Do Retailers Woes Foreshadow Health System Closings?

There was an interesting article at Forbes.com this morning speculating about which giant retailers might follow Circuit City or Linens & Things into bankruptcy or at least dramatically reduce the number of locations. The big names mentioned certainly gave me pause. The article described this contraction as the "inevitable counter punch to the days of fighting hand over fist for market share during an era of loose credit and minuscule interest rates".

When reading that line I couldn't help wonder if the same dynamic is responsible for our local health systems sudden cessation of expansion projects. Did retailers lust for market share also drive health systems to needlessly expand beyond our capacity to sustain them?

Many have argued that building new hospitals drives up health care costs. For them it must logically follow, that as one or more health systems fail, costs will come down. Something tells me it won't be that simple!

Insurers Really Ought To Stop "Cherry Picking" Applicants!

Here's an actual email I got from a business friend the other day:

"Jon, I never had dental insurance and am looking into family coverage. My spouse needs a $3000 procedure. Any thoughts on whether I should get it and any suggestions on policies?" signed, Mary. (Not the real name but every other word is exactly as I received it.

Here is how I wanted to reply:

"Mary, as a friend and an experienced financial advisor, I would expect you to have a little better grasp of the concept of insurance. You see, buying dental insurance for your 55 year old spouse with a newly diagnosed dental problem is sort of like calling State Farm for homeowner's insurance after the garage is on fire! Now I can only assume you weighed the pros and cons of "never" buying dental insurance over the years. Would you care to guess at the premiums you have saved over that time. Here's just a ballpark figure: family dental at $50/month (a very low number at today's rates) over 30 years = $18000. I would have thought at least some of that money - surely $3000 - might be in your HSA, right?

"Here is what I think you should do. Call someone in Madison or Washington and complain about your inability to get dental coverage because those greedy for-profit insurers "cherry pick" applicants. Demand that government should finance your coverage because it is after all a right. And then when the government responds by putting out of business the agents and insurance company executives who have brought consulting work to you these past 30 years, you - like us - can find a new line of work. See you in the unemployment line."

Of course, I'm reluctant to actually send this reply to my friend. (I'll just post it for everyone to see!!) It does illustrate a related point. High deductible health insurance on a young healthy person can be purchased for less than the cost of monthly cell phone service. Yet millions of young Americans badly prioritize and chose to be uninsured. Later on in life when their health goes south, they consider insurers that underwrite risk to be unfair.

That's a crock!

A Health Care Tidbit from the Czech Republic

Visiting his home in Milwaukee, U. S. Ambassador to the Czech Republic Rick Graber spoke at my Rotary Club this noon. He talked about his experiences in nearly two years of service in Central Europe. Jumping around to touch on several topics, of course my antennae were most sensitive to his brief remarks about health care in this country of about 10 million residents.

To paraphrase what I think I heard: health care in the Czech Republic is 'free'. It is interesting however that they - like the U.S. and most countries - are struggling to deal with rapidly rising costs. Up until recently, there had been no cost for receiving care and so, the average Czech sees his/her doctor 16 times per year. "There's no charge, so why not; it's like a social event", Ambassador Graber reported. Faced with such (over) utilization, they are now trying small co-pays; a koruna per office visit. FYI: the currency of the Czech Republic is the koruna which converts at about 15.1 korunas to the dollar. It would surprise the heck out of me if a 6 1/2 cent co-pay had any impact on costs and yet the Ambassador reported the citizens are in an uproar over the new charges!

Interesting, isn't it? I've referenced a P.J. O'Rourke quote before but it bears repeating here: "If you think health care is expensive now, wait until you see what it costs when it's free!"

I Stand Corrected

In my blog post of June 24th - picked up today by the 'biz times' daily enews blast (Small Business Times) - I wrote about how the high cost of health care could exceed insurance policy lifetime limits. And I mentioned two "drug therapies that can cost up to $24,000 per month". One of the drugs I referenced - Zevalin - is not administered monthly but only one time for certain cancers. Given the efficacy of the drug, the one time cost of approx $24,000 is - to quote the famous commercial - "priceless".

My apologies to Seattle based Cell Therapeutics, Inc. - makers of Zevalin -for this error.

Pondering the "Problem" of America's 301 Million Under Insured

Senator Ted Kennedy's cancer diagnosis resonates with me because it is the same malignant 'glioma' that ended my father's life in 1970 at age 49. Yes, just 49! As I 'celebrate' today one of those milestone birthday's that puts even more years between my own age and Dad's early death, I find myself in a particularly pensive mood.

To wit, it is interesting to recall that Dad's major medical policy had a $250 deductible and a lifetime limit of just $50,000. Remarkably, a team of neurosurgeons and a 110 day hospital stay did not exhaust that modest policy limit!

Roll the clock forward 38 years and now you are hearing many lament the "cost shift" burden of high deductibles and even modest co-pays. (See my blog of June 4th.) Some speak of the growing underinsured problem - never mind the fact that a $250 deductible from 1970 inflated using regular CPI should today be around $1500; using medical CPI well over $3000.

In truth, the underinsured problem is not with front end deductibles and co-pays but instead the back end insurance policy limits of between $ 2 million and $ 5 million. In this vein, Regina Herzlinger (again) speaks of cancer drug therapies alone (e.g. Erbitux or Zevalin to name just two) that can cost $24,000 a month! With evolving ever more expensive treatments, the real debate on health care may need to focus on how much is a life worth? And, should an HMO or government bureaucrat make that call? We might also ponder this: with identical cancers, should 'Joe Lunchbucket' get any less care than Senator Kennedy?

These are tough questions that do not allow for sound bite answers. My birthday wish is that more folks who really care would step forward and publicly address the gravity of the matter.

Revisiting My Mantra: "Co-Pays Suck - Get Rid of Them"

Yes, I did utter those words at an MMAC Forum several months ago. Pretty eloquent, huh?! In the context of discussing how "qualified" High Deductible Health Plans (HDHP's) combined with HSA's drive behavior change - thus reducing health utilization - the idea is (just) one key component of the Consumer Driven movement.

At a May 15th Healthcare Conference in Chicago sponsored by the Illinois Chamber of Commerce, I heard an intriguing presentation describing the importance of "Value Based Insurance Design" (drum roll please for just what the insurance business needs, another acronym: VBID). The issue is, do High Deductible Health Plans (or even modest Co-Pays) create financial barriers that cause people with chronic conditions to be non-compliant with drug and other therapies thereby increasing, instead of lowering, cost?

There will be much debate about this and having implemented many HDHP's, I know well the issues. Will the considerable premium savings of the HDHP be banked in an HSA or spent on the rent or higher gas prices? If banked, there are no "barriers" for health compliance. In fact, there are rewards; ie., we can spend enormous additional premium sums (or taxes) so that insurers (or Big Brother) can manage our care; or we can manage our own care and keep the savings!

I still think "Co-Pays Suck".