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Tuesday, June 30, 2009

When health care reform stops getting nice and starts getting real

Usually when I tell people that I work in health insurance, their eyes can't glaze over fast enough. However, that's been changing. People now actually want to find out what I think of health care or they ask me what it's like to work at "ground zero." It's like I went from the Puck from the Real World of health care to a more likeable character like Al Bundy from Married with Children. The slight rise in popularity is probably because everyone is getting ready to fight about health care. Even Obama is starting to wade into the mix with his calls for stakeholders to put up or shut up today.

Health care stakholders are living in interesting times. Reform could go in any direction as nothing is certain. Employer health insurance could lose its tax exemption. There are underdog re-emerging such as Senator Wyden and Bennet's approach which would end employer sponsored health care and have plans compete with a standard benefit package.

Even the mantra of "Medicare Part E for Everyone" is being replaced with "Medicaid for Everyone". The Kaiser Family Foundation points out that Medicaid is the logical next step for the 2/3 of the uninsured who are within 200% of the Federal Poverty Level. Medicaid has the history of providing managed health care for low income citizens. On the other hand, Medicare is a fee for service fragmented model that is focused on the elderly and has no infrastructure to offer any services other than signing a check.

Health Care Stakeholders have stopped poking each with stakes in the rush to make concessions to stave off the complete reengineering of their business models. Insurance companies are offering to stop denying coverage or looking at pre existing conditions. Drug companies will offer 50% discounts to seniors who fall in the doughnut hole. Physicians are starting to pay attention and realize that they can either be the change that they see in the world or be short-changed (in their eyes). The Obama administration is starting to look like some pretty good cat herders. However, they have some ideas like the Public Plan that still could turn this into a cat fight.

I recently had a good on-line debate (probably need to join the website to get to the link) with another blogger about health care reform. Of course, we didn't change each other's opinions but it helped my crystalize my thinking which in usual bullet pointed format is as follows:

  • There will still be a 3rd party: The above-linked debate was fueled by a 2001 Hoover Institute piece advocating that we do away with private and government insurance and have providers and patients negotiate away. An easy model to evaluate this approach is dental insurance. Only about half of the US has dental insurance and those that have dental insurance typically only get $1500 worth of services covered. Therefore, dentists and patients often discuss price as part of the treatment. Results are not good. Dental costs rise slightly above inflation (3%-4%) and dental practice is often described as "drill, fill, and bill." Consumers are negotiating with wolves. Insurance companies and the government have the best data to truly evaluate provider practices and thus still need to be the 3rd party.

  • Hard to focus with so much noise: The reason that health care is so expensive is because of law suits! No, it's insurance administration costs! No, it's hospital construction! This is the noise which causes us to lose focus on the core issues of health care costs which is a system perfectly designed to encourage a Hummer-esque utilization of care for those who will pay. Law suits, insurance administration, hospital construction are all factors which do contribute to costs. However, they are not the core driver but rather a per cent here an there. For example with law suits, Oregon has no malpractice caps and low health care costs. Texas has strict malpractice caps and high health care costs. If malpractice was such a large driver, there wouldn't be that discrepency. Another example is that insurance administrative costs are 15% of the health care dollar and generally increase with inflation. Medical costs are 85% of the health care dollar and increase at a higher rate than inflation.

  • I'd like to buy two health insurances please: Price controls has a likely future in health care. Wyden and Emanuel's plan include one price for a unit of health insurnance and call for the insurance companies to keep all provider payments under that cost of one unit of health care including administration and profit. This system also uses the government's considerable skill and experience in determining the price of health care. The free market has not reduced health care costs and there is little evidence that consumerism will. I see no other alternative other than price controls under which every stakholder will live. Future successful innovation will focus on cost effectiveness to help everyone live underneath that limit.

  • If we think that we've seen managed care. . . we ain't seen nothing yet. That's why I have begun to realize that Medicaid for All is probably the true model. Lower costs, strict formularies, and tight managed care are the ingredients of a health care system that will need to live within a budget. Rationing health care is not just a European solution. The reason we haven't heard the rallying cry of Medicaid for All is because of Medicaid's reputation- er I mean branding (got to use the 2009 vocabulary) issue as insurance for low income Americans. However, it's probably the most viable insurance model under a health care budget that truly budgets. While there is talk that everyone would have the same insurance that Congress currently has, there is not enough taxes to pay that level of insurance.

  • Whither employer insurance? There have been calls for the end of receiving health insurance from your employer. While employer-based insurance is a dated model, employers that have mastered health care costs do have a competitive advantage. Ultimately, with a Medicaid-esque public insurance model, I do see that employers may offer buy-up or supplement insurance to attract workers. That would truly be a benefit and I could see that as an appropriate role.

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