Is It in My Head?

Sign the petition to Congress: We won't go back!

act.credoaction.com

We need to expand health care for Americans, not roll back hard won reforms. Get your hands off the Affordable Care Act, and give us an up-or-down vote on expanding Medicare to all Americans.

There are also deductibles -- the amount you pay up front, before your coverage fully kicks in.

And there are co-pays -- the $20 or $30 payments you have each time you see the doctor -- provided, of course, the one you need is in your network. Many of the policies could have fairly limited networks of providers and hospitals.

...prohibits health care service plans and health insurers from implementing a rate for a new product or instituting a rate change unless it submits an application to the Department of Managed Health Care (DMHC) or the Department of Insurance and the application is approved. The Director of DMHC and the Insurance Commissioner would have the authority approve, deny, or modify any proposed rate or rate change.

... imagine a system in which all payments are negotiated, as with a single payer system. Hospitals negotiate an annual global budget. That budget includes their costs of services, such as coronary bypass surgeries, without the need to itemize each single item for the services, nor the need to bundle payments in some sort of pretense that global costs are reduced. The hospital already has incentives to improve efficiencies to stay within budget.

Likewise, physicians collectively negotiate their payments, whether fee-for-service, capitation, or salary, as appropriate to their clinical circumstances. Payments are adequate to ensure a very comfortable net income.

Other nations have proven that negotiated, administered payment is effective in obtaining greater value for health care spending. We’ve now proven that intrusion of market-model games players such as outside disease managers, or pay-for-performance administrators, have failed to improve value. So we should go with a system that really does work – a single payer national health program.

Now the insurers want to do their own “distributed model” of risk adjustment, preventing federal or state bureaucrats from looking over their shoulders as they do their dirty deeds. This applies not only to Medicare Advantage plans but to all plans in and out of the exchanges, except for grandfathered plans. They claim that this secrecy is necessary to maintain patient privacy and to protect the insurers’ proprietary data, but risk adjustment of the Medicare Advantage program has demonstrated that these are not valid concerns.

Risk adjustment does not work, as the insurers will always game the system. The insurers’ solution is to allow them to do it in greater secrecy, with a “trust us” attitude that certainly has not been earned based on their previous behavior.

Limiting overhead to 15%-20% is far from the stringent regulation that Ungar implies. Private insurers’ overhead currently averages about 14% nationwide, and they will probably be able to reclassify some items currently classified as overhead into the patient care expense category (despite regulations that attempt to stop this). Moreover, some current sales expenses will be offloaded to the insurance exchanges, which are likely to have overhead of 3-4%, and the exchanges’ expenses will not count as part of insurers’ overhead. Finally, ACOs will take over many of insurers’ administrative tasks and expenses, but these ACO overhead expenditures will not count toward the 15%-20% overhead limit. In sum, total insurance overhead (and profit) is likely to grow, not fall in the years ahead.

What do all of these have in common? They are all methods of perpetuating the private insurance industry, while shifting risks from the insurers to the insured individuals. They reduce the financial commitment of employers and the government, but increase the financial burden for workers, their families, and retirees – most of us. However, it is a jobs program – for personal bankruptcy attorneys, as if our health care system didn’t give them enough work already.

Defined contribution is a nefarious conspiracy directed at the masses to benefit the well off. We can counter by demanding an end to a system dominated by private insurers and replacing it with a single, publicly-financed and publicly-administered national health program – an improved Medicare for everyone.

(After we fix Medicare, we may want to think about greatly reinforcing our publicly-financed, publicly-administered, defined benefit Social Security program so we wouldn’t have to put up with the abuses of our private, defined contribution pension plans. Really.)

So the intent is to improve quality and the cost effectiveness of health care by encouraging integration of the health care providers, as through accountable care organizations, yet we will be seeing higher costs and higher profits as a result. That inevitably means that premiums for the private health plans will be higher – a problem that the Affordable Care Act was supposed to address.

What is the link that causes this unintended perversity? It is the insistence of our policymakers that the private insurers be included as the financial intermediaries. Plenty of studies have now shown that the private insurers do not have negotiating clout in markets with provider consolidation. So why should we continue to include them, especially when they waste so much in imposing a huge administration burden, while taking away patients’ choices of health care providers?

Nevertheless, the OECD still reports that public health and administrative costs in the United States are more than two-and-a-half times the OECD average.

Also, the OECD estimates of public spending for health care in the United States leave out two important categories. The tax deductibility of employer-sponsored plans amounts to a subsidy of taxpayer funds, plus taxpayers also pay for the employer component of health insurance premiums for employees of federal, state and local government agencies. Although the OECD reports the percent of government spending on health care in the United States as being one of the lowest, on a per capita basis our public spending on health care is actually higher than the public and private spending combined in almost all other nations.

The fundamental defect here is that we keep trying to match payment for a specified package of medical benefits to the incomes of specific individuals. Since a reasonable package is no longer affordable by median-income individuals, some form of subsidization is required for the majority of us. Yet recognized experts in the policy community have very different concepts as to how much and in what form the subsidies should be.

Averaging these wide ranges of opinions on how much each person should pay is not a satisfactory solution since the averages or medians place too much of the burden of health care costs on those with modest incomes. These averages also would not satisfy those dispassionate experts who believe that individuals should pay dearly for their health insurance and health care, so they won’t waste their money on things like flat-screen TVs (or really, “wasting” it on healthier foods, transportation to their employment, 401k plans, and so forth).

Financing health care and providing health benefits need to be totally separated. The correlation between ability to pay and medical need is negative, not positive. Payments based on ability to pay should be made into a common risk pool covering everyone, most easily accomplished through the tax system. Health care benefits should be provided to everyone out of that risk pool based on medical need. That is sort of the way Medicare works now for selected populations, but it could be improved.

The problem is in the way we finance health care. We continue to perpetuate a system in which we grant the power to control health care dollars to private financial intermediaries that must consider their own interests first. Health care providers are then placed in a position that a decision must be made on whether or not to participate in the proposed contract with the intermediary.

Contrast that with a single payer system in which the government sets payment rates based on legitimate costs of providing health care. The government pays enough to maintain the operations of the providers, along with separate disbursements for appropriate capital improvements. The providers are not faced with a decision on whether or not to accept the government contract. The only decision they might consider would be whether or not they would want to shut down operations. The government single payer would not allow that to happen merely because of an actual shortage of funds for necessary expenses, as long as essential services were being provided.

WellPoint’s Anthem Blue Cross has found yet another way to shift insurance risk from itself to its beneficiaries. Individuals who purchased or renewed their health plans did so while assuming in good faith that their costs and risk exposure would be set for another year. No. Anthem Blue Cross included in the fine print the condition that these were only one month renewals, allowing them to change the terms of the insurance contract repeatedly throughout the year.

“Bait and switch” is a despicable business practice, and the nation’s largest insurer, WellPoint, is not above it. At the current rate of insurer consolidation, WellPoint’s plans will likely be amongst only a few choices, if that, in the state health insurance exchanges to be established under the Affordable Care Act. And surely the other insurers will adopt the same despicable practices in order to remain competitive.