Could Your Health Insurer Run “Cash For Clunkers?”

Compared to private-sector reimbursements, the controversial "Clunkers" program looks pretty good

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People opposed to healthcare reform have a new mantra: If the government can’t run the “cash for clunkers” program, do you really want them managing your healthcare?

Catchy. Timely. And probably as misleading as “death panels” and “euthanasia.”

The problem with the government’s Clunkers program is that car dealers had to spot their customers those government rebates—up to $4,500—then wait for the feds to reimburse them. Since late July, dealers have sent the government about 457,000 applications for nearly $2 billion in rebates. Through the first three weeks of the program, only about 7 percent of those claims had been paid, totaling about $140 million in rebates.

Disaster!

Or is it?

[See the industries hurt most by soaring healthcare costs.]

The government hasn’t provided exact figures, but it has said that many of the rebate claims were sent back to dealers because of paperwork problems. The biggest problems were things like unsigned sales agreements, mismatched serial numbers, and forms that failed to include the make, model, and year of the clunker being traded in. Such sticklers, those government bureaucrats.

Now if a superefficient insurance company like Aetna, Cigna or MetLife were running the Clunkers program, they probably wouldn’t get all bent out of shape about a few paperwork snafus, would they? The money would just go flying out the door, with no worries about technicalities. If it turned out that a bunch of those rebate applications were fraudulent or bogus, the extra money paid to the swindlers would just get tacked onto next year’s insurance premiums and nobody would complain. Right?

[See the trouble with healthcare reform, in numbers.]

Funny, most people submitting a reimbursement application to their insurance company would be thrilled if the check arrived within three weeks. But obviously our expectations aren’t that high. I haven’t been able to find reliable data on average national wait times for health insurance reimbursements (if you know of any such data, please email me at flowchart@usnews.com), but we all have experience with this. If I’m submitting a claim that is unambiguously reimbursable, it seems reasonable to expect a check within 4 to 6 weeks. If I don’t fill out my forms right, I’m 99.7 percent certain the insurance company will send them back to me and my check will get delayed. And if I’m trying to get the insurance company to pay for something it doesn’t feel it should pay for, I fully expect it to take 3 months, 6 months or forever to get paid back.

That’s all inside a system that has been in place for years. Let’s say some omnipotent third party suddenly declared there would be 25-percent rebates on healthcare for certain people, provided they met certain conditions. Similar to Clunkers. There was a fixed pot of money to cover the rebates, and the deal would end once the money was exhausted. That would doubtless produce a surge of patients rushing to medical offices and hospitals once the rebate period began. Yet you gave the insurance companies processing the payments just a few weeks to prepare for the deluge. Oh, and they weren’t allowed to hire any new workers—they had to manage it all with staff on hand.

[See 5 downsides to the “cash for clunkers” program.]

What would happen? There would be all kinds of confusion about who qualifies. The paperwork would be a nightmare. Payments would get held up for weeks or months. Yet critics deem the Clunkers program a failure because it’s performing on a par with, or better than, the typical health insurer. And it’s not even consumers who are complaining about Clunkers. They’re pretty happy, since the burden for getting the paperwork right and obtaining the government rebates doesn’t fall on them. It’s the car dealers who are grousing, even though it’s a safe bet that every legitimate Clunker claim will be paid, because failing to do so would be political suicide by the Obama administration.

If the government ran a healthcare plan that offered major discounts, worked through existing providers, minimized the paperwork burden on consumers and paid every legitimate claim, would that be considered a failure? I guess it would depend on our expectations, which seem to be higher on government than on a private sector that routinely delays payments to consumers—without any controversy whatsoever.


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health care
  • Rick Newman

    Rick Newman is the author of Rebounders: How Winners Pivot From Setback to Success and the co-author of two other books. Follow him on Twitter or e-mail him at rnewman@usnews.com.

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