Public option: a useless piece of ground

Joseph Paduda over at Managed Care Matters has a fascinating post about the much debated public plan option being offered as part of the Democrat's health care bill.

His take? As designed, the public plan will have no effect on how competitive the health care market is.

I watched HHS Sec. Kathleen Sebelieus on the Daily Show last night talk about how a public plan would have lower administrative costs and would therefore be able to put pressure on public plans to lower theirs.

It sounds good - but here's the rub according to Paduda (emphasis in original):

A public plan would begin with zero members. And zero bargaining power. The big health plans have lots of members, which is how they convince providers to agree to discount their services. Without volume, no discount.

...

The opponents of a public plan are equally confused, claiming it would damage the free market, adding unfair competition. The reality is that in most areas, there is no free market in health insurance; markets are already monopsonies.

...would a new governmental plan have an advantage over, say, Blue Cross of Alabama, which has market share ranging from 67 percent in Tuscaloosa to 95 percent in Gadsden? Or Blue Cross of Arkansas, with share from 63 percent in Hot Springs to 97 percent in Texarkana? Or the two dominant health plans in Ohio, with combined share ranging from 46 percent to 80 percent?

It wouldn't; in fact it would be an uphill climb on a very icy slope for a governmental plan to reach market parity, much less market dominance in most of the country's MSAs.

...

Yes, a governmental plan could try to force docs to accept lower fees, and physicians could and would tell the Feds to pound sand. There is precedence for this - try and find a doc who will accept Medicaid in New York. Recall the revolt of physicians last summer when they were facing a dramatic cut in Medicare reimbursement. Physicians do not have to work with any health plan - governmental or private.

Illuminating, to say the least.

Now if only someone would put these concerns to the dems in a public hearing...

(H/t to E)