- There was a real call for the average American to more actively participate in their health care decisions. For example Oregon House Bill 2213 required that insurance carriers produce a tool that provides estimates of the cost of the top 30 procedures based on the individual's insurance coverage. However, my blog receives 20 times more traffic than those tools (and I don’t break triple digits). Americans have largely been shielded from both the financial impact and the necessary information to make health care decisions. Like retirement savings, both of those things need to change.
- The CEO's discussed a new product intended to engage Americans that was developed by the Oregon Coalition of Healthcare Purchasers. It’s a value-based design supported by Jack Wennberg’s research with the Dartmouth Atlas. The plan design covers preventive services and those that treat chronic diseases so the individual pays little to nothing for those valued services. However, services like spine surgery for back pain or global nuclear thermodynamic three dimensional imaging that provide questionable value for the dollar on a population level will be more expensive. You call that rationing but it’s really recognizing there are limited health care dollars and using consumerism or market forces.
- One CEO mentioned that there are 43 mandates for different benefits (like hearing aids for children) or eligibility (coverage of domestic partners) in Oregon. He suggested re-evaluating the mandates to see if they add unnecessary costs to the system. However, I have questioned if mandates 1) are covered by most insurance companies anyway, 2) really add up to significant savings compared to reduction of global nuclear thermal imaging, and 3) represent a failure of market forces to address a community need.
- One CEO described their efforts to engage providers by providing information such as how many of their cardiac patients have come in for preventive services or diabetic patients who have their blood sugar within range. The only Chief Medical Officer who was there couldn’t help himself from saying, “I would loathe to receive that kind of letter from an insurance company.” However, physicians don’t have the ability or time to consistently track that information easily while insurance companies do.
- I have developed my Bingo game at these events where I wait for the first CEO to mention the importance of caring for children in the most completely tangential off topic manner. Mentioning the importance of touching the lives of children is probably in the public relations guide for every industry that faces a skeptical public. Kaiser Permanente scored the Bingo this year. At least, it hasn't gotten so bad that insurance CEO's have to talk about warm puppies and ice cream.
- A medical student at the college of naturopathic medicine asked if the CEO's had considered providing coverage for naturopathic services due to the primary care shortage and pointed out that Washington and Vermont mandate this coverage. The expression on everyone's face clearly said, "No we haven't. Not at all and we probably won't think about it in the future." The Chief Medical Officer broke the silence with a quick, "That's a good thing to consider." Personally, I can't disagree as I don't know if covering naturopathy will add even more costs to the system or improve access to primary care. However, for those still considering the course of study, if covering naturopathy hasn't been discussed in Oregon, that's not promising for more traditional states.
- Instead of naturopathy, those with a quantitative skills should look at actuarial science. Most health care reform calls for increased actuarial evaluations and the value-based models will further increase the work. It's got a strong future. Sure, there are still jokes like "What do you call an actuary talking to someone else? Popular." For most of my co-workers, our children aren't going to be encouraged to become doctors but instead become actuaries.
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Monday, October 26, 2009
Friday, October 23, 2009
I still think the Public Plan is the marketing equivalent of the anti-tax Tea Parties which was very successful in introducing the concept of teabagging to millions (in terms of capturing the hearts and minds of independents, not as successful). However, the Public Plan idea is still going strong, in fact, it even has a robust option that House Speaker Pelosi is proposing.
I am against the Public Plan for the same reasons that I was against the Iraq War. I see it as a bad idea that will waste tax payer money and is being sold with analysis that doesn't bear out. My points are as follows:
It will only save money by paying providers less which doesn't solve the real problem: This robust option will pay providers 5% more than Medicare rates which are 75%-80% of market rates. Lower payments to providers is its principle vehicle for cost savings. It will not have any disease management, case management, or any kind of care coordination or health care management program. However, anywhere from 25%-35% of providers don't accept Medicare because they think it pays to little so how excited are they going to about this option? If they do accept it, are paid less, then what's to stop them from making up the price cut with more volume?
Supporters of the Public Plan also feel that it will have lower administrative costs than private plans. Here's how I see the costs adding up based on what I know of the typical health plan costs and the proposed savings opportunities:
- No margin which will save 3% of premium (that's the average margin of the largest health plans. United has the highest margin at 4%)
- No Marketing which would save 2% with an average marketing budget
- No huge CEO salaries would save 0.1% (assume $1 million salary on revenue of $1 billion for an average sized plan)
- They won't pay brokers which will save 1% (not sure how you can justify not paying someone for the services that they provide)
- There will be no provider network so that will save 1% in network management
This totals up to about 7.1% savings. Given average administrative costs are 15% of premium, this is as much to be realistically expected given that you still have to pay claims, enroll people, pay bills, and answer calls. Personally, I would call this Prozac-esque optimistic.With no care management and no network relationship, medical costs could easily be 10% higher than an average private plan . Given Medicare costs are twice as high in some parts of the country as others due to practice patterns, that's a feasible scenario. Thus, the 7.1% savings could be wiped out by higher medical costs and again, the only savings would be paying providers less. How does this address the issue that costs in Florida are twice as high as New Mexico or that we have more imaging machines in some counties than all of Canada?
There is separate legislation to require that insurance companies accept everyone: My sister has a law degree and is fairly smart even though she went to a basketball factory for college (Duke). When I asked her why she wanted a Public Plan, she said it was because she thinks that she would be rejected if she ever had to buy individual insurance. I pointed out that all the proposed legislation forbid insurance companies to reject people and even the insurance companies said that they'll stop rejecting people. "Oh, well in that case I don't really care about a public option." We went back to arguing about Duke's basketball team.
No one holds hands and sings Kumbaya at health care cooperatives: A pseudo Public Plan option that was included in Senator Baucus's bill was the idea of health care cooperatives which were local non-profit health plans that communities would start. Group Health Cooperative was held up as the model until people started asking Group Health and its members how this wonderous cooperative experience works. Turns out that it works like any typical insurance company and less than 1% of members voted for Board members or participated in the cooperative model. While Group Health is an excellent plan with a good track record of promoting high quality care, its cooperative structure was not the secret sauce. It was more like a sprinkling of spices that no one noticed.
Other models that are held up as potential examples of a successful plan don't work either: Washington has held up their Basic health plan as an example of a successful state version of a Public Plan. However, it contracts out a predetermined benefit plan to private insurance plans just like with Medicare Advantage or the Federal Employee insurance programs. It's like any government program that is contracted out to the private sector. When private plans haven't liked the terms, they withdrew from the program. The history of Washington's Basic plan is a story of little to no choice in some counties, lack of participation by private plans at various times, premium increases, benefit reductions, and wait lists for enrollment. In the late 90's, private plans stopped participating. One can't really enjoy the benefits of competition when the players leave the game.Who's going to run the Public Plan? Government entities have run very few parts of a health insurance plan. They are good at pricing, mediocre at providing customer service, bad at explanining things in simple terms, have never negotiated with providers, had few to no successful disease management programs, and don't have an updated medical claims systems. Medicare is either contracted to private plans or run through Social Security with a Social Security claims systems. The choice is either a new plan run by folks with no experience or hiring people from private plans.
What are we really trying to do? I understand that a Public Plan is needed since there won't always be affordable private plan for everyone and insurance will likely be mandated. Rather than try to figure out how to run a health insurance company, governments could look at changing the eligibility for Medicaid or the high risk programs. Health Care Futurist, Jeff Goldsmith, wrote a persuasive piece about expanding Medicare eligibility to older (55+) adults to address the issue of uninsured, unhealthy adults. Personally, I would rather be a revisionist than a futurist since you have a better chance of being right.
These are existing programs that would accomplish the same goal of providing health insurance as the Public Plan would. The other aspect that the Public Plan was intended to address was the public's anger with insurance companies and desire to give them the middle finger. I can understand the anger as insurance plans rescind policies if you don't disclose a hang nail, seem to decide claims payment with a dart board, and may only have doctors that no one has ever heard of in their network.
However, the Public Plan is a very expensive, inefficient way to give the insurance plans the middle finger. I propose that we let people pay a sliding scale of $0-$10 to be able to go into the office of health insurance executives and actually give the executives the middle finger in person. That helps address the anger, provide more funding to health care reform, and could also be used with some the participants of the federal bail out programs.
Wednesday, October 21, 2009
To make amends, I have actual TV show ideas inspired by my work in health care and the health care reform debates.
The Fight of the Undead: There could be a Heroes-esque on-going battle between ACORN and Angry Town Hall Mobs. Or the Angry Town Hall Mob could be zombies who invade and moan about government takeovers. Or ACORN could be hipster vampires with carefully tousled hair who try to save uninsured undead.
Health Care's Version of 24 (which would increase to 36 by 2015 since everything in health care increases faster than inflation): What about Senator Max Baucus as a Jack Bauer character from 24? He's given the impossible task of creating a health care bill that needs to appeal to both Sarah Palin and Dennis Kucinich, his friends become enemies, his enemies become friends, and participating in long discussions about Medicare reimbursement methodology or actuarial equivalency must qualify as torture in some state. At the end, he could finally disappear into the Montana wilderness, grow a beard, and become a vigilante who hunts down everyone who wronged him in the health care debate. Then he would flee to Canada to destroy their health care system.
Teen Dramas: I could see all of the major health care stakeholders being cast in a high school drama like the Hills, Gossip Girls, or Beverly Hills 90210. The pharmaceutical industry could be drama queen divas who take all the drugs that they make, put them in the water, and get the school hooked. Physicians would be the independent loners who don't want to participate in anything without being begged. Hospitals would be the socially awkward but included since they will get alcohol and throw the parties (kind of like hospitals keep building up their facilities so physicians and patients come to use them). The insurance plans would be the villain because you need a villain and they do it as well as anyone.
As far as new TV shows that could replace flagship medical dramas like Grey's Anatomy, Scrubs, or ER, there are 2 untapped areas. We have already seen heroic doctors, oversexed residents, and the goofy hospital cast. No one wants to see the insurance industry portrayed on TV because the public dislikes them and insurance can be a really boring topic. There is no way to make an actuarial pricing exercise to determine if a benefit meets the new mandate on therapeutic small animal coverage sound dramatic, funny, or even comprehensible. Here are my 2 ideas based on my insider perspective.
Accurate Psychiatric Staff Drama: There was a short-lived drama called Wonderland that portrayed the psychiatrists as the "best, brightest, and toughest" with "lives as complex as their patients." Anyone who has experience in the mental health field would know that an overly serious angle is doomed. Physicians who want to be serious or heroes become surgeons since they can save the world with a few micro-slices. Physicians who are goofy, socially awkward, or just plain weird become psychiatrists. Leave the patients alone and just focus on the fact the only difference between mental health staff and patients is that one has keys and ID badges.
When I worked in mental health, I've participated in discussions on whether or not the patient's purchase of a Star Trek Enterprise model ship was a regression of their illness or just being a Trekkie. Besides psychiatry, there's also psychology, social work, nursing, addictions treatment, who have their goofy approaches that generate skepticism by others. As a result, there are equally skeptical patients about all the different approaches. The idiosyncratic nature of mental health staff would supply a TV show with endless material.
Nurses Aren't just Doctor Candy: Despite the prominence of nurses in hospitals, they are generally only portrayed in TV shows as flirting with doctors, kissing doctors, or in bed with doctors. Occasionally, they provide medical care with doctors. However, there is the untapped high school drama-esque world of nursing where older nurses haze new nurses, surgical nurses look down at nurses who work on the medical floor nurses and all look down at nurses who don't work in hospitals. There's also the battle of the shifts, where day shift nurses think that the night shift is incompetent while the night shift thinks that days staff are b!tchy divas. Besides, the drama, the nurses provide 90% of the care that patients receive hospitals so there's plenty of opportunity to show them saving lives. Actually, a TV show that shows nurses as a sorority gone bad probably wouldn't help show the profession in a more positive light than current shows. But the show could show the doctors as nurse candy to at least make things even.
Oh, if any of my ideas to get turned into TV shows, the writing credit can be attributed to Deadhedge and I'll provide my mailing address for royalty checks.
Thursday, October 15, 2009
I listened with great interest to the NPR Broadcast of Molly Adams who describes being young and uninsured in Chicago. Molly aged off her parent's coverage and the option to continue the insurance through COBRA costs $300 per month. This was all of her income after food and shelter were paid. It wasn't affordable and Molly didn't need it unless she got hit while navigating her bike by some of the most aggressive drivers in the Midwest. Health insurance is not a priority and doesn't make a lot of financial sense for her and her colleagues.
This all makes complete sense. Why pay for something that you will probably use as often as a Christmas sweater when you don't have a lot of money. Here's what doesn't make sense based on what I heard in the broadcast:
Isn't Generation Y really good at finding information? The only health insurance option that I heard was her parent's COBRA plan for $300. A Google search would have revealed numerous plans for under $100 that covered all services including drugs and capped the maximum expenses for health care services at $5,000. A deeper search would have revealed catastrophic plans that Molly wanted to protect her from Chicago drivers called short-term medical for $30-$50/month. Generation Y is so supposed to be the most internet savvy and best generation at finding and synthesizing information. However, this doesn't seem to apply with navigating the health care system. Unfortunately, the ones who best understand the health care system are those who were uninsured and have debt from a hospitalization.
Do health plans speak to Generation Y? Every insurance company wants to enroll more young adults since its the most attractive segment with the most potential. Aetna has spent a lot of energy on finding what Generation Y wants and has been successful as 20% of their individual business is made up of young adults. They piloted the BodyGuard Health Plans (motto: Stuff Happens) in Chicago. They partnered with young adult social clubs, their marketing material looks like an Ipod commercial, and they took a genuine approach by creating insurance plans designed specifically for Generation Y.
My team is also looking to develop health plans for Generation that only cover services that they'll use so they'll be more affordable and easier to understand. However, these approaches do not seem to make a significant dent in the uninsured rate among Generation Y.
What can change? There are some obvious reasons that Generation Y doesn't buy health insurance that can't change. It costs money that they don't always have for something that they probably won't use.
What will change is that Generation Y will start to understand their insurance options as well as they understand their cell phone options. Generation Y has been very resilient as traditional institutions have fallen away. College leads to debt as well as opportunities and freelancing and independent work has supplemented the lack of traditional corporate jobs. Home ownership is a trap as much as an asset. Most of us never had to think about health insurance, let alone research it, since it came with the job just like a desk and a chair. Molly Adams' quote of, "Why is it that I'm working forty hours a week, contributing to society, and yet I still don't have health insurance? Aren't I earning it?" reflects another institution that has not served Generation Y as it served previous generations. Generation Y has proved its resiliency when other institutions fail and I think they will respond to health insurance. Just like they studied entrepreneurship to have an outlet from corporate America, they will learn how to navigate the individual insurance market.
Another reason that they don't purchase insurance is they possibly hate insurance companies more than the general population. My state's Blue Cross plan's downtown location has been a popular protest location. As Generation Y learns to navigate the individual insurance market, they will also learn that not all insurance companies are equal. There are for profit national carriers and non-profit local carriers that have different values. As an aside, sometimes the only difference between a for profit and a non-profit insurance company is that one calls the money they make profit and the other calls it margin. Maybe it's really a choice of the lesser of two evils, but there is a choice. Just as Generation Y researches companies to learn which match their values, they can do the same for insurance companies.
Some have run out of utensils to stick in their eye, when they hear about Generation Y. However, the participation of Generation Y in health insurance is a key part of reform. Senator Baucus even added a "Young Invincible" plan to attract them. The current disconnects that Generation Y has with health insurance confound me since it's the opposite of their behavior with other industries or aspects of society. As long as the health insurance industry and reform keeps trying to engage Generation Y, those disconnects will fade. Once those disconnects fade, Generation Y will be in a better position to transform health insurance as they like to do with other industries.
Tuesday, October 13, 2009
My post about the MBA Oath was somewhat critical. Prior to business school, I was a social worker and during business school I was very active in volunteer programs, Net Impact, and was elected the social conscience of my class (not really but just painting a picture). I was very concerned that the HBS students were capitalizing on the national movement towards service and good citizenship and was not confident about their commitment to what they preached. The last thing that we (we meaning any MBA with a serious track record in being a responsible member of society) was a short-lived movement that would provide a shining example of how MBA's were not really serious about social change, had an average attention span, and were just as opportunistic as ever. To underscore this point, I submitted my blog post to the MBA Oath essay contest. To their credit, they promptly thanked me for my entry.
Four months later and with 1,661 signers of the MBA Oath, I have to give the MBA Oath creators respect and credit. Their blog is updated and they have capitalized on their marketing success with a long-term vision of creating different chapters on different campuses. The Economist still mentions the oath in its articles about business school. I had assumed/hoped that the creators of the oath had a track record in social responsibility but the proved it. Students and alumni are still signing the oath and it appears to have carved out a niche with the potential to trigger bigger change. I'm also not concerned about the nuances of the oath and the questions about whether managers have a social responsibility. As citizens of a warming planet with growing inequities, we all have a responsibility and the oath provides an outlet for MBA's. There is still the curse of potential but I'm not cursing about the Oath creators' potential anymore.
Thursday, October 8, 2009
Medicare gives insurance plans $800-$1000 per member per month (depending on geography and health of the the members) to provide benefits, cover administrative costs, and make a profit. If the plan can cover all of those with that money, the member pays nothing. However, most plans do not cover all their costs and charge the member a monthly premium. While these revenue cuts were announced in April, we just saw the impact on October 1st which was the first day that insurance plans could reveal their 2010 plan info and premiums. The results already very clearly showed the impact of the cuts and more are expected to come in future years.
With these revenue cuts, Medicare Advantage product managers had only a few options which were 1) lower profit, 2) pay providers and hospitals less, 3) reduce benefits by increasing what the member has to pay for a service, 4) raise the price.
With regards to 1) profit, an insurance plan is happy with a 4% margin which is about matches the revenue cut. Most non-insurance folks would say, Problem solved, no profit for you this year. However, additional cuts are expected in the future years so even if an insurance company would operate Medicare at no profit, next year, they would operate at a loss. Okay, you can stop laughing at the idea of an insurance company not making any profit on a product line.
With 2), pay providers and hospitals less, I can hear providers laughing just as hard.
For the 2010 plans, that leaves 3) and 4) where grandma pays more for less- sorry, I said that I would leave her out of it. One article reports that nationally, monthly premium increased from $32 to $39. However, it's unknown how benefits were reduced. Given the sheer math involved, seniors will absorb some of that 3%-5% revenue cut which amounts to $25-$40 per month. Insurance companies will keep at least a 2% margin which is pretty much the margin of error for ensuring that they will at least breakeven. That leaves at least $10-$20 that will either be added to the monthly premium or reduced in benefits.
The interesting part is how the results played out differently across different types of plans. HMO's, PPO's, and Private Fee for Service (PFFS) plans had very different outcomes which could be called, the good, the bad, and the ugly.
The Good: HMOs: If you played a word association game with someone and said HMO, they would probably say cockroach. HMOs made up probably 90% of the Medicare Advantage market as most of them got started under the Medicare+Choice program in the 90's. In the past 5 years, they have steadily lost membership to PPO and PFFS plans.
However, HMO plans in my state had the lowest premium increases and virtually no benefit reductions with their 2010 plans. Their ability to coordinate care and partnership with a panel of physicians have proven to deliver efficient care. Maggie Mahar blogged about the value of Medicare Advantage HMO plans and how they deliver more benefits than traditional Medicare for the same cost (Any resemblance to the Don Grunt whose comments were cited in the article and the author of this blog are purely coincidental). Just like the cockroach, it look like Medicare Advantage HMO plans will be around for a long time.
The Bad: PPOs: Most seniors had a PPO plan prior to retiring, are familiar with it, and the membership in PPO plans has been rapidly growing. However, the PPO plans in my state had $20-$140 increase in premiums for 2010 in addition to significant benefit reductions. Some went old school and added a deductible which is usually only found in traditional Medicare. It looks like PPO plans are not able to coordinate care with their more open networks. Additionally, they don't have the relationship with physicians to get patient information to improve their risk scores. Insurance plans get paid more for less healthy members (called risk adjustment) but they need to demonstrate their health status to Medicare.
It looks like PPO plans will steadily become more expensive and offer less benefits as they were heavily impacted by the revenue cuts. Younger senior prefer PPO designs but we'll see if they will be able to survive on less money from Medicare.
The Ugly: PFFS plans: PFFS plans have no networks and were used as a vehicle to bring Medicare Advantage to rural areas where insurance plans can't contract with sufficient physicians. In that regards, they have been successful as rural seniors have access to options other than traditional Medicare. The ugly part came with their launch. Since they have no contractual arrangements with providers, they had no idea what they were, and refused to accept them. PFFS plans traditionally paid agents higher commissions than other plans so they were aggressive well sleezy about selling them.
With the Medicare revenue cuts, PFFS plans are already leaving the building. Toward the end of 2008, there were 2.3 million seniors in PFFS plans. Plans with 30% of that membership (667,000) have already stopped offering their plans even though PFFS plans aren't due to sunset until 2011. In short, their business model could not survive on lower Medicare revenue.
Wednesday, October 7, 2009
I found myself agreeing with the Economist article, especially its calls for the virtue of "skepticism and cynicism" with "boosterism" constituting original sin. To quote:
Business schools need to make more room for people who are willing to bite theThis trait is generally missing from the MBA blogosphere. More and more schools have official blogging platforms that promise uncensored, unedited comments. While I don't doubt the good intentions of the bloggers (or independent student bloggers), there is an entrenched conflict with being incorporated into the school's marketing. Student bloggers will benefit if their school receives more applicants and higher quality applicants since some school rankings take into account selectivity and GMAT scores.
hands that feed them: to prick business bubbles, expose management fads and
generally rough up the most feted managers. Kings once employed jesters to bring
them down to earth. It’s time for business schools to do likewise.
Actually, I do doubt the intentions of student bloggers. A quick perusal of the blogs reveal praise for the incredible speakers at their school's conferences, assurances that companies are still rushing to recruit their school's amazing students, and how they never doubted their decision to attend their school. Individual bloggers face the same conflicts of interest but are marginally better. On the flip side, one of the objective bloggers almost gave up blogging because of her "frank portrayal" of her school.
MBA Bloggers, the esteemed Economist has laid out a simple path for salvation of the MBA degree (read with a British accent, it sounds more convincing). The benefits of a blog are transparency and we can provide a better service by honoring that principle. Be skeptical and question. Don't trust but verify. No one comes in first by following everyone else. No one innovates by parroting others (again sounds better with a British accent).
Rather than post about amazing speakers and presentations, one could post about that one really obnoxious member of your learning team and what you really want to do with them. Yes every learning team has that one member. Yes, even your learning team. Rather than post about all of the job opportunities, post about awkward recruiting dinners and ridiculous feedback that you get from recruiters (My favorite was from a midwest classmate who was told that his resume was to Iowa-centric. Would North Dakota have been better?). Finally, question the MBA experience! What classes looked really good but turned into your knitting hour? What did you wish that you had known then that you know now?
The MBA does not necessarily produce leaders. It sometimes produces good managers. But it should produce a more skeptical approach that understands its history.