Gary Schwitzer links to a Business Week article that says health insurance is a very uncompetitive market. Schwitzer notes this hasn’t gotten much attention, and wonders if it is a reason why health insurance premiums keep going up.
It is – and it isn’t. As with most things in health care, there’s more to it than it seems.
Business Week and Schwitzer are right that the market for health insurance is not especially competitive. Most states have one or two dominant health insurers, and a number of other much smaller players. The smaller insurers are often at a big disadvantage. I blogged about this a couple of months ago.
As companies get bigger, they minimize their exposure to the insurance market. Mid-sized employers (between about 500 and 2,500 employees) buy so-called “stop loss” coverage. Under these plans, they self-insure for some of the risk, and buy coverage for unexpectedly high expenses. It’s sort of like a high deductible plan, except it’s for the company. That market is, in fact, highly competitive, and serves many of the 14 million Americans who work for companies of this size.
Really big companies – which employ 43 million Americans – don’t buy health insurance at all. They hire a health plan to administer their expenses, but have completely opted out of the health insurance market.
So is the uncompetitive health insurance market driving health care premium increases?
It doesn’t help, but there here are three other things that we don’t talk enough about that are driving these increases:
1. State coverage mandates. Each state requires that insurers who wish to sell there comply with a huge variety of coverage mandates. In fact, there are nearly 2,000 mandates, some of which add significant costs to health insurance. Adding new mandates is a regular activity of state governments, based on the political clout of patient groups, pharmaceutical companies and others. State governments have had an important role to play in driving premium increases.
2. Guarantee issue requirements. The other thing some states have done is outlaw medical underwriting. This means that if an uninsured person gets diagnosed with an illness, he can just go out and buy an insurance policy and, for the cost of an annual premium, get all the care he needs. He can even cancel the policy after he’s done being treated, and buy one again if he gets sick again. There may be valid public policy reasons to make health insurance guarantee-issue. But the reality is that insurers have to add in additional premium to account for the fact that their risk pool includes in it much more costly individuals than otherwise would. There is no free lunch.
3. Other cost-shifting. Studies show that tens of billions of dollars a year of uncompensated health care to the uninsured is provided by medical providers. They try to offset these costs by negotiating higher payment rates from private insurers. The same is true for government-funded programs. As these programs have attempted to control costs by simply paying less, providers have tried to recoup those reductions through higher fees to health plans. In each case, the ultimate cost is passed on to the consumer. Some groups think this kind of cost-shifting adds 5-10% to annual premium rates.
There are, of course, lots of other reasons for the rapidly increasing health insurance rates. These are few of the less discussed that we ought to talk about more.
*This blog post was originally published at See First Blog*
My Interview With President Obama On Health Care Reform
I met President Obama yesterday. I interviewed him at the White House about his proposals for health care reform. But naturally, as we greeted each other, I asked about his throwing out the first ball at the All Star Game the night before.
“Were you nervous about bouncing the ball?” I asked. He grinned. “I will say it’s actually nerve-wracking,” he said. “When they hand you the ball, there are just a lot of things that can go wrong.” I found that to be a perfect metaphor for his assuming the Presidency of the United States and attempting to overhaul the health care system.
The biggest news from yesterday’s interview: President Obama has changed his position from the campaign trail and now believes that health care insurance should be mandated for all Americans, with a hardship exemption.
Dr. LaPook: Ultimately, philosophically, do you believe that each individual American should be required to have health insurance?
President Obama: I have come to that conclusion. During the campaign, I was opposed to this idea because my general attitude was the reason people don’t have health insurance is not because they don’t want it, but because they can’t afford it. And if you make it affordable, then they will come. I’ve been persuaded that there are enough young uninsured people who are cheap to cover, but are opting out. To make sure that those folks are part of the overall pool is the best way to make sure that all of our premiums go down. I am now in favor of some sort of individual mandate as long as there’s a hardship exemption. If somebody truly just can’t afford health insurance even with the subsidies that the government is now providing, we don’t want to double penalize them. We want to phase this in, in a way that we have time to make sure that coverage is actually affordable before we’re saying to people “go out and get it.”
The interview went very smoothly and fairly predictably until we reached the following exchange:
Dr. LaPook: You’ve said that if doctors have the information, they’ll do the right thing. And generally, I like to — I’m a physician and practicing — I think that’s true. But actually, there are a lot of times when that’s not the case. For example, angioplasties — elective angioplasties, where you open up a clogged artery in the heart. It turns out that about 30 percent of them are unnecessary, that they’re done and you try to open up an artery of the heart, but really it’s no better than medication, and doctors know this, but they still order them.
President Obama: Why are they still ordering them, do you think?
I will admit that he took me by surprise by turning the question on me. Suddenly I was not in a one-way interview, I was in a conversation. Politics aside, it was clear to me that he was listening and he was curious.
Dr. LaPook: I think that because they believe — there’s this thing about — if an artery’s closed. It’s got to be better if it’s open, and it turns out that’s not true. So they have on the one side their intuition as a physician, in their bellies, and then there’s the evidence-based medicine that we talk about, and they clash a lot at times, so how do you make that doctor do the right thing or give him the right incentives?
President Obama: I have enormous faith in doctors. I think they always want to do the right thing for patients. But I also think, if we’re honest, doctors, right now, have disincentives to making the better choices in the situations you talked about. If you are getting paid more for the angioplasty, then that subconsciously even might make you think the angioplasty is the better route to take. And so if we’re reimbursing the physician not on the basis of how many procedures you’re performing but rather how are you caring for the patient overall – what are the outcomes – then I think you start seeing some different choices. And at the very least, you’re not taking money out of physicians’ pockets for making the better choice. So it’s a combination of better information and then, I think, a different system of reimbursement that says, “let’s look at the overall quality of the care of the patient.”
My conversation with President Obama illustrates a crucial focus of the current healthcare debate: figuring out if the American people are getting their bang for the buck when doctors order tests, perform procedures, and prescribe medications. The current buzzwords among doctors and politicians are “evidence-based medicine” (is there proof that something works?) and “comparative effectiveness” (if there’s more than one way to do something, what works best?). An Institute of Medicine workshop about evidence-based medicine began today in Washington, with the following listed as “issues prompting the discussion”:
. “Health costs in the United States this year will be about $2.5 trillion—nearly 17% of the economy.
. The United States spends far more on health care than any other nation, 50% more than the 2nd highest spender and about twice as high as the average for other developed countries.
. Overall health outcomes in the United States lag behind those achieved in other countries.
. Consistent with the per capita figures, many researchers studying the nature of U.S. health expenditures feel that 20% of our expenditures do not contribute to better health.”
Expert groups are currently trying to establish guidelines for reimbursing health expenses based on clear results from well-designed clinical studies. The problem is that for many medical issues, there is no definitive, evidence-based approach. Clinical medicine is often based on inexact, immeasurable tools such as intuition and experience. As doctors, we don’t have the luxury of waiting for the twenty-year study to be completed. We have to treat the patient now, as best we can, without perfect information.
In the absence of definitive data, we will need to account for clinical judgment in an overhauled health care system. What will happen when the doctor suggests something the insurance company says is not indicated? Opponents of a public option for insurance warn about the danger of having a bureaucrat in between the patient and the physician. But that threat already exists in the current system every time an insurance company decides whether to approve a claim. Wendell Potter, former head of Public Relations for Cigna, recently told
Bill Moyers about Cigna’s decision to deny a liver transplant to a 17-year-old girl, Nataline Sarkisyan, even though her doctors at UCLA had recommended the procedure.
A public-relations uproar forced Cigna to reverse its decision; the company subsequently explained its reversal as an exception, saying the surgery was approved “despite the lack of medical evidence regarding the effectiveness of such treatment.”
Ms. Sarkisyan died hours after Cigna’s decision, without having received the transplant.
A critical flaw in the current system – and one that must be addressed in any overhaul – is that the same people who refuse to pay for a recommended course of action are the ones who consider the appeal of that decision. And, lo and behold, they usually end up agreeing with themselves! In more than two decades of medical practice, I have spent countless hours trying to get various services covered by payors. One encounter – when I tried unsuccessfully to get a stomach-acid lowering pill approved for a patient who needed it -ended up as an example of twentieth-century frustration in
Letters of the Century.
Yes, our current health care system is not sustainable and we do need an overhaul. But there is no “exactly how” and we cannot afford to wait for one. There are so many nuances to the moving target of health care and so many unknowns that it is impossible to create a perfect solution on paper. I’ll settle for an imperfect solution that addresses the most important problems first and represents the best efforts of our most thoughtful experts. But it should not be set in stone. It must include provisions to mature gracefully into versions 2.0 and beyond.
An illustration from “Physical Therapy for Zombies”?
Seriously.
The crutches are way too long and there is no banister on the stairs.
Actually, I don’t even see a second crutch.
Is the nurse is standing by or running up to rescue this guy?
If he is trying to elope, he isn’t going to get far!
********************
I figure if you are trying to understand something, begin with how it affects you. Make it personal, and it’s easier to grasp.
So I took on my health insurance coverage. I am covered through my employer, but surely I could get comparable coverage as an independent buyer.
Right?
*crickets*
*****
I am covered by Anthem Blue Cross. You know, Blue Cross. The company that used to be the Gold Standard of health insurance? The one my physician no longer accepts because of their reimbursement rates? I figured my best bet was to check out and compare coverage from the same company, so I hit the Anthem Blue Cross website to try and get a quote.
You can get an overview of policies, but they make you put in your phone number so a representative can call you. I didn’t mind, as I had some questions. I spoke with Danny, who was very helpful.
But before I go any farther, you should know one thing. Just in case you are looking to purchase a private plan.
If you have insulin-dependent diabetes, Anthem Blue Cross will not issue you a private policy.
Whoa. Found that out when I asked about pre-existing conditions. I had always heard that folks were denied coverage for pre-existing conditions, but to actually hear it coming from a representative floored me.
*****
If I wanted to quit my nursing job tomorrow and make my living blogging (offers accepted), I would need to purchase insurance. I could go with COBRA and buy through my hospital for 18 months, or I could buy my own policy.
The payment for COBRA coverage for a family of three adults (ages 55, 52 and 19) is $2157.00 per month. That is $25884 per year, and includes everything from pediatric well-baby checks to maternity coverage.
Twenty Five Thousand, Eight Hundred and Eighty-Four dollars a year.
Pardon me while I go take a meclizine, just typing that number gave me vertigo.
Private PPO insurance for the same family of three, through the same company, with coverage for brand-name medications is $897, or $10,764 per year.
Huge difference.
On the surface.
*****
To get the private-pay plan you must be vetted. Screened. They will take you if you have high blood pressure, but only if you are controlled and have been on meds for a certain amount of time. Same with high cholesterol. Same with GERD. I’ve already mentioned the diabetes. If you don’t meet their criteria, it’s “buh bye”.
My friend in Human Resources told me that our insurance coverage was “more robust” than what was offered in the private plan. Our deductibles are less, our out-of-pocket per-year expenses are less, our co-pays are much less.
She was right.
But I am still confused.
And I have a lot of questions.
Why is my employer paying for coverage I no longer need? I’m long past needing the services of a pediatrician and maternity coverage is not an issue (been there, done that, may my ovaries Rest in Peace). Why can I not opt out of these things, saving my employer money? What if I did not want coverage for mental health, for example? The private pay plan is available without maternity care.
Why can’t I have the money that is spent on my health insurance premiums (more than some people make in an entire year!) put in a savings account that allows me, as an individual, to choose what type of coverage I want to have? And have whatever is left available to pay co-pays and deductibles? They are paying the money anyway – why not put it in the control of the patient/employee.
Where the hell does the private insurance industry get the authority to decide who they will and will not cover? Is that not discrimination?
What happens when/if I develop an illness that would have denied me private coverage to start with? Am I dumped? Is the illness covered? For how long?
And I still don’t understand…
Why my doctor charges $140 for a visit, I pay $15 and the insurance company pays another $40, and my doctor winds up with only 39% of his fee? No wonder he doesn’t take new patients with Blue Cross. What other profession has no control over their reimbursement?
Why, with my background as a nurse, I still am unable to make sense of an “Explanation of Benefits” report. There is an actual fee, a negotiated fee, a deductible, a co-insurance portion and then what is left is for me to pay. And trust me, the amount paid by either the insurance and/or myself never, ever amounts to the actual fee. Ever.
Why I have a bill for lab tests and screening exams that far exceeds what my deductible is for the year, and yet the deductible is not yet satisfied. Seems to me I’ve paid out the deductible-times-five and yet it is still not satisfied.
I don’t even know where to start to try and get an handle on this.
Either I’m an idiot or the system is way out of control.
Maybe both.
But I do know this. I am a 52-year-old woman who is welded to her employment solely for the medical benefits. I’m getting older, I am going to need coverage for conditions and diseases that I did not have to worry about in my 30s. Every decision I make, whether it be a new job or attending school full-time at a university will be decided by the availability of health insurance and what it covers.
Thank god I have that coverage.
I just wish I had more control over how it was applied.
Lord knows I could do it more efficiently.
*This blog post was originally published at Emergiblog*
I was having trouble keeping track of my chickens – they kept somehow escaping from their coop. So I figured that I would set guards to make sure none of them got out any more. I got some rabid wolves and put them outside of the coop, figuring that they would scare the chickens enough to stay in their place.
But here’s the problem: these rabid wolves are eating my chickens! Can you believe it?? You would think they’d have the moral decency to respect the fact that I hired them to guard my chickens, but now they try to bite me whenever I go out there! It’s amazing to me that these wolves would act in such a way. What’s the world coming to when you can’t trust rabid wolves to guard your chickens??
—-
What? You think I’m crazy? Take a look at our healthcare system! This is exactly what we are doing with our healthcare dollars.
In a recent article, Ezra Klein (coincidentally mentioned in two consecutive posts) discussed Wendell Potter, a disillusioned insurance executive who shared why he left the industry. Potter explained that the for-profit insurance industry (Cigna in this case) uses the following tactics to maximize profits:
The industry, Potter says, is driven by “two key figures: earnings per share and the medical-loss ratio, or medical-benefit ratio, as the industry now terms it. That is the ratio between what the company actually pays out in claims and what it has left over to cover sales, marketing, underwriting and other administrative expenses and, of course, profits.”
So it seems that a for-profit company is in it for the profit. Disgusting. Klein goes on:
The best way to drive down “medical-loss,” explains Potter, is to stop insuring unhealthy people. You won’t, after all, have to spend very much of a healthy person’s dollar on medical care because he or she won’t need much medical care. And the insurance industry accomplishes this through two main policies. “One is policy rescission,” says Potter. “They look carefully to see if a sick policyholder may have omitted a minor illness, a pre-existing condition, when applying for coverage, and then they use that as justification to cancel the policy, even if the enrollee has never missed a premium payment.”
So the insurance industry is “cherry-picking” healthy people to insure – people they won’t have to pay much on – and dumping unhealthy people. How can this happen? How can the insurance industry be taking money from the system and using it for their own profits?
But who is actually the problem here? Are the Wolves evil for eating my chickens? No, they are just acting like wolves. I am the fool for trusting them to watch my chickens without getting taking advantage of their position. Putting for-profit insurance companies in charge of huge sums of money is just as foolish. As Klein states:
The issue isn’t that insurance companies are evil. It’s that they need to be profitable. They have a fiduciary responsibility to maximize profit for shareholders. And as Potter explains, he’s watched an insurer’s stock price fall by more than 20 percent in a single day because the first-quarter medical-loss ratio had increased from 77.9 percent to 79.4 percent.
Actually, I think Mr. Klein understates it a touch. It isn’t that the insurance companies need to be profitable; they are under huge pressures from shareholders to maximize their profits. They are being pressured to milk as much money from the system as possible. Maggie Mahar underlines this fact:
Potter is right. Disappointed shareholders can be brutal. And it doesn’t take much to disappoint them. In this case investors sent the share price plummeting because the insurer had the poor judgment to increase the amount that it paid out to doctors, hospitals and patients by 1.5 percent.
Even if an intelligent CEO wanted to do the right thing, take the long-term view, and provide labor intensive chronic disease management so that, over the long term, customers would be healthier—the CEO of a large publicly-traded insurance company probably wouldn’t keep his job long enough to find out whether or not his ideas worked. This helps explain why for-profit insurers have not followed the example of non-profit insurers and created “accountable care organizations” like Geisinger or InterMountain.
Those who have followed this blog have heard me say it before: the system won’t change until we stop trusting for-profit insurance companies to guard the money. Those who are morally indignant over the fact that these companies would milk the system as they do are blustering in the wrong direction. You don’t blame wolves for acting like wolves, and you don’t blame for-profit publicly-held companies for trying to maximize profit. They are just being themselves. We are the idiots – assuming they could be trusted in this position.
Obviously, the best solution is to put the politicians and lobbyists in charge. Surely they are trustworthy.
One of my favorite summer activities is watching reruns of Star Trek Next Generation. It’s become somewhat of a summer tradition in my family the last few summers. Having become trekkies themselves, my kids were able to very much enjoy the recent movie, and get the history and lore behind it.
The longevity of the Star Trek enterprise is fascinating. Decades after it’s first launch, it still captures the imagination of inquiring minds and still provides endless hours of entertainment to viewers of all ages.
Even more amazing than the longevity of it’s run is the technology it represents. When the show first debuted, the sci fi components seemed truly out of reach. Today, much of the technology in the new movie and even some of the older shows doesn’t seem that implausible, especially when it comes to health.
Early Trek was a preview of our current Health 2.0 world. When first portrayed, that was not a concept any of us could grasp. Think about it. In the original series, and continuing through to the latest movie, they used communicators in high tech ways with online computers to search data bases and emails and video calls to talk between doctors at different inter-stellar locations. The doctors even had high tech gizmos to look inside and offer a 3-d look within. All medical records were online and available anywhere. New advances in medicine came from experience, science as well as other cultures and the experience of the treating physician. Patients and doctors could review information online and use that to improve their own care.
What wasn’t so out of reach was the portrayal of the practice of medicine and the limitations of what the human physician could achieve. The bedside manner was always first and foremost the key element to a patient’s survival. The physician treated all patients, regardless of species, and had tolerance for different cultural beliefs in treatment. And, not all patients made it through their ordeal. After all, the doctor was “just a man, not a miracle worker”.
So, Trek’s docs were all health 2.0 with a healthy dose of health 1.0 in that they had these important features:
1. high tech gizmos and computers to diagnose and treat
2. traditional docs to take a history and offer counsel but computerized medical records
3. limits on what could be done
4. online communication with “Googling” ability
5. New advances and lessons from other species to tackle new issues and problems
Sounds a great deal like our health system, minus the insurance headaches, huh?
The practice of medicine is begging to be more health 2.0 but with doctors who very much want and need to be involved and keep their health 1.0 skills. Today we have gizmos that keep becoming more high tech…think robotic surgeons. Today we have doctors still driving clinical care with bedside manner still crucial to the success of an outcome. Today we still have limits of what can and can not be done, with a limit of human life, regardless of our efforts to prolong it. Today we have very robust online communication between doctors, between patients, between doctors and patients, and between everyone and the computer, but with an importance still placed on the face-to-face visit.
There’s one big difference between the docs on Trek and us…insurance. Because of that, what we see on Trek is still just a dream. Those docs can do their jobs so admirably and with great patient satisfaction because they are not burdened with an insurance system gone awry and not forced into cycles of defensive medical practices.
Until health reform sorts out how to allow us to have a patient-focused, physician driven system again, what we see on Trek will remain a dream. What’s sad and discouraging is that is this is one sci fi dream that is actually within reach. Don’t you think it’s time we stopped the insurance companies from preventing us from grabbing on?
*This blog post was originally published at Dr. Gwenn Is In*
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What is this?
One of my favorite summer activities is watching reruns of Star Trek Next Generation. It’s become somewhat of a summer tradition in my family the last few summers. Having become trekkies themselves, my kids were able to very much enjoy the recent movie, and get the history and lore behind it.
