#Obamacare- The focus needs to be on Costs.

Now that an estimated 6 million + people have signed up for Obamacare, how have we done?  Is 6 million enough? Is the mix of young and old the right mix? Did enough previously uninsured people sign up?

Long term success will hinge not on any of the above questions, but on what we do about costs.

I am not talking about the cost of the insurance premium.  After all, if you insure something expensive, the insurance policy will be expensive.  Rather, I am talking about the costs of the underlying products and services- physicians, hospitals, pharmaceuticals, devices and supplies.

Here are several steps we can take that will decrease the costs of care:

-Allow Medicare to use its purchasing power to negotiate with pharmaceutical companies

-Implement tort reform

-Expand the scope of practice of physician extenders

-Open more retail clinics

-Allow, and reimburse more at-home care

-Encourage, and reimburse, more remote home monitoring

-Allow the sale of insurance policies across state lines

-Encourage more price transparency.  Increase the publication of prices.

Every one of these suggestions is either not done today or is limited in order to protect the finances of a particular interest group, be it physicians, hospitals, pharmaceutical companies, insurers or attorneys.  And in all cases, it is the consumer who suffers, either through lack of access, higher prices or higher taxes.

Don’t misunderstand me- I support Obamacare.  I am glad to see it happening.  But we need to focus on costs. Aggressively.  Now.

The only reasonable end-game is full transparency and significant downward pressure on prices.

As more and more people sign up for Obamacare, early indications are that there will be some adverse selection- more middle aged and older people, fewer young and healthy people.  This creates the “downward spiral” as those healthy people who signed up eventually drop out because prices are too high.  This worsens the risk pool and increases prices for those who remain.  Then more drop out.

This will accelerate as states and corporations discontinue coverage for some because they can now purchase coverage through Obamacare.  The people affected by this will mostly be retirees who are older and less healthy- more costs will be run through the exchanges.

If we don’t do something about the core issue of prices, this is not sustainable.

Whether the issue is people who only want catastrophic coverage but can no longer find it, or people who are forced to by coverage that cannot possibly apply to them (think 60 year olds purchasing maternity coverage), or part time workers whose hours are cut even further, there are many people who the market is presently ignoring, at great cost to the system as a whole and to those of us who participate in it.  And I am not talking about the price of insurance.  I am talking about the costs covered by the insurance- hospitals, physicians, drugs and devices.

We need to:

-force the publication of prices.  There have been several articles over the past year detailing how hospital and physician prices vary widely.  They seem unable to estimate prices until after you have received the service, then they are suddenly quite certain what you owe- and it’s a lot.

-broaden the scope of services for “physician extenders”, such as PAs and Nurse Practitioners.  If there is a “physician shortage”, the simple rule of supply and demand will ensure that they are in the “power position” in each and every discussion.  Allow more extenders, fix the shortage, reduce physician bargaining power and change the entire dynamic of the discussion with physicians.

-levy punishing fines, not token fines, when organizations are shown to have schemed the system, as one Florida hospital organization was recently shown to have done (driving up admissions and penalizing doctors who resisted).

-and yes- allow the market to provide products that are aligned with people’s needs.  If some want a catastrophic policy, they should be able to find one.  If a 60 year old couple does not want to buy maternity coverage, they should not have to.

I am not in favor of unfettered market freedom- after all, it is the market that gave us slavery and sexual trafficking.  I do believe, however, that a proper mix of regulation and market freedoms will provide the best answer.  Right now, we have swung too far in the direction of regulation, where attractive market options are forbidden by law.  We need to move back to a place where the market and regulations are in proper balance.  And if we provide transparency and allow the market to work, with some regulatory oversight, then prices will surely decline.

What should we do about Obamacare?

It has been painfully obvious during October that the HealthCare.gov site is not ready to serve large numbers of applicants.  One common response from supporters is that “Obamacare is more than a website”, which is true.  Getting past the panic and emotional arguments, let’s divide our thinking on the subject into two areas:

  1. How do we get people registered and signed up?
    1. Will the young and healthy sign up?  Why are some plans being cancelled?
  2. How will this all work out long-term?
    1. What happens when there is only 1 insurer in town?
    2. What about networks with restricted choice?

First, how do we get people registered and signed up?

This is actually the smaller question.  The site, along with other, lower tech means of registering (e.g. call centers), will eventually get fixed and people will be able to register through one method or another.  There may be some required policy fixes, such as a delay in imposing penalties, but over time, people will be able to register.  Compared to decades of a system where many had no hope of coverage, ever, even if it takes 1-2 years to get large numbers enrolled, we will land in a better place.

Please do not misunderstand- I am not saying “so what” to the problems, and I am not brushing them aside.  I am simply taking a longer view.

The more interesting question is, how will this work out long-term?”  I am focusing on two issues here, which have the potential to become, or already are serious structural problems within the industry.  These issues are:

  1. What happens when there are only 1 or 2 insurers in town, and prices have remained high?
  2. What about patient choice and the fact that many emerging networks are narrower, leaving out many popular hospitals and physicians?

Let’s discuss each of these in turn:

How do we get people registered and signed up? Will the young and healthy sign up?  And why are some health plans being cancelled?

The phrase “young and healthy” invites us to look at the young and healthy as one monolithic group with similar needs and issues.  The current dialogue masks, however, a major issue- one that half of this group feels very acutely- the prices for policies sold to young men will increase dramatically.  This is due primarily to the fact that men are now required to buy maternity coverage.  Let’s not discuss that men don’t have babies.  The present law has been crafted in a way that defines as “gender discrimination” any scenario other than men being required to buy maternity coverage.

I am not trying to start or continue a gender debate.  I am simply pointing out that asking young men to accept a large price increase because “it is good for everyone else” is asking a lot.  Please do not be surprised when young men decline to accept this dramatic price increase.

A related issue is the cancelling of policies presently in force because they do not meet the “Obamacare Standards”.  Same issue- a policy sold in the past to a young man, and which does not include maternity coverage, is no longer allowed to be sold.

So, taking away their present policy, offering only policies that include maternity coverage at much greater cost, and criminalizing those who do not buy these new policies, is a long term issue that will continue to weigh on the potential success of Obamacare.

 

What happens when there are only 1 (or 2) insurer(s) in town, and prices have remained high?

This is where the market takes over, and this will take time. Annual cycles.  When health plans in some states see that the neighboring state, or county, has only 1 or 2 health plans, and that prices are high, they will want to enter that market.  In an unrestricted market, large price differences will be evened out through competition.  This is exactly why we have such high prices now- competition has been stifled throughout the industry.

So my belief is that long term, new entrants will cause prices to drop in these areas where there is presently little competition.

 

What about patient choice and the fact that many emerging networks are narrower, leaving out many popular hospitals and physicians?

This is what will cause the large, “elite” institutions and networks to reduce their prices. 

When we have a situation where “you can go wherever you want, and somebody else will pay”, guess what?  Not only do consumers want to go the hospital of their choice, but that hospital is now incentivized to stand back, saying “that’s not enough money”, and to maintain that position until the payer, whether an insurer or the government, gives in and agrees to the higher prices.

In fact, we see a trend where hospitals are buying up competitors in order to reduce local competition, so the payers have nowhere else to turn, and are forced to pay the higher price. (By the way, these hospitals run very touching ads about how much they care about patients- all while selling the receivables to very aggressive collectors).

Anyway, leaving these hospitals and medical groups out of the network, and making it stick, eventually causes the “elite” institution to reconsider and arrive at a more reasonable price.

Short term, expect much complaining about “limited choice”.  Long term, if we do not give in, we will see prices decline- after all, a hospital cannot survive if they won’t accept patients from Medicare and the major local insurers.

I can’t resist ending with a thought question on this point- If we got to eat wherever we wanted, and somebody else paid, where would we eat?  And what would happen to the prices at those restaurants over time?

 

Conclusion:

For Obamacare to work long term, we must have sensible answers to these structural issues, namely:

-Requiring young men to purchase maternity coverage will prevent many of them from enrolling, and turning them into criminals is not an efficient or effective answer.

-Markets with a small number of insurers must be made accessible to a larger number of insurers in order to create real competition.

-Limited networks must be allowed to remain.  If we bow to political pressure and let the “elite” hospitals and medical groups continue to charge much higher prices, the cost of health care will never become more reasonable.

 

There’s a lot here- what do you think?

 

Should men be required to buy maternity coverage?

View Results

Loading ... Loading ...

What should happen to people who do not buy health insurance as mandated by Obamacare?

View Results

Loading ... Loading ...

What should we do in markets where there is only one insurer and prices are high?

View Results

Loading ... Loading ...

What should we do about networks that exclude providers because their prices are too high (limited consumer choice)?

View Results

Loading ... Loading ...

It is time to break the provider “monopoly” in health care.

Many of us believe the health care discussion is actually about money, masquerading as “quality”.  We see a number of versions of this:

1) The wave of hospital mergers.  They are presented to the public as “improving quality”, but a recent article (AARP bulletin, June 2013) cites cost increases of up to 40% following a merger.

2) Network restrictions imposed by insurers.  Large health systems whose prices are rejected during contract negotiations generally claim that to eliminate them from a network will “compromise quality”.  Pressure is then put on the insurer to include the prestigious hospital system in the network at a typically higher cost.

We also see some promising developments:

1) A recent New York Times article (“Lessons in Maryland for costs at Hospitals”, August 28, 2013) describes some results of using hospital price controls and encouraging patients to receive care outside of the traditional hospital (lower costs, better quality statistics, more satisfied patients, and yes, more profitable institutions).

2)     An increase in the number of retail clinics, and an increase in the range of services they are able to provide.

There are some commonalities here:  when we, the patients, are no longer considered “captive” by the local providers, and instead have alternatives where we can go to receive our care, interesting things happen- costs tend to go down.  Quality tends to go up.

So what then, are the benefits of granting local monopolies to select groups of health care providers?  There is an interesting lesson now playing out in New York City:

A hospital in lower Manhattan, St. Vincent’s recently closed.  Prior to the closure, providers predicted a drop in “the quality of care provided to local residents”.  Politicians predicted a disaster.  And what happened?  Nothing!  Death rates have not soared, the community has not suffered- in fact, many urgent care centers opened up to fill the void.

Some may argue that access in the neighborhood has improved- minor conditions can now be seen efficiently and at low cost, as opposed to lengthy waits in an emergency room that is also serving those with contagious conditions.

I hope this trend not only continues, but accelerates.  A provider “monopoly” tends to benefit only the providers.  It is time for the consumer to be at the center of this system!

Health Care Reform- the Path Forward

We are moving towards a new equilibrium in Health Care- it won’t be perfect, but it will, hopefully, be an improvement over our present system.

There will be many adjustments required- some painful- on our way to this new equilibrium as all parties try to protect “the devil they know”.

In short, we are moving away from a system  a) with many uninsured, b) where employers provide insurance for some, c) where providers make hundreds of billions annually while delivering questionable quality, and d) where states must balance health costs against other priorities, such as infrastructure and education.

We are, hopefully, moving towards a system a) with far fewer uninsured, b) where employers provide insurance for most if not all employees, c) where providers incomes are more aligned with results, and d) where the balancing act faced by the states becomes somewhat easier to manage.

Now for the bumps in the road- some examples:

  1. Some states are avoiding or preventing an expansion of Medicaid and reducing benefits and eligibility as they try to protect state budgets.

  2. Providers are consolidating to increase their market power and negotiating leverage.  This is a powerful force designed to increase costs (which are provider’s revenues).

  3. Employers, as they try to protect profit margins, are reducing the hours of employees under a threshold so they will not be required to provide insurance for them.

  4. Young, healthy males are not signing up, largely because their costs, alone among all demographic groups, are expected to skyrocket.

My hope is that we, as a country will stay the course and see this through.  Early indications are that the individual market will see dramatic price reductions (notably New York and California).

Some states are taking a second look at the role of Medicaid- keep your eye on Arizona.

Medicare is looking at the “gaming” of provider reimbursement, where hospitals acquire physician practices for the sole purpose of billing for the same procedures under a new number (the hospital’s billing number), and getting paid more without doing anything  differently.  This bears watching as well.

But we need to do more- we need to provide products with a range of benefit options aimed specifically at the employees whose hours have been cut.  It does little to offer a “bronze” plan which only transfers risk to the insured (by covering 60% of costs)- why not offer a product where the insured can decline some coverage types- why should a childless person be forced to buy pediatric coverage?

We also need to offer products aimed at healthy young males.  It will be tough to get someone to accept a near doubling  of rates simply because it is good for everyone else.

As health care reform rolls out and gains traction, my hope is that “profiteering” behaviors will be limited and that products will be allowed to emerge that will address, in a market driven manner, the present shortcomings in the system-  specifically, we need an expansion of Medicaid, we need to stop the provider consolidations done solely to increase reimbursement, and we need insurance products aimed at part-time employees and healthy young males- not products that lock in a major subsidy for other demographic groups.

Large Premium Increases?

A recent article describes large, double digit premium increases being requested by health insurers, and allowed, in some cases, without objection by regulators in the various states.  Now just what did we expect?

Insurers will soon be required to cover all applicants, without the ability to deny coverage for pre-existing conditions.  Many people will now enter the insured population who have been uninsured, and sick, for years.  Socially, this is a very good thing.  Financially, it is very expensive.

Do we expect insurers to just absorb these costs?  No, we should expect these costs to be built into future premiums.  Consider- would State Farm sell you a homeowners policy while your home is burning?  Of course not.  And if we required them to, that policy would be very, very expensive.  And if we forced them to average the cost of the burning house- many actually, over all policies, the price for all policies would increase dramatically.

And so it is with health care.  Accepting patients who are already ill, while socially positive, is very expensive.

Now I am not a defender of insurance companies.  But I do understand their role, and the simple reality is that if what you are insuring costs more, the insurance policy will cost more.  So as our health care system continues to evolve, we need to focus on costs– the cost of going to the doctor, the cost of staying in the hospital, of paying for drugs and of paying for devices and equipment.

If costs continue to rise, insuring those costs will only rise as well.

Health Reform: Should maternity care and pediatric coverage be considered “essential benefits” for women and men over 55 years old?

Now that health care reform, often called “Obamacare” will be implemented, one key question focuses on what is covered.  The Department of Health and Human Services (HHS) has recently released a list of “essential benefits”, that is, what must be covered by all plans in order to allow consumers to make fair comparisons.

The list is broken down into 10 categories, one of them being maternity coverage and another being pediatric coverage.

For women and men over 55, this might seem unreasonable.  And we are not just talking about the care that first comes to mind- should complications arise, maternity care brings with it care in a neonatal intensive care unit (NICU), the costs of a perinatologist and the costs of a neonatologist, all of which can be very, very expensive.

Then we get to pediatric coverage, which covers care over an 18 year time horizon, also very expensive.

For those over 55, the decision to have a child is exceedingly remote, if not impossible. And this is not a gender issue- it affects both women and men, and turns the concept of health insurance into one of health care subsidies.  One option is that maternity coverage and pediatric coverage be available as a “rider”, meaning available at an additional cost to those who want it.

So here is the question- should people over 55 be required to purchase maternity coverage? And by extension, should childless adults be required to purchase pediatric coverage?  What do you think?

Health Reform: Should maternity care and pediatric coverage be considered an "essential benefit" for women and men over 55 years old?

View Results

Loading ... Loading ...

We (the consumer) are about to get trashed!

I saw three articles that disturbed me last week.  Taken together, they are no less than frightening.  All were printed in the New York Times.

First came an article titled “Insurers alter cost formula- patients pay” (New York Times, April 24).  The main point is that insurers have changed the way in which they reimburse doctors and hospitals.  The reimbursement has gone down, so the patient’s portion has gone up.

The second article, also printed in the New York Times on April 24, is called “Pricing confusion adds to pain at hospitals”.  The main point here is that hospital bills appear to have no rhyme or reason, with the price for the same procedure in the same geographic area varying wildly, sometimes by a factor of ten or more.

Finally, in the New York Times on April 25, “Debt collectors pursue patients in hospitals” describes how employees of a collection firm, “Accretive Health” are actually allowed front line positions in their client hospitals where they can, and do, get right in patient’s faces demanding payment for expected or past services, sometimes before emergency services are provided.

Now put all of this together-

  1. We don’t know what something will cost and may be off by a factor of 10
  2. Whatever it does cost falls more and more on our shoulders to pay
  3. We will subjected to very extreme collection practices, including denial of services, until we pay what we owe.

Now compare this to the experience of citizens of every other advanced country in the world- costs are simply not allowed to come between a person and their need for health care.

We, the consumer, are about to get trashed, and it is time to do something about it! (Stay tuned for future posts).

Health Care Reform and the Mandatory Purchasing of Insurance

Is it right to require people to purchase health insurance?  I have mixed feelings on the subject.

First, I understand the concept of insurance and of “pooled risk”- the notion that the premiums of those whose homes do not burn will be used to pay for damages to the homes that do burn.  And I understand the need for everyone to participate in order for this system to work at its best.

The part where I struggle is when we are delivered to a voracious, for-profit industry like so many lambs to slaughter.  There should be, at the least, a “reasonably priced”, non-profit option (we can discuss what a reasonable price is separately).

When I discuss this with my friends, they invariably point out that auto insurance is mandatory.  To which I reply, “If one does not wish to pay for auto insurance, there is an alternative- it is called Public Transportation.

What alternative exists in the health insurance discussion?  If we choose to not purchase an overpriced product from a for-profit health system, what alternative do we have?  What happened to the “public option”?

So here is where I end up: if a reasonably priced, non-profit alternative exists, I support mandatory coverage.  But if the only option is to pay into an overpriced, for-profit system, then I do not support mandatory coverage.  What do you think?

What are your feelings about mandatory health insurance coverage?

View Results

Loading ... Loading ...

Which of the key health industry players is to blame for the current problems?

Who is to blame?  All major participants have good and bad aspects:

Insurers:

  • The Good:  They bargain provider prices down.  They pay our bills when we get sick .
  • The Bad:  They deny coverage inappropriately.

Pharmaceutical companies:

  • The Good:  They provide medications that heal.  I’d rather take medicine than receive surgery.
  • The Bad:  They overcharge and put drugs on the market that are far more expensive and no more effective than what they replace.

Physicians:

  • The Good:  They provide good, compassionate care.  They save our lives!
  • The Bad:  They put us on a financial treadmill and churn patients to increase their incomes.

Hospitals:

  • The Good:  They provide the infrastructure within which healing and recovery take place.
  • The Bad:  They build empires and overbuild in general, driving up costs.  A cath lab in every town?

Device and supply manufacturers:

  • The Good:  They invent and produce live improving and life extending devices, e.g. pacemakers, MRIs.
  • The Bad:  They inappropriately work the system to sell more of their products.

So what does all this mean?  There is no universal “good guy” or universal “bad guy”.  In improving our system, all parties must be looked at carefully, and all parties must accept change!

Health Care for persons in this country illegally.

What should we do about providing health care for people in this country illegally?

On the one hand, persons here illegally may put a strain on the system (I say “may” because ironically, many illegals do pay taxes).

On the other hand, to ignore the health needs of a large group of people has public health implications- diseases may spread within that population and then affect “the rest of us”:

  • tuberculosis
  • HIV
  • flu and related conditions

Also, for the purposes of this question, please assume that “sending all illegals back home” would take years, so we still have to deal with the issue, at least temporarily.

So here is the question- please select only one answer:

Until the day when there are no illegals, should persons in this country illegally have access to the health care system?

View Results

Loading ... Loading ...

Fourteen Zeroes!

Part 1- the problem.

If you look at our present level of health care spending ($2.6 Trillion), and project it forward, growing at 6% annually for the next 20 years, the total exceeds $100 Trillion.

That’s 14 Zeroes:

  • Just for health care
  • Just in America
  • Just for the next 20 years (if we look at 30 years, the number is over $200 Trillion).

That number is incomprehensible.  Not only is it not sustainable, it is not even possible to finance this number.  Yet, that is the path that we are on.

The present discussion aims to “bend the cost curve” and to somehow shift the burden:

  • Blame the insurers
  • Blame the pharmaceutical companies
  • Reduce provider reimbursement
  • Limit what Medicare pays on behalf of seniors.

Whomever we choose to blame, we are clearly headed for a scenario where we all  work our entire lives just to pay for health care, and when we get old, all of our assets, if there are any left, get paid over to our huge, for-profit health system.

We must fundamentally restructure our health care system, and our expectations of living and of dying, or life will become one long health-care payment treadmill.

Part 2- the discussion.  Please answer the following questions. One answer per question:

What is the responsibility of consumers (the system calls us "patients")?

View Results

Loading ... Loading ...

What is the responsibility of insurers?

View Results

Loading ... Loading ...

What is the responsibility of the government?

View Results

Loading ... Loading ...

What is the responsibility of providers (doctors and hospitals)?

View Results

Loading ... Loading ...

What is the responsibility of suppliers (pharmaceutical companies and device manufacturers)?

View Results

Loading ... Loading ...

Now, please consider all of the answers you provided.

What do your answers, taken together, mean for the 14 zeroes in our future?  Something to think about…

It’s Time to Really Look at Costs

As we all know, the federal government and nearly every state is facing huge budget gaps.  Health care is a large part of every crisis:

  • Medicare is a large part of the federal budget crisis
  • Medicaid is a large part of every state budget crisis

Health insurers are not to blame this time:

  • The Medicare discussion is about Medicare, not Blue Cross, Aetna, Cigna, United or Humana.
  • The Medicaid discussion is about Medicaid, not Blue Cross, Aetna, etc.

The health care reform bill that we recently passed was really health insurance reform- yes, we needed to reform the insurance system.

Since Medicare and Medicaid are not traditional insurers, but still seem to be drowning in costs, the question is, “Where should we focus our reform efforts going forward?”  What do you think?

Since the Medicare and Medicaid discussion is not about the insurers, where should we focus our reform efforts going forward? Select all that apply.

View Results

Loading ... Loading ...