Congrats, Legislators: You Did The Right Thing

BUT THERE WAS A SIMPLER, CHEAPER OPTION

The Arkansas Legislature did the right and good thing. They passed a federally funded extension of health care insurance for hard-working Arkansans in low-paying jobs.

But it’s curious. There was the easy, eft cient way to do that. Or there was a complicated, expensive way. They chose the hard, expensive way.

Instead of simply extending Medicaid - a simple, eft cient health insurance program with a proven history - they created a complicated “Private Option” plan that will probably cost a whole lot more.

But they did the right thing. They could have done nothing and left 250,000 people vulnerable, and left our hospitals and doctors who treat them uncompensated. Doing something was much betterthan doing nothing. The new plan will help our economy and our health. But I think the government option would have been the wisest choice.

Most people think competition in the private market always outperforms government services. Not so with health insurance.

Private insurance is less eftcient than Medicare and Medicaid.

Administrative costs for government insurance run about 2 percent of operating expenses, including costs for tax collection, fraudand abuse controls, and buildings.

Insurance industry advocates estimate private plans spend 17 percent on administrative costs (and that doesn’t include marketing and profi t expenses).

Government beats industry: 98 percent eftciency vs. 83 percent.

Medicare/Medicaid is publicly accountable, so we know their real costs. That makes it easier to adapt cost-saving changes and to track their eff ects. Insurance companies treat much of their claims data as trade secrets, so it is hard to know what their actual eft ciencies and waste might be.

Private insurers have to return a profi t to stockholders. Medicaid and Medicare don’t.

Private insurers have large advertising and marketing expenses the government doesn’t need. Private insurers don’t have the government’s bargaining power to negotiate lower prices for prescriptions andprovider costs. Government programs hold down costs better than private plans.

Between 1997 and 2009, private insurance premiums grew 31.7 percent faster than Medicare spending.

The nonpartisan Congressional Budget Oft ce predicts the rising costs of private insurance will continue to exceed Medicare for the next 30 years. If the private insurance option were running Medicare instead of the government, CBO predicts it will cost almost 40 percent more in 2022 for a typical 65-year-old.

I think the biggest advantage Medicaid has over private insurance is that Medicaid is designed for patients with complex medical and social service needs. Private insurance finds ways to exclude many disabled people, especially those with low-income and special needs. Private insurance often requires expensive co-pays Medicaid does not.

Thanks to the Aff ordable Care Act, which somerefer to as Obamacare, private insurance can’t have spending caps like they used to, sending many families with major illnesses into bankruptcy.

The majority of bankruptcies in the U.S. are related to medical expenses.

Most of those happen to be middle-income people, many of them with private insurance. If your little daughter has a complicated cancer requiring very expensive chemotherapy, you would probably be a lot safer with Medicaid than with a private insurance plan.

I wonder whether Arkansas’ “private option” plan will provide the same security and protection against medical bankruptcy as Medicaid?

One big advantage favors private insurance plans - more access to providers, especially specialists.

Medical specialists turn away Medicaid patients with dismaying regularity. That’s because many private plans pay more to hospitals anddoctors than Medicaid. But that’s also a reason a “private option” plan is likely to cost more to the public than an extension of Medicaid.

Some Arkansas oft cials believe competition among insurers for the new extension of care will keep costs down or even save money. Let’s hope so. But that’s contrary to past track records.

Two main points:

(1) Congrats to our Legislature for passing health care legislation. Other Southern states betrayed their residents and left them out, uninsured. They’ll just send their tax money to Arkansas and the rest of the country.

(2) But notice how things play out in the next few years. If Arkansas’ costs are higher and our participation is lower than other states’, we might want to rejoin Medicaid - the cheaper, simpler plan.

LOWELL GRISHAM IS AN EPISCOPAL PRIEST WHO LIVES IN FAYETTEVILLE.

Opinion, Pages 13 on 05/12/2013

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