Exposing One Public Servant's Bias

Yesterday I attended the WMC Business Day in Madison. The afternoon session included a panel discussion on health care which was recorded (about 65 minutes). It will be archived on Wisconsin Eye in a few days. John Torinus talked about how he is controlling health care costs at his company and how those same principals can be applied to other businesses and the public sector. It was a compelling presentation; one everyone should watch.

Also on the panel was the Secretary of the Department of Health Services, Karen Timberlake. She talked about steps the state is taking to control costs. Again, I hope you will seek out this presentation and listen to her remarks as there are some very positive steps being taken. Regrettably, she had a few comments on health insurers that showed her great bias against 'my' industry.

A power point slide focused on how in 2009 health insurers profits increased by 56% while over the same period they were "dropping" 2 million people. I don't have access to the industry wide P & L results for 2008 and 2009 but I happen to know 2008 was a terrible year for health insurers. In addition to the usual underwriting losses, their investment portfolios (like everyone's) were hammered by the stock market crash. (Investment returns often offset unexpected claims.) So if insurers collectively had earnings in 2008 of about 1.8% of revenues but in 2009 earnings recovered to about 2.8% (these are estimates but pretty darn close, I'd wager), that would be a 56% increase. By reporting only the % increase, it sounds pretty bad doesn't it? (Now I ask you, what business owner in his/her right mind would be content with earnings of only 3% of revenues?)

As for "dropping" 2 million members, do you suppose the economy had something to do with that? H-m-m-m, haven't I been reading something about unemployment over recent months and don't the majority of Americans get their health insurance through their employer?

At least in this case, Secretary Timberlake - like so many politicians on both sides of the aisle - seems to be distorting the facts to her end; i.e., if you portray health insurers as scheming to drop 2 million (just the sick, of course) customers to pad profits, does a gullible public conclude government might do better?

Well, we're not as gullible as 'they' think. And by distorting the truth so badly, 'their' overall credibility is even lower than the insurers they vilify.

And while I'm thinking of insurers, I'm sure you're hearing a lot from the same political class about recent premium increases. While I'm hardly a lackey for those insurers I represent - and clearly some of their increases seem unnecessarily high - regulators have a lot to do with premiums. Insurers are required to remain solvent. If we applied the same rules to Medicare, the tax increases would make premium hikes seem small! My suggestion is that Medicare's 'Board of Directors' (that would be Congress) get their own house in order before they presume to second guess insurers!

Et tu, WSJ ?!

The airwaves are full of ads from doctors, dentists and other health care providers encouraging you to spend "unused" dollars before the end of the year. Even my own dentist, in advance of a routine appointment last month, sent me a personalized letter informing me I had used only a fraction of my Dental Plan's annual limit, so wouldn't I like more dental care before year end? (Oh please, let's go for a crown!)

I don't blame providers for trying to drum up business and perhaps there is some logic to spending unused flex dollars that can not be rolled over from year to year. Just because you've satisfied your health plan deductible or other out of pocket limits, let's not kid ourselves - as the ads would have us believe - that there is no cost to additional spending.

The WSJ Editorial Board has been a great champion of restoring "consumerism" to health care markets. They have long advocated that individuals should have some "skin in the game" so as to make more prudent spending decisions. Thus it was particularly galling to read an advice column authored by Anna Wilde Mathews in a recent Wall Street Journal 'Sunday' feature, in which she suggested to readers that at this time of year they need to "check that you aren't missing out on free stuff"!!!

Let me make this crystal clear: whether paid for by your insurance plan or the government, health expenses are NOT "free"! Premiums (or taxes) paid - whether all or in part by an employer - proportionately reduce employee spendable income. And claims paid - even those at year end after our deductibles have been satisfied - add to overall utilization which causes even higher premiums (or taxes).

This lesson reminds me of the P. J. O'Rourke quip: "If you think health care is expensive now, wait until you see what it costs when it's free."

JUST WHAT ARE 'GLOBAL REIMBURSEMENTS'?

I wrote an Op-Ed piece for the Journal Sentinel this week and sent friends/clients a sneak preview. In it I discussed a fundamental re-make of the payment models for health care. I opined we should stop paying a discounted fee for every service and instead develop "global pricing" for "episodes of care". A little more explanation would have helped sell this vision.

The way we pay for care now, docs are actually rewarded for non-compliant patients. The diabetic who fails to take his meds for example, sees his health spiral out of control. Problems develop with vision (in the extreme resulting in blindness), circulation (amputation!), heart failure, etc etc. all requiring more treatment and more income for the doc. The patient that takes his meds, changes his diet and controls his disease obviously doesn't need to see the doc nearly as often. So the doc has the less income but the same overhead. He loses money delivering better outcomes. Isn't that just wrong?

Why not develop a fixed price for each diabetic patient. What will it cost on average to treat them? $2,500 a year? $15,000 a year? I don't know what would be a fair number but whatever it is, that becomes the "global" reimbursement for the diabetic's entire "episode of care". Doesn't this change all the incentives?

Here's another example. You have a strained back. Under the current system you might seek out a physical therapist who recommends twice weekly visits. This goes on and on and on . . . . . and on. Every visit, another payment. What other market gives the seller of services so much control over the buyer? Do you have the knowledge to question whether or not you really need 35 treatments! Heck, if the insurance company is paying the bill, what do you care. Well, if the diagnosis is a strained back, why not just set a fixed fee for treatment. If the PT can get you back to normal in three or four visits, he makes out nicely. If it takes 15 visits, not so well.

Now, couple this change in payment methodology with complete transparency. PT 'A' is charging $1000 for every strained back so PT 'B' figures out a way to charge $850 and with better outcomes. Do you see where this could go?

This isn't nearly as controversial as you might think. Many health systems have pretty much moved to this model already. When payers (government and insurers) better align the incentives, we will see enormous savings. Waste, fraud and abuse are estimated by some to be as high as 50% of our total health care spend. How many more people could be insured if premiums were 40 - 50% lower?!

The question is, when so many agree on the need for this change, why is it taking so long?

This Just In From the Congressional Budget Office

Blogs by definition are supposed to be short. Indeed, this one will be very short.

If you have any interest in health care reform and what will or will not work, you must read the just released Congressional Budget Office document entitled 'Health Care Reform and the Federal Budget'.

It may take you 30 minutes or more to carefully read and understand this 16 page tome. If however you are overwhelmed by the politics of health care reform and confused by the disparate points of view, would a 30 minute investment of time be worth it to get to a modicum of reality?

I beg you to read this CBO paper. Please! Then ask your friends to read it. I dare you to ask your local and state legislators if they have read it. Transformational health care public policy should be based on unfiltered unbiased information. Get informed now. Then get involved.

Thank you.

Prerare To Be Surprised

General perceptions often are that health insurers profit only at the expense of their policyholders vis a vis denied claims. This week industry trades reported second quarter results for managed care companies. As a percentage of revenues, earnings for three of the larger managed care companies were as follows:
* Humana 2.0%
* United Health 3.3%
* Wellpoint (Blue Cross) 4.3%

For your consideration: Are those 'excessive' earnings? As a business owner, would you be content with that ROI? More fundamentally, do you believe the profit motive creates incentives to run a health insurance company efficiently; ie. to compete on price and value? There are many who believe government would actually be more efficient than the private sector. Should one become dissatisfied with the financials of their insurer - say for example the executive compensation packages are unacceptable to you as a consumer - isn't it relatively easy to change companies? But what if, after switching to a government run health plan, we become dissatisfied with the inefficiencies of bureaucratic malaise. How do we change plans then?

As a final thought, I'd ask you to compare the above earnings of those who finance health care to the health systems who deliver care. I'm fairly certain you will be surprised.

An Epidemic That Costs Us Billions of Health Care Dollars

Tongues are wagging in the wake of the FEMA flood relief handouts in Milwaukee this week; it has been suggested that the overwhelming turn out for free food vouchers has implications for a Single Payer Health System as in the P.J. O'Rourke quip: "If you think health care is expensive now, wait until you see what it costs when it's free!"

So the blocks of long lines of folks who suddenly had flooded basements in Milwaukee shocks you? Liars. Thieves. Thugs. Buffoons. Mostly inner city folks of color so it must be a racial thing, right? I'm not so sure.

Let me call attention to health insurers who routinely miscode claims thus underpaying policyholders; small (and sometimes not so small) annoying 'errors' that could be remedied through a call to customer service if that didn't require three hour waits on hold. Or, how about doctors and health systems that routinely fraudulently over bill or charge for services never rendered. Or how about insureds who overstate or misstate health conditions so that they may then be covered by their policies. Come on, we've all done that, haven't we?

If all these other dishonest folks were also conspicuously lined up on a sidewalk to collect their unjust rewards, the multiracial lines would be miles not blocks long. Fraud and abuse in health care is no less epidemic than the decline of basic morality throughout our society. It costs us by some estimates 40% or more of every health care dollar. I could not suggest a remedy.