I try to stay away from politics; Democrats, Republicans and everyone in the middle gets sick. On the other hand, I am frequently asked by my patients about health care policy and I do live in Colorado. In Colorado, Gov. Polis has recently proposed changes to how Coloradans receive health care so I thought I would try to explain his proposed changes.
A note, the details of his plan are not finalized so some of this may change.
First, let’s start by stating what he is not proposing. He is not setting up a Medicare for all system, he is not taking away anyone’s private health insurance and he is not forcing anyone to join his program.
He is creating a state-sponsored health insurance plan that will be administered and run by private insurance companies. This plan will compete on the open market against other private health insurance options and the sign up will be voluntary. The controversial part is that he is proposing (and here is where many of the details still need to be worked out) using the power of the state to force health providers (hospitals, doctors, pharmacies and such) to accept rates that are potentially less than what they currently receive.
In its current form, his plan will require every health insurance company of a certain size that sells health insurance in the state of Colorado to offer the “state option” as one of its plans. These companies would be required to spend 85 percent of the premium on direct health care costs leaving them only 15 percent for administrative costs and profit. The state would set benchmark rates for what health care providers can charge the insurance companies under the state option.
That last part is the most important section and the part that is creating the most headaches for providers. Under the current system, the federal government sets a rate for a procedure that Medicare will pay for it. That rate varies by physical location (hospital vs surgery center vs office) and geographic location (New York City vs Denver). All other rates are quoted as a percentage of that Medicare rate. In most large cities, Denver for example, it is not uncommon for private health insurance companies to reimburse over 300% of Medicare rates for a procedure. On the other hand, Medicaid usually pays a fraction of Medicare rates. That lays bare a not well-known fact, if all hospitals received only the Medicare rate for a procedure, many hospitals would not be financially viable as they rely on their privately insured patients to make up for their Medicare or un-insured patients.
And that is exactly how Gov. Polis plans to save money with his state option plan, he would limit what health care providers could charge insurers to somewhere closer to 200% Medicare rates. That will allow the state option plan to be significantly cheaper to consumers than private plans but will take a lot of revenue away from hospitals and providers.
The question many providers are grappling with today is the existential question of are they a viable business entity at those rates. And that remains to be seen. Please check back here for updates on the state of health care in Colorado and remember, at the end of the day, everyone gets sick and everyone needs to be taken care of; it’s just the right thing to do.