For Profit Insurance
Grading the Public Option
Published August 20, 2009 @ 05:07PM PT
If it’s August, that means that people are releasing somewhat longish reports on health care policy. The most interesting one comes from the guy who looks like Tobey Maguire’s older brother – if his older brother was an influential economist. Dr. Jacob Hacker, who first published a paper in 2001 suggesting a “public plan” (the ancestor of the public health insurance option) based on the infrastructure of Medicare could create real, meaningful competition with private insurance, is back. In today’s paper, he grades how well Congress did translating his principles into actionable legislation. As you could guess, the results are solid but not exceptional -- with one big exception.
Today’s report, “Public Plan Choice in Congressional Health Plans: The Good, the Not-So-Good, and the Ugly”, reads at times like a professor checking in on his students. If that’s true, the House version of the public option looks like it got a B+. This version of the public option would have started with Medicare rates for the first three years, until it was on its feet. Then it would negotiate rates directly with providers, when it already had millions of customers. This version would also piggyback off the Medicare provider network, by offering Medicare rates +5% for those who accept both Medicare and the public plan. It’s not a home run because the Health Exchange which allows for direct head-to-head competition is closed off to all but businesses under 50 employees and individuals, although the bill allows for that requirement to be loosened at a later date to include larger employees. Given Hacker's dynamic tension model of competition between public and private, the more individuals that are able to make that choice, the more public and private will try to improve to view for customers. And, incidentally, the better deal the American people have, no matter which option they choose.
The House version after the extraction of a pound of flesh by the Blue Dogs, however, would be a C. This public option starts off with negotiated rates with providers on day one, meaning it’s negotiating before it knows how strong its customer base is. That gives providers a huge leg up – the government needs them more than they need the government. Hacker also notes the folly of claiming that negotiating rates puts the public option on a level playing field with private insurance companies who frequently does not have to do so: “Although we know very little about private plan payments due to their proprietary nature, we do know that many large private insurers do not ‘negotiate’ in the sense of bargaining directly with providers. They provide a price list to providers who have the option of accepting it or not.” It’s worth noting that Hacker's consistently says the point is not to have a mega-strong public option. He wants to give private insurance the ability to change and improve in the face of competition. As he writes, “It is healthy competition in which all plans are pressed to improve their weaknesses and build on their strengths. If public and private plans are competing on fair and equal terms, the choice of enrollees between the two will place a crucial check on each.” But you don’t get healthy competition if the public option has to give away the farm just to get started.
The Senate Health, Education, Labor and Pensions version, dubbed the “community health insurance option,” would get a C-. It’s nearly identical to the House version after the Blue Dogs deal, but the language of the bill spends a little too much time talking about what the Gateways (the Senate state-based version of the Exchange) and the community option can’t do than it does guaranteeing what they can. Most notably, the Senate is ambiguous on whether only individuals and microbusinesses will be allowed to buy from the Gateways (it leaves that decision up to the states), and it doesn’t explicitly give the public option the ability to negotiate for the best pharmaceutical rates like any other insurance plan. Being able to negotiate for discounts on prescription drugs is a necessary tool to make the public option more like the cost-efficient VA and not like the budget-busting Medicare Part D (thanks again, lead negotiator and now head of PhRMA, Billy Tauzin).
The health co-op is the last to be graded, and I won’t ruin for you the delight of reading how Hacker deconstructs the half-backed concept. Suffice to say, the likely grade would be, “Did you even read the assignment?” Or, as Hacker puts it, “The Senate Finance Committee’s cooperative model is not good, nor even not-so-good. It is ‘ugly.’”
Of course, these are just mid-term grades. When Congress returns in September, we’ll see if they’re able to bring their average up or if we’re going to need to punitively take Baucus, Grassley and the Senate Finance Committee out of the lineup for Saturday’s big game...
(Photo credit: House Committee on Education and Labor on Flickr.)
Things You Might Not Know About the Lewin Group and the Public Option
Published August 19, 2009 @ 11:11PM PT
You’ve seen this as many times as I have. Some big Republican – Orrin Hatch or somebody – goes on television and talks up the problems with having a public health insurance option competing against private insurance plans as a choice in the Health Exchange. They’ll normally cite a study by the Lewin Group purported to show that 83.4 million Americans would “lose their coverage” and join about 20 million other people in the public option. There are a few faulty assumptions, a dash of conflict-of-interest issues and one rather sizable problem with this analysis: they’re describing a public option that no longer exists in bill they're analyzing.
Let’s start with the biggest problem: the Lewin Group version of the public option doesn’t resemble the HR 3200 version. They base their modeling on this notion of provider payment: “The public plan would pay health care providers using the Medicare payment methodology, with an additional 5 percent for those agreeing to see both Medicare and public plan enrollees.” The Lewin Group calculates savings in the 20-25% range. That would certainly give a public option a huge price advantage. To be fair, this reimbursement scheme was part of the original draft of the bill in June… except not quite. Even there, the Medicare rates were a crutch to get the public option up and running. They would give way after three years to a plan that negotiated rates directly with providers, like any insurance plan. At that point, you’re not even getting close to 25% savings. In fact, the CBO estimates it will be closer to 10%.
Thanks to the Blue Dogs, though, the whole point is moot – after amendment, the public option negotiates rates with providers from day one. So the crux of the argument just went bye-bye.
But let’s press on with their inaccurate model for pricing. After all, the questionable assumptions don’t end there. The Lewin Group presumes private insurance won’t be able to keep up and therefore won’t try. The CBO, on the contrary, presumes that in the face of competition, private insurance will practice some cost-containment – hence only 10% difference between public and private, and a net win for the rest of us. For another, the Lewin Group runs its calculations by the classical economics model that price is the only decision point – if I’m an individual, I’ll only buy the cheaper plan; similarly, employers will discontinue their current contracts, having done that to purchase coverage in the Exchange for their employees, will only buy the public plan because it’s cheaper. Speaking as a human being who’s drinking a $1.69 bottle of Coke Zero because the store that sells it for $1.50 is an extra two blocks away, I do not share this assumption that price is all that matters in making a decision.
Furthermore, the Lewin Group presumes that “about 89.5 million people would become covered under the public plan with an employer paying a share of the premium.” That actually represents “a net increase” of nearly 2 million people in employer-based insurance (pg. 18) – interesting for a study that often gets cites as proof that having a public option will unravel the employer-based benefits system. (Btw, the CBO sees a slightly bigger increase in employer-based coverage). So it admittedly doesn't even directly support the talking point that millions would lose their employer-based coverage.
In closing, let me speak directly to those who are planning to trot out this faulty and inaccurate study in the future – please, please, for the love of God, please find someone else to crunch your numbers. The Lewin Group is a wholly-owned subsidiary of Ingenix, the database company that provides information on provider rates for most of the major insurance companies, and is itself a division of UnitedHealth, the nation’s largest insurer. This is the same UnitedHealth urging its customers to go to anti-reform tea party rallies. This is the same UnitedHealth, the subject of a congratulatory profile in Business Week showing how the insurance industry has subverted and manipulated the legislative process on health care.
Really? You can’t get someone else to come up with a study based on several odd assumptions and a misreading of the public option provider rates? You can’t cite some other study to say that the employer-based insurance system will unravel (despite the study suggesting it will actually be strengthened)? Really?
(Photo credit: live w mcs on Flickr.)
Medicare Advantage Is Still Breaking the Bank
Published August 19, 2009 @ 05:26PM PT
The L.A. Times has an article entitled “The next healthcare battle” which focuses on the overpayments currently being made by the federal government to Medicare Advantage plans. I suppose you could call it the next health care battle, if you’re defining “next” as “something we realized has been a mistake and have been trying to fix almost since we started it.”
I’ve written so much about this program and am so stunned that it continues to be “controversial” that I sometimes feel like a parent who has now told his child six consecutive times she needs to clean her room and – guess what – discovers there are still clothes and stuffed animals everywhere. Here’s the deal: If a Medicare beneficiary so chooses, s/he can opt out of traditional Medicare and sign up instead for a private insurance plan (“Medicare Advantage”). Sometimes they come with extra goodies like free gym membership or an optical plan, sometimes not. But one thing they don't come with are measurable better health outcomes – never have. They’re also not tied to traditional Medicare fee-for-service or cost per beneficiary rates. This was originally billed in 1997 as a way for the always-efficient private sector to deliver the same quality at lower costs. It hasn’t worked out. The Medicare Payment Advisory Committee noted back in 2004 (when the program was still called Medicare + Choice) that compared to traditional fee-for-service Medicare, that the HMOs cost 7% more per beneficiary for no real reason – and indeed, these HMOs cost more “in all counties,” not just high cost areas of the country. They recommended the plans only be paid at 100% of traditional Medicare. Congress ignored them. They’re now at 114%.
In 2009, after five years of saying the same damn thing, MedPAC kicked their rhetoric up a notch:
Paying more than [fee-for-service Medicare] is unfair to taxpayers and beneficiaries not enrolled in [Medicare Advantage] plans who subsidize those payments. We estimate that in 2009 Medicare is paying about $12 billion more for the beneficiaries enrolled in MA plans than it would have spent if they were in FFS Medicare and that the Part B premium is increased by about $3.00 a month for all beneficiaries, whether or not they are enrolled in an MA plan.
Then President-elect Obama described it as an example of “programs that don’t work.” In his budget, he made it clear he would do away with paying them more than 100% of the cost of traditional Medicare beneficiary. Max Baucus and the Senate Finance Committee were counting on cutting the fat off Medicare Advantage to help fund health care reform. The House bill does the same thing explicitly. Obama has recommended it time and again, perhaps by using competitive bidding to set their payments (an idea also endorsed by MedPAC… this time in 2003). So I don’t think I’m being unreasonable to ask why the hell we’re still overpaying them.
In many ways, the L.A. Times answers my question for me. After citing all the problems with overpaying Medicare Advantage, the cost savings potential ($177 billion over 10 years) and even showing that the AARP is against overpaying for Medicare Advantage, the L.A. Times gives the defense of the program through a single guy signed up for a Medicare Advantage plan who’s pretty happy with it. He may not have gotten any better care than he would have through traditional Medicare (measuring health outcomes, he probably didn’t), but the guy likes it. And, by gum, how dare Uncle Sam take it away from him?
Thus we see the insurance industry’s ace in the hole: superior marketing. As far as most folks are concerned, Maurice Engleman can have his HMO substitute for Medicare, if he likes it so much. But is it too much to ask for private insurance companies to make a better mousetrap rather than a better marketing pitch?
(Photo credit: Fiber! on Flickr.)
The Best Entourage $263.4 Million of Lobbying Money Can Buy
Published August 14, 2009 @ 11:01PM PT
An optimist sees the glass as half-full. A pessimist sees the glass, sees the water, and begins to wonder how it got there, who paid for the service, and what favor they’re going to expect in return. According to Bloomberg, the amount of money and staff supplied by the health care industries over the past six months is an order of magnitude larger than either those industries’ campaign contributions to politicians or their advertising budgets. The most colorful statistic is that there are six industry lobbyists for every member of Congress. If you’re a legislator working on health care reform, your life might have begun to resemble a Washington DC version of Entourage.
President Obama rode into town declaring that the era of special interests and lobbyists standing in the way of progress is over. Apparently, Congress didn’t get the memo, and the health care industry flat-out ignored it. The numbers are gaudy. $263.4 million in lobbying alone in the past six months. $20.5 million in political contributions to, yes, both political parties, including over $382,000 for Majority Leader Harry Reid. $320,000 for a Ferrari for Turtle, and an extra $100,000 so Kanye West’s entourage could all be wearing designer outfits. OK, I made that last sentence up. But there’s no doubt that in a year of reform, the industry that makes money off the system is livin’ large down by the Potomac.
The problem is less intrinsically the practice of lobbying and more the extreme concentration on the single issue health care. The number of registered lobbyists working for the health care industries now beats both the defense industry and the oil and gas companies -- no mean feat! With that "shock and awe" exposure, troubling questions arise. After all, if throughout your day you were trailed by a salesman who was regularly reminded you of how great a beverage Coca-Cola was and how cheap it was, and occasionally handed you surveys comparing how happy people were to drink Coke vs. water, after a few days or maybe even a few hours, you might start to think, “You know, I am kind of thirsty…” You can count as “thirsty” such legislators as the House Blue Dogs and Sen. Kent Conrad, who were both mentioned by name in the Business Week article on how well UnitedHealth has protected the interests of the health insurance industry. You can probably add Sen. Max Baucus, whose staff, we’re told, “rotates weekly meetings among the various groups in the health-care debate, providers one week, purchasers a second, consumers a third.” And sadly, you can even add the White House to that list, as evinced by the leaked details of their deal to insulate the pharmaceutical industry from future negotiations for savings in exchange for their full-throated and well-funded campaign in support of health reform. (Although no one quite knows how far-reaching, binding or damaging to reform efforts that deal is, at this point.)
Many people see the provisions in the reform bill as taking it too easy on those industries that make big bucks off our health care system being so dysfunctional. There may be many reasons for this – balkiness at what could be perceived as a high price tag, an attempt to appeal to moderate Republicans, or honest concerns with the measures. But you can’t entirely discount the effect of an entire basketball team playing zone defense on every single one of our elected representatives.
(Photo credit: Ethan Bloch on Flickr.)
Insurance Companies Blame [Insert Your Name Here] for Health Care Costs
Published August 12, 2009 @ 11:43PM PT
The new hip phrase for the proposals moving through Congress is “health insurance reform.” That's less a change in policy and more a shift in messaging emphasis. Most (though not all) parties agree that discrimination based on pre-existing conditions, the practice of rescinding a policy for a paying customer upon the discovery that they have a catastrophic medical condition, giving people different rates on the basis of gender, health status or employment, and cheaping out on primary and preventative care for their customers crosses the line to abusive. For some, the language change has helped remind people just how really, really angry we get at insurance companies.
So America’s Health Insurance Plans are reacting the only way they know how. They’re blaming someone else.
They’re pretty expert at this now. Traditionally, they wail on Medicare rates. It’s their favorite punching bag, claiming Medicare rates are so low that providers and hospitals must shift their costs to private insurance in order to make ends meet. While that's true to an extent, the numbers AHIP produces tend to use the calculations that make the disparity look as bad as possible. When the Obama Administration first hyped up its rhetoric, AHIP responded with contingency plan #1, releasing a report that suggested if everyone was enrolled public health insurance option based on Medicare rates, nearly none of California’s hospitals would be able to recoup their costs. It’s a straw man argument, of course – the public option wouldn’t use Medicare rates, and nothing out of the Lewin Group, the Congressional Budget Office or the Commonwealth Fund predicts the public option would come close to having the monopoly that AHIP uses as the basis of its argument.
Clearly contingency plan #2 is blame it on providers and doctors. When Health Care for America Now! released its report documenting that 94% of insurance markets have a monopoly for 1 or 2 companies and exploring the link between lack of competitive pressure and increase in premiums, AHIP shot back with, “Studies over many years have shown clearly that rising health care costs are the result of increases in hospital costs, increases in physician expenses, and increases in the cost of pharmaceuticals.” In short, it’s everybody except us!
Now they’re at it again. The White House is using “health insurance reform” more and more regularly, and AHIP responded with a report to say, “It’s not us! It’s these damn out-of-network providers.” To illustrate, they show the worst of the worst. A Louisiana doctor charging $17,500 for a hip-replacement where Medicare would only reimburse about $1,500, for example. The report is filled with shocking examples, and I suppose we’re supposed to be saying, “Thank God for these insurance companies who heroically negotiate down greedy doctors from charging whatever the market can withstand!”
Except there are two problems with this little bit of misdirection. For one thing, there’s no statistical significance to any of the examples AHIP cites – they seem to be the very definition of outliers, since, as Igor Volsky points out, 90% of health care claims are in-network. Sure, we need to find a way to control Dr. Ebenezer Scrooge, but this argument that somehow 10% of claims is a leading factor to insurance premiums increasing by 87% in 7 years is absurd. For another, AHIP must think we have short-term memories. We know that insurance companies only reimburse for “usual and customary” rates – they’re not paying for the excesses of Dr. Scrooge’s $17,500 fee, the patient is. How do we know this? Because the Ingenix system used by most insurers across the country was revealed under an investigation by NY Attorney General Andrew Cuomo to be under-reimbursing its doctors and patients by 10-28% of what it should have been paying for usual and customary fees for that region.
Way to bring up a sore subject, AHIP!
Dare I ask how long we have to wait for the inevitable AHIP report detailing that it's actually the fault of patients that premiums have gone up so much?
(Photo credit: guimby on Flickr.)
Living with Cancer, Dying with Insurance
Published August 10, 2009 @ 03:39PM PT
A very long month ago, I woke up in my sunny Brooklyn apartment with this thought: I am going to die.
The next thought was no less comforting: I am dying.
I am turning thirty in a few days, but I have had cancer for ten years. I went for my regular test at Sloan-Kettering a month ago, and I thought to myself over and over before submitting to the general anesthesia, "All I want for my thirtieth birthday is a clean scan. Good news, good news, good new--" and that's where I stop remembering. When I came to, four hours later, some part of my brain was still repeating "Good news good news good news." But I was wrong.
I found out that I have to start chemotherapy again. I remember 2001, having a biopsy of a large tumor in my hip joint on my birthday. I remember singing a dirge-like "Happy Birthday" under my breath to myself, alone with the doctors, shaking uncontrollably from the medication coursing through my veins in that freezing cold operating room.
But it was not having cancer for a decade, not finding out I had more cancer after already dealing with cancer every day, that made me think I was dying.
It was wondering how to pay Oxford.
A month ago, I did not know what would happen if I lost my medical insurance. Maintaining it seemed so necessary, it had such a stranglehold on my life, that it was and is all that I think about. My coverage was running out fast. Without it, and with my bank account already drained from a year and a half of COBRA payments, I thought the only possible resolution to my situation was that I would slip through the cracks, and I would die. Now, I was looking at an individual insurance policy on the open market and finding it would cost $2600.00 a month. Now, I was talking to a social worker who told me I would have to move into a shelter to qualify for Medicaid.
And now, I was talking to a woman in Arkansas on the phone, whom I called as part of a phone bank to urge her to call her senator, Blanche Lincoln, and ask her to support a public option. Now I listened as she told me that she "did not believe in anything Obama stood for" and that the answer to my predicament was not the government insuring its citizens, treating health care as a UNIVERSAL HUMAN RIGHT, but instead that God would help me.
I don't exactly know why I can live and thrive with cancer, but am reduced to such unadulterated fear when it comes to maintaining my insurance coverage. Having cancer? I've been brave and strong and fierce. Losing the only way to maintain my fleeting health? I can't face it. I'm reading this blog, reading about people who have died because they do not have insurance, who have died trying. Will I be one of them?
(Photo credit: Paulo Romalho on Flickr.)
The Best Health Care Reform UnitedHealth Could Buy
Published August 09, 2009 @ 06:16PM PT
I’ve just read something that closely mirrors the health care reformer’s worst nightmare – that the current attempt at reform has been so intent on getting special interests to play nicely that it’s conceded too much. That health insurance companies, they of the business practices that at some point decades ago turned from social insurance to big-profit HMOs, have used their money, their power, and their “under the radar” assets to tailor a reform bill that will allow them to actually make more money than before. It reads so much like what single-payer advocates have been warning for years, that some might chalk it up to a leftist conspiracy.
There’s just one problem. It’s the cover story of Business Week.
The title of the article proclaims it all – “The Health Insurers Have Already Won.” And reading the article, a lot of the odd hiccups in progress on health care legislation suddenly make a lot of sense. For one thing, we marveled that the Blue Dogs, with their self-professed emphasis on fiscal responsibility, had actually sought to weaken the employer mandate (by making it apply to fewer businesses) and block the public health insurance option (despite the CBO saying it would cost more to do health reform without it). According to Business Week, this is the cornerstone of the game-plan carried out by lobbyists for United Health and other large insurers: “Impressing fiscally conservative Democrats like Matheson, a leader of the House of Representatives' Blue Dog Coalition, is at the heart of UnitedHealth's strategy. It boils down to ensuring that whatever overhaul Congress passes this year will help rather than hurt huge insurance companies.”
Many have wondered why the impressive “benefits as good as a member of Congress” – a pledge that goes back to at least John Kerry, and repeatedly vouched for by Obama, Clinton, Edwards and others – have turned into a standard benefits that’s more or less dictated by what private insurance is already offering. Business Week has the answer for that, too: “[UnitedHealth] has also achieved a secondary aim of constraining the new benefits that will become available to tens of millions of people who are currently uninsured. That will make the new customers more lucrative to the industry.”
Many mistakenly believe the Congressional Budget Office predicted over 80 million in employer based insurance would jump ship and sign up for the public health insurance option. Actually, the Congressional Budget Office predicted a net increase of 3 million people would be on employer based insurance, and a measly 10-15 million would sign up for the public health insurance option – most of them currently uninsured. Where did the far scarier number come from? The Lewin Group – causing Business Week to note: “Left out of these testimonials or buried in the fine print is that a UnitedHealth unit owns the Lewin Group and thus is ultimately responsible for Sheils' paycheck.”
Not mentioned in the article is that UnitedHealth has not been entirely successful. Courting the Blue Dogs has been a good idea, but they achieved few of the objectives the insurer was looking for except, perhaps, the decoupling of the public health insurance option from Medicare rates. The Senate HELP Committee bill also doesn’t look like it’s paid off for the insurer, other than the fact that any reform is likely to give them new customers subsidized by the government. Left unmentioned are the more stringent regulations on private insurance contained in both bills – although it’s not clear they even seriously tried to stop those.
But Max Baucus’ coalition of the willing is a different story. The details coming out of those closed door meetings has been maddening. Much weaker regulations on private insurance? Check. No public option but instead a weak system of co-ops that could easily get swallowed by UnitedHealth and others? Check. Weak benefits or curtailed subsidies? Check. Cutting subsidies to individuals and cost-sharing relief to keep under an arbitrary $1 trillion price tag? Check. In fact, Business Week helps show exactly how weak Baucus et al are making reform:
This is good news for UnitedHealth, which benefits when patients pick up more of the tab. In late spring, the Finance Committee was assuming a 76% reimbursement rate on average, meaning consumers would be responsible for paying the remaining 24% of their medical bills, in addition to their insurance premiums. Stevens and his UnitedHealth colleagues urged a more industry-friendly ratio. Subsequently the committee reduced the reimbursement figure to 65%, suggesting a 35% contribution by consumers—more in line with what the big insurer wants. The final figures are still being debated.
Some hold out hope that the Baucus plan will be the most bipartisan and, if so, the best for the country. But if this somewhat congratulatory article from Business Week is to be believed, the real winner in Baucus’ version of the bill will be UnitedHealth.
The question is – what are we going to do about it?
(Photo credit: MacRonin47 on Flickr.)
