New administration wouldn't solve healthcare problems

In an election op-ed, Roberta Domos argues that the Ryan Medicare plan would only line the pockets of insurance companies
Tuesday, September 25, 2012

The HME industry will not find a savior to vote for in this year’s presidential election. Some form of competitive bidding will march on as long as Medicare continues to exist, regardless of who is elected president. The deluge of audits will continue. That’s because a giant bureaucracy known as CMS has been steering the boat for years now. That didn’t begin under President Obama and it won’t end if Republicans take control of the White House. 

It’s hardly politically popular to claim you’re against weeding out fraud, waste and abuse, and CMS officials have done a remarkable job in convincing politicians of all persuasions that there are plenty of savings to be had in that regard when it comes to HME payments.  

When the Romney/Ryan ticket claims it will “restore cuts” made to the Medicare program, it’s a sure bet they aren’t talking about help for the HME industry. After all, the Ryan plan assumes the very same savings they criticize in the Affordable Care Act. What the Romney/Ryan ticket really means when they say they will restore the ACA cuts is that they will restore the cuts to government subsidies for Medicare Advantage plans. How do we know this? Because the preeminent feature of the Ryan Medicare plan privatizes Medicare by changing it from a defined benefit program to a premium support program. In other words, its main aim is to push more seniors into Medicare Advantage type plans and move them off traditional Medicare. 

We, as an industry, have experience with this. After all, Republicans have been pushing Med Advantage plans for years as a way to privatize Medicare. The unfunded Medicare Part D prescription drug bill passed under President Bush added almost $150 billion in future appropriations to subsidize private insurance companies offering Med Advantage plans. As a result, approximately 25% of seniors are currently on these plans, and last year taxpayers spent twice as much on these subsidies ($15 billion) as they did on all Medicare DME spending ($7.5 billion). 

Anti-government types don’t see a problem with this. In their view, Ayn Rand-style naked capitalism is good, even if the private insurance company profits do essentially come out of the pockets of taxpayers. But the HME industry should see a problem with it because it could be the final nail in the coffin of independent HME providers. 

The problem is that these insurance plans are often closed to independent HME providers, particularly in larger metropolitan and suburban areas. When these private insurance companies are open to independent providers, the reimbursement rates for HME are 45% to 50% of the Medicare fee schedule. National HME providers are more than willing to take these deals because economies of scale lead them to believe they can subsist on the thinnest of margins. 

Private insurance plans exist to make a profit and even the so called “not-for-profit” insurance entities share the problem of higher administrative costs (well over 16%) as compared to Medicare (2% to 4%) in the form of sales and marketing expenditures, CEO and other executive salaries, and all the money they spend trying to prevent legitimate claims from being paid.  

You don’t have to be an accountant to understand that adding additional administrative costs and profit to the system won’t decrease healthcare spending. And it doesn’t take a genius to figure out that these administrative costs and profits will come from a variety of sources that include taxpayer-funded subsidies, higher premium costs for seniors and for the DME industry, the elimination of small providers who can’t wholly subsist on typical Medicare Advantage reimbursement rates even if by some chance they can secure these Med Advantage plan contracts. 

It would be wrong to take comfort in the fact that the Romney/Ryan Medicare plan for healthcare spending isn’t fully implemented for 10 years. With Republicans in control, private insurance payer subsidies will continue to rise just as they have under previous Republican administrations. In addition, the plan calls for immediate and draconian cuts to the Medicaid program. 

To be sure, the country faces a huge problem when it comes to funding Medicare and Medicaid in the coming decades. According to the CBO, the Affordable Care Act extends the solvency of the program for nearly a decade. In the intervening time, politicians of both parties will need to work together to develop long-term solutions. But it’s a sure bet that a plan to further subsidize the profits of private insurance payers will benefit no one except the shareholders and CEOs of insurance companies.

Roberta Domos owns Domos HME Consulting Group. Reach her at or 425-882-2035.