Insurance

All the Way to the Bank

There has been a lot of discussion about excessive CMS payments to the privatized Medicare Advantage plans.  One area of special concern is the risk management adjustments that provide additional payments for the care of high risk patients. This leaves open a huge area for gaming the system by the insurance companies. Upcoding and adding new diagnoses (not those supplied by the attending physicians) seems to be on the increase. A recent article by Bob Herman in Modern Healthcare discusses this problem. Besides this chicanery of the insurance industry one of the most sordid aspects of the current debate is the overt buying of government by the same industry and the obvious bribery in the U.S. Senate. 53 Senators have sent a letter to CMS pressuring the agency to continue the overpayments. According to Open Secrets.org the two senators leading the pack have received more than $727,000 in campaign funds from the health insurance companies in the last 8 years; Mike Crapo $234,000, Charles Schumer $493,000. In the mind of Everyman this is unethical. But, then, we already know that our politicians are not answerable to Everyman.

Insurance Con Artists

Dr. James Binder recently wrote an article on one of the manipulations that health insurance companies use to circumvent the new insurance regulation that makes it illegal  to deny insurance coverage on the basis of pre-existing illness. So what do they do? They create multiple tiered drug benefits which generate high out of pocket expenses for people under treatment for serious illness such as cancer, rheumatoid arthritis and multiple sclerosis. This drives these patients away to find a different source of insurance, which means more expensive. The industry has found a way to discriminate on the basis of pre-existing illness.

It should be mentioned that the insurance companies have a similar ruse in developing narrow networks. This creates an automatic screening of patients with chronic illnesses. First, by excluding major referral centers (like Children’s Hospital in Seattle) they drive patients to other insurance or it forces them to pay large amounts out of pocket to continue to see their specialists who have been taking care of them. They also make their insurance policies unpalatable by excluding large percentages of all of the physicians practicing in the area. For those individuals who are basically healthy it does not present too big of a problem to choose a physician from the approved list. But for those patients who have multiple chronic illnesses and multiple specialists it becomes almost impossible to find all of their usual physicians on any one narrow plan. And, of course, the plans change providers every year. So, again, they look for more expensive broader networked plans, and they are back to the old problem of paying higher premiums because of pre-existing illnesses.

As Dr. Binder says, “It is well past the time to rid the health care system of these middlemen.” How? Improved, expanded (to everyone) Medicare. For more see…http://wp.me/p4MwV3-11

Vermont not SIngle Payer

Gov.Shumlin of Vermont has announced that he has given up trying to create a single payer medical system in Vermont. This is not surprising. There is no way that single states can obtain the authority to pool the present health care funding of our present system. This amounts to over 65% of today’s costs mostly paid by Federal programs, V.A., military, Medicare, Fed Employees and Fed share of Medicaid and ACA along with Fed prison expenses. Employers, many of whom are national or international, pick up most of the remainder of the bills. And single states do not have the power to control pharmaceutical prices and provider payments. As Don McCanne wrote of Gov.Shumlin, “He has shown us that it is imperative that we continue with our efforts toward a goal of enactment of federal single payer legislation.”. The only affordable way to do this and offer comprehensive coverage for everybody is on a national level

Don’t Fight the Health Insurance Companies

The recent poll by the AP concerning health insurance deductibles with private policies only confirms what we knew was going to happen.  People cannot afford health care even when they are insured. The trend for policies to have higher deductibles is just making the matter worse. Most of the policies being sold in the insurance exchanges are high deductible. Supposedly the consumer is at fault for picking premium price instead of level of coverage. The insurance companies are happy.

If the deductible prevents people from seeking medical care for illness and injuries or following treatment recommendations then those people are underinsured.  As Obamacare increases the number of insured by 10-15 million people it is increasing the number of underinsured by many millions more. This problem will get noticeably worse year-by-year as the people who are use to good health develop an increasing number of medical problems that require them to pay $3,000 to $6,000 even before their insurance kicks in. And, of course, if the problem lasts into the next year then the out of pocket deductible starts all over again. And, God forbid, what if two people in the family get sick. For comments by Dr. McCanne see http://www.pnhp.org/news/2014/october/private-health-plans-no-longer-assure-adequate-protection.

For my Blog: Insurance Exchanges: The Fast Food of Health Care

And  We Are All Underinsured

There is no use complaining and talking about which insurance policy to buy, etc. Don’t fight the health insurance companies. It’s only going to get worse. The solution is single payer medicine, Improved Medicare for All.

Health Insurance Profits

Sarah Kliff’s recent publication on VOX was nicely done and covered many of the ways in which our health care system is broken. I would add that the disappearance of primary care is another important factor and contributes to the high average cost per office visit and the incentives toward expensive specialist procedures.

One area of the presentation needs further discussion and that is health insurance company profits. Ms. Kliff uses the measure promoted by the American’s Health Insurance Plans (AHIP) under the term “net profit” which refers to dollars left over after all the rest has been spent (roughly 3%). But that doesn’t mean spent on health care. That includes the 15%-20% spent on administrative costs, paper shuffling, lobbying costs, advertising, and multi-million dollar executive compensation packages. A more appropriate metric would be the Return on Equity (ROE) which runs at 12.1% for Health Care Plans. Health insurance is a no-value-added industry. The companies do not take care of people, they do not provide medical care, they do not create or build anything. They are pass-through operations that take the money in (premiums), remove 15%-20% of it, and pass the rest on (trying hard to find ways not to pass it on). That’s the policy holders’ money that they are passing through. They are getting that 3% net profit on other people’s money; not their own money. That’s just free money for them. Their own money is their equity. And their return on that is 12.1%. As much as I admire Uwe Reinhardt I can’t really agree with him when he says, “The profits of insurance companies are truly a trivial part of national health spending.” With premiums totaling $738,889,000,000 I think they play a significant role in our spending. Of course, it is understood, that with government agencies paying for 60% of our health care in the U.S. this discussion is about the remaining 40% (less OOP).

 Health total premiums                                          http://www.naic.org/state_report_cards/report_card_us.pdf

If there is any doubt that the insurance companies are making plenty of money we need only to look at the compensation for their CEO’s (not to mention all of their CFO’s, CIO’s, and vice-presidents of…,etc.).  For example, in 2013 the CEO’s of the top 11 for-profit companies received a total of more than $125 million.

Health Insurance Info 2014_Table

And, of course, their stockholders are happy with 18% to 34% increases in the stock values in the last year.

We should all keep in mind that however we define “profits” in the health care insurance industry we are really talking about money gained from avoiding payment of medical bills.

The Pot…….The Kettle

Karen Ignagni, the President/CEO of AHIP in discussing the astronomic price of Gilead’s HepC drug, Sovaldi ($84,000 for a 12 week course at $1,000 a pill):

 “The reality is that the company in this case is asking for a blank check, and we can’t give anyone anymore a blank check in the health care system – whether it’s a pharmaceutical company, a hospital, a device manufacturer […] because it will blow up family budgets; it will blow up state Medicaid budgets; it will blow up employer benefit costs; and it will wreak havoc on the federal debt. So we now have to step back and say, is the hallmark of innovation higher pricing” (1)

Irony of Ironies.  Karen Ignani slapping down the Pharmaceutical Industry. The CEO of the medical insurance cartel with its $102.4 million spent on lobbying during the health care reform debate(2) is calling out the drug companies because they will “blow up family budgets”.  Forget the fact that the other industrialized nations provide full drug coverage in their universal health care systems. Forget the fact that the number of under-insured people with their new high deductible, narrow network policies can’t afford to get their medical needs cared for even though they are paying monthly premiums to the insurance companies(3).  Forget that the insurance companies siphon off 20-25% of the premium dollar for “overhead” which includes outlandish payouts to their CEO’s. Aetna’s CEO received $30.7 million in 2013 and the CEO’s of the top 11 non-profit insurance companies took home $125 million.(4) Forget that it is the insurance companies who deny care prescribed by their customers’ doctors.  Both of these rapacious, rent-seeking industries (insurance and pharmaceuticals) need to be reeled in because they are already wreaking havoc on the economy. Just another problem that could be solved by Medicare for All.

(1) The Atlantic Forum on the Future of Medicine

(2) Exclusive: AHIP Gave More Than $100 Million to Chamber’s Efforts to Derail Health Care Reform

(3) http://kff.org/private-insurance/report/medical-debt-among-people-with-health-insurance/

(4) Payouts for Insurer CEOs Keep Growing

Insurance Exchanges: The Fast Food of Health Care

The Policies Offered By Insurance Exchanges: The Fast Food of Health Care

The exchanges may not be cheap but at least they have low value.

Now that January 1 has come and gone we are moving in to the era of medical insurance exchanges. These exchanges were created by the Affordable Care Act and took effect on January 1, 2014.  They are designed to be state marketplaces where individuals and small businesses can go to shop for health insurance. Insurance companies are required to offer essential health benefits of various, but comparable, levels of coverage.  These have been labeled the “metal” plans, i.e.,  Bronze, Silver, Gold, and Platinum which are supposed to cover 60%, 70%, 80%, and 90%,  respectively, of the insured’s medical expenses.(1)  For many reasons, those percentages are deceiving. The plans also are supposed to cap out-of-pocket expenses at the same level as that provided by Health Savings Accounts. That cap does not include premiums, most pharmacy benefits and uncovered services such as multiple physical therapy visits and errant visits to out-of-network medical facilities. Eligible applicants will be offered tax credits for premium support or expanded Medicaid coverage.

As a buyer- consumer- patient when looking at the plans it is important to know what physicians, hospital, laboratories, etc. are covered by any given plan.  A large percentage of the plans being offered are so-called “narrow networks” which have a small list of providers compared with traditional networks. This has a number of bad effects, especially for people who have their own primary physicians and specialists. The out of pocket costs of going out of the network can be huge whether intended or unintended such as in emergencies, confusion over the complexity, or lack of appropriate specialty care within the network. (2)(3)

Deductibles are another important issue in choosing an insurance plan. This is the money the buyer has to spend before the insurance kicks in. Even before Obamacare the insurance companies were pushing policies with higher and higher deductibles.  The exchange policies are building on this process. Some policies can have separate deductibles for provider services, emergency room visits, and prescriptions. This raises the cost to the patient even higher. Often, copayments and coinsurance charges are not included in the deductible.  Furthermore, it has been shown that a high deductible encourages patients to forestall or completely avoid needed medical care. If you know that an emergency room visit can cost you $300-$2000 and you have a $3500 or $5000 deductible you may think twice, thrice(?) about going to the E. R. with that uncomfortable abdominal (or chest) pain that you have had for the last 6 hours.(4)(5)  This not only defeats the purpose of medical insurance but it can have disastrous consequences. This is the high price of under-insurance. Any policy that has a deductible that the patient cannot afford to pay is not a good investment of the premium dollar. It is telling that, in the United States, studies have shown that 62% of personal bankruptcies are related to medical bills. Sixty percent of those had medical insurance at the time those medical bills were first generated.  Obviously there was an issue of under-insurance . (6) The Massachusetts precursor of Obamacare has not improved those figures in that state. It has been rightfully stated that high deductible plans are for only the rich and healthy.

Unfortunately, purchasers, when selecting an insurance policy, look mainly at the premium price.  This is the fast food business of the insurance industry. Best advice?  Caveat Emptor.  Buyer Beware.

High Deductibles

High Deductible, Low Adherence

Suggested Reading:

 1) Obamacarefacts.com

2) Out-of-Network Physicians: How Prevalent are Involuntary Use and Cost Transparency,” HSR, June 2013

3) See my blog “Narrow Networks :Less Choice, More Cost Shifting”.

4) Half of Insured Adults with High-Deductible Health Plans Experience Medical Bill or Debt Problems The Commonwealth Fund, January 27, 2005

5) The Impact of High-Deductible Health Plans on Men and Women: An Analysis of Emergency  Department Care. Kozhimannil, Kat et al, Medical Care (APHA), August 2013

6) Himmelststein DU, Thorne D, Warren E, Woolhandler S. Medical bankruptcy in the United States,2007: results of a national study. Am J Med. 2009;122:741-746.

 

 

We Are All Underinsured

 

The Many Faces of UnderInsurance

  

As the Affordable Care Act (ACA) kicks in we are moving into an era where a larger and larger percentage of our population will be unable to afford medical care and we will see an increase in an already high number of medically preventable illnesses and deaths and medically related personal bankruptcies. This will result from lack of control over medical inflation and a tidal shift of medical insurance policies into a lethal pattern of underinsurance. The ACA is predicted to decrease the number of uninsured Americans to about 30 million. (1)  Lack of medical insurance leads to at least 55,000 unnecessary deaths a year in the United States. But inadequate medical insurance also takes its toll and it is likely that this problem will worsen dramatically over the next few years in response to the ACA.

 Definitions of Underinsurance

 By the common definition, individuals are considered underinsured if their out-of-pocket expenses are more than 10 percent of their income  (5 percent if they were low-income) or deductibles are more than 5 percent. By current definitions 44 percent (81 million) of adults ages 19–64 were either uninsured or underinsured in 2010. 29 million of these adults were underinsured.

In reality, the formal definition of underinsurance needs to be revised.  As we will see, all of the factors listed below expose the fact that most of us are being denied access to appropriate, comprehensive medical care unless we pay for it out of our own pockets.  Another way of framing this is to state that to whatever extent our medical insurance is not paying our medical bills we are underinsured.  Also, underinsurance  is definitely responsible when any insured person  avoids needed medical care for financial reasons. This can take the form of not seeing a physician, or delaying to see one, not filling a prescription or partly filling one, and not following through on recommendations for testing, therapy or return appointments.  The fact that if you are in the top 5% of wealth or income you can afford to supplement your insurance when any medical bills arrive, only illuminates how you can deal with being underinsured. WE ARE ALL UNDERINSURED (2)

 What are the many faces of underinsurance?

Low actuarial value

 Even the policies sold on the new insurance exchanges will create financial problems because of their low actuarial values. The prescribed Silver plans will claim a 70% value but for reasons to be discussed they won’t even provide that. And if they did, the 30% left for the patient who has little or no liquid assets means assuming unrealistic debt or foregoing needed medical care. (3)

Lack of Transparency

As an example,  frequently a patient will be held in the emergency area or even in a regular hospital room for 24-72 hrs. of what is billed as observation status. This is not a hospital admission so Part A of Medicare does not kick in but Part B or D does.  This shifts the coverage to higher deductibles and other out-of-pocket expenses. (4)-

Deductibles Six years ago, 12 percent of workers faced a deductible of at least $1,000 for single coverage. Now more than a third do, according to the Kaiser Family Foundation’s 2012 survey of employer-sponsored plans.  Increasingly a high-deductible plan is the only insurance offered on the job, even at big companies. These are often coupled with a Health Saving Account with employer and/or employee contributions. (5) The new exchange policies can have deductibles as high as $6,350 for singles and $12,700 for families.

Copay

Copays are fixed dollar amounts that the insured patient has to pay toward most services. They vary by service (office call, x-rays, pharmaceuticals, etc.), and policy terms which vary year to year. These can be very high including 100% of the cost of many generic drugs.

Co-insurance

Co-Insurance is a percentage of any category of charges that is assigned to the enrollee in an insurance plan. These can easily add up to thousands of dollars during any one illness.

Defined Contribution

More employers and pension plans are moving into defined contribution plans in which the employer contributes a defined amount each month and the later benefit is determined by the amount left in the fund.

Benefit Confusion causing Out-of-Pocket Expenses

Frequently in our present system patients experience sticker shock when, after an illness, they discover that their insurance (Medicare or otherwise) doesn’t cover as much as they expected.(6)

Narrow Networks

The morphing of insurance coverage into narrow networks of providers is another gambit for shifting costs to the patient, i.e., creating more underinsurance. (7)

Tiered Pharmacy Plans & the Do-nut Hole

Prescription cost is one of the first areas the underinsured skimp to save money.  The donut-hole in Medicare prescription coverage defies justification.

Long Term Care, Dental, Optical, Mental Health, Rehabilitation

Entire categories of health care are not covered by Medicare and other insurance plans. These all contribute to the medical bankruptcy rate which is going to continue to grow.

It is obvious that the insurance system doesn’t work.  WE ARE ALL UNDERINSURED.  Every one of the above items (and the cost of administrating them) could be eliminated with single-payer medical financing, i.e. improved Medicare for all.

 Suggested Reading:       CTRL-click to follow link

 1) When Insurance Isn’t Enough: Underinsurance in America
            
Healthwell Foundation

 2) The ‘Underinsurance’ Problem Explained
     By Jenny Gold, Kaiser Health News, Sep 28, 2009

 3) Actuarial value may not predict your financial exposure
    Choosing the “Best” Plan in a Health Insurance Exchange: Actuarial Value Tells Only Part of the Story.  Ryan Lore, Jon R. Gabel, Roland McDevitt, and Michael Slover
The Commonwealth Fund, August 2012

4) Observation Units Can Improve Care But May Be Costly For Patients
  
Health Aff September 2011   vol. 30  no. 9  1762-1771
Michelle Andrews Feb 12, 2013

5) The Prevalence and Cost of Deductibles in Employer Sponsored Insurance:
           
 A View from the 2012 Employer Health Benefit Survey
  
Kaiser Family Foundation,  November 2012

6) Milliman Medical Index (MMI) 2013

 7) See my blog NARROW NETWORKS Less Choice, More Cost Sharing

Why Call It Insurance?

Marmor et al, in their recent book, do an excellent job of illuminating and analyzing “social insurance” in the United States.(1) This is a term that the authors used to refer to public policies that protect citizens against the six greatest risks that threaten personal and family well-being, one of those risks being ill health. But here, the term “insurance” is more of a metaphor and not a reference to private, personal insurance. These authors end up concluding that universal health care is “not unaffordable but could be in modern-day America, where a commitment to market-based solutions to rising health care costs may make unaffordability a self-fulfilling prophecy.” The health insurance game is one of those solutions that is preventing the creation of a sustainable, universal health care system in our country. 7% of U.S. health expenditures go to insurance administration. That’s $531.20 per capita per year. Countries like Japan, Finland, Australia, Austria, and Canada spend from $53.60 to $153.30 per capita.(2)
It is mind-numbing to listen to the cacophony that rises up from the health policy interests in the United States today. Moral hazard, cost-sharing, eligibility, co-pays, silver plan, risk-management, narrow networks, rating band, medical loss ratio, underwriting, the HIAA, exchanges, etc., etc. We have arguments, debates, laws, rules, complex computer programs (and glitches) all to continue the charade that the answers to our national health care problems lie in tweaking an insurance system. There is nothing inherent in paying for our basic health care that requires some sort of medical insurance. In fact, this particular mind-set is rather unique with the United States. Most developed countries defer to private insurance only for uncovered items such as private hospital rooms, cosmetic surgery, etc.
Traditionally, the term insurance referred to a contract by which regular payments were made to provide financial recovery in case of severe, unpredictable, emergencies (accidents, fire, death, etc.). For most of us the term insurance still carries that implication. But this meaning fails us when we try to apply it to all of the health care needs people have during a lifetime. Many of those needs are preventive, or routine, or comfort-driven, or for disease management as well as emergencies. We don’t talk about pre-school insurance, kindergarten insurance, K-12 insurance. We don’t talk about fire insurance to put out our fires or police insurance to respond to our 911 calls. We don’t buy highway insurance policies so that we can drive down the road to our family or jobs. We don’t buy National Guard insurance so that we can receive aid and protection in emergencies. The problem is that we keep trying to find ways to provide for our health needs within an insurance system, distorting and shape-shifting the elements of that system. It is not more or different insurance that we need; it is a different framework. Let’s stop talking about eligibility, copays, etc. Let’s talk about a real, comprehensive system that defines, guides, and finances adequate health care for everyone. This is the moral imperative. We must do it, not just because our economy requires it, or because every other developed nation has done it, or because we lag behind most developed nations in healthcare results, but because it’s the right thing to do.

As R. Paul Olson says: “To state this more generally, I am asserting that ensuring universal, equitable access is not merely an aim, it is an obligation; it is not merely a goal, it is also a duty; it is more than merely a noble ideal we might like to realize if only we could afford it; rather, it is a reality we must bring into being for the entire population our health care system is designed to serve. It is morally unacceptable to say that universal health care is desirable, but optional; rather, it is a goal we must achieve because it is grounded in a universal human need, not merely in what people want. Universal access must be ensured as a priority and prerequisite for a health care system to qualify as a morally justified system. Other factors being equal, a health care system that provides universal access is morally superior to a discriminatory system that limits, delays, or denies equitable access to portions of the population. Stated positively, the ethical arguments in favor of universal health care are so compelling as to make implementing it a moral mandate. It is also a practical necessity because to someone denied access, it simply does not matter that the system provides high quality and cost-effective care. Inaccessible care is ineffective care; indeed, inaccessible care is no care at all.”(3)

Suggested Reading:
(1) Marmor, TR, Mashaw,J, Pakutka,J. Social Insurance: America’s Neglected Heritage and Contested Future. California, CQPress, 2014, p 134.
(2) OECD (database). Version 06/2011 The Commonwealth Fund Commission on a High Performance Health System October 2011.
(3) Olson, RP. Moral Arguments for Universal Health Care: A Vision for Health Care Reform
Indiana, AuthorHouse, 2012 , p7-8.