By Evan Falchuk
Did you know there actually is a “public option” in the health care reform law? It’s true – it’s called the Pre-Existing Condition Insurance Plan, and it’s designed to cover people who who have been unable to get insurance because of a pre-existing condition. To hear the stories about how big of a problem this is in America, you’d think a product like this would be a big hit.
Except, it’s been a big flop.
By Evan Falchuk
You want to see a doctor?
You’re going to have to wait. And I don’t mean like an hour in the office.
I mean like 53 days.
By Evan Falchuk
At the beginning of the school year in my hometown, teachers ask parents to donate supplies for the classroom. They’re often very basic necessities like markers and folders and things. The school can’t afford them, so teachers ask for help so they don’t have to pay for them out of their own pockets.
If you’re thinking I live in a distressed area, you’re wrong. I live in a wealthy suburb in one of the wealthiest, highest-taxed states in the country. Even here, public school teachers aren’t paid enough, and don’t have enough resources. How is this possible?
By Evan Falchuk
Giving people “incentives” to spend their money wisely is a growing part of the solution to rising health care costs. Give people financial responsibility for their health care decisions, the thinking goes, and they’ll make cost-effective choices.
It’s usually done by having people pay part of the cost of their employer-provided health coverage, and through things like higher deductibles and co-pays. Today, on average, people in the private sector pay 20% or more of the cost of their coverage. The trend is for this number to go up.
But it’s not true everywhere.
If you look in the public sector you see a different, more troubling story. It’s a lesson in what can happen when incentives go wrong in health care. (more…)
By Evan Falchuk
Today the Commonwealth Fund came out with a chart that it says is a “grim reminder” of what happens when health care doesn’t get reformed.
If only we had listened to Richard Nixon or Jimmy Carter. We would have saved tens of trillions of dollars in health care spending.
Click to enlarge
By Evan Falchuk
Massachusetts Governor Deval Patrick announced this week he has had enough of rising health care costs.
So he is proposing a novel solution: make them illegal.
By Evan Falchuk
A friend sent me this interesting graph from the blog of the National Geographic.
You’ll have to click on it to see a bigger version. It captures a lot of data very elegantly on a single graph– Professor Tufte would love it.
What it shows is health care spending per person across a group of countries, along with life expectancies, average number of doctor visits per year, and whether a country has a system of universal health coverage. Although putting all of this data on one graph is novel, the graph makes what by now is one of the oldest political arguments for reform – for all the money they United States spends on health care we don’t get a good deal.
So why blog about this graph?
By Evan Falchuk
Is the health care bill the Senate passed a good thing or a bad thing?
It depends on who you ask. Which ought to be your first clue that it is really an exercise in politics.
I’ve been warning for months that the rushed process and soaring rhetoric veiled the reality of what was happening. And that is this: no one really can describe what health care reform is about.
There are a lot of reasons for this, but the biggest one is that very few people on either side seem to understand the health care “system.” In fact, calling it a “system” is part of the problem. So let me try to help.
Our health care “system” like one of those pictures from an I Spy book. Here’s one.
The US health care system
What do you see? There are some coherent things about it. First, someone put all of those pieces there. They seem to be set up haphazardly, but they’re actually set up in a way that’s convenient for the publisher of the book. They also have a general Christmas theme to them.
But that’s about it.
Now, say someone wanted to “reform” this picture. How would you do it? You could put everything in some kind of order. But what order? Red things on the left, yellow in the middle, blue on the right? Or the other way around? Or why not order it by size or shape or type of object? Why not reform it to make it easier to find the items on that list at the bottom – clear out everything else and just leave behind the thimble, four birds of red, two fuzzy chickens and a gold-trimmed sled? That would be simple, but it wouldn’t make the game very good.
You could forgive someone who wanted to reform this picture from doing what a lot of people looking at these pictures do – give up and go to sleep.
But would-be health care reformers are cleverer than that. They decided to change the problem. Instead of trying to reform the messy health care system, they said let’s reform the health insurance system. A picture of that looks like a map of the United States. Now this is a system that can be reformed.
At the federal level it’s a blank slate, so anything you do counts as reform. And, since we’re in a hurry, you can take a short-cut and just put in place federally something like what the states have been doing for decades. Presto! Reform.
I poke fun, but what’s so bad about a federalized version of state insurance regulation?
The problem is this: the way states regulate insurance is one of the major reasons why health insurance is so expensive. Heavily laden with thousands of rules dictating what they have to cover, how much they can charge, who they must accept as insureds, only a few insurers are able to compete. A cynic might say the rules have become rigged in favor of these few companies. A kinder person might say that these are the unintended consequences of good intentions. But whatever the reason the result is the same: a very small number of companies dominate the markets of every state. Where competition is low, prices are high.
This is the great irony of reform. The things that have made health insurance so expensive in the states are the very things reformers want to use federally to make it more affordable.
So what do political advocates think about all of this?
Progressives don’t like it because they think it benefits the insurance companies, and they’re probably right. Conservatives say, no, the insurance companies are getting taken over by the federal government. They’re probably wrong. In fact, it’s the machinery of regulation that’s getting taken over by federal government. And that, should this bill become law, is a bigger deal than most people realize.
By Evan Falchuk
The Healthcare Economist points to a study from late last year about the impact of state insurance regulation on the price of health insurance policies. It’s a subject I’ve blogged about many times before (like here, and here and here and here).
The study tried to quantify the impact of the types of mandates used by states in their insurance markets: guarantee issue, community rating, mandated benefits, and so-called “any willing provider” rules.
It found that all of these increased the price of health insurance, but there were limitations in the study. They had a “rich data set based on actual insurance contracts” only for guarantee issue and community rating mandates on individual policies. Still, this is a big segment of the market – perhaps 30 million people buy insurance in this way – and the data are revealing.
But first, what do these terms mean?
“Guarantee issue” means that an insurance company can’t deny you coverage because of a pre-existing condition. So if you are sick you can buy a policy and the company has to accept you. “Community rating” means that an insurer can’t charge you more because you are sick, or because of your age or gender. Different states put different spins on these concepts, or don’t have them at all. They typically exist together as part of one regulatory scheme. They are both part of reform bills in Congress.
According to the study, community rating increased individual premiums by as much as 17%, and family premiums by as much as 33%. Guarantee issue increased premiums by well over 100% for individuals, and by as much as 191% for families.
Why does this happen?
If the law says insurers have to treat every person the same, without taking into account whether they’re sick or healthy, young or old, a rational insurer will do some rational things. For example, it will assume disproportionate numbers of people who buy a policy from them will be sick and old.
Of course, when they do this, the product becomes expensive, and young, healthy people start to wonder if they should even buy it in the first place. After all, they don’t really need insurance, right? They’re young and healthy and can wait to buy insurance when they get sick. So, the insurers’ assumptions on the age and health of their portfolios come true, or are worse than expected. Coupled with the overall rise in the cost of health care, insurers now push through new rounds of price increases, which, in turn, create more uninsured people. It is a very nasty cycle.
Which brings us to reform, circa 2009.
As Congress debates the politics of reform, there seems to be a lack of recognition of what makes health insurance so expensive in the first place. The great irony of reform is that lurking in the bills our representatives have written are precisely the kind of regulations that got us here in the first place.
By Evan Falchuk
Blue Cross Blue Shield of Massachusetts and Caritas Christi Health System are announcing a new agreement that some suggest may be a model for the rest of the country.
Under it, the non-profit insurer will stop paying the non-profit hospital on a fee-for-service basis for certain insureds:
Under the deal expected to be announced Friday, Caritas . . . will be paid to take care of about 60,000 Blue Cross members in its new program — whether or not they get sick. Caritas will use some of the payments for preventive services to help keep patients healthy. If Caritas can keep health-care costs under a certain budget, it can make a profit. But if health-care costs go over the agreed-on amount, Caritas is on the hook. . . . . Blue Cross is adding a carrot: If doctors and hospitals can meet certain quality targets, they can earn a bonus of as much as 10% on the value of the deal.
It sounds like a new approach to health costs. But it reveals more about how the same old ways of controlling health care costs continue to thrive.
Here’s what I mean.
The model of the last few decades has been this. Insurers and hospitals negotiate rates to pay for care. The bigger and more important the hospital, the more leverage it has over the insurer. The bigger and more important the insurer, the more leverage it can have back over the hospital. So in Massachusetts, like other states, hospitals have consolidated into a small number of big hospital “systems.” In turn, the health insurance business has become dominated by a small number of insurers, chief among them Blue Cross.
Simplified, here’s how these negotiations go. The insurer threatens that if it doesn’t get what it wants, it will change its plan designs to make it less likely that patients will seek care at the hospital. The hospital, says if it it doesn’t get what it wants, it will stop accepting the insurer’s customers. It’s a game of high-stakes chicken, but deals usually get made. They typically involve the hospitals agreeing to lower rates of pay for more routine care, and preserving higher rates of pay for more specialized care. It’s a set up that encourages big hospital systems to get bigger, so they can capture more patients, and more focused on highly specialized care. It also makes it far more likely that smaller insurers will end up paying more for the same care at the same hospital, as the hospitals try to offset lost revenue from them.
So what does this have to do with the new deal between Blue Cross and Caritas?
Well, less significant hospital systems like Caritas (which has very good doctors but has been notoriously troubled in recent years) have very little negotiating leverage with the big insurance companies. For them, the game isn’t so much getting a good rate of pay for their services as it is getting patients through the door. And so they need to figure out ways to get the insurer to encourage patients to go there. What better way to do it than to enter into a high-profile new contract with the biggest insurer in the state?
Now, take a look at the numbers. If I’m doing the math right, Caritas is going to get about $6,000 per insured per year. With state Medicaid payments running at about $5,500 per insured, these Blue Cross patients not particularly interesting, financially. Unless, that is, the program works as expected and Blue Cross ends up changing its plan design to encourage more people to go to Caritas for care, as opposed to the other major Massachusetts hospital systems. And you know Blue Cross would love to be able, one day, to use its deal with Caritas as part of its negotiations with those other systems.
“It’s a bet,” said Caritas Chief Executive Ralph de la Torre.
That, it is. But some new paradigm for health care? Not so much.
