Category Archives: Health Insurance
Part 2: The Emergence of Consumer Value
Despite its deep flaws, the new health reform law, ACA, has three aspects that make me optimistic about medical entrepreneurs being able to surmount the law’s barriers to create a consumer-dominated, market-based medical care system that will deliver high-quality, affordable medical care to everyone:
1. The creation of consumer value
2. The rise of high-value local health plans
3. Effective disease prevention
This second of five installments discusses consumer value.
Medical Consumer Value
The word “value” appears more than 200 times in ACA. The law’s architects clearly liked it and felt that the bill should strive to achieve it. Too bad they never bothered to clearly define it. If they had, they could have created a much more direct approach to fixing our dysfunctional medical care system, and without all the counter-functional, top-down bureaucracies that will actually impede it and force medical costs higher than they need to be.
Part 1: Even a Blind Pig Finds an Occasional Truffle
I’ve made no secret of my disdain for the Patient Protection and Affordable Care Act (ACA), the new health reform law. It is a bad bill that focuses the wrong “solutions” on the wrong problems and promises to visit unnecessary economic distress and destruction on America’s providers, consumers, taxpayers, and insurers. Even the IRS is protesting.
Yet, rather than continue to bash it, I’ve taken my summer hiatus from writing this blog to focus on a more constructive approach. The law is a fact we have to deal with, and despite a lot of talk about a subsequent Congress overturning it, I’ve concluded such an action to be both unlikely and unwise. The opposition has nothing better on the table and the ACA situation is actually far from hopeless. The focus needs to be on repairing, not revoking it.
MEDICAID, MEDICARE, AND THE INSURANCE EXCHANGES
The new health reform law’s central message to America’s hospitals is a classic good news/bad news story. First, the good news. Hospital exposure to 46 million uninsured Americans showing up in their ERs is about to drop by two-thirds over the next several years. Medicaid alone is predicted to take on 15 million of them, as the states—with temporarily enhanced federal assistance—expand eligibility to cover all non-seniors who fall below 133 percent of the federal poverty level ($24,350 for a family of three). And assuming the individual insurance mandate survives likely court challenges, another 17 million uninsured will be required to buy subsidized private health insurance through new state health insurance exchanges beginning in 2014. This adds up to 32 million people who hospitals will no longer have to treat for free under the federal EMTALA law and their own charity-care policies.
I need your help (and no, it’s not a request for money).
The attorneys general (AGs) in at least 14 states (Colorado, Louisiana, Florida, South Carolina, Alabama, Nebraska, Texas, Pennsylvania, Washington, Utah, North Dakota, South Dakota,Idaho, and Indiana) have joined together to challenge the constitutionality of the just-passed federal mandate that will require all documented American residents to purchase health insurance beginning in 2014. As a former health insurance actuary, I support this challenge on the basis of my extensive analysis and conclusion that there are voluntary alternatives to mandates that will be even more effective at providing universal health insurance access while preventing the adverse selection (i.e., free-riding) that would otherwise destroy any universally available health insurance exchange like that specified by the federal law.
About the same time I saw a picture of the man I voted for signing the new health reform bill, I received an email with a picture of George Bush (The Younger) waving at the camera with one of his goofier grins and the caption, “Miss me yet?” I’m hardly a Bush fan, but at the moment—God help me—I’m even missing Nixon.
One of the annoyances from having spent forty years inside the health care beast is having to endure the blatant half-truths and patent falsehoods coming from our President and his legions of economics-challenged health reform advisors and supporters. Particularly abrading are his statements about the “immediate benefits” of the new law, with no mention of the equally immediate costs that will accompany them.
Here are some of the more bothersome ones:
- Free preventive care. The journal Health Affairs and others have authoritatively concluded that preventive services almost always increase medical costs rather than reduce them. Thus, our premiums will go even higher with no net savings now or ever.
One of President Obama’s most frequent health reform mantras is, “If you like your health care plan, you can keep your health care plan.” This is consistent with his belief that we “must build on the current employer-based system” that insures 158 million people who comprise the vast bulk of all privately insured Americans. There is just one problem with this approach: employer-provided group insurance is dying and cannot be saved. Despite its longstanding dominance, group insurance, whether self-funded or provided by outside insurers, suffers from major flaws that are increasingly exposing its fundamental unsuitability as an even partial solution for effective health care reform. This is true for all employers, no matter what size. Here are group insurance’s more pronounced shortcomings:
1. Lack of Portability: Group insurance ties the individual to his or her job, an anachronism in an era when people change their jobs as often as their cars. And if you lose your job through layoffs or illness, you soon lose your insurance as well. If you can’t find affordable individual coverage, then welcome to the ranks of the uninsured.
As part of his last-ditch effort to revive the Senate’s undead health reform bill, President Obama has proposed a federal board to veto health insurance premiums it finds “unreasonable and unjustified.” In case you’re wondering, all 50 states already do this, albeit with the countervailing requirement that premiums must also be “adequate” to assure insurance carrier solvency—a key requirement the President ignores.
His proposal is the obvious result of his Administration’s high dudgeon over Wellpoint’s 39% individual premium hikes in California (where it has lost millions). The argument is that such increases are unconscionable from an industry that earned “$12 billion in profits last year.” Please note the inapt comparison of percentages with dollars, a diversionary, demagogic tactic often used to enrage the innumerate while failing to note Wellpoint’s 2009 operating profit margin of 4.8% or the entire industry’s hopelessly pedestrian 2.2%. Even more absurd was one congresswoman’s snarky suggestion that the real reason for the increases was to maintain WellPoint CEO Angela Braly’s $9 million annual compensation—equal to twenty-eight cents per member per year. The cause of premium increases is not profits or executive compensation. To paraphrase President Clinton, “It’s rising medical costs, stupid!”
As we approach Thursday’s bipartisan health summit, no one has yet successfully challenged the comprehensive health reform proposal I describe in my book, speeches, media interviews, and this blog. It has withstood all technical, actuarial, financial, behavioral, and economic challenges to date. This would be gratifying if it weren’t for one annoying loose end—the political issue.
Almost everybody tells me that my approach’s lack of sound-bite simplicity renders it DOA as a workable legislative agenda. They have a point. As bad as our health care system is, it’s not yet bad enough to engender the kind of political will necessary to put American consumers fully in charge of buying their own health insurance and medical care. Until we get there, let me offer a simpler, interim proposal that will immediately offer relief from out-of-control medical costs: we should make everyone financially responsible for his own preventable illnesses.
Scott Brown won the Massachusetts senate race by promising to derail the Democrats’ congressional health reform locomotive, a victory that has also thrust his biggest supporter, Mitt Romney, back into the national spotlight. The irony is that, as state senator, Brown helped pass then-Governor Romney’s remarkably similar 2006 state health overhaul. Despite Mr. Romney’s statement at the time that “Every uninsured citizen in Massachusetts will soon have affordable health insurance and the costs of health care will be reduced,” his RomneyCare milestone threatens to become a politically costly millstone for his 2012 presidential prospects—or so says Kimberley Strassel of the Wall Street Journal.
The Massachusetts program has used the carrot of generous premium subsidies and the stick of mandated individual coverage to reduce its uninsured population from about 10% pre-reform to 5.1% (Census Bureau estimate) or 2.6% (Massachusetts estimate) last year. Unfortunately, it has failed to contain costs, with insurance premiums continuing to increase considerably faster than the CPI.
Cable news is jammed with horrific stories of widespread destruction and disarray caused by an unpredictable calamity that struck with sudden, unstoppable force, thrusting many who were already sorely beleaguered into chaos and desperate disarray. Hurried rescue missions failed to prevent widespread pain and suffering. Such is life for the Democrats following the Massachusetts special election. Tip O’Neill was misquoted. All politics is loco. The big question now is whether the Mass. disaster presages a mass disaster for the Dems come November.