Monday, July 27, 2009

Are people really satisfied with the health insurance they have?

‘How’s your wife?”

“Compared to what?”

H. Youngman

We keep hearing that people are “satisfied” with the health insurance they have. I have to ask, compared to what?

We live our lives comparatively. When we judge our wealth and income, our success in life, even our health by comparing it to others. Just look at your true feelings as you attend school reunions. There is fellowship, pleasure, … and comparisons.

Why would anyone be “satisfied” with their current health insurance? It is very expensive, unduly restrictive, uninformative and mysterious

I can only think, compared to not having insurance. OK, that makes sense. Or, compared to being on Medicaid, or having to go to a clinic. Or, compared to having to pay for the whole thing yourself and not be helped by an employer. Or, finally, compared to what might be coming down the pike and you might have to change to something new that you haven’t tried before, because we fear change. We do think comparatively.

Years ago we had a young new employee from a labor union family when single payer came up on the California ballot. Of course, this would have benefited her a great deal. But she was against it. We asked her why. She said that it would probably all be just like Medicaid, and she wanted "private insurance." Was that comparative thinking? I thought maybe it was.

I have to agree that I think similarly.

But if we compare our insurance to the way it used to be, don't we get another picture? Price has risen astronomically. Is it not significant that health insurance costs twice what it did ten years ago, on average? In many cases (Bayside Medical Group, our practice, for instance), only double would be a blessing. Difficulties with accessing care has risen. Providers drop out of networks and leave patients with more to pay, or needing to change providers. Provisions within policies have become more company-friendly rather than patient friendly. The insured have become progressively under-insured. We are the proverbial frogs in the slowly warming water that will parboil us if we don't do something, but we don't know quite what to do.

We can also compare our insurance to that of other countries, but that gets shot down too quick - Canada, the UK, they certainly have their problems. Sweden has too different a culture. France is too French. It is tough for people to imagine difference.

But in sum, I think all this public obeisance to “you can keep the insurance you currently have” is just for political sales; necessary, but destined to be transitory. The point is, break the logjam, get reform started, get some people on new insurance, and most will say, “remember that old insurance that we liked? It stank!”

Budd Shenkin

Sunday, July 26, 2009

Is Health Care Reform Really Costly?

Here is something I don’t understand. The biggest current issue in the health care reform debate is, how much will it cost, and how can we cover that cost? What I don’t think I understand is this: are we just looking at the cost to the Federal government? If so, that’s a pretty narrow view, I think.

Look at it this way. Currently, about 47 million people are uninsured. When they get sick and are hospitalized, they get astronomical bills, as we all do. Since they are uninsured, they might pay some of it or all of the bill, but frequently pay none of it and/or declare bankruptcy. The hospitals thus don’t receive recompense for their services. The hospitals say that they spread this cost to all those who are insured by keeping their rates high, and collecting enough from insured patients to cover their expenditures for the uncovered.

Now, say that health reform leads to most of the currently uninsured become insured. Insurance money now flows from the Feds and people now required to purchase insurance, to the insurance companies and into the hospitals (and other providers) where it didn’t flow before. That’s more income for the providers. There is no change in utilization from before; the only change is where the money comes from and how it is distributed. The government helped to supply the money for the insurance, but now the hospitals get money they didn’t get before. If the hospitals keep their prices high, they benefit from the transfer from the government. If they lower their prices because they now would have no need to spread their loss, then insurance prices could decline, incomes would increase because of lower health insurance costs, and higher taxes would flow to the Federal government. The problem would be disgorgement of new-found profits from hospitals, not an easy problem to fix, but fixable.

In addition, if it is true that the uninsured now utilize emergency rooms disproportionately, and if they were insured they would switch to doctors’ offices which would be less expensive, we would be looking at a true decrease in utilization and a true decrease in cost.

The point is, it would seem to me quite possible that the true cost to society would be stable or decline if we were to follow the broad outlines of current insurance reform proposals. The problem with costliness would be in the Federal government budget, but the nation’s wealth would either be unaffected or perhaps increase. Looked at this way, it is simply a problem of reclaiming the Federal government’s investment, rather than actually looking at an increase n national expenditure.

Or am I wrong?

Budd Shenkin

Wednesday, July 22, 2009

How much out of pocket should a patient pay?

I'm concerned about the amount of out of pocket costs patients might be required to pay under the new plan to come. Currently the basic plan on the HIE under HR3200 calls for $5,000 out of pocket for a person, and $10,000 for a family. This seems so high to me!

Here is what the Commonwealth Fund says about subscribers currently:

"People enrolled in an individual market plan spend far more out-of-pocket and on premiums than those with employer-based coverage: the average family covered by an employer plan spends $2,250 out-of-pocket on health expenses, while those with individual insurance spend an average of $6,750. Adults with individual market coverage are also more likely to have high deductibles and face limits on what their plans will pay. More than two of five adults with coverage through the individual market report not getting needed health care because of the cost."

But, one of the main objectives of the HIE is to make insurance available to individuals on the same basis as those with group insurance. So, has that been achieved by HR 3200? Not in this respect, it would seem. Where did they get this, I have to wonder? If you need to save money, this doesn't seem to me to be the place to save it. It's like being defeated by your own hand.

Budd Shenkin

Health Reform - Public Option, Private Option

I think I now understand how the new health plan could work. I have dealt with the heart of the plan, the Health Insurance Exchange (HIE), previously. It's a good heart of a plan. But the role of the Public Option has been obscure. Here's what I think.

The Great Health Reform Bill (GHRB) of 2009 needs to set the path for reform of the health care system. It can’t solve a whole lot of things at once, but it can solve some of them – access to health insurance being the most prominent. But making the health system more effective, efficient, and cost-saving will take time. The role of the GHRB should be to get us on the path.

We are set to have a Health Insurance Exchange. That’s very good. The HIE will make health insurance accessible to people, will set standards that people can understand and be sure of, and stop insurance companies from making money by shucking and jiving – not covering things, denying insurance after the fact (rescissions), low-balling vulnerable primary care providers, etc. As currently constructed the basic insurance policy under the plan is pretty bad – high deductible insurance was a bad idea from the start. But we won’t deal with that in this post – I think I’ve dealt with it before. This can be solved. The current bills also restrict access to the HIE to individuals and very small groups, which is also bad. Why not make it accessible to larger groups? The answer seems to be that the authors of the GHRB are afraid of adverse selection – that is, the only reason a larger group would opt for the HIE would be that they couldn’t get a good policy from a conventional private plan, because of poor health care utilization history. This reasoning means, we’ll give private people a good deal, but screw the larger groups that can’t get coverage. Thanks a lot. But again, that can be solved.

But those problems aside – I couldn’t help but comment – the biggest problem lawmakers and lobbyists are dealing with is the Public Option. Clearly, if there were a Medicare-like plan that competed with the full force of the public coffers behind it, this sort of PO would be able to blow the private plans out of the water. The so-called “volume discounts” available to a Medicare-like PO would mean that they could pay providers much less, charge the public less for policies, and drive the private plans out of business. A temporary fix for costs, yes, but in effect creating a single-payer plan. The country currently rejects this option, as do I unless it were completely thought through, which it hasn’t been. So it’s a non-starter. The next option for a PO is a good possibility – a government sponsored plan on a level playing field. This would mean that the PO would obey all the rules that apply to the private plans – be funded only with premiums, keep similar reserves, etc. Although denied “volume discounts,” this type of PO would still be able to “keep the private plans honest.”

OK – how would that solve anything? To answer that question, we need to look at the as to now unexamined side of the equation – that of providers. (For those who have been skimming, here is the meat of this post!)

Currently, the private health insurance companies not only contract with customers who buy their policies, but they contract with providers as well. The contractors can be individual physicians, integrated groups of physicians, individual hospitals, larger hospitals and hospital chains, pharmaceutical companies, and others. Depending on market power, the insurance companies are winners or losers on each contract, although with their overall book of business they need to be solvent. But the insurance company has freedom to contract or not contract with each entity. They make business decisions.

Medicare, however, does not have such latitude. Medicare has a set price and a method of paying, take it or leave it. If the provider meets the Medicare standard of professional requirements, they have to be accepted as Medicare providers. This is called Any Willing Provider (AWP).

I would propose the same AWP rule for the PO – any willing provider would be admitted as a contactor to the program. The terms of engagement would not be differentiated by the judgement of the governmental agency – that would constitute a great difference between the PO and private options. But it would mean that no provider would be completely shut out of business.

I would further propose that the PO set their prices in accord with public policy objectives. For instance, the pay of various specialties under our current system is very skewed. There is a curve with primaries at the bottom, some specialties (general surgery, for instance) in the middle, and some specialties (orthopedics, interventional cardiology, radiology) at the top. As a direct result of this allocation, not surprisingly, the top paid specialties have many recruits and the lower paid specialties, especially primary care, are wanting. I would propose that the PO adjust the pay of these specialties to rectify the current imbalance. A possibility might be 125% of Medicare rates for primary care, 115% for the middle specialties, and 90% for the high-flyers. It may be that the PO would have difficulty recruiting the top-paid specialties for these contracts. This might mean that there would have to be high-level negotiations in Washington. There may be no other way.

Likewise with hospitals. Currently, the payment scheme has many hospitals making tons of money, because there is often no real competition for many of these capital intensive institutions. Their contracts with private insurance companies are very lucrative; many hospitals are making tens of millions of dollars profit per year. The PO would be charged, in concert with Medicare, to introducing the rigors of competition to the hospitals.

If this were done, let’s look at what would happen on the private side. The private plans would not have the requirement of AWP; they could accept or reject whomever they wanted. Seeking profits, it would be in the interest of the insurance companies to organize superior networks of providers. What would “superior networks” be? They would be providers who pleased the public and thus obtained subscribers, and saved money while doing it. These insurance/provider plans might cost more money for each subscriber – but if the improved service were worth it, that’s competition. Or, they might be less expensive, since the plan could reject less cost-effective providers. These plans might let go of fee-for-service and opt for capitation. They might be able to assemble actual “accountable organizations” that accepted capitated payments for defined episodes of care. They might be primary care groups that assembled themselves, and then referred their patients to preferred centers of excellence for specialty services, as suggested in “Redefining Health Care” by Porter and Teisberg.

In other words, the PO would be traditional and stable as an entity, not changing the method of payment of providers (although it might go back to DRG’s for hospitals). If the experimentation of the insurance companies/provider networks went awry, it would be a port in the storm for patients to switch to. At the same time, it would be able to enact some of the more obvious needs of public policy.

The private plans have not been good at positive innovation up until now. They have not been able to team with providers in the public interest. They have not been able to adjust the pay of primaries and specialists to conform to public needs. In fact, they have come up with plans – high deductibles – that have negatively impacted the problems. Now, under new conditions, they would need to innovate positively to survive and prosper. At the same time, they would be constrained by the PO to keep costs down to be able to compete, but on a level playing field.

Politically, this should be a saleable. The Left wants a PO – here it would have one. The Right wants a level playing field and competition – here it would have it. Primary care needs to have support – here it would have it. Costs need to be contained and the path set for further cost reductions by efficiency rather than rationing – this would happen. Monopolistic and oligopsonistic hospitals need to be constrained – this proposal would work toward that goal. High-flying specialties need to be restrained – this proposal would do that.

So, that’s my plan.

Budd Shenkin

Friday, July 17, 2009

Economy Held Hostage

Goldman Sachs has just reported multi-billion dollar half-year profits, to be distributed as usual to the usual suspects. By this time everyone knows that Hank Paulson, recruited by dumb George Bush who was apparently all through dispensing as much as he could to his oil and war-profiteering buddies, got the taxpayers to pay AIG off so they could pay Goldman Sachs off, from whence came Paulson. Privatize profits, socialize losses - no change there.

So outrage is building, as it totally should, as well as realization of having been played for the patsy. If you don't know who the patsy is sitting around the table, it's you.

So, we read the papers and boil, and realize that Obama has the Wall Street stooges in place who are aiding and abetting. But I'm also reading The Ignorance of Blood, the third of the Seville Trilogy by Robert Wilson. It is another police procedural crime book, featuring the Russian mafia in Spain. So - this gives me insight to Goldman! Not that anyone else didn't see it.

We are in a hostage situation. "Too Big to Fail" is essentially a hostage setup. If we fail, they say, the economy goes with us. Go ahead, stick it to us - you will cause your own demise and everyone else's. Your only chance is to pay us to continue to exist and function, and it will be on our terms. What can one do? We ARE hostage. We WILL fail. Everything WOULD collapse. So we pay the money.

But, if you are in a hostage situation, you also realize that the getaway is pretty important. You can pay the money, you can get the hostage back - but the Mafia then has to get away with it. They can do that. They can have so infiltrated the police and the politicians that they will be protected. The few good souls can be emasculated if the whole society is rotten. Or, after the hostage is returned, there can be a bona fide effort to find the culprits, punish them, kill them if possible, and change the situation so that organized crime has no more standing, or at least much less.

So that will be the test for the Administration and the politicians. I'm not so sanguine about the future. Do they see the full extent of the problem? Are there too many stooges paid off within the body politic? Can they use anti-trust? Can they change the rules that should never have been changed in the first place?

They have to wait until recovery is in place. Then we'll see.

Budd Shenkin

Thursday, July 16, 2009

The non-Freudian Unconscious - Eureka!

Let's do the old association test. I say "unconscious," and 2:1 you say "Freud." He "discovered" it. So we have gotten used to think in terms of suppressed desires, unknown influences on us, emotions. Which was a great advance.

I remember when I was a freshman in college and I wrote a paper that talked about how we think about ourselves. I said we talk about ourselves as though we are a unity. As though we had a little pea in our brain that is "us." And then the paper stopped. My teacher read it, and my friend David Riggs read it, and they both said, so where is this going? I thought you were going to come to a conclusion, no? But I couldn't. I could pose a problem but couldn't go further. But I'm patient, and I figured it would just be something that I'd have to think about more. If you only write about questions you can answer, you're not writing about much.

Then two years later I was taking the elementary biology course from George Wald. He said that the problem of life would probably be solved in our lifetime (too optimistic - he died, and we're not close enough for me to expect it in my lifetime). What he meant was that we could put inanimate molecules together and add electricity, as from lightening, and get something that was proto-life. As I said, not yet.

But then he said the second big problem was the problem of the brain. This, he said, would take a lot longer. It was just too complex. When I was in medical school I was amazed by brain anatomy - so many differentiated structure, and so little idea of how they worked! We knew some - the inverse humunculus in the cortex that Penfield had traced, the basic functions of the hindbrain, other things. But not that much.

But amazingly, it seems that much more progress is being made in understanding the brain than in creating life. Thank technology. PET scans; functional MRI's. The functional MRI let's us now know what parts of our brain are thinking what.

So, with all that in mind (aha!), here's what happened last night. I was lying in bed around 4 AM, I think, after I had woken up and started obsessing about what I needed to email in the morning about the office, what about the stock market, etc. There is something about thinking in bed at night after I've been asleep that leads to very succinct sentences, very clear. Also very good and clear thoughts. Somehow, the brain is working differently at night after I wake up.

And then I thought, well, I might as well think about the New York Times Sunday crossword puzzle. I had done it all except the upper left hand corner. There was a 10 letter entry for "publicity push," with the 6th, 7th, 8th, and 9th letters "blit." I hadn't been able to figure it out. And then it came to me, "blitz." It had to be! So I thought, as I always do, should I get up and write it down, or try to go back to sleep and risk forgetting it (I often forget the perfect sentences I think of). So I got up and wrote it down, and in a minute or two thought of "mediablitz," and that was it.

Now, here's the question - where did that word come from? I had the experience that it was floating somewhere and I had to grab it and say it to myself and tether it. It didn't come from consciously going through alternatives - I had done that earlier, for several days. It just popped up and floated.

The answer is, it came from my right brain, the part of the brain that doesn't go through things sequentially, or consciously. [More specifically, the anterior superior temporal gyrus (aSTG).] So it's - unconscious! But it isn't emotional, it's just a part of the brain that works a little differently and then sometimes gets captured by the conscious part. It's unconscious reasoning. Make room, Dr. Freud.

Jonah Lehrer has written beautifully about this in the New Yorker in an article called "Eureka"- July 28, 2008, page 40 - http://www.newyorker.com/reporting/2008/07/28/080728fa_fact_lehrer

Pretty interesting. It's pretty clear that the idea of a little pea that is "us" was indeed only a rhetorical device and a way that we think about ourselves, a heuristic. The same point is made by the famous TED video by the neuroscientist who was conscious as she had a stroke and found her faculties leaving. Or maybe not. Maybe there really is a little place in the brain without which we don't appreciate ourselves the way we do now. Probably so. Probably in the prefrontal cortex somewhere. I guess.

Budd Shenkin

Monday, July 13, 2009

Health Care Reform - eliminate high deductibles!

I've been looking at various reform proposals. I got a look at the so-called Leaders' proposal, from a group headed by Bob Dole, Howard Baker, and Tom Daschle -- all former Senate Majority Leaders. Their proposal was written by Mark McClellan, former Bush Medicare head, and a guy named Jennings, a veteran of Clinton health care from 1993 on. Not much of a recommendation for any of them.

Anyway, I looked over this bureaucratic mess, with some good ideas and lots of real gook, and saw the levels they had set for the Health Insurance Exchange plans. The "basic" plan was, amazingly to me but then I tend to be very naive, high deductible plans! Plans the insurance companies devised that would charge people out of pocket money for basic care, but let the hospitals and specialists run wild! Plans that penalize the least fortunate economically! Plans invented so that employers could save money and pass on expenses to employees! Typical insurance company concoctions! It had made its way to the health reform platter!

Well, enough exclamation points. This is what some free marketers (and I like the free market) point to as the flexibility and inventiveness of the market that the government would not be capable of. Right. They have some standards.

I'm just thinking now more and more - what do we really need the health insurance companies for? Certainly we don't need them for what they do currently. Could they transform themselves into something useful? Usually, it takes a new kind of company to emerge that can do that, and the old horse and buggy companies just fade away. If their money doesn't purchase them artificial continued life.

Meanwhile, I've been thinking what details I would want to lobby on if I had the chance. One would be, the "basic" choice of health insurance on the HIE would not be high-deductible. It would be an HMO, like Kaiser, or like Hill Physicians, or like Geisinger. Anything less is unacceptable.

Budd Shenkin

Budd Shenkin

Thursday, July 9, 2009

Health Reform - Madison expects many steps forward

When I was about 26 years old and just out of my pediatrics internship, I joined the U.S. Public Health Service and was stationed with the Medical Care Administration in Washington, D.C. My first boss was Don Madison. Don came from Lincoln, Nebraska, and was a Seventh-day Adventist and a vegetarian. He was a great fan of the Broadway musical, and great fan of basketball, and was a disciple of some of the leading lights in American pubic health, including Cecil Sheps, who became Director of the Health Services Research Center at the University of North Carolina, whose faculty Don later joined, and whose basketball games he faithfully and enthusiastically attended. Even though he was a Seventh-day Adventist from the Midwest who then attended Loma Linda University Medical School, Don was a great liberal thinker, worked with USC med students Mick McGarvey and Bill Brontson, whose wife was an airline attendant and who could thus fly anywhere for free in his organizing, to start the liberal-radical Student Health Organization (SHO), and then worked at the Beth Israel Medical Center in Manhattan and Montefiore Hospital in the Bronx studying how to organize to deliver health care. He will, as is his way, correct me in these details, which I am never good at, but I'm aiming to get to the flavor of Don. Don was the greatest, nicest, smartest, and most inspiring boss a guy could have. When my unit was splitting into two divisions, "systems" and "action," he asked me which one I wanted to join. I said, "Whichever one you are going with." That's how smart I was. I never learned more from anyone.

Don has been my lifelong friend. As you can tell, I love Don. He says that he is retired, and he is leaving health care behind, where he was a brilliant teacher and wonderful writer. But I won't let him do it. I keep sending him papers, and asking his opinion, etc. It's like the mob - "They keep bringing me back in."

So with his permission I'm posting what Don says about the current health reform movement. I observed to him that Medicare has been so stagnant — I compared it to the Titanic — that it might not be reasonable to suppose that a Public Option in health care would be able to adapt and make progress. Here is his response, which I agree with. His basic point -- just get the best bill you can out now, and trust that there will be lots of adjustment to follow.

"Of course only the passengers on its maiden voyage had the opportunity
> to really appreciate the Titanic! You don't believe Medicare is
> salvageable?
>
> "I think that the fiscal pressure (starting with that from
> Peter Orszag) is going to be so overwhelming in the next couple of
> years that Medicare will have to undergo a major shift in its
> behavior.
>
> "The important thing now is to pass a bill, the best bill we can get
> but one that gets us substantially closer to a "health care for all"
> situation. Then comes the long, hard part. Because it is going to be
> a decade-long, maybe decades-long, process of improving whatever is in
> that first bill. I don't think that the rule of precedents (Medicare
> is the main such precedent, but several out-of-country systems fit
> this model, too) will guide what will happen. What I mean is that
> whatever program passes will not be set in stone — like Medicare seems
> to have been, except for a few changes around the edges — but will
> instead undergo major but step-wise changes (more like Bismarck's
> original program did over the next 40 to 50 years). The changes needed
> will be so complex and difficult, given the recent history of medical
> care in this country (especially The Coming of the Corporation), that
> everything will necessarily move incrementally, once the big bill has
> passed. But that has to happen first."
>
> Don

Budd Shenkin

Why the Mayo Clinic is not a national model

Last month I wrote a response to Atul Gawande's great article in the New Yorker, where he profiled a local community in South Texas that was a high-utilizer and high-cost center of care. He contrasted that area with the Mayo Clinic, and I pointed out that Gawande himself is from the Peter Bent Brigham Hospital in Boston, another elite institution. I opined that these institutions, being elite, could not really be models for the bread and butter health care of the United States.

Now, here is a commentary from the Fort Worth Star-Ledger, July 2, that makes a similar point but with more insight to the financing of those institutions. The author is David Maldonado, M.D., a Fort Worth pulmonologist practicing in Fort Worth.

>>The Mayo Clinic receives millions and millions of dollars in donations from foreign and domestic donors, which the U.S. healthcare system would not have (other than, of course, by increasing our tax burden even more). The Mayo Clinic is the largest training program in the country, giving it an enormous pool of very low-wage physicians-in-training who provide medical care at a teacher’s salary.

The clinic is an organization whose physicians are hired as salaried employees rather than fee-for-service physicians. Mayo can attract top-notch physicians to work there for salary because of its historical reputation and its ability to offer research-based physicians the same salary as its clinical physicians.

At other high-profile medical institutions such as Harvard’s Brigham and Women’s Hospital, where Gawande is employed, a significant number of staff physicians must moonlight to make ends meet.<<

Budd Shenkin

Wednesday, July 8, 2009

The Health Insurance Exchange

This post is a bit repetitive from former posts, but I've been struggling to get my thoughts straight, and I'm hoping this is an advance in thinking. It addresses the issue of the Health Insurance Exchange (HIE), although I have deferred the question of the Public Option as being part of the HIE until later.


The theory of market capitalism is that as companies compete for profit, the public is supposed to benefit, courtesy of the “hidden hand.” That has not happened in the health insurance business. To understand why not and to understand how to fix the system, we need to understand how health insurance companies make their money.

The Current System

First, what does the current playing field look like?

One, there is no fixed price for a given policy. Instead, each policy, whether group or individual, is set by negotiation. This is called “experience rating.” If there were a single price for all comers, it would be called “community rating.” Decades ago Blue Cross/ Blue Shield had community rating. When private companies entered the field they used experience rating. The Blues then had to also do experience rating, or they would have gotten all the bad risks (“adverse selection”).

Two, health insurance is a highly concentrated industry, with only a handful of major players nationwide and few local competitors. In any local area or even a state, one company can have 80% of the business.

Three, market power among the contracting parties varies greatly according to specific situations with buyers (patients and employers) and providers (physicians, hospitals, pharmaceutical companies, and others).

So, how do the companies make money?

Vis-à-vis Patients

Negotiating prices for policies is key. The insurance companies underwrite policies for applicant groups and individuals as part of their process, assessing risks and offering prices for varying products. Because of industry concentration, any group will frequently have few and very similar choices, which typically happens with concentrated industries. Because no specific company has a mission to make sure that everyone gets covered, some groups become pariahs and are unable to find affordable policies anywhere. Individuals seeking policies find them uniformly expensive and/or lacking full coverage, especially when the companies discover “prior conditions”. In sum, the game is one of “cherry-picking.” This is probably the clearest example where the search for profit runs counter to the national interest.

The companies also make money by rejecting policies retroactively (this is called “dumping,” or “rescissions”). When a patient gets sick the insurance company withdraws the policy on the grounds of an unrevealed preexisting condition. Thus, an insured patient becomes uninsured and the insurance company is not liable for the medical expenses. Again, the company’s search for profit opposes the social goal of secure coverage.

They write policies cleverly, exploiting their superior knowledge of policy details. Policy purchasers are confused not only by the “small print,” but even by the basic terms of deductibles, coinsurance, and exclusions from coverage. As certain procedures and conditions are excluded from coverage, patients discover when sickness strikes that they are under-insured.

They reject specific procedures and treatments for patients. There is as yet no independent and authoritative authority to determine which treatments and procedures are valuable. Thus, practitioners make their decisions and the insurance companies get to authorize or reject. Insurance companies probably feel more defensive than offensive in trying to curtail the proliferation of tests and procedures, but the battle for authorization piles up overhead and patients are caught in the middle.

They neglect customer service. Concentrated industries offer few consumer alternatives and can get away with this.

They pay less when a patient chooses an out-of-network provider. This contract provision is rather straight-forward, but recent lawsuits have clarified that the companies have compounded their gain by illegally overestimating the amount the patient is compelled to pay by using faulty cost data.

They market their products either through brokers or directly themselves, using the usual marketing techniques. There is no reputable central source of information and evaluation of these policies for buyers to turn to, only salespeople.

Vis-à-vis Providers

The great majority of policies are now either HMO’s or PPO’s, both of which require the insurance company to assemble a roster of physicians, hospitals, laboratories, etc., that “accept” that insurance. The companies assemble their networks by contracts that specify payment rates.

Again, negotiations are key. The companies find their most vulnerable negotiating interlocutors to be physicians in independent practice, who are forbidden by law from negotiating as a group. Many hospitals hold local monopolies and can be “price-givers” instead of “price-takers,” and can make startling profits. Other local situations have competing smaller hospitals that offer a more level negotiating field.

After the contracts are established and services rendered, physicians try to maximize their billings but must adhere to detailed rules of coding their services. The insurance companies make money by delaying, denying, and down-coding (estimating a service complexity at less than the claim) payments. The physician/insurance battles are legendary; the overhead of personnel salaries on both sides funding this war is also legendary.

Administration-only Services

Large employers frequently self-insure and use insurance companies for their provider networks, policy benefit structures, and claims payments. In contrast to the above situations, this function appears to be more typical of the general business world.


The end result of these activities has been an industry that has made a lot of money with hefty profit margins, and has paid their executives handsomely. Formerly non-profit entities have become for-profit and benefited accordingly.
It is easy to see that the ways that the companies make money bear little resemblance to the “hidden hand” of the market that benefits the public. Quite the reverse.

How The Public Interest Could Be Better Served – The Health Insurance Exchange (HIE)

A major part of the evolving proposal for health reform is to establish a “Health Insurance Exchange” (HIE) similar to the current system for Federal employees. The HIE would present a menu of insurance choices to buyers. There would be Level I, Level II, Level III, and Level IV benefits, with each company offering at each level guaranteed to provide at least the benefits specified by the HIE. The costs would vary, and some offerings might have extra features above the specified level – add-ons, if you will. So at Level I you could choose company A with its network of providers, or Company B with its own, etc. The companies would be required to accept all comers at a common price (“community rating.”) Riskier groups and individuals would be subsidized (several techniques are available, from private and public sources), so no company would suffer adverse selection. Lower income individuals would be subsidized – in essence, they would have a voucher. The HIE would be available to individuals and small groups at first, or perhaps everyone from individuals to large groups.

Just establishing this new exchange system would solve several of the health insurance problems. It would:

• Increase insurance accessibility, and thus greatly reduce the numbers of uninsured.
• Eliminate the problem of portability.
• Reduce underinsurance.
• Increase transparency of policy provisions, and thus protect patients from exploitation.
• Eliminate patient dumping.
• Reduce costs in the insurance system by:
o Eliminating the overhead of underwriting.
o Reducing the overhead of marketing.

Attracting patients would now center on price, additional coverage offered, patient service, and choice of provider networks.

On the other hand, the HIE would not fix some of the existing insurance problems:

• The conditions of negotiating with doctors and hospitals.
• Payment wars between providers and insurance companies, with the accompanying overhead.
• Insurance company\patient wars over coverage for procedures.
• Excessive concentration in the health insurance industry.

The HIE would also not solve the greater problems in health care system of cost and quality.

Would the addition of a Public Option help solve some of these remaining problems? Would other means – rules of the marketplace – be necessary to make the HIE function well?

These are questions for another day. (I’ve been struggling hard enough to get this post together.)

Budd Shenkin

Tuesday, July 7, 2009

Department of I Told Ya So

So, we're in the midst of major health reform. Time to look back a year! My friend Jim Mongan and colleagues published an article in the New England Journal of Medicine that posited possible reforms to the health care system that were politically possible. I objected to the modesty of their proposals. Here is my letter to the editor as published:

>>Volume 359:434-435 July 24, 2008 Number 4

Slowing the Growth of Health Care Costs

To the Editor: The limitation of the article by Mongan et al. (April 3 issue)1 on options for slowing the growth of health care costs is the acceptance only of reforms that will not irritate powerful, entrenched corporate and labor interests. Our system is costing us perhaps twice as much as it should. We need to target the fattest cats and slim them down. Hospitals currently seek consolidation rather than efficiencies, charge a fortune for routine services, and pay higher wages rather than taking strikes. Insurance companies add so little at so high a charge. Pharmaceutical companies advertise, develop frivolously repetitive drugs, and charge without restraint. Medical specialists in some areas operate and serve dying patients with little restraint.

The interventions suggested in the article are popguns against a profit-bound army. Restraint in our mixed system needs to come from government, not voluntary acts by corporations.2 Schlesinger3 has identified a cycle of government activism at 30 years, the last peak being 40 years ago. It is possible, then, that suggestions that are more challenging to entrenched interests should be entertained.


Budd N. Shenkin, M.D., M.A.P.A.
Bayside Medical Group
Oakland, CA 94609
bshenkin@gmail.com

References

Mongan JJ, Ferris TG, Lee TH. Options for slowing the growth of health care costs. N Engl J Med 2008;358:1509-1514. [Free Full Text]
Reich RB. Supercapitalism: the transformation of business, democracy, and everyday life. New York: Borzoi Books, 2007.
Schlesinger AM Jr. The cycles in American history. New York: Houghton Mifflin, 1986.<<

Yes!

Budd Shenkin

Sunday, July 5, 2009

Adventures in Primary Care

I enjoy seeing my teenage patients. Someone said that when you see an adolescent there are three people in the room – the patient, you, and you-when-you-were-a-teenager. I think that’s a pretty insightful description. My goal with them is to have them share their highs and lows, concerns and confidences with me, and to reflect back to them how they are fitting into the common tasks and concerns of adolescence. I want to be a comfort to them. A lot of times I can reflect back to my own life and my own family, and how I succeeded and failed, worried and finally survived. Or I can reflect on the usual frustrations, sexual longing and inexperience, the experiences of other teens I know. It usually works and we both feel enriched.

So on Monday I was seeing brothers of 9 years and 13 11/12 years of age. The elder boy, G., is a gangly, good-looking kid who has matured a bit early physically. His father told me that he had worked hard to get him into a good junior high of his choice, which sounded like a good move to me, very devoted of him to do. As usual, after I finished with the younger brother I asked him and his father to step outside so I could talk to G. alone.

As always happens with these kids, as the parent left the teenager came into his own and we had an honest conversation. How were things at home, good? Well, not always, he said. His father is pretty dominating and won’t admit when he’s wrong. Sure, I said, I can see that that must be frustrating. But in these years of striving for independence, it gets unclear who is responsible for what, etc. This is what usually comes up, and I think I can be helpful.

So then I turned to sex, drugs, and rock ‘n’ roll. Not much drugs, it turns out. We had a little conversation about what is dangerous. Then I said, OK, G., when you get older and get a girlfriend and if you guys are going to have sex, how often are you going to use a condom? The right answer is “always,” but his answer was a little different: “Both times!”

“Both times?” I said.

“Yes, I used a condom both times.”

“So, you’ve had sex twice?”

“Yes, with two girls.”

“Really? How’d that happen?”

“Well, you know our school is right there with a high school attached. So they came to me and asked if I wanted to have sex with them. So I thought about it, and then I did.”

I held it together and didn’t probe for details, but he was pretty earnest, so he just went on. As far as I could see, they went somewhere, I don’t know where, and he did one and then the other. At 13 11/12 years old.

“But I’m not going to do it sophomore year,” he continued. “Maybe junior year. I’m pretty picky. I’m not going just to do it with anyone.”

“Yeah, OK,” I said. “So, have others asked you?”

“Oh, yeah.” he said. “But I’m going to be picky.”

So, as I say, I like to reflect back on the struggles of adolescence and relate it to my memory of my own life. I like to say, yeah, I remember how it was. In this case I didn’t think I could honestly say that.

Things might have changed since my day. I mean, he’s not that good-looking.

Budd Shenkin