The Mischief In Obama's $634B Health Care Fund

No man is exempt from saying silly things; the mischief is to say them deliberately. - Michel de Montaigne

Last week as reported in The Houston Comical Kelsey Seybold clinic announced plans to stop accepting Medicare patients except those enrolled in a Medicare Advantage Plan. The stated reason is that the reimbursement from Medicare is below the cost of actually providing that care. The article notes that in TX the percentage of physicians accepting Medicare is down from 78% in 2000 to 64% recently.

The WSJ reports today in an article by Laura Meckler that President Obama is proposing a $634B in new taxes as well as cuts in spending to fund a down payment on Health Care reform. The single largest spending cut is designed to come from Medicare.

The biggest chunk of savings in the budget proposal, estimated at $177
billion over 10 years, would come from changing the pay structure for private
managed-care plans that participate in Medicare. Under current law, payments for Medicare Advantage plans are set by a formula, and the result is that private
companies are paid, on average, 14% more to care for a Medicare patient than the
government would normally spend through the traditional Medicare plan.

So the bottom line is that for years physicians have been moving out of traditional Medicare due to poor reimbursement that has shifted costs to employers and individuals with insurance and cash payers which has fueled health care inflation and increased the number of uninsured Americans. Many have moved to Medicare Advantage where there remained an opportunity for a profit. That profit has now been targeted. Don't believe me? Managed care stocks with Medicare Advantage exposure are in free fall as pointed out here.

In a note today downgrading both HealthSpring and Humana, along with
$575 million Universal American Corp. (UAM)
to “Underperform” from “Market Perform,” BMO Capital analyst Dave Shove writes today that Medicare’s profitability growth “will all but disappear” as a result. Medicare programs will see “significant” reductions in enrollment in 2010 and a 1.5 percentage-point drop in profit margins, writes Shove, and the movement of many of the insured to public programs away from private Medicare coverage. The last time HHS “dealt a crushing blow to Medicare Advantage capitation rates,” in 2000, writes shove, “the program lost roughly 10% of enrollees in the first year, and bottomed out with 22% participation loss over a three year span.” (Bear in mind, the capitation rates statement is preliminary: final rates will be decided on April 6 and could potentially be higher, meaning, more
profitable.)

For decades the US government has shifted costs for entitlements like Medicare to the private sector leading to rampant health care inflation. As we move towards the promised land of universal coverage such policies will no longer work. I only hope the media will begin to point out the mischief when silly statements crafted as policy are reported. As for me I am not amused.