For the month of December, it was difficult to tune into any news source and not see a story about the “Fiscal Cliff” negotiations ongoing in Washington, DC. Now that it is in our rear-view mirror, the news media has moved on to other important items in our world like Oscar nominations and Golden Globe snubs. But what effect, if any, did the “Cliff” negotiations have on the health care system in America?
I recently had a discussion with one of our clients about this, and she was VERY relieved the debate was over, and most of the Medicare funding had been restored. You didn’t know Medicare was a central part of the “Cliff” discussions? That’s odd… the news media usually does such a good job informing the public of what’s important in DC. Anyway; Medicare was facing very steep cuts had the negotiations gone another way, or not at all. So much so, that many providers may not have made it through the year on what the reimbursements were going to be reduced to!
Which once again brings us to the primary focal point of any legitimate discussion on health care reform; Medicare. This is the federal government’s insurance company for people over 62, and providers who accept this form of insurance are told how much they will get for certain types of services. These payments, or “reimbursements”, usually run about 40% of what the list price of a service is, depending on the service and where you live in the country. That number was going down by half, or more for some services, if the Cliff was not averted. My friend at the surgeon’s office was prepared to shut the doors if things weren’t changed! Depending on the news source, nearly $1 trillion was going to be “cut” from Medicare reimbursements over the next 10 years if we went over the “Cliff”. As it stands, there are reductions, but not the size and scope that was feared.
How does that affect debt collections? The same way Medicare payment reductions always affect collections: they go up! Ask providers how they arrive at the price for any given service and they will tell you something like this: first we have to get the Medicare reimbursement chart, then we can negotiate with commercial insurance providers, then we can set the cash price of the services. When Medicare is reduced, the cash price has to go up, irrespective of the actual cost of the service! So those with no insurance, or those with growing deductibles, will face higher prices for the medical services, which means more dollars going to collections, which will in turn raise prices too.
There are seven or eight major issues to consider when talking about health care reform, but if you are not starting with Medicare, you will not change the primary problem; service prices are not related to their true cost due to Medicare cost-shifting. Well, we can all breathe a bit easier now that Congress and the President have put another band aid on Medicare via the “Cliff” negotiations and kicked this can down the road for a bit longer.