Category: ACA and Policy, Cost of Healthcare, Health Insurance

The Full Cost of a Public Option, Part 3 | The End of The World

Part 3: The End of the Healthcare World as We Know It

And Mike doesn’t feel fine.

In part 2 of this three parter, I laid out how government involvement in any industry affects all of the people in and out of that industry. Today, we’ll look at what happens in the private healthcare industry when the government requires providers to take lower payments than it costs to provide care.

Imagine a World…

Imagine you are running a business. You have 100 employees and you are a bit profitable, turning 2-3% of your sales every year into bottom-line profit. Now, imagine a government agency comes in and demands that you sell them your product for 10% less than you can create it yourself. You only have two choices in that scenario:

  1. Get out of the business while you still have a few bucks in your pocket; or
  2. Figure out a way to deliver the product at a cheaper cost (automation, layoffs, get out of some lines of business, etc.).

Forgetting option #1 for the moment, let’s focus on option #2. Imagine the business at hand is a hospital. The most expensive thing on any hospital’s expense list is labor costs. You know, doctors, nurses, technicians, maintenance staff and the same people you see in any other company like accountants, marketing folks, IT people, the works. It’s not unusual for your local hospital to run 60% of their costs as strictly labor. SO, if they are going to have to drastically lower their costs, the first thing they are going to have to do is lay people off. We are ALREADY in the grips of a flight from medical careers, as we lost 3.5% of our healthcare workforce last year due to COVID-19. Imagine that effect times 10.

And let’s not forget, in the hospital world today, around 60% of their existing beds are full of people who are already costing hospitals money (Medicaid/Medicare reimburse providers for the care their members get at rates lower than the provider’s break-even point). So, the so-called “public option/Medicare-For-All” would add yet another layer of people paying below costs to reimburse those hospitals for treating patients.

How will your local hospital respond?

Well, the American Hospital Association has done a vast amount of analysis on a “Medicare-for-All” and “public option” scenarios, and the results were not pretty. Their research showed that EXISTING Medicaid/Medicare patients are driving $55 BILLION of below-cost care in the hospital world. That is, if public health plan patients simply paid enough to cover their medical costs, hospitals would be receiving another $55 BILLION a year.

That same research showed that a vast expansion of a “Medicare-for-all/public option” plan would lower overall revenue in the hospital world by 40%. That would lead to the closure of HALF of all rural hospitals as a start. Yep, half!

Now, let me ask you, if you had the choice, would you want to be treated at a hospital that just had to cut its total spending by 40%? Or a hospital that is staffed up to today’s levels?

Would you rather have the closest hospital 50 miles away? Or closer to your home?

These are just some of the choices we must face to embrace these “Medicare-For-All/Public Option” type plans.

Here’s What I Think Will Happen

My personal estimate is if Medicare became the standard rate across the board in the U.S., we would lose a third of our medical capacity. And where would that capacity go? Into private, non-insurance-accepting hospitals and clinics, and cash-only medical businesses where they could be free from government shackles. We are already seeing this trend in primary care, it’s called “Concierge Medicine” or “Direct Primary Care”. In fact, other countries where this public option scenario already exists typically OUTLAW PRIVATE CARE and health insurance so that money keeps flowing into the government-run system. You know, so everyone is equally miserable. And the waiting lists for treatment are very, very long. Years, in some cases.

Is that what you want from your healthcare? No thank you.

I know healthcare is expensive and downright unaffordable if you don’t have a third party to cover you when you get really sick. But is the solution throwing up our hands, shoving the whole pile to Washington, D.C. and saying “YOU take care of it!”? Not at the expense of losing a third of our medical capacity.

Straight Talk is, allowing a “Medicare-for-all/public option” to flourish in the U.S. would be so disruptive to our healthcare system, it would make COVID-19 look like a walk in the park. Pull 40% of the funding of ANY organization and you would damage it severely, if not shut it down completely. And then, without that money in the system, why would any young man or woman go through the aggravation and expense of becoming a doctor or a nurse? We lost 3.5% of our healthcare workforce last year alone! We’re already importing docs and nurses from all over the world because of our existing medical school or clinical program enrollment shortages. Will there be enough clinicians left to treat all the patients if it gets radically worse?

This is life-or-death stuff, this “Medicare-for-all/public option.” Don’t let it slip under your radar.

Read Part 1

Read Part 2

Posted on: April 14, 2021

2 comments on “The Full Cost of a Public Option, Part 3 | The End of The World

  1. Wesley J Watkins

    What if the government increased payments by increasing taxes to match what private insurers pay hospitals? This practice wouldn’t be unheard of by our government, yet unlikely.

    • Michael Bertaut

      I was thinking about your comments, and while I think we can all assume the current administration and Congress is about to go HARD after a very large tax increase, I suspect the LAST thing they are thinking of doing with that money is trying to make Medicaid, or even Medicare payments more competitive with private insurance payments. It appears they have different priorities and you can see them in the new, rather poorly named “American Jobs Act”. Stay tuned!


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