I interviewed Grace-Marie Turner from Galen. Take a listen to the podcast (about 45 mins) (Unfortunately I’m very loud and she’s very quiet, so you’ll have to adjust the volume every time I come on! Also excuse the first few seconds of the call. She’d just met with Bush and was hoping to see herself on TV, and why not!)
By the end of the conversation I was way more confused about the CDHP movement than when I began. As far as I can tell she’s an advocate of managed care, disease management, and pre-paid care, and even perhaps even compulsory universal insurance. Or at least she appeared to be promoting the benefits of all those things.
It seems to me that just like Reggie, she grabbed any potential advance in health care and called it "consumerism", even if the organizations that do it best like Kaiser and the VA have no history of HDHP and HDHP insurance products. In fact those products promote fee-for-service procedures beyond the deductible –exactly the opposite incentives that she suggested were necessary. I felt like I was listening to someone who’d read what was wrong in the Alain Enthoven manual and had no idea that the solutions she was proposing weren’t going to solve the problem.
I also spent a very long time trying to get her to explain if the healthy people are allowed to take their money out in the form of personal accounts where the extra money in the risk pool would come from to treat the sick people. (For more on this problem read down here). Unfortunately either I’m just too dumb to understand her explanation or there is no underwriting, no sick people, and no adverse selection in her world, or at least it’ll all washes out in time. And apparently no one would get a better deal in the individual market, if they could get a worse one via an association?
So I’m still awaiting the clear explanation I’ve been looking for about how this HDHP/CDHP movement is going to deal with the mathematical problems it causes and avoid destroying the risk pool. I read Cato’s book, the Hubbard one, now have talked to all kinds of HSA proponents, and not one has answered the question. I wonder why?
Still it was a fun conversation, even if I never got to the tough questions about where Galen’s money comes from although Hillary Clinton knows!
Grace Marie will be out in SF at the CDHCC conference on May 8-10 in San Francisco
Categories: Uncategorized
Moved this thread over to the comments about my piece on Greg’s comments
> Using an insuance mechanism to pay for routine care
> is hugely inefficient. It involves massive
> administrative costs from both the insurer and the
> provider.
Yes, and.
Using the insurance mechanism or something a lot like it is the only way I can think of to drive quality improvements and see the patterns that lead to the price-insensitive services under insurance.
I don’t know how to come down on this at all. I understand the economic argument — reduce friction and restore some price-sensitivity. But that friction has beneficial effects too.
t
Matthew Holt would have a point about “draining the pool” if it were true that every dollar currently spent on health benefits was necessary and efficient. But our current system is awash with administrative costs and needless spending.
Using an insuance mechanism to pay for routine care is hugely inefficient. It involves massive administrative costs from both the insurer and the provider.
And first dollar coverage encourages needless spending. This needless spending can be curbed by rationaing, or by demand-side behaviors. We tried rationing with managed care, and it works pretty well to hold down costs, but it was pretty unpopular. So now we’re trying to afect the demand side — getting people to make their own trade-offs.
HSAs are not the be-all-and-end-all of health care reform. But they are an enormous step in the right direction, and they will help bring about other changes like a demand for reliable information from consumers, greater accountability on the part of providers, and new more efficient ways of delivering care.
Bravo, Eric. This is what the REAL consumersim should be about. One more item is needed however: complete transparency of both price and quality.
Unfortunately, too many people are confusing the meaning of consumerism. But this does not diminish its potential.
Oh so much flattery amongst friends!!
Points of disagreement for discussion:
1. change law so that providers can choose to set prices at, below, or above Medicare rate for medicare services. Make that information available to the public. Competition and human nature would make it that perhaps some very good docs might set their prices higher and some bad ones lower. Also, new docs might start out lower to get more patients when starting up.
that would be real consumerism
2. for the very low income people, healthcare services should be paid for in a tax credit for services provided. Documentation and processing as required for the current tax processor, the IRS. To incentivize, make the benefit indexed to care provided in certain neighborhoods (poor, inner city, rural) to increase competition for caring for people in certain areas.
3. Pass broad AHP legislation and break the oligarchy of the few big insurers that currently exist.
4. Pass the healthcare choice act which would make insurance much more portable.
5. For the top 5 diseases in terms of cost to system, establish baseline care that ought never be given and baseline patient behavior that ought not be tolerated. For example, doctors should not give certain drugs to people with kidney dysfunction and patients with diabetes should never smoke. Benefits (to both docs and patients) should be in part dependent upon making good decisions for care.
doc information should be made public
6. encourage point of care payment for nonurgent medical care which would promote cost disclosure.
7. The VA system ought not be the model for US healthcare. Just ask most veterans. Usually good care, but hardly responsive in most cases.
8. Health courts to increase access of care for those with certain conditions.
something to chew on.
Hey, THCB is a safe place for name calling among friends. Eric is a smart intelligent guy, and he can happily call my ideas crap if he wants to (and vice versa). I know his heart is in the right place
The major problem I have with Eric (and many of those who disagree with me) is that when we get in conversation, we agree too much and dont get to focus on where we disagree. That was a major frustration that I had with Grace-Marie. She continually ascribed lots of good things (disease management, consumer involvement in their own care) to a type of insurance product that has the opposite incentives. When I called this out I felt that I was opposing the good things?
And it goes without saying that I am nowhere as skilled an interviewer as Eric, even down to setting the levels on my microphone!
I apologize for strident… just think name calling is bad for the debate…
I agree with you that doctors need to do better.
That does not mean that it is impossible to be informed.
I maintain that instead of trying to create a master list of best treatments for every condition at every time, we should decide what is definitely wrong for certain conditions and make sure doctors understand.
This is much more achievable and would be more likely to improve people’s health.
that should be “doctors can not”
Eric, your comments are becoming more strident than I recall previously. The concept of informed consumers is a myth since not even doctors can identify and prescribe the most cost effective care on a consistent basis. Explain this result if you want to be taken seriously about personal responsibility.
http://www.arthritis-pain-cure.com/article_info.php/articles_id/208
Commonwealth fund study= study deisgned with bias toward results.
You skipped out on all of my questions? I actually do not think that ‘personal responsibility’ is crap and neither do you. Who is responsible for making my kids understand the importance of learning? for their understanding right and wrong? for their values? It is the parent’s responsibiltiy. (not the government)
Who is responisble for not drinking and driving, putting yourself, others and your family at risk? you.
Who is responsible for showing up at work on time? getting deadlines met? paying your bills on time? you.
Who is responsible for checking to see that the gas tank is almost empty to refill so you can get to work? you.
Who is responsible for eating properly, getting sleep, exercising? the individual.
I would be much more sympathetic to your cause if you would simply admit that if people just made a small effort, that money would be saved and health improved.
When counties in Britain deny care on the basis of weight (which they do), cutoff dialysis on the basis of age– is that not ‘victimizing the sicker and poorer members of society’?
And Matthew- the HSA crowd, as you call it, at least understands that HSA is not the be-all and end-all. You have no answer for the questions I posed other than to institute an unresponsive bureaucracy of ‘smart people’ to decide for you what can and cannot be done if your knee hurts…
A safety net is something that essentially everyone supports– the single payer crowd is unwilling to present more than the concept of an all encompassing baby blanket which with to swaddle the American public (and everyone else who crosses our borders…)
We have much that we can do in our country to improve healthcare. I encourage you to pick one area (ie. infant mortality) and tell me exactly how a single payer tomorrow would start to improve things, without spending more money- rather have it cost 40% less… (remember that doctors often get only $700-$800 total for 10 months of prenatal care and delivery, not paid until 2-3 months after delivery).
Matt,
I’m very interested in learning as much as I can about this issue, and I appreciate your responsiveness.
I agree that the insurance pool would be deprived of money from young healthy people under your $10 per year for a $100,000 deductible scenario. However, I think even young healthy people would prefer the peace of mind that comes with health insurance that protects against high cost catastrophic events. Afterall, life is unpredictable and the financial consequences of being wrong (catastrophic event occurs and you don’t have insurance) are severe, at least once you have some assets to protect and a family to support.
In your link to the example about 100 retirees with healthcare valued at $5,000 per person and 80% of the cost likely to be consumed by the 20 most expensive cases, suppose the choice were along the following lines: Choice A: The beneficiary chooses to use his $5,000 insurance voucher to buy the comprehensive, low deductible plan. Choice B: The plan with the $2,500 deductible cost $4,000 and $1,000 will be deposited in the HSA. If all 20 people who selected the comprehensive plan were, in fact, the high cost cases, their costs would consume $400,000 of the $420,000 in the pool (with $80,000 sitting in 80 HSA accounts). The 80 low cost cases incur $100,000 of costs ($1,250 per peson on average), most of which should be covered by the money in the HSA’s plus the insureds other personal resources up to the $2,500 deductible with $20,000 left in the pool as a margin of safety.
I know there are limits to how much can be contributed to an HSA in a given year, but I don’t think the funding source can comes only from the premium differential. Personally, I would prefer to see all tax preferences related to healthcare eliminated, and let people make health insurance and health expenditure decisions with after tax dollars like we do for everything else we buy.
Eric, cmon man. You’ve never heard of social insurance? Invented by Bismarck? in the 1870s? Ever heard of Social Security, Medicare?
And you think that getting along in Washingon in today’s climate is an indication of being something special? Hey–lets go to Iran with the rest of the PNAC loonies–they run the show now. They must be brilliant…just your and my kids will be paying for their lunacy for years to come.
And I call Grace, Reggie, etc the way I see them. I don’t care if they ever speak to me, I’d rather be known for telling the truth…and asking the hard questions.
I said to her many times in the interview that we didnt need to argue about all those poorly contructed studies. I never went after her about them, their funding, her organization’s funding. I just gave her the chance to answer the main logical problem with the theory of HDHPs and HSAs and she couldnt. She just kept on raising all those studies as though I’d never heard of them.
She then claimed that CHDP’s would promote a range of activities that they have nothing to do with, and started claiming the Medicare Disease management program as a consumer program??
She could not answer the questions I raised about the theory of insurance–I agreed with her and with you that the current system is a disaster. She advocates policies that will just make it worse, and couldnt contradict me when I showed why. Am I wrong to show that? I gave her lenty of chances to explain.
I think the same about her that I think about Reggie, and so do many many others (Enthoven, Robinson et al). No one can figure out what their thesis actually is!
And get off your horse about “patient accountablility”. It’s basically crap and you know it is. The issues you raise exist in all societies and will always exist. The challenge is how do you supply/allocate those services without bankrupting individuals and society.
The point is that this is the only one that victimizes the sicker and poorer member of societies. Check out the commonwealth study today for yet more evidence about how we do that badly.
Matthew- quick hint from an interviewer— do not report to the public that “your guests cannot string a logical sequence of thoughts together”. Makes it unlikely you will ever get them or anyone they know to speak to you again. Avoid ad hominem attacks as they weaken your cause.
Ms. Turner, who I spoke to last year, has impressively risen the ranks of influence, given her role on the medicaid reform committee and her meeting with the President. The rules for those people are somewhat different (on both sides of the aisle) as the career and political aspirations can be limited by certain kinds of statements.
I am proud to have helped with the discussion on THCB about the concept of low vs. high utilizers. Your concept of “social insurance” when it comes to healthcare seems to have no end– would you offer joint replacements to people who are overweight? would you pay for gastric bypass surgery in all cases? would you not provide ICU care for people with certain diagnoses? would you have a cutoff date for dialysis? what about smoking? what about drug use and abuse? what about premature babies? what about drugs to increase the chance of getting pregnant?
Need I go on?
Promoters of ‘single payer’ want to move this further and futher removed from the patient into a government (at least controlled) bureaucracy.
All of the countries subsidize higher education for doctors– is this something you support? who should set doctors salaries?
All of the countries have much stricter medical liability systems– is this something you support?
The progression toward HSA/HDHP might change expenditures by a couple of percent in the short run (no small change as every one percent equals $20 billion), but has the longer run benefit of encouraging and inculcating in the public a greater and more active role in managing their own health– this has real possibility.
The concept of ‘pulling some money out of the risk pool’ is a bit of a canard. Private insurers underwrite relative to the whole market. This is why, even if you have no claims, your rates go up year over year— the ‘risk pool money’ is growing.
I may be behind the curve, but is the new codeword for national health care ‘social insurance’?
Barry. That only works if you view the 100,000 young healthy’s as a separate pool. But you need their money to pay for the sickies. If they paid $10 a year for a $100K deductible, you could get it to be actuarily neutral, but you end up with anyone who needed care paying for it out of pocket, or as would actually be the case, not paying for it. That’s why it’s called social insurance!
Go back to the post I link to and answer the question, and forget that you ever heard the words premium, actuarial, and expected cost. Instead just think about how the money is divided up, and what happens if you allow people to take their money out in individual accounts.
I know that we’re already down this path in practice, I just want one sucker on the HSA warpath to explain to me how it doesn’t cause the end of social insurance in theory.
Trap. Your intellectual champions (Reggie, Grace-Marie)cannot string a logical sequence of thoughts together, and claim that any advance in health care is a product of consumerism, or will be turbocharged by it when the financial arrangements they advocate, even when those advances (like DM) have nothing to do with HDHPs and will be destroyed by it.
Did you get to the part yet where she told me that my buying a cheaper underwritten plan was illogical behavior and that consumers would rather buy a more expensive group policy, and that there was no adverse selection. I was ROTFLMAO.
“By the end of the conversation I was way more confused about the CDHP movement than when I began.”
Well, that’s really saying something Matthew!! (Just Kidding)(Not Really).
Matt,
I am assuming that insurance companies, if they have a large enough population to work with, can make reasonable estimates of expected claims costs. I’m sure they must have data related to past claims costs sliced 100 different ways — by age, sex, disease category, even how much they have spent cumulatively on behalf of individual claimants. I actually asked for that information from my insurer because we have a lifetime benefit cap, and got an answer within a couple of minutes.
If you took 100,000 young people who describe themselves as healthy and ask them to estimate how much in medical costs they expect to incur over the next 12 months, how accurate do you think their estimates would be? I have no idea, but it might be an interesting exercise.
I suspect that if I wanted to raise my car insurance deductible from $500 to $1,000 or my homeowners deductible from $1,000 to $2,000, the insurer would try to make the premium reduction actuarially neutral. I don’t see why health insurance can’t work the same way.
Thanks Rick. I didn’t know that such a high percentage of policyholders had claims below $1,000 in a year. My own employer’s plan (which is not an HSA) has a $1,000 per person deductible which I think is perfectly reasonable. Deductibles much below that don’t make a lot of sense in today’s world, in my opinion.
However, I still don’t understand why the insurer can’t price the high deductible policy at a rate that would be actuarially neutral vs the low deductible policy. If the insurer thinks, for example, that the likely buyers of high deductible policies will only allow the insurer to avoid $400 of claims cost, then reduce the premium by $400 or so. The HSA, I thought, could still be funded separately with pretax dollars the same way I currently fund my flexible spending account — with payroll deductions in order to pay some of my out of pocket costs with pretax dollars.
If the policyholder does not think it is a good enough deal to opt for the high deductible policy vs the low deductible based on an actuarially neutral price differential, he can stay with the low deductible plan if he has a choice. However, I suspect that at least in the small business sector, high deductible plans may be the only affordable and available option.
Separately, I will be interested to see how Massachusetts defines an affordable policy, how much it costs for both individual and family coverage, and how well and completely it covers catastrophic events.
Barry. I’m a simple guy and I’m a little confused by your explanation. Frankly the only important thing is how much money is in the pool to pay for all the pools costs. Under most scenarios if you allow healthy people to withdraw any significant fraction of their average premium from the pool, because it exceeds their individual costs you are — by definition — leaving the pool with an inadaquate amount to pay for the care of those sickies who cost more than average.
That’s the basic problem. Your scenario doesnt say how much actual spending leaves the pool. If it’s $400m then it’s neutral as $400m less was brought in. If they are healthy and have $0 in health spending, then the pool just lost $400m which means that it needs to find that money elsewhere.
I’m afraid for someone as dumb as me you’ll have to stop talking about “potential claims” and talk about what is spent on people, and what money is paid in.
Barry
Perhaps Matthew was a little loose with his nomenclature. It’s not the HDHP per se that drains the money from the system. It’s the HSA.
Think of this for a second. I had a rather large regional insurer tell me just last month that their research shows 75 percent of their members use less than $1,000 in services in a year. These are the healthy folks. If each of them switched to an HSA with the required HDHP and maxed out their contribution at $5,000, then a portion of the money those people would normally pay towards premiums (because their formerly high premiums are now split between a lower premium and HSA contributions) no longer goes toward medical costs. It goes toward sitting in a tax-free account accumulating wealth for that individual, $4,000 or more a year each, if my insurer’s research is accurate.
So the money that healthy people formerly paid to subsidize the costs of the sick people (i.e. social insurance) now sits in an account unused for medical services. Remember, health insurance, while lucrative for the big companies, is nonetheless a low-margin business. Most are happy with 6 percent. So how do you now pay the medical costs of the sick when the money for their care now goes to Wells Fargo/Mellon Bank/Exante Financial?
Or, as Matthew says, do sick people just go away?
I’m not sure I understand why high deductible insurance, whether coupled with an HSA or not, will drain the risk pool of resources needed to pay for sick people. I think the key issue is how it’s priced vs the standard or low deductible policy.
Suppose a large insurer wants to offer a high deductible policy with the only difference between it and the standard policy is that both the deductible and the out of pocket maximum is $1,000 higher. Their actuaries estimate that 1 million of their policyholders might be interested in switching from the standard policy, and all of them are much younger and healthier than the total policyholder base. Accordingly, the actuaries figure that 1 million policies at a $1,000 higher deductible shifts up to $1 billion of potential claims risk from the company to the policyholders, but because this group is so young and healthy, the company expects to avoid only $400 million of claims expenses or $400 per policy per year. Therefore, it decides to price the policy at $400 less than the standard policy.
For the individual policy holder, in exchange for accepting responsibility for up to $1,000 more out of pocket expense, he saves $400 on his premium. So, the range of financial outcomes for him is a best case of $400 better off (no claims beyond the old standard policy deductible) to $600 worse off ($1,000 higher out of pocket cost less the $400 premium savings).
For the total group, they, in effect, underwrote $1 billion of claims risk for a $400 million “premium” at a 100% medical loss ratio. Thus, assuming near perfect forecasting by the actuaries, the choice between the standard and the high deductible policy is actuarially neutral, and there is as much money as before in the insurance company pool to pay for sick people.
Indeed, if the insurer improved its claims handling systems by making information readily available to both insureds and providers as to what it actually pays for particular services, tests and procedures, the claims handling organization could reduce its workload by hundreds of thousands of claims while providers could get their money faster with less administrative hassle and cost, and the patient receives satisfactory assurance that he is paying the contract rate and not the full list price.
If the insured wants to fund an HSA up to the full deductible in order to take advantage of the tax preference, he can use payroll deductions or other resources just as he does now when funding a flexible spending account (which must be used during the calendar year or forfeited).
The bottom line is that high deductible policies with or without HSA’s should be able to work fine for both the individual and the system if priced correctly vs the policy with the lower deductible.
I do think community ratiang, at least by age tiers, coupled with assinged risk pools to take care of the uninsurable, needs to be a key part of a sensible system as opposed to the risk cherry picking approach perfected by Golden Rule.