On Tuesday, during an interview with AHIP’s Robert Zirkelbach, David Shuster suggested that private insurers opposed the public health insurance option because “the for profit insurance companies are terrified that if there is a public option that competes with what you do, people are going to leave the insurance companies and go to the government plan and people are going to lose profits.”
Without contesting Shuster’s characterization, Zirkelbach argued that a public option would underpay medical providers and put some doctors and hospitals out of business. “The way a government plan would save money,” Zirkelback explained, “is that they would simply dictate the prices that they pay for services. Right now, Medicare only reimburses hospitals about 85% of their cost. It’s employees and families that are paying $1500 a year to subsidize the Medicare program. ”
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Most insurers, however, tee their payment rates for physicians off Medicare reimbursement rates. Medicare’s physician fee rates are based on the relative cost of providing services determined something called the Resource-Based Relative Value Scale (RBRVS). A panel of medical doctors, through the American Medical Association, updates the relative work values every five years based on: the time it takes to perform the service, the technical skill and physical effort, the required mental effort and judgment, stress due to the potential risk to the patient, malpractice rates in the area, and other geographic adjustments to reflect cost variation before coming up with a number. The process is also open to public comment and private health insurers — along with anyone else — have an opportunity to weigh in on the process and the rates
Zirkelbach’s explanation for why a new public option (which would pay Medicare-like rates) would shift costs to Americans with private insurance is similarly disingenuous. He assumes that private plans are always right in setting reimbursement rates. According to MedPAC, however, Medicare rates are adequate and consistent with the efficient delivery of services. In fact, over-payments by private insurers to health-care providers drives up overall costs. “Hospitals which didn’t rely on high payment rates from private insurers ‘are able, in fact, to control their costs and reduce their costs when they need to’ and ‘combine low costs with quality.’
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In recent weeks, right-wing groups have been pushing the 

