Conflict of Interest: If Private Companies Run the Public Option

[Blue State Blues]

Like many, I'm concerned by the proposal that the Public Option will be administered by private insurance companies. Although some have pointed out that private companies already handle claims for Medicare and Tricare more or less successfully, the Public Option is different.

When a private insurance company administers claims for Medicare or Tricare, they are handling claims for customers they do not want or cannot insure directly. They do not want the expense of insuring Medicare patients. Even if they could exclude the Tricare members with expensive injuries and conditions, they can't compete with Tricare's coverage, at least not a price many would be willing to pay.

But the Public Option is different. The Public Option is marketed as an alternative to private, for-profit insurance. The Public Option is supposed to drive down everyone's costs by COMPETING DIRECTLY with for-profit insurance.

Even in a weakened state, it is our hope, and their fear, that a successful Public Option will grow and expand to perhaps one day become something like a Single-Payer system.

But that expansion of the Public Option would only happen if it is successful. If, however, the Public Option doesn't work, it will be touted as proof that government-run health care won't work and can't work.

If a private company administers the Public Option, they have a perverse incentive: their industry and their parent company benefit if the Public Option fails. And all they have to do ensure that the Public Option doesn't work is administer it poorly.

If the private company "accidentally" rejects valid claims, fails to pay claims promptly, provides conflicting information about benefits leading to confusion among patients and providers, the "government-run" Public Option will take the criticism.

And there is precedent. This thread on DU discusses an article about a clinic in Austin, TX that will no longer accept Tricare patients. Focusing on the clinic ending treatment for Tricare patients, the article buried the lead (or "lede" if you prefer). The headline should have read:

"Humana Drags Feet Processing Tricare Claims: Patients Lose"

The clinic's CEO, Robert Spurck Jr., said the company that processes Tricare's claims, Humana Military Healthcare Services, does not pay bills on time, typically disputes the amounts and uses an inaccurate fee schedule. "It's been difficult at best " since the clinic began accepting Tricare 2 years ago, he said.

The government, of course, can replace a private insurance company if its performance on the contract is unsatisfactory. In fact, Tricare has decided to replace Humana with another company, but that process takes time.

Meanwhile, Tricare announced in July that it has chosen UnitedHealthcare to replace Humana Military in the 10 states where it now processes claims, including Texas — a contract estimated to be worth $21.8 billion over five years. But because Humana Military is protesting, the contract is under review, probably until the end of the month, said Tricare Management Activity spokesman Austin Camacho.

With that example in mind, I am deeply concerned that conflict of interest could severely incapacitate the Public Option.

[enlightenment]

1. I don't know for sure, because I can't keep up with the

various versions, rumors, etc that are swirling around - but I don't think that the Public Option is intended as an alternative that will be open to that many people. It appears (to me) that it will be strictly limited in terms of who can participate in it - all along it seems that Congress (and the WH) have made every effort to ensure that the Insurance companies would not suffer any hardship to their profit margins.

All this talk of how this will 'force' expansion of health care access is just that - talk. There is no evidence to support it beyond wishful thinking. (I've particularly enjoyed the fantasy of "opt-out is GOOD because it will lead to single payer" . . . I would really like to have some of what those folks are smokin' . . .)

[Blue State Blues]

2. As I understand, the latest version is only available to the currently uninsured

and with opt-out, that will be only in certain states. So, no, it's not the Public Option that progressives were sold, or that pollsters talk about when they ask people, "Do you want a Public Option."

On the up side, if they keep the rates as "Medicare Plus 5" it will be in a much stronger position than if it had to negotiate rates with that small of a number of members. On the other hand, I think it's still premium-supported and self-financing, so having a relatively small number of members severely limits the ability to lower premiums by spreading the risk around ...

But no matter how small it is, the opposition fights it as the potential start of something. The private insurance company who gets a contract to administer it, would probably rather have tax-payer subsidies going toward their own for-profit policies with a strong penalty for failure to buy one of their policies at whatever price they care to set.