I’m viewing the latest rumblings in the US health care debate from the confines of a clear but cold Britain, where the big news is that the country is joining the PIGS in entering economic meltdown—or at least being a lot more broke than it thought it was. (PIGS are Portugal, Greece, Ireland & Spain, not farm animals). And yet it appears that health reform is making if not a comeback then at least vigorous palpitations. The reason for this seems to be the strength that the Anthem Blue Cross/Wellpoint premium rises have imbued into the Administration.

Those of you reading THCB over the years will know that I think the individual insurance market is doomed to fail and should be replaced. It has its apologists; for example Cato’s Michael Cannon here criticizes Paul Krugman who explained last Friday why the individual market goes into a death spiral. Michael claims that Mark Pauly’s research shows that the individual market works. What Pauly’s work (and I despair at having to read it again, so this is from memory) tends to show is that insurers are incompetent at charging sick people to the full extent that they cost them, but do charge them roughly three times what they charge healthy people. Pauly also said in Health Affairs that the individual market works pretty well for 80% of the people in it, but he seems to think that screwing the remaining 20% is OK. Coming from a tenured Ivy league professor who’s probably never had to buy health insurance in his life, that was pretty rich. But apparently Wellpoint’s latest performance shows that it’s not OK for much of the other 80% either—hence their dropping out, leading to Krugman’s death spiral.

But Wellpoint has shown its incompetence in three major ways.

Incompetence one. I severely doubt that Wellpoint loses as much money on its individual business as it claims it’s been doing.

The only figure I’ve seen is allegations that it lost $58m on California COBRA customers, and that California’s law extending COBRA to double the Federal period makes it worse for Wellpoint. I don’t understand why it’s been linked to the individual market problems. At least until the 2009 stimulus paid a big chunk of COBRA, very few people accepted COBRA. Those who do accept COBRA are buying back into the group policy they were previously in, which is precisely the opposite of buying an individual policy. (Of course for most people buying a high-deductible policy is way cheaper than group policies they are leaving. Of course that pricing only holds if you are healthy as those individual policies are underwritten and group policies are not).

What we do know, is that medical loss ratios in the individual market are typically much lower (i.e. the insurer keeps more of the money) than in the group market. In 2008 Wellpoint’s MLR in California overall was 79%, meaning that in the individual market it was lower than that (probably below 70%). Of course if you believe Cannon and Pauly, they were losing money in the individual market to buy market share. Cannon quotes Pauly as saying

Wellpoint had tried aggressively to expand its individual business by setting low premiums, and I think realized the underpricing to gain market share did not make sense in a recession, so they put premiums back up where they should be.

That might appear vaguely plausible until you consider what Len Schaeffer, a minor footnote in Wellpoint’s history (OK, OK, the guy who started it) said in an interview with McKinsey a few years back:

But today the most important thing for us is our actuarial data, which helps us price our premiums. As you might guess, pricing is critical. Our analysis showed that the so-called cycle in health insurance—three good years, three bad years—is simply a function of pricing discipline and pricing mistakes. There isn’t any doubt that the companies with the best pricing are less cyclical. In our case, we have no cycles at all.

We found that the most critical information for good pricing wasn’t how many contracts we had but how many people we had—who they were, their age, their gender, and where they lived. Together with regional and local differences in illness types and doctors’ behavior, these characteristics determined what the costs would be. So we gathered more information than anybody else about those things, and this was a huge competitive advantage. Now almost everybody does things that way.

We also make a point of processing claims quickly because we found that faster processing gives you a better idea of your costs and early knowledge about how trends are changing. By monitoring the landscape, we were able to raise or lower our prices before anyone else, which is really important in this business. You never want to sell an underpriced policy.

So either Wellpoint has been lying to the market, its customers, Wall Street and now the Administration in that it doesn’t need these increased premiums to do anything more than pump up its bottom line, or it’s lost that actuarial competence that Schaeffer was so proud about.

Incompetence Two. The history of health insurer profitability over the last decade has been their ability to increase premiums faster than their underlying costs increased. Over the 2000’s medical loss ratios went down as overall health care costs went up. Health insurers were keeping a larger share of a larger number. This was reflected in their profits and stock prices over the decade.

What they failed to do was to make any impact on what was actually going on in the delivery system. And Karen Ignagni herself has repeatedly and correctly said that health insurers are unable to do anything about underlying health care costs. Which leads to the rather obvious question, why are individuals, employers and the government paying them so much money for their services? Isn’t the societal point of paying an intermediary that they improve the situation between providers and end consumers? Doesn’t this mean that they are incompetent?

It does, and their solution (which Ignagni has consistently stretched the truth to defend) is that the taxpayer pays them over the odds to provide services to Medicare and Medicaid recipients.

Incompetence Three? So apparently Wellpoint can’t manage pricing (supposedly what it was good at) and can’t manage providers (something which now it or at least the head of its trade association admits it’s bad at).

Wellpoint has now also shown that it can’t manage PR. So much so that it’s 39% rate increase has breathed new life into the ashes of the health reform debate—a debate that previously produced a bill that would essentially eliminate the individual market where Wellpoint made (or at least where we thought it made) so much money. And this is a health reform bill that it was desperately trying to torpedo by the end of 2009.

With three such incompetencies, you might be wondering what the point of Wellpoint’s existence is? Or what’s going to sustain it, and the massive salaries it pays Braly et al.

But I’ve think I’ve got the answer. You see Wellpoint didn’t understand that the individual market was going to die, and that their first incompetency was an incompetency.

Now Wellpoint is terrified that its individual market bonanza is disappearing, and it’s desperately looking around for an alternative. And someone there remembered that in that reform bill it was dissing not so long ago are billions of dollars in subsidies—which now look pretty good given that all Wellpoint has to give up is an individual business that on which it’s losing money.

But health reform was dead and buried post Scotty Brown. “Hang on”, someone in the Wellpoint war room thought, “what can we do to change that agenda?  Perhaps if the White House had a poster child for health care cost explosions in the absence of health reform?”

“What would happen if we arbitrarily announced a 39% price increase? You know, just to get the music started again?”

I think we have our answer.

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84 Responses for “Wellpoint: just incompetent?”

  1. Tom Leith says:

    Exhausted, of course it is about money. Unless you and your clinical colleagues are willing to work for free, the rest of us have an unpredictable chance of needing a lot of money on very short notice. It is that simple. Sorry.
    Kaplan, Nate and Margalit mostly talk past each other: the term “insurance” means completely different things to each of them. I wish we had a term for “social insurance” that doesn’t have the word “insurance” in it: I think that would help a lot. That way Nate could say “I prefer insurance” and Margalit could say “I prefer kerpumpalump” and they wouldn’t be trapped by the vocabulary problem. This notion “being rich is evidence of desert” is deeply ingrained into our essentially Calvinistic culture. Spelling flames are unseemly and unhelpful.
    Vikram, Nate did answer your question. He’s more a Jeffersonian small-r republican and it looks like you’re more a Hamiltonian small-r republican. He’s defending the Jeffersonian vision of the republic.
    paolo, universical healthcare “is” whatever the government says it is.
    matthew, I don’t know how much wellpoint makes on what, but I think #2 & #3 are spot on.
    Oh shoot — I could’ve just waited for jd ;-)
    t

  2. jd says:

    ExhaustedMD,
    Being a clinician has real but limited value in the policy debate. If there is a debate about food safety in meatpacking plants, should only meatpackers be listened to? I, for one, would be keen to hear what people versed in the public health data have to say, as well as people who can tell me about the cost of various safety regulations versus the expected benefit.
    I would expect the meatpackers, in general, to not want very much to change and in general to be motivated to support things that make their lives easier, with less onerous restrictions, and higher pay. Same goes for clinicians, or any representative individual working in one of the segments of the health care sector.
    Maybe rude to write. But, rude has its place at times.
    You and I, of course, transcend our industry roles. ;)

  3. jd says:

    Tom, glad you didn’t wait. Good points and certainly not duplicated by mine.

  4. Margalit Gur-Arie says:

    jd, I don’t quite understand your argument. Either suppliers are pushing costs, or rather prices, higher or Americans are pushing demand, therefore utilization, higher because they will not be denied, which one is it? Or is it both?
    Every statistic I have seen indicates that Americans are not using more health care services than people in other countries. They are just paying multiples of what other countries are paying. So why would managed care be a good solution?
    I also don’t think that Medicare and the private insurers suffer from the same problems. Medicare cannot control costs because the government is selling out to supplier side lobbyists. Private insurers are not controlling costs because they have an escape valve in the form of unfettered ability to raise premiums and reduce coverage.
    The way I see it two things need to happen simultaneously. The government needs to stand up to suppliers and cut reimbursements for products and services in a smart way, not across the board. Primary care must be protected. The second thing that needs to happen is a “public option” for the exact same reason that the President originally mentioned. It will keep the private insurers “honest”.
    If we do all that and it still turns out that this country cannot afford to support the same levels of care as the Europeans, which I find preposterous, then it will be time to discuss managed care. Not now.
    Tom, I think I understand Nate rather well, and I think Nate is mostly right on the money when he replies to me. I’m not sure about “kerpumpalump”, but I would prefer that the Nate style insurance notion would just go away, and Nate knows that.
    I’m not sure that people in this day and age can be either Jeffersonian or Hamiltonian, unless in the very strict interpretation of small versus big government, but that would leave out the essence of both great men.

  5. Jd says:

    Margalit, I don’t have hard numbers to show right now but based on my years of paying attention to this I’d say that unit cost is at least two-thirds of the problem. Utilization factors in at least two ways: a preference for more intensive/expensive interventions when simpler, older, cheaper and roughly as effective ones are available. And that happens in part because of unit cost. The increased rate of cesareans in the US over Europe is an example.
    If you look at some utilization measures (bed days per thousand, primary care visits) we of course have lower numbers than other nations. It isn’t about utilization per se, but utilization of the most expensive stuff (in questionable circumstances) which is made more expensive by the lack of controls on unit cost.
    And all of this is enabled by the confused trust the public places in providers and to a lesser extent suppliers (pharma, devices) to act in the public interest, joined with a lack of understanding of how insurance works, an entitlement attitude towards care for the insured, etc.

  6. archon41 says:

    If you include the concept of “monetary self interest” in the definition of “profit,” I am quite at a loss to imagine how you remove “profit” from health care.
    Here’s the problem: Let’s say you are a claims examiner for Cigna or Aetna. You are looking at reams of bills from a certain provider. You know from past experience that this provider bears watching. You are convinced that that many of the procedures are overpriced and/or unnecessary. The procedures in question do not fall within any of the limitations or exclusions of the policy of insurance. You don’t know, and really don’t care, whether the impetus for these procedures derives from the patient or provider. You just know you’re being hosed down. So what do you think you’re going to do? You’re not a doctor, and the question at hand turns on medical judgment. You consult with someone within your network who does have the requisite level of expertise, and he or she agrees with you. So that leaves you with the choice of paying the dam thing or getting into a nasty dispute with the provider. From past experience, you know how that is going to turn out. You are going to be “roasted” for coldly denying medical care, for the most contemptible of reasons, to a deserving patient. So you pay the dam thing. If you’re handling Medicare claims under contract, of course, you don’t get into all this. You just check the arithmetic, maybe, and cut the check.
    Appealing to providers to exercise self-restraint on these issues is not only a waste of time, but a confession of sappiness. Unnecessary and overpriced treatment will continue until some mechanism is created whereby they can effectively be challenged.

  7. Nate says:

    If only it was limited to questionable medical necessity. About 10 years ago in Southern CA one of my adjusters got suspicious about a provider billing for out patient surgeries or some sort of treatment. Unlike a number of carriers and other payers we assign adjusters to specific groups so they get to know the members and the plan, some of that value we don’t add Peter. She noticed an unusual number of people seeing the same provider group. Normally this wouldn’t raise flags with an auto-adjudication system but she was curious and looked into it further. Eventually it was determined they where recruiting patients, not performing the service, and pay them a cut. We had clear evidence which you would think we could take to the police and have people arrested, not even close. It took years before they ever got in any legal trouble and then it was minor and limited to the owners of the facilities. To protect our plan we denied all claims from the provider from them forward, for which we caught hell, not only from the member that was pissed they weren’t getting their kick back but also from the provider. There is such a feeling of entitlement that even when we made clear we knew what they where doing, would never pay them another cent, and had turned all our info over to the police they kept on doing it. It went on for a few more years till they were finally shut down.
    If we can’t easily deny non necessary care obtained under illegal pretense without being threatened with lawsuits and complaints to the DOI how do we even start to question the border line legit care? Providers and individuals feel they are legally entitled to what ever payment they want from employers and carriers and our politicians have helped foster that belief. Obama’s populist proposal today saying the government is going to have rate setting authority being a perfect example.

  8. archon41 says:

    While we’re awaiting an authoritative overview of Obama’s new proposal, here are a few tidbits from the White House summary: “. . . all Americans who can afford insurance will have the responsibility to purchase it.” Waiver if premiums would exceed 8% of income, or family income falls below $18,700. Those under 30 may elect a “low-cost catastrophic plan.” No “public option.” The word “subsidies” is studiously avoided, but they will be provided (no details in summary.) Insurers will not be permitted to decline applications on the basis of “pre-existing” conditions. Exchanges will be created for individuals and small employers. I haven’t perused the section on federal involvement in rate-setting. No Public Option: Waaagh!

  9. archon41 says:

    Remind me sometime to tell you about the Austin orthopedist who named his yacht “Whiplash.”
    Any idea whether the elimination of annual and lifetime limits will affect the availability of reinsurance?

  10. Nate says:

    it will drive the cost through the roof. Those are the only remaining ways to limit utilization. Lifetime is a concern for expensive treatment, what stops a hospital from giving someone an ICU bed for 5 years strait?
    The more immediate concern will be the annual out of pocket, perfect example of people that have no idea what they are doing screwing things up.
    OOP is calcualted on member liability. We the payor have no way of knowing if the doctor collects it or the member pays it. You can have a provider over treat someone to a rediculous degree and never bill the patient for any of it. They are happy cause the provider is into the carriers pocket 100% and the employee doesn’t care becuase it never cost them anything. They have completly eliminated any member liability, one of the largest contributors to inflation to start with.
    Those two provisions alone with increase cost 50% in a matter of a couple years. We have spent a ton education people on the need to use generic, if we arerequired to pay brand at 100% with no cost sharing why would anyone fill a generic anymore?

  11. maggiemahar says:

    jd’s comments are spot on.
    Insurance company reimbursments to doctors, hospitals and patients have been going up by an average of 8% a year, every year, for the past 10 years.
    That is what is driving health care inflation–the underlying cost of care.
    The cost of care has been sprialing for two reasons: prices have been climbing, and as jd says we are using (and over-using) more high-tech agressive, intensive treatmetns.
    When American health care providers are compared to European health care providers you will find that our doctors “do more.”
    Americans undergo more surgeries than the citizen of any other country in the world– and the nmber has been climbing rapidly in recent years, with no improvement in outcomes. (See the June 1 New Yorker article by Boston surgeon ATul Gawande.)
    Our hopsital stays are not as long as in some European countires, but as Dartmouth’s Elliot Fisher puts it: “More happens to you while you are there”– more tests, more prcoedures, and you see many more specialists.
    In general, Americans undergo many more diagnostic tests using cutting edge equipment than in other countires.
    Yes, we do many more ceasarians, and many more bypasses and angioplasties (See this WSJ article on how many unnecessary angioplasties we do )
    We do PSA tests to try to diagnose early-stage prostate cancer, and then a great many men undergo treatments that they don’t need. (The vast majority would die of something else before the prostate cancer ever caused symptoms.)
    PSA tests are no longer done in many Euoprean countires.
    They respect medical evidnece, and when the medical evidnece showo benefit, they don’t do it.
    As the WSJ article on angioplasties points out, we tend to ignore medical evidence.http://online.wsj.com/article/SB10001424052748703652104574652401818092212.html
    When it comes to end-lf-life care, we tend to prolong the process of dying. Dr. Steve Schroeder talks about going into an ICU in another country and finding it almost empty. Where are the train wrecks? he asks (referring to patients on the edge of death, being kept alivein an ICU). The residents look down at their shoes . . until finally one speaks up: “You (Americans) don’t know when to stop!
    IN the U.S. we have built many ICUs for newborns– and in order to pay for them, we use them.
    Newborns in teh U.S. are far more likely to end up in an ICU– a few years ago Health Affairs published a story about the over-use and harm done to newborns.
    I could go on . . .
    Most of this over-use of high-tech expensive medicine is driven by the provider. Few new mothers demand that their new baby be placed in an ICU. They want the baby with them. Reserach shows that providers, not mothers, generally recommend the Cesarians.
    Providers popularized angioplasties–though now patients ask for them as a “quick fix.” But they wouldnt’ be asking for them if providers had done so many (unncessary) angioplasties, promoting them as a quick fix for angina (which they are but in most cases they don’t reduce the odds of death by heath attack).
    Once the patient is in the hospital, very few demand a battery of tests, or to see 10 or more specialits.
    They are told, you need this test; you need to see this doctor.
    As Dr. Don Berwick, president of the Institute for Health CAre Improvement puts it: We have overbuilt our healthcare system, and having created excess capacity, we have to use it.”

  12. “Same goes for clinicians, or any representative individual working in one of the segments of the health care sector.”
    True. For some reason a surprising number of physicians by dint of being physicians seem to believe that fact qualifies them to make policy pronouncements on healthcare policy.

  13. ExhaustedMD says:

    Maggiemahar:
    Let me get this straight, so I will repeat your opening comment with spaces to accent the sentence:
    Insurance company reimbursements to doctors, hospitals, and patients have been going up by an average of 8% a year, every year, for the past 10 years.
    Nothing between the words or lines I am missing, correct? That sentence is so absurd and outlandish, I have to ask you what planet you are on to legitimately claim this? And I ask my colleagues reading that above sentence, am I wrong to reply this way?
    By the way, I think people mistake profit for additional income stream above expenses. Profit is about making money and pocketing it for yourself or your company to then thrive further for one’s own interest alone. Making money and then putting it back into the system, or saving it in case there are future losses, is NOT profit, but providing services/product that is about serving the community, not your pocket.
    You gotta love how people try to blur that difference. What an addict would do. Rationalize, project, displace, and deny. The largest type of addiction we see in America, folks. Money, and power. The two elements that have crippled health care. And it is non providers who want to displace the blame onto the very people who are doing the work and effort to support the system. And, my lame colleagues are either too afraid or too lazy to take a stand and shut this garbage up!!!
    And, for that minority percentage of physicians who are profit/money oriented in care providing, they are as much scum as the non-providers trying to feed off the system. Yeah, roaches. The metaphor just gets better every time I write it!

  14. louisdous says:

    I love providers aka takers. First person I ever met was a OBGYN. Without me making even one comment to him, he smacked me. All down hill from there.
    Providers kill more people in the USA than all the insurance companies, guns, drunk drivers, Michael Vick, and Bernie Madoff combined. Yet, these takers receive over 80% of every health care dollar spent in this country. You would think with this arrangement, where they do not have to worry much about dirty work of getting paid, they would have the decency not to bash the folks signing the checks.
    If you want a better system, put up or shut up. Start your own healthcare system or managed care system or insurance company. Just don’t try and force me (or even tell me) on how to run mine.
    Thanks for listening. LD

  15. louisdous says:

    Power and money…
    Don’t you dare come between me and my patient in determining care.
    Don’t you dare tell me what to charge or what you will pay.
    A foolish consistency is the hobgoblin of little minds, adored by little statesmen and philosophers and divines.
    md stands for minor diety

  16. archon41 says:

    You’re being awfully insensitive to those who exist only to serve the community. Has no one ever explained to you that “profit” is but “capital,” “dead labor,” as it were, a parasite on the body politic which, rife as it is with internal contradictions, can only result in imperialistic wars and total economic ruin? You’re way off message.

  17. Nate says:

    Was just reading insure blog and their review, another one that will be sure to hit part D premium is eliminating the donut hole, not like Medicare is underfunded or anything.
    If compromise is keeping the worst parts of a bill and ignoring everything that has even a slight chance of working are we really better off with compromise?

  18. Peter says:

    “Nice try Peter but you strike out again, as of a year ago it was still the case;”
    http://www.rcpe.ac.uk/policy/2009/additional-private-care.php
    This response is a little late but Nate you are misrepresenting the link. It is “Draft Guidence” on policy. I quote:
    “The Department of Health should make clear that no patients should lose their entitlement to NHS care they would have otherwise received, simply because they opt to purchase additional care for their condition;”
    It could not be clearer.

  19. “Nothing between the words or lines I am missing, correct? That sentence is so absurd and outlandish”
    I think Dr. Exhausted might want to get some rest. I fail to see what is wrong with Ms. Mahar’s sentence or her comment in general.
    Dr. Exhausted’s comment is incomprehensible. Could he/she? possible rewrite it in a way that someone outside his/her mind can understand what is intended?

  20. Peter says:

    Here’s the solution I see as to who’s to blame:
    Everyone make a fist of each hand, then extend each index finger (no the index finger), now cross your arms in front of you and the person on each side is the one to blame. It’s called the “Healthcare Solution Salute”.

  21. ExhaustedMD says:

    At the end of the day, I live with my choices and decisions and get the feedback from the majority of my patients that I care and do what is clinically correct.
    With the way some people attack me for what I legitimately offer as how a business mentality has hijacked a profession that does not focus on the “bottom line” first, as capitalism does, it does reveal to me what people are trying to do here and with this alleged “health care reform” agenda.
    Guess you don’t like people who see the real agenda, eh?
    Again, like addicts respond when they are called on their selfish and destructive ways.
    I’m not backing off when it impairs patient care. By the way, I don’t gross multiple hundreds of thousands of dollars in income a year. It is not about the money for what I do for a career.
    How many of the detractors to my position can say that?

  22. Nate says:

    It is “Draft Guidence” on policy. I quote:
    If you haven’t even completed the draft guidence yet then how can the policy be in place? If you read the article it also specifically says some systems were continuing to deny care
    “I don’t gross multiple hundreds of thousands of dollars in income a year.”
    But you are grossing 1 hundred thousand of income? That is more then 90 percent of the population. Why are you better then 90%? I think your overpaid and should have your salary cut to no more then 50K

  23. archon41 says:

    I wonder how eager the insurance companies will be to bid on these “exchange” groupings? I assume Obama has incorporated the mandated loss ratios of the Senate Bill, and those don’t leave much margin for error. Offhand, I would think adverse selection and premium collection might be real headaches.

  24. Nate says:

    The exchanges I have seen generally work out pretty good becuase they eliminate competition and allow for excessive fees. They also allow collusion to eliminate competition from new ideas. Perfect example is what I do. In NV, OH and numerous other states my clients buy Anthem, or other carrier’s, high deductible plans then self fund back down to low deductibles. The carriers HATE it becuase we reduce their premium 30-50%. They don’t have a choice though becuase other carriers offer it, if Anthem disallowed it they would lose a ton of business.
    The only place I have ever been unable to do this is CA. All of the carriers participating in CalChoice disallow it. They have 1-2 crappy plans outside of the exchange they “allow” you to use but they are rated so bad they are worthless. By grouping together and agreeing not to allow this they have protected themselves from innovation.
    Exchanges are a terrible idea that will only increase cost and stifle competition.

  25. ExhaustedMD says:

    Anyone who truly believes that Maggiemahar’s statement I previously challenged is true is either out of touch with reality, or, a bold faced liar. You look any responsible clinician in the face and tell him/her their reimbursements from insurers, private or public, have increased in the past decade for their services, they either will laugh in your face, or, they will curse you out for such a false assumption.
    As for her adding patients to this claim, when do insurers reimburse patients? What, someone here is going to tell me premiums have gone down 8% a year for the past ten years? Really, you are even going to consider saying this?! As to the point of this thread in the first place, as Wellpoint is raising rates 39%!?
    You know what I don’t get? It doesn’t surprise me that people will make such comments, especially at an internet site where there is minimal accountability. It is that others will take something in print as valid, or, have an agenda to sell equal falsehoods and poor premises.
    Perhaps those of you who really are interested in true, honest, and accountable change to health care as it stands now might want to read Linda Stroh’s book “Trust Rules”. The subtitle “How to tell the good guys from the bad guys in work and life” puts the premise in full perspective.
    And we should start with the politicians who claim they are working for you, the citizens they claim to represent as constituents. Oh, I forgot, you all love back room deals and watching Senators who realize they are the crucial votes practice bold faced extortion to allegedly represent their districts and states.
    I don’t know what is more pathetic, these lying politicians, the ignorant citizens who keep them in office, or, the apologists and defenders who seem to only benefit from these slimy deals.
    Remember this simple truism, folks. If someone is knowingly lying to another in front of you, they will probably be lying to you sooner than later! That is, if you tolerate maintaining the relationship with the liar.

  26. Barry Carol says:

    Exhausted MD,
    When Maggie said that insurance company reimbursements to doctors, hospitals and patients have increased 8% per year for the past 10 years, her wording was imprecise. What she meant to say was that insurers’ TOTAL MEDICALCLAIMS costs have increased at that rate, not average reimbursement rates PER PROCEDURE. A good chunk of the medical cost trend is driven by higher prices charged by hospitals, especially those with famous brand names, hospitals that have consolidated into groups and community hospitals that have dominant market shares in relatively isolated geographic areas. Some is related to higher drug and device prices, some to advances in technology, more intensive use of that technology, upcoding, etc. and some to an increase in population and (very) gradual aging of the population.
    While patient demands and expectations are probably a cost driver in areas such as diagnostic imaging, drugs they see advertised on TV and end of life care, the fact is that the dominant share of medical costs are driven by doctors’ decisions to order tests, admit patients to the hospital, prescribe drugs, consult with patients and perform procedures themselves.

  27. Margalit Gur-Arie says:

    Maybe somebody should look at splitting up all these hospital conglomerates created by a flurry of mergers in the nineties. It seems that healthcare costs rate of increase has grown significantly during the same period.
    The only efficiency this mergers brought about is the efficient dictating of prices.

  28. Nate says:

    “As for her adding patients to this claim, when do insurers reimburse patients?”
    Every day, they reimburse over a hundred million patients a year. We constantly send checks to patients.
    As little as I care for Maggie’s work it was a case of bad wording, expenditures to providers have gone up every year. I am skeptical it is only 8%. What we pay for a 99213 might be the same or less but what we pay for the newest codes and the number of 99213s that are now 99214 or 99215 has without question gone up.
    “Maybe somebody should look at splitting up all these hospital conglomerates created by a flurry of mergers in the nineties.”
    Break up the hospitals and the insurers. All of the mergers in the 90s and 00s have killed competition. Its to easy for 4 hospital chains and 5 insurance companies to, even passivly, agree to inflated prices where they jointly bleed the third party dry. With technology We don’t need insurers the size of Anthem or United.

  29. Nate says:

    ExhaustedMD just to throw your words back at you and maybe shut you up for awhile we have groups/policies that only reimburse the patient, we don’t allow assignment at all for them so every payment goes to the member.
    When presented with proof of your lies do you retract or deny, that is how you gauge the person speaking in front of you

  30. louisdous says:

    Ms. Margalit, It is a proven fact that “splitting up all these hospital conglomerates” (i.e. increasing the number of seperate hospitals) actually increases the absolute total dollars spent as each hospital or facilty now has operating rooms, ICU’s, MRI machines, etc, with capacity that will be filled to cover the cost and generate revenue. Most states now have instituted CON requirements to address this phenomen.
    Exhausted, it is my personal belief that most Doc are confronted with a changing work/financial environment that gives them the feeling of being screwed. However, while they are not the only ones to blame, the providers did sign deals with the “devil” (Networks, hospital, etc) to avoid the unpleasant tasks of finding patients or worrying about being paid or collecting.
    If you don’t like the deals, don’t agree to them. Start your own health plan.
    You may not be receiving 8% increased fee payments, but I’ll bet the time you spend with each patient has declined. I know you think you have to see more patients to offset the low fees you agreed to, but why not consider kicking out the middle man and work directly with the patients instead. Could it be because they are “the ignorant citizens who keep them (politicians) in office”. Perhaps you could treat only the educated patients “I’m not backing off when it impairs patient care”.
    Thanks for listening. LD

  31. Jd says:

    I’ve enjoyed this thread. ExhaustedMD, if Maggie and Nate and Barry all agree on something you need to take a hard second look at the facts–all of them–before you keep contradicting them.

  32. ExhaustedMD says:

    First of all, I read of Nate being threatened to be banned from this blog site in the past for his irresponsible and hostile comments; Maggie made an original statement that I fairly called her on to restate, which; Barry, I assume, had the right to do for her, but I don’t buy his reasoning how it leads to patients being reimbursed.
    As I said before, and at this point do not expect the business model commenters to get, health care was not intended to be a business. Whether or not physicians played a larger role than I believe they did to let it happen, the profit model corrupted the health care process, and just shouting at me I am wrong and continuing the lie to support the agenda here, I won’t agree and hope readers see through the bs you folks are selling.
    You know, you all think it is so easy or clear cut to be a health care provider. Go to med school, or nursing school, osteopathy, whatever program you feel would fit your needs. Oh, but wait, it requires time, energy, sacrifice, and investing YOUR OWN MONEY to accomplish this. Doesn’t fit the business model now, does it!? Yeah, you don’t get the point. I just hope unbiased and objective readers get it. And then get over your bashing. To me, you write like addicts just protecting your turf. Money and/or a product.
    Hey, some doctors actually provide good care, and aren’t watching their wallets first. So, continue to project and deflect. I see through your agenda. It is a shame it took the majority of Americans so long to see that this “health care reform”, as currently presented, is not the answer.
    Look behind the speaker, and see the lobby being represented. It IS about taking out the profit quotient, folks, you just won’t read the majority of commenters here reminding you of that.
    And why this site really isn’t selling responsible health care reform answers. That is my take as I have watched the corruption become logrithmic.
    Politicians directing health care decisions. Does anyone else reading here see the absurdity of this statement?! Pay no attention to the man behind the curtain, that is what they want you to hear!

  33. jd says:

    ExhaustedMD,
    No one said and no one thinks it is easy to be a physician. We all know the hours are long, the training is grueling (more grueling than it has to be, but then when there is so much money at the end of the rainbow people put up with it). We know that if you go into private practice you become a small businessperson to boot, with all the paperwork and management headaches that entails.
    And no one posting here fails to understand that money drives decisions throughout the industry. You might be interested to know that Maggie actually wrote a book called “Money Driven Medicine.” You might read it sometime.
    As for looking behind the speaker at the lobby represented, you could start with yourself. The truth is that physician pay has increased faster than the CPI, faster than GDP, for decades. If you are a primary care physician, you are probably below the average and don’t see it personally, but that doesn’t make it less real.
    You haven’t said anything at all to discredit what Barry, Maggie, Nate or I have said about how physicians help drive up the cost of health care. Because for the most part we’re not using anecdotes in place of established statistics; we are using them in the service of established statistics. You are not.
    Here are the numbers from CMS. You’ll see expenditures on professional services have increased at a rate greater than the growth in GDP throughout.
    And for the record, you did not simply ask Maggie to “restate” her position. You said she was either out of touch with reality or a bold [sic] faced liar, and then suggested that many of us commenting here were the latter. Now, to be fair, Nate does this kind of thing with regularity. But I’m not sure that’s behavior to emulate.

  34. Peter says:

    “Break up the hospitals and the insurers. All of the mergers in the 90s and 00s have killed competition. Its to easy for 4 hospital chains and 5 insurance companies to, even passivly, agree to inflated prices where they jointly bleed the third party dry.”
    Nate, glad to see you’re agreeing there are excessive profits in insurance and hospitals, and I guess you’re saying those profits have been the result of collusion.
    Anyone in the insurance and hospital groups care to comment?

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