SCHIP Signed: Doctors Get a Pay Cut

February 5th, 2009 Posted in Health Insurance, National Healthcare, politics

Yesterday President Obama signed the 2009 reauthorization bill for the State Children’s Health Insurance Program (SCHIP) program. This legislation will reportedly make about 4,000,000 individuals now eligible for that taxpayer funded health coverage at a cost of $33 billion over four and a half years. Many of these people moving onto the SCHIP plan will be leaving their private insurance.

Combine that news with the recent Milliman report which shows that over $88 billion dollars is cost shifted from government sponsored plans (Medicare, Medicaid/SCHIP) to private sector plans and you can easily see that the doctors who treat these new SCHIP patients will be getting a pay cut.

About now you are asking, “What the heck is cost shifting and why should I care?” Let’s say a doctor would normally charge $125 for an office visit. SCHIP, however, will only reimburse the doctor $100 for the visit. In order to make up the loss, the doctor charges $150 to the patient with private insurance. Thus, in essence, cost shifting is a tax on people with private insurance (individual medical policies or ones offered through a person’s employer).

On another note, I’m still trying to figure out the math on this. Please let me know if you find an error in my logic:

$33,000,000,000 – cost of program, divided by
4.5 years – equals
$7,333,333,333 – annual costs to cover 4 million kids through SCHIP.

But, one can purchase an individual Aetna policy for $78/month ($936/year), so correct me if I’m wrong, but couldn’t the government the go into the private sector and cover over 7.8 million kids for the same amount of money?

$7,333,333,333 – annual cost to cover 4 million kids through SCHIP, divided by
$936 – annual cost to cover an individual under an Aetna policy
7,835,000 – kids covered by a private sector solution

So, it looks like our elected officials have taken a route that will grow government and cover fewer of the people they say they are trying to help. At the same time, (i) doctors will get less reimbursement for the patients who switched from private insurance to SCHIP, (ii) many doctors will quit seeing Medicaid/SCHIP patients because they get lower compensation, (iii) individuals and employers who have private insurance policies can expect an incremental increase in their premium rates, and (iv) taxpayers can expect a bill from the government when this underfunded coverage needs another cash infusion.

What’s there not to like? Your thoughts?

  1. 2 Responses to “SCHIP Signed: Doctors Get a Pay Cut”

  2. By Celia Dyer on Mar 1, 2009

    Angus, how about the government go to the private sector for the 4 million kids and save taxpayers almost 50% of the $33B? Why isn’t the administration considering this option, and where are the protestors? Insane.

    (I take it that Aetna rate is for a children only and for a huge group. I want to talk with you about what is would cost TechDrawl to add employee benefits for 1 employee).

  3. By Angus McRae on Mar 2, 2009

    Votes! The families of four million kids now dependent on the government is a whole lot more enticing to a politician. You are right, it is insane (and sad).

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