsidy of 13-17 percent to handle Medicare coverage for some seniors, including that for prescription drugs.
• President Bush threatened to veto any bill that touched Medicare Advantage, which had greatly fattened profits at insurers -- at least until recently.
• Lobbyists for doctors and insurers took over from there.

Last month, the House passed a bill that restored the fees by cutting the Advantage insurer subsidies by a vote of 355-59 -- a huge and unexpected win given that the same bill had earlier failed in the Senate. Laszewski attributes the shift to "enormous heat" from the physicians' lobby on Republicans, who have generally supported the Advantage program as a stalking horse for Medicare privatization.

Today's similarly lopsided 69-30 Senate vote renders Bush's veto threat largely meaningless, as it exceeds the two-thirds majority needed to override. (Of course, you can't discount the effect that Kennedy's return from brain-cancer treatment might had on shifting the votes of his colleagues.) More to the point, it seems likely to embolden healthcare reformers, who generally consider the Advantage program a costly and unneeded sop to insurers that couldn't otherwise compete with the federal Medicare program.

None of which is particularly good news for insurers, who are already on the ropes as medical costs climb faster than they're able to raise premiums. On the plus side, some may take the opportunity to pull out of Advantage, which has recently been a drag on the bottom line at companies such as WellPoint and Humana. On the negative side, Barack Obama has promised reforms that would, among other things, bar insurers from denying coverage on the basis of illness or pre-existing conditions, which certainly wouldn't make life any easier for them. (John McCain's far less detailed plan might be kinder to health plans, but stands little chance of passage unless Republicans were somehow able to regain control of Congress -- an unlikely prospect at the moment.)

Image via Flickr user Waldo Jaquith, CC 2.0
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