Category Archives: Insurance Companies

Why Market Competition Will Not Lower the Cost of Health Insurance

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 “Competition drives improvements in efficiency and effectiveness, offering consumers higher quality goods and services at lower cost. It can have the same effect in the health care system, if given the chance to work.”– Mitt Romney

Creating “robust competition” is at the core of Mitt Romney’s approach to Health Care Reform. He would be right–if health care were commodity like any other.  In many industries when more sellers compete for customers, prices come down. Think of thin-screen TVs.  But the healthcare market is not like other markets, as a great many health care economists have explained.

When it comes to medical care, the consumer does not have the leverage that he enjoys in other markets because there is too much uncertainty about a) what he needs, and b) the value of what is, in the end, a very complicated product.

First, consider his needs: Should he purchase an expensive, comprehensive policy with no caps on annual or lifetime payouts? If he has a big family, he knows he needs a big car. But he has no way of knowing whether he, his spouse or one of his children will develop cancer, MS., Alzheimer’s or be in an accident that leaves one of them paralyzed for life. So there is no way that a savvy consumer can bring down insurance prices by shopping for the “least expensive policy that fits his needs.”

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Paul Ryan’s Plan for Medicare: A Disaster for Seniors (Why Doctors Might Stop Taking Medicare)

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“Robin Hood in reverse, on steroids”–that’s how Robert Greenstein, President of the Center on Budget Policy and Priorities (CBPP),  has described vice-presidential candidate Paul Ryan’s blueprint for the 2013 budget: It could likely produce the largest redistribution of income from the bottom to the top in modern U.S. history.”

I quoted Greenstein in April, in a post that originally appeared on HealthInsurance.org. There, I explained that Ryan’s budget would shift Medicare costs to seniors  and slash Medicaid, while simultaneously offering tax breaks for Americans perched on the top of a our income ladder.

Under the newest version of the Ryan plan, Washington would give seniors a voucher equal to the cost of the second-cheapest private-sector Medicare plan in their region. In theory, this gives seniors “choice” — the opportunity to pick a Medicare policy that best suits their needs, and their pocketbook.

If they don’t want to buy a plan from a for-profit insurer, they could, if they wish, use the voucher to buy traditional government-sponsored Medicare–though if it costs more than that second-cheapest private plan in their area, they will have to make up the difference.

Romney and Ryan are convinced that the private sector is always more efficient than government. Thus, for-profit insurers will be bound to offer better care at a lower price. Their faith is remarkable, given that past attempts to privatize Medicare (Medicare + Choice and Medicare Advantage) have largely failed on both counts.

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As the Republicans Take Tampa, Consider What a GOP Victory Would Mean for Women’s Health

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For decades, Republicans have opposed abortion. This, we know, and so it comes as no surprise that Mitt Romney, the Party’s presidential candidate, has called “Roe vs. Wade“ one of the darkest moments in Supreme Court history.” 

But what some call the “war against women” is escalating.  This year, the Republican platform calls for a constitutional amendment that would make abortion illegal.

In 1976, the GOP blueprint acknowledged that “the question of abortion is one of the most difficult and controversial of our time,” and the Party called for “a continuance of the public dialogue on abortion,” which it called a “moral and personal issue.”  Just eight years ago, the preamble to the Republican platform declared: “we respect and accept that members of our party have deeply held and sometimes differing views.”  But today, there is no such language in a platform that calls for “a human life amendment to the Constitution,” and declares that “abortion is detrimental to women’s health and well-being.”

Meanwhile Alabama, Arizona, Idaho, Indiana, Kansas, Louisiana, Nebraska, North Carolina, Oklahoma, and Ohio all have passed legislation outlawing abortion after 20 weeks, even though, as the Center for American Progress’  Emillie Openchowski points out “complications are sometimes discovered after this point in a pregnancy that could cause serious harm to the woman. In those states, a woman would be forced to continue the pregnancy, no matter the risk to her health.”  This is frightening.

While Republicans parade women across their Tampa stage– and avoid talking about what they have quietly embedded in the Party platform–it seems a good time to consider what a Republican victory would mean for women’s health.

Turning Back the Clock: Contraception 

Susan Faludi’s Pulitzer-prize winning 1991 book, Backlash, is subtitled: “The Undeclared War Against American Women.” Twenty-one years later, it seems the war is out in the open . As a recent New York Times editorial observes:  “Having won on abortion, social conservatives are turning to birth control.”

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Medicare, Medicaid, Global Warming and Gun Control– Can Liberals and Conservatives Find Middle Ground? Should They? Part 1

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 In a nation divided, “compromise” has become an extraordinarily appealing idea. Weary of the acrimony and endless wrangling, more and more Americans are asking: Why can’t conservative and liberal politicians come together and forge bipartisan solutions to the problems this nation faces?

Keep in mind that it is not only our elected representatives who are having trouble finding common ground. The Pew Research Center’s latest survey of “American Values” reveals that as voters head to the polls this November, their basic beliefs are more polarized than at any point in the past 25 years. In particular, when it comes to the question of government regulation and involvement in our lives, the average Republican has gravitated to the right. In 1987, 62% of Republicans agreed that “the government should take care of people who can’t take care of themselves.” Now just 40% support this proposition. Democrats haven’t changed their views on this issue: most continue to believe “there, but for fortune . . .”

In Congress, where polarization has led to paralysis, some argue that Republican leaders are responsible for creating gridlock by insisting on “party discipline.” But liberals in Washington also are accused of “dividing the nation.” Even President Obama, who set out to unite the country, has been described as “the most polarizing president ever.” During his third year in office, Gallup reports, “an average of 80 percent of Democrats approved of the job he was doing, as compared to 12 percent of Republicans who felt the same way. That’s a 68-point partisan gap, the highest for any president’s third year”–though this may say more about the temper of the times than the man himself. Nevertheless, many commentators believe that progressives, like conservatives, need to cede ground. The debate has become too contentious, too “political,” they say. I disagree. There are times when we cannot “split the difference.” Too much is at stake. We must weigh what would be won against what would be lost.

But reporters who have been taught that they must be “fair” and “balanced” often write as if all points of view are equally true. After all, they don’t want to be accused of “bias.” Thus they fall into the trap of what veteran Supreme Court reporter Linda Greenhouse calls “he said, she said” journalism. To them, the “middle ground” seems a safe place– a fair place– to position a story.

This may help explain why so many bloggers and newspaper reporters are calling for “bi-partisan consensus” as they comment on some of the most important issues of the day.

Global Warming

Writing about global warming, Huffington Post senior writer Tom Zeller Jr. recently declared: “Compromise is the necessary first step to tackling the problem. What ordinary Americans really want is for honest brokers on all sides to detoxify and depoliticize the global warming conversation, and then get on with the business of addressing it. That business will necessarily recognize that we all bring different values and interests to the table; that we perceive risks and rewards, costs and benefits differently; and it will identify solutions through thoughtful discussion and that crazy thing called compromise.” [ my emphasis] (Hat tip to David Roberts (Twitter’s “Dr. Grist”) for calling my attention to this post.)

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Health Insurers in the Spotlight

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Consumer Reports Publishes Quality Rankings; HHS Makes Rate Increases Public; They Can Run, But . . .

Are health insurance plans with big brand names better than smaller insurers that most people have never heard of? “Not usually,” says Nancy Metcalf, senior program editor, at Consumer Reports. Unless of course, the plan’s name is “Kaiser.” As Metcalf points out, Kaiser Permanente, a non-profit that insures some 8.8 million Americans nationwide, stands “head and shoulders” above the other large insurers. In general, smaller plans outranked the well-known names, and surprisingly, when it comes to patient satisfaction, Health Maintenance Organizations (HMOs) received higher marks than Preferred Provider Organizations (PPOs) even though HMOs require that the patient remain “in network.”

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Highlights from the Reconciliation Bill, and Maggie’s Comments on the Changes

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Overall, the changes in the reconciliation bill will make the Senate
bill more progressive—and fairer.

My prediction: the bill will
pass. Those who oppose universal coverage are becoming
angrier, louder, more abusive, and more frantic. This is because they realize
that they are losing, and now they are just flailing about.

This
evening (Thursday) I heard Bart Stupak acknowledge, on “Hardball
with Chris Matthews”, that while the Democrats may not have the
votes today, by Sunday, they could well have them. On this, I agree
with Stupak.

Below, the details of the new bill, and my comments
in red.

Under the new reconciliation bill:

  • Low-income and middle-income families will have an easier time
    affording premiums.     The tax credits for health insurance premiums
    are more generous for individuals and families with incomes between 250%
    and 400% of the federal poverty level (FPL)—i.e.  individuals earning
    less than $41,500,  or a family of three earning less than $70,400. When
    compared to the Senate bill, the legislation also cuts cost-sharing for
    individuals and families with incomes between 100% and 250% FPL.

Comment:  Research shows  that when a low-income
family of four (for instance a family earning less than $22,000) is
required to share in health care costs, too often they delay needed
care.  For these families, even a $15 co-pay can be a barrier. Fifteen
dollars will buy groceries for two dinners for a family of four (e.g.
spaghetti with tomato sauce and bread).  Middle-income families who
don’t have help from an employer also need the higher subsidies that the
new bill provides.

  • Six months after the bill is enacted, all existing health
    insurance plans are prohibited from imposing life-time limits on payouts
    or refusing to cover children suffering from pre-existing conditions.      
    Excessive waiting periods before insurance kicks in also will be
    banned, and insurers will be required to provide coverage for
    non-dependent children up to age 26 on their parent’s polices.  (Parents
    will pay extra for the coverage, but adult children will get better
    deals than many would on their own.) Beginning in 2014, group health
    plans will no longer be able to exclude adults based on pre-existing
    conditions. Annual limits on how much an insurer will pay out will be
    restricted beginning six months after enactment, and prohibited starting
    in 2014.

Comment: Limits on how much insurers will pay out
annually or over a lifetime can condemn individuals to death. If you
have the bad luck to be diagnosed with a very expensive disease that
might require years of pricey treatments (MS for example, or childhood
cancers) your insurance can easily “max out”—even though treatment that
might cure you (in the case of some childhood cancers where we have been
making great progress)– or at least give you many additional years of
life.

  • The “Cadillac Tax” on expensive health insurance plans has been
    pushed back five years and won’t go into effect until 2018.     The
    thresholds also have been raised: the tax will apply only to individual
    plans that cost $10,200 or more (up from $8,500) or family plans that
    fetch $25,500 (up from $23,000). Dental and vision plans would not be
    included.  Under the new bill, there is no special deal for unions.

Comment:  In my view, this is a positive change.
As I have argued in the past, the Cadillac tax could hit middle-income
families.

  • While the Cadillac tax is rolled back, the Medicare tax for
    wealthy individuals earning over $200,000 and married couples who earn
    over $250,000 rises.      Today, they pay a 1.45% payroll tax on wages.
    The Senate bill would raise that tax to 2.35%. The reconciliation bill
    expands the tax to include investment income (dividends, capital gains,
    etc.) as well as earned income. It still applies only to individuals who
    show income over $200,000 and couples who report income over $250,000.

Comment:  This tax makes up for the cut-back and
push-back on the Cadillac tax. In contrast to the Cadillac tax , this
tax is limited to those at the very top of the income ladder. Unlike the
middle-class, those earning over $200,000  have  enjoyed significant
tax breaks and income hikes in recent years. They are in a much better
position to afford the increase. It’s worth noting that other countries
tax investment income to help fund healthcare.

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Complaints about Medicare Advantage Mount…While Congress Contemplates Slashing Fees Traditional Medicare Pays Docs

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Recently I argued that eliminating the private insurance industry would not suddenly make health care affordable. But this is no reason to gratuitously overpay private insurers to provide health care to Medicare patients—while simultaneously planning to slash the fees that Medicare pays physicians.

Begin with the insurers. When Congress created Medicare Advantage, the program that allows private insurers to offer Medicare to seniors, it agreed to pay for-profit insurers about 12 percent more per patient than traditional Medicare would spend if it were covering those patients directly.  Add up those extra payments and they amount to a $16-billion-a-year subsidy for the health insurance industry.

Why the sweetener?  Lobbyists argued that the government would have to pay more to persuade for-profit insurers to join the Advantage program.  Moreover, they promised that the insurers would use the $16 billion to offer patients extra benefits like acupuncture and eye exams that they would not receive under traditional Medicare.  And Congress agreed. Now, think about this for a minute: legislators agreed to use our tax dollars to help for-profit insurers draw customers away from a government program that most people liked—and that cost taxpayers less.  This is not about saving money by transferring Medicare to the supposedly more efficient private sector. This is about the conservative agenda: some politicians are determined to try to outsource government to for-profit corporations.

Predictably, private insurers structured their plans to siphon off the healthiest seniors.  In New York City, for example, Oxford included free memberships to some pretty posh gyms as part of the package. They called it the “Silver Sneakers” program. Unfortunately, a year after seniors signed up they discovered that the number of gyms involved in the program had suddenly shrunk. The options that remained weren’t nearly as tony, and most were no longer located in upper-middle-class residential neighborhoods. Is this “bait-and-switch”? You decide.

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Health Care Spending: The Basics

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JUST HOW MUCH DO PRIVATE INSURERS ADD TO THE NATION’S HEALTH CARE BILL?

As a nation, we are spending well over $2 trillion a year on health care. This includes: all of the money that you and I pay out-of pocket to cover co-pays, deductibles and drugs; the dollars that you and I (and our employers) fork over for private insurance; the money Medicare, Medicaid and SCHIP lay out to reimburse doctors, hospitals and patients; the billions taxpayers chip in to fund veterans’ health programs, public hospitals, school programs, and health insurance for government employees as well as the money private charities contribute to health care.

What exactly are we paying for? How much of that money is used to pay the CEOs of drug companies salaries that read like telephone numbers? How much do hospitals eat up?  How much is spent on insurance company ads? How much is used to provide healthcare for the poor?

I’ve decided to do a series of posts spelling out exactly where the money goes. Today, I’m going to start with private insurance.

Many people believe that if we just eliminated the private insurance industry, healthcare would become much more affordable. There is a general sense that the “administrative costs” of private insurance are siphoning off a sizable share of our health care dollars.

There is some truth to that: because we  have  multiple insurers—not to mention so many solo practitioners, small hospitals, clinics, and individuals filing for reimbursement—the paperwork is enormous. If we had only one big insurance company that used just one set of forms we could simplify the paperwork greatly. People who want a “single payer” system, with the government paying all of the bills,  point out that the savings would be enormous.

And we could cut costs even more if, instead of having tens of thousands of health care providers filing for separate reimbursements, doctors, hospitals and clinics joined together into, say, eight our ten large organizations like Kaiser Permanente, each with its own back office.  The doctors would be on salary, so rather than filing for payment for each service they performed, they would receive a monthly check for taking care of their patients, just as they do at Kaiser Permanent or the Mayo Clinic (where doctors are on salary).

In other words, it is not only a fragmented multi-payer insurance industry that generates so much paperwork; on the other side of the transaction a fractured network of separate providers adds to a mind-boggling stack of paper. Unlike most other developed countries, we have turned healthcare into a  cottage industry. This gives us lots of choices: we can select from a Chinese menu of insurance plans and proviers. But it also means higher administrative costs. In this post I would like to focus first on just on how much our huge private insurance industry is costing us. (In a later post, we’ll look at the price we pay for a fee-for-service system of independent providers.)

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The New York Times “Gets Cracking” on Rising Health Care Costs

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On Sunday the New York Times published an editorial that set out to analyze “The High Cost of Health Care.” The result might best be described as “muddled.”

What is exasperating is that about 85 percent of the facts in the editorial are true. But a good 15 percent are simply wrong.  And the Times’ editors managed to weave truth and error together in such a way that it would take a knitting needle to separate the two. As Matthew Holt put it on The Health Care Blog: “the piece looks entirely as though it was written by a committee that couldn’t agree with itself.”

As you read the editorial, you can almost see the editors sitting around a table, negotiating. “Okay,  we’ll let that sentence about the value we’re getting for our dollars stand—as long as well keep this sentence about  ‘skin in the game.’”  The result, a mix of propaganda and analysis, is far more dangerous than outright lies because the many true facts make the whole thing sound credible.   

Because I hate to see our paper of record disseminate disinformation, I am going to try to separate the wheat from the chaff. Begin with the truth: Near the top of the story, under a sub-head that reads “Varied and Deep-Rooted,”  the Times provides a nice summary of the main reasons why we lay out roughly twice as much as the average developed nation, without getting care that is twice as good:

“we pay hospitals and doctors more than most other countries do. We rely more on costly specialists, who overuse advanced technologies, like CT scans and M.R.I. machines, and who resort to costly surgical or medical procedures a lot more than doctors in other countries do. Perverse insurance incentives entice doctors and patients to use expensive medical services more than is warranted. And our fragmented array of insurers and providers eats up a lot of money in administrative costs, marketing expenses and profits that do not afflict government-run systems abroad.”

Spot on. If only this section of the editorial had not begun with a casual half-truth: “Contrary to popular beliefs, this is not a problem driven mainly by the aging of the baby boom generation, or the high cost of prescription drugs, or medical malpractice litigation that spawns defensive medicine.”

They first part of the sentence is correct: the aging of the boomers is not a major cause of health care inflation.  The last clause of the sentence is debatable, though probably true.
What’s troubling is the middle clause:  Why does the Times feel obliged to declare that the “high cost of prescription drugs” is not an important factor behind soaring medical bills?

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Conditional Cash Transfers: An Interim Model for Health Care Reform?

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This past September, New York City’s Mayor Bloomberg welcomed 5,000 families into the pilot program of Opportunity NYC– the nation’s first conditional cash transfer (CCT) program. Based on a Mexican program called Oportunidades, CCT programs like Opportunity NYC (ONYC) provide financial incentives for poor households to “meet specific targets” in three areas: education, employment/training, and health.

I recently spoke with Héctor Salazar-Salame, Advisor to the Center for Economic Opportunity, which operates ONYC, about the health components of the program. I wanted to get an idea of the aims and strategy behind ONYC—and also to learn more about CCT as a potential model for thinking strategically about health care reform. 

According to the city’s press release, ONYC’s health incentives will be offered “to maintain adequate health coverage for all children and adults in participant households as well as age-appropriate medical and dental visits for each family member.” In terms of coverage, families can earn “$20 or $50 per adult per month for maintaining health insurance and $20 or $50 for maintaining health insurance for all the children in the family.”

The point is to encourage low-income families to enroll in health insurance plans. “Many families work for employers that offer insurance,” Salazar-Salame explains, but “many times the necessary employee contribution is quite high for low-income families. We’re providing an incentive for families to opt into their work-based, private health plan—and hoping that the incentives will help them offset the cost of the employee contribution.”

If parents are unemployed—or work for employers that don’t offer coverage—the family can still be eligible for health incentive rewards that keep them enrolled in Medicaid. “We know that to recertify for Medicaid can be a challenging yearly process that takes a lot of time,” says Salazar-Salame. (It’s worth keeping in mind that roughly 30 percent of parents who don’t manage to enroll or re-enroll their children in Medicaid have less than a high school education).  “We’re hoping the incentive will help them maintain the insurance that they’re eligible for,” Salazar-Salame explains.

Maintaining insurance is harder than it sounds. In October, Maggie wrote about  just how difficult it can be to stay enrolled in Medicaid and SCHIP, pointing to a Health Affairs article titled "Why Millions of Children Eligible for Medicaid and S-Chip Are Uninsured."

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