The New York Times’ David M. Herszenhorn reports that, “If Democrats break down their major health care legislation into components that could be approved separately, the first bill up for consideration could be a proposal to end the exemption from federal antitrust laws that insurers have enjoyed since 1945.”
If reformers want to pass just one piece of the reform legislation, this is the wrong piece.
Granted, the public tends to like anything that might hurt private insurers. But if big insurers are broken up they will have even less power when negotiating with brand-name hospitals and physicians’ groups. In many parts of the country, health care providers have consolidated, and these giants are able to extort exorbitant fees from insurers. Patients and employers want these popular providers in the insurers’ network—if insurers resist demands for higher reimbursements, customers will switch plans. (See my post below about what has happened in Massachusetts). So insurers succumb and then pass these higher costs on to you and me in the form of higher premiums.
Those who support the bill pretend that if insurers are broken up and more insurance companies are vying for business in a given state, premiums will come down. But as we know, competition doesn’t work that way in health care markets. Most customers won’t buy a less expensive plan if it doesn’t include the “best providers”—i.e. the biggest names—in its network. As Austin Frakt points out on The Incidental Economist: “Taxpayers will be best served by insurers with sufficient market power to bargain down provider rates.”
Some legislators may think that they’ll score with voters if they appear to be getting tough with insurers. But the public could wind up paying a high price for such pandering.
Health reform is now officially DOA, unless a Democratic politician wishes to sacrifice his/her political career for a President that has lost the country’s vote.
There is no need for anti-trust when all one has to do is allow carriers to sell across state lines. We go from 4-5 carriers to 140. The problem is the Dems protectionism for state run insurance commissions and their bureaucracies. The argument of interstate commerce should trump this.
My first reaction is to say bull, but I’ll forbear that and instead ask, have we seen long term analyses and conditions like today’s but without the anti-trust laws? In my humble opinion, the lack of anti-trust laws creates irresponsibility through a lack of accountability– in some ways, no one can hold these health care giants accountable. I’m asking you to cite your sources– tell me, who and what says that health care markets are different?
Until all health care practice acts are federally mandated the same for the entire country, I do not see how you can sell health insurance between states that have different laws pertaining to health!!
I’m having a hard time with this latest post Maggie. I see that providers have become the new heavies in the healthcare harangue. AHIP (the insurers’ trade group) must be delighted.
Actually rampant greed is the problem. Everyone wants to protect their profits, prevent their ox from being gored–But the real goree/victim in this whole debate is the patient forced to pay exorbitant premiums, sent home from the hospital too early, made bankrupt by medical debt, or left without care due to inability to pay.
While insurers and provider networks duke it out, patients and taxpayers are victimized by our current “money-driven” system.
As you and Nobel economists (2007) have pointed out, markets don’t work in health care. We need a good dose of regulation.
Paul Krugman tells us we could learn from the weel-regulated Canadian banking system and, as I’ve said on this blog before, we could also learn a lot from the Canadian health care system.
Harriette, NG,
For-profit insurers have profit margins of just 3%.
This have had very small profit margins for quite a long time. This includes the biggest.
I realize that many people don’t want to believe this, but it’s true. The are the 87th most profitable industry in America.
Drug-makers, by contrast have 18% profit margins.
Companies that make medical equipment have very high profit margins.
Some brand-name “non-profit” hospitals enjoy lareg surpluses.
Insurers have hard time making money because the cost of drugs, hospials services, devices, physiicas’ services keep rising as providers do more and the prices for most health care products spiral.
The amount that insurers have been paying out in reimbursements has gone up 8% a year,every year, for each of the past 10 years.
They have been scrambling to raise premiums fast enough to keep up with rising costs.
NG–
The big problem with selling insurance across state lines is that some states regulate insurance fairly tightly; many others don’t.
Mykle–
MOst health care economists– beginning with Kenneth Arrow, the father of health care economics–down to today’s health care economists
will today you that the health care market is different.
The consumer has very little leverage.
We spend 80% of our health care dollars when we are very sick.
People who are very sick can’t wait until a competitor comes along sellling the same product at a lower price. They can’t defer the pruchase, and they’re not bargain-hunting.
If you have cancer, you’re not interested in discount surgery.
People buying health care are often in pain, often they are frightened, often they are old. Quite understandably, they will buy what their doctor or hospital tell them that they need.
They also are not usually in a positoin to compare treatments or products. They haven’t been to med school.
If your doctor tells you that you need bypass surgery or else you may die, you may well go for a second opinion. And chances are the second doctor will tell you teh same thing.
So you have the surgery.
In other markets, consumers can bring down prices, and demand better quality by waiting for market competition to offer them a better product at a better price.
But health care is a necessity. In that way, it’s like a utility– the gas & electric company.
Consumers aren not usually in a position to have much effect on how much there local electric company charges. This is why government regulates utliity rates.
In every other developed country in the world, the govenrment regulates health care prices because they understand that market competition doesn’t work.
If you want more sources and evidence, see my book Money-Driven Medicine– available, used, at a low price on amazon. It’s heavily footnoted and you’ll find an explanation of how the health care market is different in the opening chapters.
Hoyt– in some states insurers are barely regulated. States that do try to protect their citizens don’t want insurers from states with very little regulation selling products that barely deserve the name “insurance.”
(For instance, in Texas, insuers can sell policies that cover pregnancy, but not complications during pregnancy, or during child-birth.
Most cusotmers don’t find out until it’s too late. These “Swiss cheese” policies are filled with holes.
interesting idea viewing the insurers as the consumer’s surrogates here in making the system more rational. maybe they could also impose care protocols and favor certain providers, all of which could contain costs. sounds like a real step forward to me. what should we call it? managed care, maybe.
jim–
No we don’t want them trying to judge quality or trying to decide which treatments provide the greatest benefit for which patients.
They had a chance to do that in the 1990s, and often they refused oto pay for a treatment because it was expensive–even though it was effective. In other cases they refused to pay for ineffective treatments.
Butt they made deals with drugmakers and kept expensive but popular drugs on the market even though there was building medical evidnece– published in peer-reviewed jouranls–showing that the drug was hurting people (in one case, causing fatal heart attacks and strokes.)
That knowledge led the VA, the Mayo Clinic and Kaiser to take the drug out of their formularly more than a year before the manufacturer was forced to take it off the market. For-profit insuers continued to pay for it because they didn’t want to lose market share (cusomters liked the drug and few knew that it was killing people.).
If they have enough clout and are big enough, for-profit insurers could balance out some of the power that large brand-name hospitals have when negotiating prices.
But as I indicate at the end of the post, a better solution would be to follow Maryland’s precedent and regulate hospital prices much the way we regulate the price of other recessities–ie. utilities.
Finally, yes we do need to manage care. But it needs to be done by an entity that is not required, by law, to put the intersts of its shareholders first. Panels of disinterested docotrs and other medical experts need to be making these very complicated decisoins–based on medical evidence, not on what would be good for market share.
Would it be possible to move towards a system of standardized prices for everything, so one person (or insurance co) isn’t paying $100,000 for the same surgery that cost someone else $40,000, for example? One of the surgeons I work with, for example, has opted out of most insurers and instead is the on-call doctor for the ED. Why? When he is a partipating provider, he gets paid $300 to get up in the middle of the night, evaluate the patient, and perform an appendectomy, plus see the patient for any after-care that is needed (in the hospital or at his office). If he is out of network, the exact same insurer will pay 5 times the amount. Although it is tempting to label him as greedy, the fact is that he cannot pay his staff and keep his office open if he’s only getting $300 for 10-15 hours of his time.
The end result, though, is that the exact same insurance company pays the exact same surgeon 5 times as much for the exact same operation. Fortunately the patients don’t end up on the hook for the cost in this situation, though in many circumstances they would if they had the misfortune of having one of the providers in the room be a non-participating provider.
Wouldn’t a fixed price for procedures help with this?
Maggie, Thanks for the infomative blogs. All our oxen are being gored. We are used to having anything and everything we want (or think we need) stat. That requires providers to be able to supply those wants/needs, payors to finance them, and legislators allow them (under pain of not being reelected). Until we are willing to accept unnecessary care being withheld, less than the newest, best technology, etc. The insurers will profit, the providers will provide the legislators will wring their hands and we will watch this whole piece of the economy implode. . . but I haven’t yet become cynical!
Midwest,
Midwest,
Thanks for your comment, and welcome to HealthBeat.
You wrote: “Until we are willing to accept unnecessary care being withheld, less than the newest, best technology, etc. The insurers will profit, the providers will provide the legislators will wring their hands and we will watch this whole piece of the economy implode. . . but I haven’t yet become cynical! ”
I totally agree. My only quibble: as you no doubt know, the newest technology often isnt the best. It’s just more expensive, and not fully tested.
On being cynical– I don’t see the point when you really care about something.
I’m very cynical about many things I don’t really care about, but with health care, it matters. So we have to continue to care.
I agree with Maggie here in a big way. Cost is driven higher by the provider and the payor just takes a cut.
Locales with dominant providers have high costs.
I guess we have to break them up too if we continue with the current system.
Alternately we could wait until the US goes bankrupt from Medicare costs. That will create the crisis needed to go to single payor.
Hoyt – Here is an example: I moved from Arizona to Wisconsin and am covered by the Government-wide service benefit plan of BCBS. You would think the plan, coverage, etc. would be the same from state to state. But no – What BCBS pays for in AZ is often different in WI. So much so that providers have figured out how to “game” the system so that they can care for their patients in the right way without getting denied. It is very strange to know that my asthma medication, Xolair, was accepted by BCBS AZ based on the results of tests my doctor performed yet those same tests do not meet the minimum requirements for receiving benefits on Xolair in WI.
oops – I meant my response for Mykle Law. Sorry!
Let the patients, not the state, determine what coverage is suitable for them. A young single guy does not need a policy which covers IVF. Strengthen, don’t gut HSA’s. Eliminate the anti-trust exemption for Health Insurers. Eliminate Direct to Consumer Drug adverts.
Ed, Jeri S., Sharon MD
Ed–Thanks for your comment.
Alternatively, we could set prices for hospital services (adjusted for hopsitals that have higher expeness for various reasons) so that “dominant” (brand-name but not necessarily better) providers can’t gouge.
Maryland has done this (see end of this post. I’ll be writing about this in part 2.
Doc 99–
You miss the point of insurance. It’s all about everyone being in one pool and sharing the risk.
The guy who doesn’t want to pay for IVF today may have been the product of IVF when he was born. (Not all mothers tell their children how they were conceived.)
Or, eight years from now, he may find himself married and in need of IVF.
No one knows what health care they may need– tomorrow or down the road. Or what healthcare their parents needed when they were kids.
Insurance is about realzing that we’re all mortal, we’re all at risk, and we’re all in this together.
On anti-trust exemptions–
Apparently, you didn’t read the whole post??
Perhpaps you prefer talking to listening/ reading. Many people do. But you don’t learn as much that way.
IF you read the post, you
will discover how breaking up insurers would lead to
higher costs.
Jeri S.–
Yes, it makes no sense for insurance rules to vary so widely from state to state.
Arguably, if different insurers cover different benfits within a single market, that gives patients choice. (Though in loosely regulated states, it usually means that some insurers are selling policies that dont’ cover everything that insurance should cover if it is going to protect customers)
But if you move from one state to another, and find that the same insurer doesn’t cover the same benefits–that’s totally irrational.
Sharon–
Yes, fixed prices would make sense.(They just need to be adjusted for real differences among hospitals due to sicker patients or difference in cost of labor(-due to differences in cost-of living) in different parts of the state)
Many of the differences in what insurers pay are simply a matter of who has more market power in that particular negotiation.
The cost to the provider is not higher-and the benefit to the patient is not higher– yet the provider is paid far more
And, ultimately, this added cost is passed on to the patient. We all pay higher premiums when insures have to pay certain providers far more for no rational reason.
Sorry- I haven’t posted recently on this blog- I am exhausted and demoralized. But I will try to re-coup my energy.
Nortin Hadler put a remarkable piece on The HealthCare Blog today
Dr. Rick Lippin
Southampton,Pa
We have a situation that speaks to this going on right now. Continuum Health Partners, a large hospital conglomerate is battling with United Healthcare right now over increases that Continuum wants.
Seems to me if we start allowing insurance to be sold across state lines we will have a race to the bottom like South Dakota and Deleware for the credit card industry.
Martha and Rick-
Martha–
Thanks much for your comment, and the example of Continuum vs. United.
You are exactly right. If we let insurers sell across state lines we will see a race to the bottom
Dr. Rick–
Please don’t lose hope.
Even if we don’t get the federal legislation that we need, there are other ways to do what we need to do.
I’m a survivor and so I learned, as a child, to look for an escape, a remedy, a way to cope– what I now think of as “another way out and around.”
The minute that I smell possible disaster I am already thinking of solutions.
In this case I am focusing on:
–Changing the system through Medicare reform
–Changing healthcare through state reforms(seem my most recent posts on what Maryland has done)
-and( I think this is our best hope)reforms led by health care professionals throughout the coutnry. We need a ground-level reform movement
I think it should be led by doctors, nupses, and public health experts.
We need “inside agitators”: questioning what our medical establishment is doing.
And I know that you are one of those people.