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Will not for profit health plans save money? Better ask how!

19 Jun

2013

From the New York Times, June 16, 2013:

The consumer-operated plans, known as co-ops, are also expected to put pressure on other insurers to hold down prices. “We don’t have to return money to stockholders on Wall Street, like for-profit insurers,” said Jerry Burgess, the chief executive of Consumers’ Choice Health Plan, the co-op established in South Carolina.

He says the insurer expects to charge little more than the actual costs of its medical care and will lower its premiums if possible. “We would see an opportunity to gain market share by lowering our price,” Mr. Burgess said. “That’s exactly what health reform hopes will happen.”

The fact is a substantial portion of health insurance is already provided by non-profit health plans and has been for years.

“… charge little more than the actual costs of its medical care?” That little more still must cover all administration, overhead and reserves. That means even in the ideal scenario, we are talking about a variable of perhaps 5-7%. In my experience working with several non-profit HMOs many years ago (all of which eventually went out of business), the lack of a profit motive can sometimes lead to inefficiency, lack of attention to strategic planning and lack of accountability… not unlike a government bureaucracy.

Only time will tell if non-profit co-ops can deliver on their promises of sustained lower costs. One major determinant will be their ability to attract an actuarially sound enrollment base. Marketing as the lowest cost plan among many options may make that more difficult.

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Why all the experts are wrong about controlling health care costs and why the coming “Cadillac” health benefit tax sends the wrong message

17 Jun

Many, very many, health care policy makers and experts believe you waste money on health care because you don’t care what it costs in part because the “generous” benefits your employer provides are tax free. Many experts believe employers don’t try and reign in health care costs because the cost of providing coverage is tax deductible. These beliefs drive important policy decisions that affect every American.

It is true that the tax free status of employer benefits is unfair to those Americans without that benefit and it’s certainly true that simply because of the math, those with higher incomes and who pay the highest tax rates get the greater tax benefit. It is also true that this tax provision is the single largest tax revenue loser for the federal government.

However, to extend those facts to the idea that because of the tax status of health benefits employers provide generous benefits and workers and their families don’t care about health care costs is pure nonsense. Nevertheless, beginning January 2018 a 40% excise tax will apply to the value of health benefits that exceed certain limits.

During my nearly fifty years designing, negotiating and managing health benefits never once was the tax status a factor in improving or reducing health benefits. Employers are always concerned about costs (with the likely exception of public employers) and unions know that the rising cost of these benefits reduces available funds for wages and retirement benefits (with the likely exception of public employee unions).

Individuals worry about health care costs because most people have coverage with significant out of pocket cost requirements. The plans that provides near first dollar coverage with very low out of pocket costs and freedom to see any physician or hospital are long gone and have been for decades. This is because employers have been trying every latest fad to lower health care cost for the last forty years. The fastest growing plan design today is the high deductible health plan that shifts more and more costs to the individual, also in the hope that these costs will stimulate patients to consume health care more efficiently.

If the tax benefits are so important why would employers be making these changes?

The fact is that the new excise tax is designed to raise revenue, period. However, policymakers will be disappointed as fewer and fewer plans will pay the tax because over the next several years the value of employer-sponsored plans will continue to be reduced … and the cost to individuals increased.

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So, tell me again how this competition among health insurers works?

16 Jun

Read below what I have placed in bold. Now recall all you have heard about increasing competition among insurance companies lowering health care premiums. The more competition you introduce in an area, the less ability each competitor has to negotiate the best prices.

Excerpt from a recent Wall Street Journal article:

Insurers with only a small presence in a state’s individual market may not wish to maintain it amid the shifts tied to the law—though rather than withdrawing completely, some might simply tone down their marketing and other efforts to win new business. “It’s the effect of the change,” which creates uncertainty for carriers, said Raj Bal, a former insurance-industry executive who is now a consultant.

The health law is expected to expand the individual insurance business, but the new coverage rules will also mean major changes. Also, in the new exchanges, consumers are expected to focus closely on costs, particularly monthly premiums. Insurers may find it tough to compete if they don’t have scale in a particular market, partly because they can’t match the prices that competitors win from health-care providers.

When you hear claims about competition among insurers in the new health insurance exchanges lowering premiums, you might want to ask exactly how that works.

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Are physicians overpaid?

14 Jun

To answer the question are physicians overpaid perhaps we need a frame of reference.

Many football coaches in leading colleges make far more than most physicians. Many heads of large unions make more than physicians. Some members of Congress make more than physicians. Then, of course there is the Hollywood and sports elite who earn more than just about everyone while contributing nothing of significance to society.

I’ve done some research and I am convinced that on average physicians are not overpaid in any sense of the word.

Before we get to specifics lets consider the training and investment a physician must make, the risks they take, the irregular hours many physicians have to deal with, the emotional issues on a daily basis, dealing with patients and their families, continuing education and more.

When one compares U.S. physician income with other countries, we find many countries lower and some higher. When you look at the overall average income you get apples to oranges because the U.S. has far more higher paid specialists than other countries (it’s yet to be determined if so many specialists is a good thing).

Below you can see average physician salaries by specialty. This is from the Medscape News 2013 survey. As you can see, there is a wide range among the specialties.

Putting on my compensation and benefits hat, I see nothing wrong with these numbers except perhaps some physicians may be underpaid.

So what’s your opinion?

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The lack of coordinated records in health care is incredible … and inexcusable

12 Jun

2013

Ok, my wife and I are in the local hospital (really, she is sitting on the treatment couch and I’m writing this on my iPhone; I’m nuts, right? but you can’t say my posts aren’t timely) for pre-whatever in advance of a minor outpatient procedure. My wife has been to this facility for scans, lab work, outpatient visits to a doctor and more, some visits within the last month.

No matter, all the paper work must be completed again. All the insurance cards must be submitted and copied again. I asked the person at the desk why their own departments don’t coordinate with one another. Her response was; “You would think, wouldn’t you.” I know, it’s so frustrating.”

Indeed it is frustrating and inefficient and costly… and stupid!man_head_spinning_lg_clr

During the visit, the doctor was looking for the results of a scan, it wasn’t in the file so the nurse went to get a copy … I had a copy on my iPhone.

Wouldn’t it make more sense to have the information stored in a central location? Why do we even carry insurance and Medicare ID cards? Why don’t we have the ability to log on to a website and call up all the current information? When I ask about all this I frequently hear that’s it’s because of privacy. Privacy you say, for Pete’s sake my iPhone knows where I am 24 hours a day as do most of my apps. Facebook knows I am in the men’s restroom in Copenhagen. There is no such thing as privacy.

This lack of efficiency, wasted effort and wasted money is outrageous, inexcusable in the 21st century.

Rise up America, enough is enough! You are paying for all this nonsense.

Pass this along to all your friends and tell them to do the same. Talk to your health care providers and let them hear your frustration (which most share by the way)

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For or against Obamacare, at least be informed and ask the tough questions. Here are the questions you should ask about claims for Obamacare

11 Jun

2013

From an article on Californian.com

By Don Kusler, executive director of Americans for Democratic Action. Write to him at ADA, 1625 K St. NW, Suite 102, Washington, D.C. 20006.

Children with pre-existing conditions can now get coverage. Young adults can now stay on their parents’ insurance up to age 26. Seniors are now paying less for prescriptions. Insurance companies are now required to spend their ample incomes primarily on patient care, not advertising or lobbying — and if they spend too much on self-promotion, they have to send refunds to their policyholders — the first checks went out last summer.

In the coming months and years, more benefits will kick in: Adults with pre-existing conditions will be covered; prescription drug prices will go down even more for seniors; Americans will be able to compare insurance options online as easily as they shop for airline tickets now, increasing the quality and driving down the cost of coverage.

The Affordable Care Act is a comprehensive approach with a big goal: expanding and improving health care for all Americans. While detractors do everything in their power to tear it down — most recently by blaming it for the doctor shortage — the ACA will increasingly serve the health-care needs of the American people, guided by the simple but powerful principle that everyone has the right to a healthy life.

Whoopee do! we have achieved nirvana … problems solved. I love these types of blind faith, naive articles which ignore the realities of cost and the interaction of the various moving parts of a complex problem.

Here are a couple of my favorites:

  • Insurance companies are now required to spend their ample incomes primarily on patient care, not advertising or lobbying — and if they spend too much on self-promotion, they have to send refunds to their policyholders

    • The fact is most insurers were already spending at least 15% of premiums on all administration and were for years. The fact is health insurance company profit margins are well in line with general business and often less than that allowed regulated utilities. And hey, what about that $236 million California is spending on “advertising” the new insurance exchanges. I guess that doesn’t matter because no one is paying in premiums.

  • prescription drug prices will go down even more for seniors;

    • True, but to offset the growing savings somebody else will pay and besides a relatively few seniors reached the so-called donut hole and even fewer reached the 95% reimbursement level.

  • Americans will be able to compare insurance options online as easily as they shop for airline tickets now, increasing the quality and driving down the cost of coverage.

    • Exactly how does shopping on line have anything to do with quality or driving down costs? Insurance companies compete now, you can go to healthcare.gov and compare the insurers in your area right now and have been able to do so for years … try it and see how easy it is! Then look at the “improved” application process for exchange coverage and see how easy that is.

    Proponents and opponents of Obamacare mislead, misinform, and charge ahead with idealistic and questionable assumptions. Before you accept the ideas of anyone left or right about health care and health care reform (including me) be prepared to ask questions. For example:

  • How will that be accomplished?
  • Exactly what does that cost and how is it paid for?
  • What are the unintended consequences?
  • If we do this, won’t (doctors, hospitals, patients, insurers, etc.) do that in response?
  • How exactly is that measured, especially the claims for higher quality?
  • Doesn’t that somehow cause cost shifting to other groups?
  • What has fundamentally changed that affects the delivery of health care in America?
  • Does the federal government saving money on Medicare impact costs for the non-Medicare population?
  • What, if any, are the adverse consequences of squeezing more and more in taxes and fees from employers, insurance companies and the pharmaceutical and health device industries?
  • Exactly what will make competition work now?
  • Can I ever be an informed, dispassionate consumer of health care where cost is the prime consideration in obtaining care for my family?
  • Please define “affordable.” Does that mean the true cost or just that something is more affordable to one party because another party is paying more?

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    Paul Krugman: Only a handful of people will be hurt by Obamacare … chances are you are one of them. Think 40% excise tax among other things

    10 Jun

     

    2013

     

    Paul Krugman, Laureate of the Sveriges Riksban...

    Writing in the May 26, 2013 New York Times, the ultimate optimistic liberal Paul Krugman writes about the success of Obamacare based on the proposed premiums for the health insurance exchange in California.

    A handful of healthy people may find themselves paying more for coverage …

    Obamacare closes this gap with a three-part approach. First, community rating everywhere — no more exclusion based on pre-existing conditions. Second, the “mandate” — you must buy insurance even if you’re currently healthy. Third, subsidies to make insurance affordable for those with lower incomes…

    Only a relative handful of people will be hurt at all …

    How can such a smart man be so naive? It’s like, I mean it’s no big deal this adverse selection thing; everyone will comply with the mandate and subsidizing an unaffordable cost makes it affordable … 20130322-093910.jpgto whom? And about that handful of people hurt. In one way or another that handful includes tens of millions of Americans who already have employer-based coverage, including a few million retirees.

    Let’s just look at one of many examples.

    With a few exceptions, effective January 2018 the Affordable Care Act imposes a new 40% excise tax on High-Cost insurers of employer-sponsored health plans (or self-insured employer plans) with aggregate expenses that exceed $10,200 for individual coverage and $27,500 for family coverage.

    The CBO has already substantially lowered its estimate of the revenue to be generated by this tax. Why you may ask, ok, ask. The reason is that employers and unions with such plans are going to, in fact have already started to, adjust their plans to lower the value in order to not pay the tax. Anyone who does pay this tax is likely a fool and if they work for a large employer also likely to be unemployed come 2018.

    So, allow me to translate “lower the value.” Simply put, you as an employee will become one of Krugman’s ”handful of people hurt” by the health care reform law. Your benefits are going down and your out-of-pocket costs are going up so that your employer or union plan does not exceed the value limit under the law thereby avoiding the 40% excise tax.

    No plan sponsor in its right mind is going to maintain a generous health benefits plan and pay a 40% tax on top of it.

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    Survey Shows Physicians Not Meeting CMS Objectives for Utilizing Electronic Health Records

    9 Jun

    2013

    From the Annals of Internal Medicine

    Since 2009, the Centers for Medicare & Medicaid Services (CMS) have spent billions of dollars in the form of incentive payments to providers to encourage the adoption and meaningful use of electronic health records (EHR). To qualify for payment, physicians must meet specific criteria as they move through stages of adoption. Ultimately, EHR should allow physicians to provide high-quality, efficient, patient-centered care by using the data in their EHR to measure and assess the care they provide to their patient populations. Little is known about the proportion of physicians who are able to meet meaningful use criteria or their use of EHRs to manage patient populations. Researchers surveyed 1,820 primary care physicians and specialists in office-based practices to evaluate physicians’ reports of EHR adoption and ease of use and their ability to use EHRs to manage patient populations. The survey revealed that about 43 percent of physician respondents had a basic EHR and about 10 percent met meaningful use criteria. Computerized systems for patient population management and quality reporting were not widespread, and physicians reported finding them difficult to use. The authors conclude that adopting EHR does not ensure better management of patient populations.

    Billions in incentive payments you say? And besides, the issue is not electronic records within a physician’s practice, the issue is the lack of accessibility to all medical and coverage records among all health care providers and facilities.

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    Affordable health insurance ?

    8 Jun

    2013

    A quote from a recent WSJ article about potential entrepreneurs who will be free to head out on their own because of Obamacare:

    Laura Stoll is among those who dream of living the entrepreneurial life—if robust, affordable coverage becomes available.

    ROBUST? AFFORDABLE?

    Let’s try this again, the more “robust” the insurance … presumable meaning low out of pocket costs … the less affordable the insurance, meaning your premiums will be higher because there is a greater potential the insurance company will be required to pay more in claims.

    Even if coverage is obtained through a new exchange and premiums are offset by tax credits, does that make insurance affordable? Not necessarily; just because both the government and the individual are paying the cost does not mean insurance is automatically affordable in total.

    A lot of people, including insurance companies, are working hard to make health care and hence health insurance more affordable, but we have a long way to go because first we must solve the many problems facing the delivery of health care in America.

    What is your view, how do you define “affordable” health insurance?

    New Health Insurance Tax hits beginning January 2014

    7 Jun

    taxes

    Slippery Road Ahead

    2013

    What does a HIT, your health insurance premiums and 2% have in common?

    You have heard it an endless number of times, the President refuses to raise taxes on the struggling middle class. I’m betting that we will not see higher “taxes” but that doesn’t mean the middle class won’t pay more no matter what you call it.

    The Affordable Care Act includes (among other fees and taxes) a new health insurance tax (HIT) on insurance companies. That tax applies to their insured book of business which means mostly small groups and individuals. This tax raises billions of dollars each year.

    But here is the point, these additional taxes will find their way into premiums, the premiums the middle class pays, mostly those who must buy individual coverage and coverage through a small group. The total tax will be $8 billion in 2014 and up to $14.3 billion in 2018. Over the next ten years the tax is expected to exceed $100 billion.

    Individuals with good health insurance, privately or through an employer tend to direct their wrath for high premiums at insurance companies (even, based on my experience, when the plan is self-insured). Over recent years this misdirected ire has been heightened by political rhetoric using phrases like, “discriminatory practices, abuse, high salaries, high retention costs” and the ever-present “high profits” and “lack of competition”. All of this is bogus and is not and never has been the cause for high health care costs and the resulting higher premiums.

    However, what you should really be concerned about is that rather than make the cost of health insurance better, through the various taxes and fees and the mandates for new coverage and changes in underwriting rules, we have made the cost of health insurance worse for the vast majority of Americans (and their employers … and that is a big concern or should be).

    According to America’s Health Insurance Plans website:

    “The Congressional Budget Office (CBO) has said that this tax will be “largely passed through to consumers in the form of higher premiums.” A 2011 analysis by Oliver Wyman estimates that this tax “will increase premiums in the insured market on average by 1.9% to 2.3% in 2014,” and by 2023 “will increase premiums 2.8% to 3.7%.”

    Impact on individual market consumers: Increase premiums over a ten-year period for single coverage by an average $2,150, and for family coverage an average $5,080.
    Impact on small employers: Increase premiums over a ten-year period for single coverage by an average $2,760, and for family coverage an average $6,830.

    Impact on large employers: Increase premiums over a ten-year period for single coverage by an average $2,610, and for family coverage an average $7,130.
    Impact on Medicare Advantage beneficiaries: Increase costs $16 to $20 per member per month in 2014 and will increase to between $32 and $42 by 2023. The average expected increase in the cost of Medicare Advantage coverage over ten years is $3,590.

    Impact on Part D beneficiaries: Increase average premiums by $9 in 2014 and by $20 in 2023 for a total increase of $161 over ten years

    Impact on Medicaid managed care beneficiaries: Increase the average costs of Medicaid coverage by about $1,530 per enrollee between 2014 and 2023.

    There is talk these days about moderating health care costs based on trends for the last several years. Hope springs eternal, but the reality is that we have a long way to go to change the health care delivery system. In the meantime there are numerous new cost drivers added to the system, to insurance companies and to employers that will add to the cost of health insurance.

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    Spending to minimize the risk of health insurance exchanges

    6 Jun

    There are those of us who are skeptical of the potential success of the new Obamacare health insurance exchanges in terms of affordability. There is one simple reason; human nature; in this case the tendency for young healthy people to forego health insurance.

    If there is not a good mix of non users buying insurance, the premiums will skyrocket eventually becoming unaffordable even with federal tax credits. It’s happened before.

    Lest you think I am playing Chicken Little, consider that this summer, the California exchange alone will spend $236 million on a federally financed marketing campaign, including ads on Spanish-language TV soap operas and grass-roots efforts by community groups and churches just to encourage enrollment by people who probably think they don’t need to spend money on insurance. $236 million could pay for a lot of health care instead we must spend it selling people on the idea of health insurance.

    Now extrapolate those dollars for the other 49 states.

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    Explaining lower health care costs

    4 Jun

    2013

    Do you think health care costs are under control?

    That the rate of increase in health care costs has moderated over the last five years is a fact. What so-called experts cannot agree on is why. Conflicting studies point to the economy, a more efficient health care system and some people claim the Affordable Care Act is responsible. Experts also disagree on whether this change is temporary or long term.

    On May 13, 2013 a Wall Street Journal editorial reviewed the situation and said this:

    “In a word, patients make better decisions when they have the right incentives and information. Old-style first-dollar insurance coverage is declining in the private economy because employees prefer cash wages and employers can’t afford to finance ever-more expensive benefits. One way commercial insurers have responded is with plans that steer consumers to higher-value hospitals, doctors and other providers in return for lower out-of-pocket costs. Think of the way drug formularies encourage generic pharmaceuticals over name brands.”

    I don't seem to be getting anywhere.

    I don’t seem to be getting anywhere.

    The WSJ is a bit naive on this one in my view. I never met any employee in fifty years in the employee benefits business who preferred cash wages to good (tax-free) health benefits. In addition, the cost shifting to employees has been a trend for many more years than the beginning of the recession. I also would question the steering of consumers to “higher-value hospitals, doctors and other providers.” While insurers clearly try to develop cost efficient networks, they also must have networks broad enough to serve customers plus the ability to define high value (unless you only mean least expensive) providers is limited.

    Most of all I strongly suggest the idea that patients are making better decisions thus helping to lower health care is fantasy. Other than deciding not to go to the doctor at all, patients have and want very little decision-making. On top of that a recent study found that when patients are more involved in decision making hospital costs actually increase.

    Rather, what we are seeing is the effects of the economy, a recurring cycle in health care costs and some response to the threat of controlling costs just as we did with the initial push for HMOS in the late 70s and early 80s and during the Clinton efforts. Nothing in Obamacare has had time to affect the health care system, but has added significantly to costs for employers, insurers and elements of the health care industry.

    That’s my opinion, what’s yours? Are annual health care costs increasing long-term in the 3% range or will we see 7-8% as the norm once again? I’d like your comment on this issue    .

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    California health insurance exchange … More to the story

    3 Jun

    Louis Theroux: Gambling in Las Vegas

    2013

    The press is full of the good news about premiums in the California health exchange beginning in 2014. Actually there is much more to the story and many people will see large premium increases.

    However, even beyond that is one of the main reasons for lower than expected premiums.

    In many plans the number of participating physicians and hospitals is greatly reduced. The smaller the network, the more leverage the insurer has in negotiating fees … as long as it can deliver patients to the provider.

    The fact is that the premiums the insurers set for 2014 are irrelevant. They are guessing, they are curbing their networks; as reported in the press, some insurers are lowering their profit margins to generate lower premiums in 2014. In other words they are taking a risk that there will be robust enrollment of the right mix. But you see the premiums don’t matter, what matters is the claims generated by the people who do enroll. Regulators can crow all they want about forcing lower premiums … only the actual experience means anything … and that won’t be known until sometime in 2015. The insurance companies that guessed wrong will take a bath.

    From Bloomberg, May 30, 2013, 2:55:44 PM

    UnitedHealth Group Inc. (UNH) has trimmed its plans for selling to the uninsured under President Barack Obama’s health-care overhaul, in the latest sign large insurers see little gain from quickly plunging into the new market.

    To read the entire article, go to
    http://bloom.bg/11rs0tq

    From the New York Times editorial 6-1-13 touting the great success of competition under Obamacare and mocking Republican criticism of the law (ok, that part’s fair). Read this quote carefully. Talk about spin. Suddenly, 8% trend in health care spending is a good thing and surprise Obamacare did add 5% to costs. . A couple of years ago we were gnashing our teeth over double digit premium increases.

    Blue Shield of California said that its premiums for individual customers would increase about 13 percent on average next year over current premiums; about 8 percent of that increase would the cover rising cost of medical care, which would have happened anyway. The other 5 percent pays for better benefits, guaranteed coverage for pre-existing conditions, and taxes and fees imposed on insurers by the reform law.

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    Colonoscopies Explain Why U.S. Leads the World in Health Expenditures – NYTimes.com

    1 Jun

    And you thought the problem was lack of competition among health insurers. There is good reason why prices are lower around the world among them physician income is much lower. Despite what the politicians and chirping pundits say, the problem with health care costs is first our utilization and second the price we pay for some services (and the way we decide what we actually pay).

    Colonoscopies Explain Why U.S. Leads the World in Health Expenditures – NYTimes.com.

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    Illegal or is it provisional legal immigrants and health care

    31 May

    2013

    This from Politico:

    To the chagrin of liberals and the immigrant advocacy community, the debate over health care for people seeking legal status appears likely to be over how explicitly to ban their access to benefits – and for how long. “We’ve always said that people who are here illegally and become [provisionally legal immigrants] are not eligible for means-tested public benefits, period,” Sen. Chuck Schumer said last week.

    This from the liberal’s liberal.

    Now, if you are on the right, you most likely agree with this position. No benefits for illegal immigrants …

    The only problem is we are paying for their health care anyway. So, we avoid subsidizing their insurance and instead pay for 100% of their care, typically in the highest cost setting.

    What to do, what to do?

    Illegal immigrants should not be here in the first place (except they put roofs on our houses, do our yard work, pick our food, pump our gas and clean our tables when we eat out). But they are here, so there is no simple solution is there? Ok, yeah we could in theory ship them all out, but I for one don’t want to pick strawberries.

    If we change our laws to give 11 million people an eventual way to citizenship and we accept them and their children and we expect them to pay taxes and abide by our laws, how are they not to be eligible “for means-tested public benefits?” This may all be politically correct to those who are worried about re-election, but is it logical?

    What is your point of view? Before you comment, think about the consequences of any “solution.”

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