Regular dKos members know that over the past few weeks, I've written several diaries about the confusion regarding how much of an impact on the private insurance industry the move to a universal, 100% publicly-financed single payer healthcare system would have.
Most recently I noted that not only would the latest versions of the House and Senate "MFA" bills expand their reach even further by adding in Long-Term Services & Support (thus legally denying private insurers yet another range of services that they'd be legally allowed to duplicate), but in an interview ahead of the rollout, Bernie Sanders himself stated point-blank that private health insurance companies would be "reduced to nose jobs" and the like (which is of course the whole point).
In all of my posts, though, I've also made sure to include a caveat that there'd still likely be some small role for private insurance carriers, even if they'd only be a shadow of their current selves. I noted that this would mostly include things like elective procedures, upgraded services (private hospital rooms, extended numbers therapy sessions, etc), experimental treatments and a few other odds and ends.
HOWEVER, there's one area where private health insurance carriers would not only survive, but likely increase their revenue a good 8 times over their current business: MACs:
A Medicare Administrative Contractor (MAC) is a private health care insurer that has been awarded a geographic jurisdiction to process Medicare Part A and Part B (A/B) medical claims or Durable Medical Equipment (DME) claims for Medicare Fee-For-Service (FFS) beneficiaries. CMS relies on a network of MACs to serve as the primary operational contact between the Medicare FFS program and the health care providers enrolled in the program. MACs are multi-state, regional contractors responsible for administering both Medicare Part A and Medicare Part B claims. MACs perform many activities including:
- Process Medicare FFS claims
- Make and account for Medicare FFS payments
- Enroll providers in the Medicare FFS program
- Handle provider reimbursement services and audit institutional provider cost reports
- Handle redetermination requests (1st stage appeals process)
- Respond to provider inquiries
- Educate providers about Medicare FFS billing requirements
- Establish local coverage determinations (LCD’s)
- Review medical records for selected claims
- Coordinate with CMS and other FFS contractors
Section 911 of the Medicare Prescription Drug Improvement, and Modernization Act (MMA) of 2003 directed CMS to replace the Part A Fiscal Intermediaries (FIs) and Part B carriers with MACs. CMS procures all MAC contracts according to the Federal Acquisition Regulation. Various elements of the Agency’s original strategy for implementing Section 911 of the MMA evolved over the years.
Currently there are 12 A/B MACs and 4 DME MACs in the program that process Medicare FFS claims for nearly 68% of the total Medicare beneficiary population, or 38.5 million Medicare FFS beneficiaries. The MACs serve more than 1.5 million health care providers enrolled in the Medicare FFS program. Collectively, the MACs process more than 1.2 billion Medicare FFS claims annually, 218 million Part A claims and more than 1 billion Part B claims, and paid $386 billion in Medicare benefits.
It's important to understand that MACs have nothing to do with Medicare Advantage, or "Part C" plans. Those are actual Medicare policies which are offered by private companies contracted & authorized by the Centers for Medicare & Medicaid. Medicare Advantage is a whole different business division for insurance companies. MACs are used by traditional Medicare.
The text above makes it sound like there are a total of 16 MACs contracted by CMS to process claims, but in some cases the same private contractor operates more than one region. As far as I can tell, there's actually only 7 different MAC companies:
- Noridian Healthcare Solutions, LLC
- CGS Administrators, LLC
- Wisconsin Physicians Service Government Health Administrators
- Palmetto GBA, LLC
- National Government Services, Inc.
- Novitas Solutions, Inc.
- First Coast Service Options, Inc.
What's that? You've never heard of any of these companies? Yeah, except it turns out that you have. I did a little quick searching, and it turns out...
- Finally, regarding Novitas Solutions, Inc: "In January, Diversified Service Options Inc, a wholly owned subsidiary of Blue Cross and Blue Shield of Florida Inc, acquired MAC Highmark Medicare Services (HMS) from its parent company, Highmark Inc. As a result, HMS changed its name to Novitas Solutions Inc."
...which I think means that Novitas is also owned by the same company which owns BCBS Florida.
So, there you have it, folks: BCBSND, BCBSSC, BCBSTN, BCBSFL, Anthem and WPS appear to be in charge of processing all 1.2 billion fee-for-service Medicare claims annually for over 38 million people.
Of course, if Bernie Sanders' flavor of MFA (which would stick with the fee-for-service structure) were to actually come to pass, that means instead of 38.5 million Medicare FFS enrollees, these companies would presumably be handling claims processing for all 330 million Americans, or roughly 8x as many people.
How much money do these seven companies get paid for their efforts? Well, I'm not sure what it is for 2019, but according to a 2014 Administrative Contractors' Performance Report from the HHS Dept. Office of the Inspector General, all 16 MACs were collectively awarded $4.3 billion in contracts over a 5-year period. Accounting for inflation and Medicare enrollment growth since then, I'm going to assume that amounts to a bit over $1.0 billion per year. Assuming a direct extrapolation (and obviously there'd likely be some pretty significant changes), that would likely jump up to around $8.5 billion per year, give or take.
Of course, the top five carriers alone brought in $361 billion in total revenue in 2017...and as far as I can tell, they only make up around 40% of total 2017 health insurance revenue, which would mean the grand total is closer to $933 billion in 2017. The MAC contracts would still be chump change compared to that even at 8x the revenue.
So there you have it: Proof positive that if Medicare for All were to completely replace all private health insurance throughout the United States, for good or for bad, private insurance carriers would still have...um....0.9% of their current revenue stream.
AS FOR CURRENT EMPLOYEE IMPACT:
In the past couple of diaries, there was a lot of back and forth between myself and subir over just how many people currently work for health insurance carriers (directly or indirectly) who would be at risk of either losing their jobs or having to be retrained/relocated/etc if they wanted to stay in the same field. I originally estimated between 2-3 million; he convinced me that I should reduce this range down to between 500K — 2.7 million.
This has still been bothering me, however, so I’ve gone back and tried once again to take a crack at figuring out not only how many currently work in the health insurance industry, but how many of them would likely still end up working for private health insurance carriers under an MFA scenario.
The MACs seem like a good place to start. Currently...
- Noridian Healthcare Solutions has 1,000 - 5,000 employees
- CGS Administrators, LLC has 500 - 1,000 employees
- Palmetto GBA has 5,000 - 10,000 employees
- WPS GHA has 2,700 employees.
- National Government Services has 1,000 - 5,000 employees
- First Coast Service Options has 500 - 1,000 employees
- Novitas Solutions has 1,000 - 1,500 employees
All told, it looks like these seven companies employ somewhere around 18,000 people. Assuming they were to grow in direct proportion to the volume of Medicare enrollees they service (which of course there's no guarantee of), that would increase to something like 150,000 people, a net increase of perhaps 130,000 government contractor jobs.
That brings me to the original debate between myself and subir. I’ve checked a couple of other sources, and came up with these figures:
- Around 500,000 people work directly for health insurance companies in the U.S.
- An additional 1.17 million work indirectly as insurance brokers, agents, or other insurance-related businesses such as claims adjusters etc...although that includes life, property and casualty insurance.
I'm therefore going to assume the actual number whose jobs depend directly or indirectly on the private health insurance industry specifically would be somewhere in the range of 600,000 - 1 million people.
Let's assume 130,000 were shifted over to work for the MAC contractor subsidiaries of those companies to cover the 8x Medicare claims processing load from having all 330 million of us in the program.
Let's further assume another, say, 70,000 were hired to fill other new openings in related positions (either by the federal government or other private contractors) to fill additional MFA-related needs (the IRS, perhaps, to deal with changes to the tax system due to MFA?)
Finally, let's assume that the "supplemental health insurance market" left behind to cover oddball stuff employed, say, 5% of the original workforce...another 30,000 - 50,000 people. I should also note that this might generate perhaps another 5% of the private industry's current revenues...let's call it 6% when you include MACs.
If so, that would leave perhaps 350,000 - 800,000 people who'd have to find a completely new career, which is far lower than my earlier projections (but still a lot of potentially pissed-off people).
So there you have it: 94% of the private health insurance industry eliminated, ~350K — 800K displaced workers (and yes, I’m aware both the House and Senate MFA bills include provisions to help those folks get settled in elsewhere).
Whether this would be a positive or negative thing obviously depends on your perspective.
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