POLICY/HEALTH PLANS: The sensible way out for the non-profit plans

Ken Melani, who was the medical director at Blue Cross of Pennsylvania when I presented to them back last century but is now the CEO of HighMark (since BC and BA merged), points out the rational logic for private (non-profit) health plans. And that of course is to try to stay alive as a regional power that will be used by the government as a utility after the eventual inevitable government take-over:

Government expenditures for health care have taken a bigger piece of total spending every year since the creation of Medicare and Medicaid in 1965. While Republicans in Congress viewed the new Medicare prescription drug program as a way to expand the role of private companies in the massive health insurance program, Dr. Melani said the end result is a further expansion of government spending. "History has been made," he said. "If you look year after year, decade after decade, the government has been growing in its role as the financier of medical services, both through Medicare and Medicaid. We’re not growing from the private sector standpoint; we’re shrinking as a proportionate share." The key for Highmark, the region’s dominant health insurer, is to maintain and enhance its position as a regional player so that it can work as a key government contractor, Dr. Melani said.

Of course, a government-regulated utility — which Melani sees as being Highmarks’ future — will have to be managed in a slightly more sensible way than the Republicans rolled over Part D.

If the government expansion continues, the ongoing experiment with the new Medicare Part D prescription drug program provides lessons in how it should — and shouldn’t — develop, Dr. Melani said. One is that consumers like choice, but too much choice is confusing. Consumers in Pittsburgh, for example, can buy Part D benefits in more than 60 shapes and sizes, but they can’t make apples-to-apples comparisons between plans, Dr. Melani said. Another lesson is that the transition of beneficiaries from one government program to another can be difficult. For example, many low-income patients whose pharmacy benefits shifted from state Medicaid programs to Medicare on Jan. 1 were unable to access benefits at the pharmacy because of glitches.

But then again, even if the government can’t manage its own programs, insurance companies have no hope of controlling costs:

But the other key driver is technological advances in medical care, whether in the form of advanced imaging equipment, improved medical devices or new pharmaceutical products. Noting the emergence of cancer treatments that cost tens of thousands of dollars per month, Dr. Melani said insurers were nearly powerless to stem the tide."How can we afford that new technology?" he asked. "First of all, is it worth it? We won’t even ask that question, because we don’t do that in the United States. But how many of these $100,000-per-year treatments can we continue to support and survive as a country, as an economy? "You take the unit price of professional services, the unit price of technology, and we’re out of control — totally out of control."

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2 replies »

  1. Theora, if only they could whip that by the Penn legislature. Sadly for the remaining Blues (e.g. Maryland), the “late to convert” crowd have found that the greed of the early adopters has nixed that option.
    On the other hand, where they’ve been forced to set up Foundations (e.g. California) as part of converting I think that the overall benefit to society has been a plus, given that the non-profit Blues still act like for-profit acvarious health plans, and the Foundations do some limited amount of good. (Of course I do some work for one of them so I would say that wouldnt I!)

  2. This approach sounds like it’s too focused on having the company survive over the long haul. Alternatively, they could take the approach that many of their CEOs seem to be taking, like in NY and California. Go public, get a lot of stock for yourself and your buddies, suck profits off the system as long as you can, and cash out before it all starts to come tumbling down.

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