Foes of the Public Plan Option Will Need to Do Better Than This

National Public Radio’s ‘Morning Edition’ interviewed Wellpoint’s Dr. Sam Nussbaum today about the option of a federally sponsored public plan. Wellpoint is a publically traded and for-profit health insurer with 35 million enrollees and yearly revenues exceeding $60 billion. While those facts are impressive enough, readers may be more familiar with Wellpoint because of its reputation for rescissions.

The Disease Management Care Blog admits to being something of a fan of Dr. Nussbaum. Years ago, we both served on the Board of Directors of DMAA and the DMCB was mightily impressed with his energy, judgment and kindness. This is not a doc who puts profits before patients or dollars before doctors.

Dr. Nussbuam, however, is a doc that puts private insurers before public ones. His point in the interview was that the private sector is more ‘efficient’ and a public plan is simply not needed. He gave the example of ‘advanced’ imaging (pricey CAT and MRI scans are an example). Noting that up to 30% of such tests are not necessary, Wellpoint’s subsidiaries instituted a program (the DMCB suspects it involved precertification for ‘medical necessity’) that resulted in a 0-5% radiology cost trend. Dr. Nussbaum noted that in contrast, Medicare’s trend for these tests have been 15-20% per year.

Which begged the question: if the private plans are so efficient, why can’t they compete against the seemingly inefficient public option? Dr. Nussbaum’s answer was that the competition wouldn’t be on a level playing field. What they lack in efficiency would be made up take-it-or-leave-it low-ball fee schedules. As a result, providers would turn to the private insurers to make up the difference, resulting effectively in ‘cost shifting’ or a ‘hidden tax.'

The other example he gave was the cluster of insurance plans that are available to federal employees. Dr. Nussbaum noted that the same highly regarded ‘kind of health insurance Members of Congress get for themselves’ really consists of private sector plans that are purchased by the government.

Hmmm. The DMCB gets it, but with further reflection, isn’t sure the average voter is all that concerned about the cost shifting in a bloated medical-industrial complex. They’re more likely to be concerned that their CAT scan will be denied. In addition, health insurance is 1) arcane (?risk pooling?), 2) frightfully expensive (the middle class DMCB writes a check that exceeds $1000 a month) and 3) a commodity (consumers will change insurers in a heartbeat over price). Since other parties buy private insurance for most individuals (including the Federal government), there is little brand loyalty - especially when consumers and Senators are grumpy over rescissions. Accordingly, the average voter is unlikely to be concerned over the threat to Wellpoint’s economics, especially when that 0-5% trend doesn’t translate into meaningfully lower premiums.

If this is the best that the private insurers can do to muster support, the DMCB fears the public plan has a decent chance of passage.