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POLICY: Kinsley–Good grief! (with UPDATE)

Supposed voice of liberal moderation Michael Kinsely is out with a Washington Post op-ed called Before We Go ‘Single Payer’ which is just staggering. I thought Arnold Kling was bad in his misunderstandings, but I apologize to the libertarians on this one. Kinsley’s piece just doesn’t make sense, which indicates to me that he doesn’t understand what he’s talking about.

He accuses Krugman and Wells of ducking the rationing issue — they don’t. Instead they say it can be delayed by cutting out some administrative costs, but it will come in the end. You may not buy that argument, but it is a proven fact that admin costs are lower in single payer nations than they are here. Check the CMS cost data if you don’t believe me.

But then he wonders off into absurdity.

But anyone is insurable at some price — a price that reflects the cost he or she is likely to impose on the insurer. Adverse selection is only a problem to the extent that insurance is not really insurance but rather a subsidy.

Frankly I have no idea what he’s talking about with this “subsidy” stuff. If he means that some people pay more in premiums than they receive in benefits and some pay less, then that’s what insurance is. But I have a simple way of correcting his notion that everyone is insurable at a price. Let’s give Kinsely a pre-existing condition, and send him out into the individual market. He’ll change his tune faster than Mark Pauly wold under the same circumstances.

And then he seems to have missed the whole concept of the debate on the political left between the Enthovenistas/voucher crowd and the single payers. And most importantly that no one seriously thinks Americans won’t be allowed to trade up to a better class of waiting room with their own money.

The problem is putting in a floor for everyone, not getting rid of the ceiling — that’ll come naturally once everyone’s in the same system.

Nowhere does he mention the one thing that is necessary for fixing health care — the imposition of some type of mandatory universal insurance system. Something that everyone in the voucher v single payer argument realizes is essential. And however it happens that is not “incremental change”.

(Trap, you can use this as a thread to beat up on Kinsely, Krugman me et al)

UPDATE: Meanwhile a (gasp) Republican, although not one in the good graces of the loonies running the country any more, has some ideas that are at least getting at (some of) the problem and mention the "mandatory" word. Here’s what Paul O’Neill said:

Mr. O’Neill has long argued that addressing health care with tax
incentives is an inadequate approach. "When they’re talking about tax credits,
they’re talking about our money, not their money," he said in a phone interview
last night. "When you use tax credits and deductions, unless they are
refundable, … they’re very inequitable, because the value of the credit or
deduction depends on the level of income or wealth accumulation an individual
has."Mr. O’Neill said Congress should pass a law requiring all Americans
who make more than $30,000 a year to purchase catastrophic health care coverage
for themselves and their families, with fewer deductibles and co-insurance
payments. The government would then use general revenue funds to purchase health
insurance coverage for lower-income people, he said.

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25 replies »

  1. Tom
    “I don’t know what I want to see, but what we got ain’t working so well for anybody.”
    My conclusion too.

  2. “I don’t have time to lead an inquiry. I’m too busy trying to get paid”
    Sorta what I’ve been saying in general, and you seem to agree. Docs have not taken the time to lead on this issue. Docs have taken the time to oppose change whenever they felt it threatened their income (money) or autonomy (power) – there are no angels here. Still, the country needs much more from its physicians on this issue. I really don’t want government policy wonks and academics making the decisions. I really do expect leadership from physicians. But they don’t have time. So we get what we got. I’m not happy about this, in case you haven’t noticed.
    “And you have not heard me complain about my charges or contracted allowables.”
    True. At the same time your gross income has grown over the years (what you bill insurance companies). And you do complain that your net income is down. Well, so’s mine. Can’t help you on that one.
    “the government seems to be able to do it for an administrative burden of 2-5%”
    But “the government” does not “do it” – this work is contracted out to commercial insurance companies and Blue Cross organizations, who administer the government programs.

  3. Greg,
    You are in a very tough spot. I understand why that “all cash” approach is so attractive.
    > she (i.e., her company) would not stay in business if
    > they had to put up with the crap we do!
    They have to put up with just about all of it. Their customers take deductions off invoices for reasons they simply invent, or for no reason at all. They pay late. The argue over the bills, everything you describe. Lately the government has added a number of tracking an reporting requirements, and they have added a person just to take care of that. And no, they can’t simply raise their prices to cover it.
    They do not, as you put it “calculate what it would like to make as a profit margin, and then charge its customers what is necessary to meet its goals.” They are price-takers in the market, just like you are. The things they distribute are quite literally commodities. Whatever is the prevailing price in the market, they figure out whether they can meet it. If so, great. If not, they drop that product or customer. Simple as that. Over time, her company has simply grown better than other companies at meeting customer needs and adapting to changes in the market. That is how they stay in business. She has worked there more than 20 years — I have seen it all. Well, not all, but I hear about a lot of it in great detail .
    This is true of any business that can’t somehow get market power through patents or other intellectual property, or other means. You are not alone. Every small business in a competitive market has the same circumstance. You feel it more because you are solo, you face a small number of buyers, and you have only one product. Most of my brothers in law are self-employed tradesmen. Some years they do well, other years not so well. This mostly has to do with the business cycle. But sometimes a new competitor comes into the market and undercuts everyone’s prices until he goes out of business himself, which can take a few years. All the time their customers don’t pay them, their suppliers mess with them, … Do not think that you are uniquely challenged.
    John
    > I am a little surprised that you actually prefer
    > dealing with a government clerk over an insurance
    > company clerk.
    He’ll only have one clerk (set of billing rules) to deal with, and the government’s implementation of electronic claims and so-forth is really quite good. Their rules are pretty clear, and they tend to follow them. I am not so suprised. There is a lot to be said for single payer, but only if it can be combined with many of the Managed Care features rejected ten years ago: gatekeepers and so-forth.
    > then managed care will disappear
    Managed Care, as “ethically” conceived, already has disappeared. Anything called Managed Care nowadays amounts to beating up on providers to reduce their prices, coupled with some opaque UR at the level of the individual doc. The patients hated managed care because it took away their “choice”. They complained to their state legislators, and “ethical” Managed Care essentially illegal in most states. The the docs hate especially the current incarnation of “Managed Care” because the insurers can play them off against each other to reduce prices. The docs’ response has been to get Any Willing Provider laws passed, that took away the ability of a PPO network to add value by acting as a sort of Quality Review Board for members. The only thing that is being managed today in most Managed Care is the expenditures, not the care. This is not good for anyone. There are some efforts going on in the purchaser camp to begin to address some quality and structural issues like Leapfrog.
    I am glad you ride herd on your ASO contractors. I need to learn more about this end of the business.
    Nobody is smart enough to figure everything out on his own, and I am a little skeptical of centrally-managed solutions generally because I don’t think a roomful of the very best are bright enough to do it either. I don’t know what I want to see, but what we got ain’t working so well for anybody.
    t

  4. John,
    “Physicians who should be leading the inquiry on this whole subject have largely chosen instead to complain that their charges have not increased and tend to blame the insurance companies for that.”
    I don’t have time to lead an inquiry. I’m too busy trying to get paid for a physical I began billing 3 months ago.
    And you have not heard me complain about my charges or contracted allowables. I even said that I thought some were too high. Reimbursement rates, though stagnant, are fine. It’s the increasing overhead necessary to SIMPLY GET THE CHECKS that is killing me.
    I am sure that your plan pays on time and follows its own rules and never denies a claim just to see if anyone will question it. But, even so, yours is only one of hundreds of plans that I might have to deal with, each with their own rules, each covering different prescription meds, each making me fill out different prior authorization forms and with different requirements for precertification of tests.
    “OK, then let’s have single-payer. If it saves money, I’ll support it.”
    If done right, I am fine with it. In fact, my professional organization has been pushing for it for a few years now (AAFP).
    “I see no rational argument that insurance companies are solely to blame for the growth in the cost of our plan.”
    I presented you with two well-done studies showing that our health system has an administrative overhead of 25% of $400 billion, that show that the government seems to be able to do it for an administrative burden of 2-5%, and that other governments do it for as low as 1.3%. Healthcare providers, be they hospitals or physicians, have no reason to create administrative costs out of the blue. So where is this cost coming from except the private health insurance industry?
    Tom,
    “Can’t you engage in a little first-class price discrimination, and accept less from your self-pays whom you are convinced can’t reasonably pay you $64?”
    No, I cannot. Not without breaking the contracts I have signed with insurance companies and (though this has recently been questioned) with Medicare.
    “My wife is in food distribution, and it seems to her sometimes that grocers have NO MOTIVATION to deal fairly with her company.”
    The difference between your wife’s occupation and mine is that her company has every right to determine what it costs to do business and distribute their products, to calculate what it would like to make as a profit margin, and then charge its customers what is necessary to meet its goals. She does not have to deal with a third party company that’s located in another state that decides for her what she is able to charge and often, for inexplicable reasons, decides not to pay her at all. For all her bills of laden and customers that do not understand and every other headache she complains of, she (i.e., her company) would not stay in business if they had to put up with the crap we do!

  5. “Having heard what happens between PCPs and claims processors, maybe you can help do something about it!”
    Tom, my company has negotiated a range of perfmormance guarantees with our ASO administrators. We receive monthly reports that show 97% of claims are paid within 30 days. Also that the accuracy of payments and compliance with our plan design are above 99%. Also that there is a minimum of claims pended to avoid the 30-day report. A long list of performance criteria. Once a year we engage an outside auditor to determine whether the actual performance matches the reported performance. For the past 4 years, the auditors have reported that it does – within a confidence interval of 95%.
    You do raise an interesting point. Yes, businesses are demanding insurance companies reduce our benefits costs. That demand is where “managed care” came from. But keep in mind no one ever asked for managed care. We asked for control of our benefits costs. If managed care ultimately fails to do that (and it might if its benefits do not outweigh its costs), then managed care will disappear. It will be replaced by the next most promising idea – no matter whose it is. (I’m not betting managed care disappears any time soon. Many of the single-payer countries that are cited as successes manage their costs using similar “managed care” techniques.) On the other hand, if a better idea appears, it might replace managed care pretty quickly because the pressure to reduce costs is that great.
    I haven’t seen the better idea. Not on this board, not anywhere. I don’t think I’m smart enough to figure out the better idea. I do hold a wan hope that I’m smart enough to recognize it, if I see it.

  6. Dear Dr Hinson,
    You say that
    – my charges have not increased in 4.5 years
    and you say
    – I see 20-30% more people per day now than I did 4 years ago.
    Then your income has risen – the amount that you charge to the insurance companies, I mean.
    Your defensiveness on this point illustrates something that I stated before. Physicians who should be leading the inquiry on this whole subject have largely chosen instead to complain that their charges have not increased and tend to blame the insurance companies for that. In my opinion insurance companies are increasingly only bearing the message. The message is coming from large plan sponsors such as my company. I don’t think it’s a accident that insurance companies are pushing “consumer-directed” plans now. Insurance companies want out of the middle. I think it would be good – a shock, but good – for individuals to begin to comprehend what health care really costs. And I think it will be good – a shock, but good – for individuals to begin to understand how expensive health care is. The let’s permit the chips to fall. Wherever that leads.
    BTW, I deal almost every day with some pretty hairy disputes between our employees and providers of all kinds, about charges for health care. My opinion? There are no angels in these disputes.
    “The hospital got the rest. Maybe I am indeed misguided in the blame I am giving to insurance companies.”
    Ya think? Or do ya really think the insurance company is responsible for the hospital getting the rest?
    Please do not read into my statements any defense of insurance companies. When I say ” There are no angels in these disputes” I mean there are no angels. The angels don’t become involved in fights over power and money.
    “the US’s Medicare and Medicaid programs have administrative costs of between 2-5%”
    OK, then let’s have single-payer. If it saves money, I’ll support it. If it truly works that well elsewhere – and costs a lot less – how could I not want it? But I am a little surprised that you actually prefer dealing with a government clerk over an insurance company clerk.
    “according to these studies, even though your company does not purchase insurance, inefficiencies created by the private health insurance system means you are spending $1 million more than you need to just to subsidize the bureaucracy that is created by it!”
    Hmmm. I have no doubt that “studies” report this. But are they believable? I mean, if that is true for health care, why wouldn’t all consumer goods be more efficiently provided by the government? Pencils. Cars. Groceries. Housing. Vaccines. Perhaps more to the point, why shouldn’t all physicians be employees of the state? George Bernard Shaw advocated as much about a hundred years ago –
    “Make up your mind how many doctors the community needs to keep it well. Do not register more or less than this number; and let registration constitute the doctor a civil servant with a dignified liming wage paid out of public funds.”
    Was Shaw really that much ahead of his times?

  7. So John —
    Having heard what happens between PCPs and claims processors, maybe you can help do something about it!
    Suppose you survey the docs you are paying through your ASO contractor about their satisfaction with you as a payer? You can begin to develop performance standards for your ASO contracts to keep the doctors of your employees happy, so your employees stay happy.
    I had an idea I posted in a comment over here about a way to mitigate the problem of the battling paperwork while still insisting it be done. Could you get your ASOs to do something like this? A late pay makes some difference to a hospital, but it is murder on a solo doc and I think as a matter of equity something like this arrangement ought to be standard.
    What do you think?
    t

  8. > Regarding healthcare provider reimbursement, my
    > charges have not increased in 4.5 years (because
    > my insurance contracts have still not caught up
    > with them, so why should I increase just to punish
    > those without insurance).
    Can’t you engage in a little first-class price discrimination, and accept less from your self-pays whom you are convinced can’t reasonably pay you $64? You do not “punish” anyone by asking to be fairly paid. In a sense, the patient’s financing mechanism is beside the point — plumbers do not think they “punish” people who don’t have a new home warranty, do they? Go ahead and put up your charges to the point you think you would be reasonably paid for that service. You “punish” no one. Keeping an unreasonably low charge-master hurts everyone, most of all you! Any practice management consultant will tell you this. Maybe you should ask one to punish you a little.
    > His total bill was $15,000. The surgeon got $600.
    > I got $64 even though I stayed 45 minutes late
    > to take care of him. The hospital got the rest.
    Hospitals get the bulk of it, but probably not everything they billed. At least they would not here. Pharmas get I think 15% of total spending. Of course, pharmas would get less if primary care docs prescribed more generics and prescribed less, but I digress. Primary care docs have got to become professionally active.
    I have said it before: primary care docs ought to expect to be paid for the work they do. If “reasonable” means $110 — 150K for about 50 hours’ work/week, then when you reasonably spend 45 minutes on a patient (whether “late” or not) you ought to expect to receive about 3/4 of about $220 for your time — period. On the flip side, benefits managers do not want to pay someone $220/hr to hold their employees’ hands and tell them everything’s going to be all right — spouses, friends, or social workers do that for a lot less money. So there is tension.
    t

  9. > They profit by more by obfuscating the whole process.
    I think I see where you are going — you are saying that in their apparent refusal to have a transparent claims adjudication process, they refuse to standardize or cooperate with you, that all the standardization that has occurred has been one-way, and for their convenience. You say further that through this refusal, the insurance industry profits unjustly.
    Insurers will counter that a transparent adjudication process is open to gaming, and there is all kinds of evidence that they are being gamed by patients and by providers sometimes cooperating with patients, and sometimes assaulting them for profit with unneeded tests and even procedures. Insurers will say they are just trying to enforce their contracts (not that they’re all that good at it) and even to look out for their members.
    I agree that everyone is stuck in a web of mistrust. This will take a long, long time to solve. I would’ve preferred that The Guild would’ve handled all the insurers’ concerns internally, but it didn’t, and others got involved. The genie will not now go back in the bottle.
    I can tell you that clerical errors like your $1780 bill are not unique to medicine or to insurance companies, and are in fact (because of standardization) less severe in the medical industry than in many others. My wife is in food distribution, and it seems to her sometimes that grocers have NO MOTIVATION to deal fairly with her company. She tells exactly the same stories. Her company has herself and four other people who work full-time on billing and collections, using processes far less standardized than are common in medicine. The president of her company will on occasion have to get involved too. I am sure he doesn’t like it.
    My own analysis of the problem here is that the low-level clerks have not the authority or training or judgement to do other than what they are told, by rote. Even if you get to a UR nurse who can get things fixed for you, everyone requires written documentation of some kind — in your case it will be a re-submitted bill; in my wife’s case it is a pile of invoices, bills of lading, signed warehouse receipts, copies of checks and remitance advice memos, credit memos, bits of contract language, and a letter from her telling her counterpart at the grocer’s what it all means in very simple language, plus multiple telephone calls to follow-up. It is just a cost of doing business, and she is not always successful. Then she, like you, has to decide whether to fire the customer. This may not make you feel any better, but at least with respect to process, you are better off in medicine than in many other businesses.
    I understand your frustrations with insurance companies, I really do. You haven’t told a story I have not heard over a dinner table, from doctors not my wife. Multiple times .
    Insurance company claims processing systems are by and large poor. I know — I have seen two of them up close and personal, and I am told they were better than most. We should have quality standards for claims processors as well as providers. What’s good for the goose, and all that. Note that’s more standards. Not less.
    > [standards are] their primary means for denying
    > claims and saving money.
    Standards are also their primary means for approving claims. You are complaining that the standards are being abused. Anything can be absued but abusus non tollit usus, abuse does not take away use. The abuse of standards is beside the point.
    > The health insurance industry has NO MOTIVATION to
    > simplify…
    I could make the same observations about providers (generally) having no motivation to report on processes and outcomes, or to refrain from doing any number of unasavory things that have been done over the years.
    > requiring DRGs or specified pathways does not save
    > money nor have such efforts improved the quality of
    > the care.
    This is nonsense. How many more AMI patients are being treated more appropriately in EDs everywhere now than a few years ago? Even so, it is obvious there is a ton of room for improvement on this score, and it would not be obvious but for standards and reporting requirements. This is just one example; there are zillions of others.
    I think, by the way, you are owed at least interest on the $1780 bill that went unpaid. Personally, I think you ought to be owed reasonable collection fees as well, but you probably aren’t. And maybe you want to coach your billing and collections person on how you finally resolved this so you can have better service from her(?) in the future. It seems this is what you’re paying for and did not get.
    I urge you to get involved professionally to help solve these problems. You can do far more about this than I can — my coat is the wrong color. Maybe you have a local MGMA or HFMA chapter nearby. I am sure they would love to have your participation.
    t

  10. Regarding healthcare provider reimbursement, my charges have not increased in 4.5 years (because my insurance contracts have still not caught up with them, so why should I increase just to punish those without insurance). I see 20-30% more people per day now than I did 4 years ago. I have the same personnel (though at increasing costs), pay the same rent, buy the same supplies, am dealing with malpractice insurance costs that are 200% higher but should be covered by the added number of people I am seeing, and otherwise have taken home less money each year for these past four years.
    John, when you pay your $4,000,000 bill, take a closer look who it is going to. It is going to pharmaceutical companies, hospitals, and high dollar specialists. A small fraction of it is going to primary care physicians so do not lump us all together as greedy healthcare providers.
    I looked a patient’s medical bill recently. He came in, I examined him and arranged for tests, sent him to a surgeon, and he had surgery to remove his gallbladder. His total bill was $15,000. The surgeon got $600. I got $64 even though I stayed 45 minutes late to take care of him. The hospital got the rest.
    Maybe I am indeed misguided in the blame I am giving to insurance companies. Maybe there is something bigger that I am missing. But explain the following to me.
    ———————
    (I cut and pasted and copied the below from another blog a month or two ago, but I lost the bookmark and cannot remember where I found it. My apologies to the author.)
    A prominent study that appeared in the New England Journal of Medicine in 2003 estimated that the cost of administering the US’s health care system was about $300,000,000,000 in 1999. A more recent study in the International Journal of Health Services found that in 2003, administration costs in the US health care system ate up about $400,000,000,000, or about 25% of total health care spending.
    (http://www.pnhp.org/news/IJHS_State_Paper.pdf, http://content.nejm.org/cgi/content/abstract/349/8/768)
    By comparison, national health care systems incur administrative costs of a few percent of total health expenditures. According to the NEJM study Canada’s national health insurance system spends just 1.3% on overhead, and the US’s Medicare and Medicaid programs have administrative costs of between 2-5%.
    In addition to being large in an absolute sense, administrative costs have been rising faster than other health care costs in recent years. The Medicare and Medicaid Actuary’s Office estimates that the direct administrative costs of private health insurance plans (including profits) rose from about $40,000,000,000 in the late 1990s to about $95,000,000,000 in 2004.
    These estimates only measure the direct costs paid by the insurance plans themselves, however, and exclude the bureaucratic burdens faced by doctors, hospitals, etc. to deal with insurance paperwork. The NEJM study estimated that hospitals and doctors devote roughly one-fourth of their resources to dealing with insurance paperwork. Indirect administration costs in the US health care system are roughly four times the direct administrative expenses incurred by the insurance companies themselves.
    All in all, the IJHS study concluded that the US health care system could probably eliminate 75% of its administrative costs by switching to a single-payer system. The excessive bureaucratic burden (i.e. over what it could have with a single-payer system) of the US’s health care system seems to be in the neighborhood of $300,000,000,000 per year. That’s $300 BILLION. And it’s growing, not shrinking.
    Economic theory provides several fairly clear and convincing explanations for why private health insurance plans spend so much money on administration, including economies of scale (or lack thereof), burden-shifting, and selection.
    First of all, private health insurance plans are far smaller than national health insurance plans, and thus have much less ability to reap economies of scale. For the same reason, the relative administrative costs of the Medicare system have steadily been falling over time.
    Secondly, private health insurance plans have a strong financial incentive to try to shift as much of the costs of each insurance claim on to individuals, providers, and other health insurance providers. It therefore makes sense for them to devote substantial resources to the task of trying to avoid paying claims that are brought to them. One example of this effect is how insurance companies go over claims with a fine-toothed comb to try to deny them whenever possible. A national government-run insurance plan would have no such incentive, since there would be no one to try to shift the burden to.
    Finally, private plans also have a strong financial incentive to try to exclude high-cost individuals from their plans. It therefore makes sense for them to devote a lot of resources toward vetting potential enrollees and screening out those that they guess will have large claims. Again, a national insurance plan has no such incentive, because by definition it is set up to insure everyone.
    These are just some of the ways in which the market for health care is rife with what economists call “market imperfections” and “market failures”. And as every economist learns in their first year in graduate school, when there are market failures and imperfections, the private market outcome is not likely to be the most efficient outcome, and government intervention (or even provision of the good) will probably produce far better results. Unfortunately, the evidence from the US’s health care system seems to suggest that economic theory is exactly right in this case.
    ——————————–
    So John, according to these studies, even though your company does not purchase insurance, inefficiencies created by the private health insurance system means you are spending $1 million more than you need to just to subsidize the bureaucracy that is created by it!
    I am not sure of the answer. I think there needs to be some hybrid of private and public pay. There needs to be a way to make consumers conscious of the costs. I think we need to encourage the adoption of electronic medical records. I think we need to find a way to fairly incentivize physicians to improve care, but I also think we need to build in health incentives for consumers so that their costs are lower as long as they take care of themselves. And I think we need to eliminate this huge drag on our system that is referred to above.

  11. “The health insurance industry has NO MOTIVATION to simplify their system. Doing so would mean that many of those charged with the simplification would lose their jobs. Doing so would decrease their profits. They profit by more by obfuscating the whole process.”
    Doc, you’re probably a nice guy and a good doctor, but you are so busted on this issue.
    1. Insurance companies do compete and have invested enormous amounts over the past 20+ years in their infrastructure and operations to deliver benefits at lower cost than their competitors. Their principal investment has been in so-called managed care – which doctors and hospitals have fought and complained about, just about every inch of the way.
    2. Your comment on lack of motivation to change the system ignores how the present system got here in the first place. Systems are created by people looking for new and better ways. New entrants to a competitive market are disruptive precisely because they threaten the status quo. Would insurance companies have voluntarily developed HMO’s? Maybe not. But HMO’s nevertheless appeared and the necessity of remaining in business forced the insurance companies to adapt. Adaptation is how companies grow; it’s how they they secure profits, and it’s how they provide jobs – NOT by holding on to outmoded systems while someone else invents ways to take their business away from them. You can name the companies who maintained the latter strategy – Equitable; John Hancock; Travelers; Metropolitan; New York Life; get the picture? Their health insurance operations no longer exist. By no means is this insight limited to the insurance industry. My grandfather and his two brothers practiced medicine in the early decades of the 20th century – no way could they succeed today doing only what they did then.
    3. “They profit by more by obfuscating the whole process.”
    Well. I manage a large benefit plan. When I say large, I mean my company spends nearly $200 million per year on employee benefits. We will spend less than $200 million this year. We will spend more than $200 million next year. Why? Because the cost of health care continues to rise year after year. My company does not have a group health insurance policy. Our benefits are not insured. We hire insurance companies only as administrators – to reimburse the costs incurred by our employees, according to our plan. We do not buy insurance. We do not pay insurance premiums. We fund the cost of our employees’ health care directly from our bank account. Yet without the presence of insurance our costs have gone up monotonously year after year by 8-12%. I see no rational argument that insurance companies are solely to blame for the growth in the cost of our plan – or for the general growth in the cost of health care. Too much else has been going on for the past 40 years: technological change, demographic change, higher government spending on health care, changes in personal health behaviors and, it must be said, the rising incomes of health care providers.
    If rising health care costs will ever be controlled, providers’ incomes will be affected. IMO, health care providers over the years have been overly defensive on this issue and have not provided the nation with leadership on it. Instead health care providers have too often taken opportunities to turn the public’s attention away from themselves. The target of convenience is insurance companies. Insurance companies are an easy target – the public is primed to believe they are the culprits because the consumer’s cost of insurance is outrageously high, while the consumer’s cost of health care – cushioned by health insurance – is low. But the public does not grasp the connection between the high cost of health care and the high cost of health insurance and (let me guess here) most doctors and hospital administrators do not go out of their way to clue them in. So the public is constantly reinforced in this misunderstanding by people such as yourself who insist on blaming the insurance companies whenever and however you can. I think that is a huge distraction. An obfuscation, if you will.
    So when you say “They profit by more by obfuscating the whole process.” from my perspective you are describing the medical professions and the hospital industry as much as the insurance industry. Meanwhile I must continue to authorize payments of close to $4 million a week in health care costs. It is beyond frustrating that so many academics and professionals argue with increasing rancor and partisanship how many single-payer systems should fit on the head of some pin. Fortunately there are also many academics and professionals with practical ideas and businesses, with the help of our consultants, are working with as many as we can to figure out what we can do next. I would add that the insurance companies we have hired to administer our plans are working cooperatively with us. If you have a winning idea, now would be the time to voice it. My company’s next $4 million payment is due in 5 days on the 24th of March.

  12. Real examples, right from my practice. If you are a 45 year old male with a family history of heart disease you need to know you lipid levels. I order and submit charges for 80061, Lipid Profile. I give the diagnoses V17.3 (family history of heart disease) as the reason for the test. The charges are denied.
    When the patient is then billed for the amount, thinking the insurance company must’ve made a mistake, they call their insurer and the rep says, “This was not covered because your doctor used a ‘routine’ code as the reason for the test. He needs to use a code that shows us that the test is necessary, because it obviously is in your case.”
    The patient now calls me (or maybe just refuses to pay the bill) and angrily tells me I have to resubmit the bill with a different code. There ARE no other codes that apply. Not without lying and giving a false diagnosis. So the patient pays, saving the insurance company money. Or I eat the charge.
    Sure, they adopted the AMA’s coding system. They love it. It is their primary means for denying claims and saving money.
    I once submitted a bill for 9 months of obstetrical care and the delivery. The bill was for $2900. This particular insurer pays $1780 for the same. In spite of a clean electronic claim, using whatever the electronic standard du jour was at the time, the charge was entered by hand as $290. The company therefore paid $290 in spite of our contracted agreement for $1780. Phone calls to the company, each usually requiring over a half hour on hold, always resulted in the same answer, “oh, you’re right, our mistake, please resubmit this and it will pay.” Only to find each resubmission as being denied as a duplicate charge. Finally, 9 months later, and after several written appeals, I call myself, spend half of my day off on the phone, and ultimately used the internet to find my way to the company’s medical director. He apologized and mailed a check the same day.
    The more obstruction a health insurance company causes with things like X12.n, HCPCS, DRGs and automated computer responses to claims, the less likely a doctor’s office or an insured customer will pursue a charge until it is rightly paid, even when we have played by their rules. (And don’t get me started about how these rules change monthly.)
    The difference between you and me Tom is you rambled off a list of things that you think are good for the healthcare system. I do not believe these “advancements,” at least as they have been implemented, help anyone as much as the health insurance companies themselves. All of these things simply represent layers and layers of dollars spent right on top of the giant healthcare bill, without doing anything to improve the quality of the care.
    Making changes in how bills are submitted or prescriptions are paid for, or requiring DRGs or specified pathways does not save money nor have such efforts improved the quality of the care. It has only made it more difficult for my splintered industry of thousands of small medical practices to keep up and get paid for the work that is done.
    The fact is, I could single-handedly improve the quality of the care provided in my town if I were able to slow down and spend an appropriate amount of time with each patient. Don’t pay me more per visit, just pay me for each visit without me having to BEG for it. Instead I am having to see more and more people, spend less and less time with each one, in order to bring in enough money to cover the overhead created by the health insurance companies I deal with.
    Let me give you another example. I have a colleague who sees a mostly elderly population in a town where Xxxx Xxxxxx is the primary insurer. They represent such high percentage of the population there that they bully the physicians with lower and lower contracts. Worse, they know that a physician would have a hard time making it there without being a provider. My friend sees 12-15 people a day and spends an average of thiry minutes with them. He probably would qualify for any P4P bonus ever proposed. Because he spends so much time with his patients, he qualifies using the AMA coding standards that the insurance industry adopted to bill for a higher level of complexity. So, instead of seeing 25 level 3 office visits a day, and billing $55 each, he sees 12-15 level 4 and 5 office visits a day, at $80-100 each. You do the math. This company threatened to remove him from their provider panel unless he began charging the same percentage of level 3 visits as the other doctors in town. They did not care if that meant a patient might have to come back twice to get the same level of care, especially since these patients have $25 copays!
    I do not want higher fees. I am perfectly happy with the fees that I have contracted for. In fact, I think they are TOO HIGH in many cases. Instead, I want to be able to get these fees without miles and miles of red tape. If an insurance company wants to give me $55 for a 15 minute office visit, fine. Don’t make my staff have to resubmit the charges three times and make two phone calls to get the $55 7 months later! THAT is the reality of the 1,000-pound gorilla that is smothering our healthcare system.
    The health insurance industry has NO MOTIVATION to simplify their system. Doing so would mean that many of those charged with the simplification would lose their jobs. Doing so would decrease their profits. They profit by more by obfuscating the whole process.

  13. > The profit-driven insurance industry controls
    > the money and they do not want us to cooperate
    > and standardize.
    Nonsense. This is just nonsense. I don’t even know where to start. X12.n. EBM. Pathways. DRG. Any kind of outcome reporting at all. Coding and vocabularies generally. The HMO/PPO experiment (before it was made essentially illegal and became corrupt; yes in that order). Standardized billing. CDSS. Electronic prescribing and now ordering generally. Take your pick. All driven by the profit-driven insurance industry. Invented sometimes by pure-as-the-wind-driven-snow physicians, and thank God for them, but adoption has been DRIVEN by the evil profit-driven insurance industry (or by HCFA/CMS which I will lump in with the profit-driven insurance industry for these purposes).
    Can you name one single bit of standardization besides prices desired by clinicians and thwarted by the evil profit-driven insurance industry? One? c’mon Dr. Hinson! Surely you can find one example.
    No, I think it goes quite the opposite way. This oughta be served on a shingle.
    t

  14. quote: “The healthcare industry will cooperate and standardize when forced to by the people who control the money.”
    The profit-driven insurance industry controls the money and they do not want us to cooperate and standardize. They’re profits depend on waste and red-tape and keeping healthcare providers, not good health or cost efficiency.

  15. Trap said that Kinsley meant (or something):
    > the adversity of adverse selection in health insurance
    > is tied to wealth transfers. In other words, adverse
    > selection is a particularly heinous economic problem
    > in health insurance markets because we are blending
    > two policy problems and drinking them at once: “how
    > to pay for medicine” and “who should pay for paying
    > for medicine”.
    How in the world to you get this out of Kinsley?!? Adverse selection (not that I think Kinsley understands it) is adverse because it is fraudulent. Wealth is transferred by this fraud, true enough. But what has this got to do with the who/how question, and where do you think Kinsley says it does?
    t

  16. > You can accuse me of lazy wording.
    Shucks, I wanted to accuse you of malice or stupidity, but now I can’t.
    As for what you meant: so what if all PC software is compatible with all PCs? Isn’t that what it means to be PC software in the first place? This is a tautology. And there truly are more than two kinds of computers, with varying levels of compatibility among them.
    It is a dream of mine that the healthcare industry could have mere cooperation. Do not forget it was the customers who forced cooperation and standardization on the computer industry. Microsoft in 1993 would have been just as happy not to support TCP/IP at all, and in fact did not. They were forced to by people who said “We will never be your customer until you support fully and well TCP/IP and its common applications on WNT.” I know — I was one of the people who said this directly to Microsoft reps. They got the message loud and clear, and WNT 4.0 had a pretty good (but not great) implementation.
    The healthcare industry will cooperate and standardize when forced to by the people who control the money. Just like the computer industry.
    t

  17. Tom, You can accuse me of lazy wording. I meant that all PC software is compatible with all PCs. Not that all Mac software is compatible with all PC software. But the point is that there actually is great levels of standardization within the computer industry. It’s a dream of mine that the healthcare industry could have half the standardization the computer industry has.

  18. > I have no idea what he’s talking about with
    > this “subsidy” stuff.
    I think what he’s trying to say is that people do not pay the full cost of the medical services they consume, and they usually do not pay even the full cost of their insurance. They are “subsidized” by their employers. He evidently considers wages only to be “compensation”, the rest is “gift” or something. But what this has got to do with Adverse Selection is beyond me.
    > Krugman and Wells say that private insurance is
    > flawed by “adverse selection”: Insurance companies
    > will avoid riskier customers. Only a single payer
    > (that is, an insurance monopoly) can insure everybody,
    > and spread the risk.
    A) Krugman & Wells misunderstand adverse selection B) Kinsley misunderstands Krugman & Wells; C) this bit of writing is truly sloppy. Not having read Krugman & Wells, but based on internal evidence, I tenatively vote for B & C, but not A.
    Private insurance is indeed plagued by information asymmetry, and insurance companies will (try to) avoid riskier customers. These are related concepts, but hardly flip sides of the same coin. And “riskier than what?” is the question.
    Theoretically I suppose everyone is insurable at some price under conditions of symmetrical information. We could imagine building an insurance pool of overweight 40 year old white guys with a bum knee who have never experienced angina. They will insure each other against the differentials in their health outcomes.
    But this particular pool runs a big risk of accepting someone who has expereinced angina, and is keeping quiet about it. This is Adverse Selection. Every insurer will try to avoid it, but it is emphatically not the same thing as avoiding risk. Insurance pools are “fair” to the extent every member faces “similar” risk, and this risk is known to the insurer. The insurer will avoid dissimilar risk or hidden risk, not risk generally.
    > There are two models: Mac and PC. …almost every
    > piece of software is compatible with all of these.
    Sun Microsystems and IBM will be disappointed to learn of this, and users of Microsoft Word on Macs will rejoice to find that they are now compatible with Microsoft Word on Windows. Both assertions are simply untrue. Shall every oversimplification be considered a lie or a sign of stupidity?
    t

  19. In the shameless plug category, I have interviewed Rashi Fein of Harvard for my radio show this week. He has co-authored a book reviewing the US healthcare industry and promoting single-payer. Jimmy Carter wrote the forward…
    Get your thoughts on the interview next week…

  20. Kinsley sure wrote a strange article. His point about how the computer industry creates hundreds of different incompatible models was really weird. There are two models: Mac and PC. Almost Every PC is compatible with every other PC, Windows is the standard OS that almost everybody uses, and almost every piece of software is compatible with all of these. Is he stupid or lying?
    When he was describing the hundreds of incompatible computer systems, I figured he was talking about the healthcare industry! Then at least he would have been making an intelligent point. That whole column was just… incomprehensible to me. I still don’t even know what his point was.

  21. A progressive attacking Krugman’s single-payer argument? A Republican breaking line with Bush’s H.S.A. policies? Has the health policy world gone to hell? Is NOTHING sacred anymore?? Somebody stop the madness.
    ps…I’m loving this…the best ideas don’t usually follow party lines…

  22. > Mr. O’Neill said Congress should pass a law
    > requiring all Americans who make more than
    > $30,000 a year to purchase catastrophic
    > health care coverage
    If he’s going to say this, he might as well socialize insurance entirely. It reduces to the same thing…
    t

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