Insurance Companies Win Big in Healthcare Debate…Hospitals Too

Wednesday, August 26, 2009

If a health reform plan manages to become enacted, insurance companies and hospitals will by no means come out on the short end financially. An aggressive, well-orchestrated lobbying campaign by insurers, and a shrewd bit of bargaining by hospitals, has put both of these powerful players in strong positions to make money—not lose it—as a result of Democrats’ designs for providing health coverage to all Americans.

As it currently stands on Capitol Hill, the leading proposals for changing the medical care system all would require citizens to have health insurance, even if it means government subsidies to make such a goal affordable for everyone. That means tens of millions of new customers for insurers.
“It’s a bonanza,” Robert Laszewski, a former health insurance executive, told the Los Angeles Times.
Likewise, Linda Blumberg, a health policy analyst at the nonpartisan Urban Institute, said: “The insurers are going to do quite well. They are going to have this very stable pool, they’re going to have people getting subsidies to help them buy coverage and . . . they will be paid the full costs of the benefits that they provide – plus their administrative costs.”
The heath insurance industry made sure it wasn’t left out of the reform debate, not only by spending lavishly on high-priced lobbyists who roam the halls of Congress, but also by having 50,000 of its employees write letters, make phone calls and attend town-hall meetings and other forums to promote what their bosses like, and hate, about the reform plans. This includes bashing the “public option” that could result in the government providing health insurance and competing for new customers with private insurers.
Meanwhile, hospitals have made sure they too will be protected from any reform plan that gets adopted. When leaders announced in July that hospitals would contribute $155 billion in cost savings over 10 years to help pay for the Obama administration’s health care overhaul, observes wondered: What’s in it for them? Well, how about $16 billion in added revenue.
According to an industry estimate, hospitals stand to make $171 billion in new revenues over the same 10-year period from reimbursements for newly-insured patients. So the $155 billion in cost cuts they promise to give up would be more than replaced by this new income. Furthermore, many of the industry’s cost sacrifices won’t have to happen until the second half of the 10-year agreement, leaving them the first five years to enjoy billions of dollars from caring for the newly insured.
-Noel Brinkerhoff
Healthcare Insurers Get Upper Hand (By Tom Hamburger and Kim Geiger, Los Angeles Times)
Insurers' Employees Counter Criticism (By Vanessa Fuhrmans and Avery Johnson, Wall Street Journal)
Hospitals See Profits in White House Deal (by David Kirkpatrick, New York Times)


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