HEALTH PLANS/POLICY: Meter Reading–How Regulation Might Fail

Today I’m up at Spot-on in a piece about the influence of big health plans on reform efforts called Meter Reading: How Regulation Might Fail.

Maybe, just maybe, we’re getting serious about health care.

This week’s news says yet more unlikely allies are advocating healthcare overhaul.

The alliance between the Business Roundtable, unions and interest groups – an even more unlikely bunch of reformers than Republican Gov. Arnold Schwarzenegger and the insurance association  (both already out with their own plans) –  are all saying, loudly and clearly, that something must be done. It’s all leading to an odd sense of optimism – one I don’t, sadly share.

Forces outside of health care are starting to talk the talk about
forcing change. Former Massachusetts governor and Republican
presidential hopeful Mitt Romney’s health plan, the election of a
Democratic majority in Congress, and ever- increasing costs are all
forcing everyone to get those old reform plans out again. And as
evidenced in this discussion even political columnists from the
WaPo think that something is going to happen – although they do tend to misread the light at the end of the proverbial tunnel. Continue

As ever come back herre to comment

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  1. Managed Care; Anatomy of a Mass Medical Movement. 2000.
    The Rise and Fall of Managed Care: A Comprehensve History of a Mass Medical Movement. 2001.
    Rise and Fall of Managed Care: History of the Mass Medical Movement. 2002.
    “The author documents that despite promises of managed care zealots, we have a sad healthcare landscape of crippled academic medical centers, dissatisfied patients, uninsured, chronically ill and elderly citizens, and demoralized physicians: with NO cost savings. Managed care produced, however, ‘monetarization’ of medicine, multi-million dollar consulting firms, and Wall Street riches. Dr. Smith wisely reminds us that the best way to care for patients is ‘care for the patient.’ It is not too late to rediscover that the most cost effective care is that which is competent and compassionate.”
    “Dr. Smith has given us a very readable but chilling chronicle of the rise and fall of the managed care era in medicine, [and] it’s demise in an avalanche of greed and bankruptcy. [The] tragic legacy of this ill-conceived plan: disgruntled patients, uninsured citizens, demoralized physicians, and crippled academic medical centers. All this with the burden of increased costs, as major resource went not to research of patient care, but to administration, regulation, and stockeholders. Fortunately, the public has finally boecome aware of the failure of the mistaken social experiment.”
    Since the early 1970s, rising medical costs resulted in a profusion of healthcare plans and criticism of the profession of medicine: a confusing, chaotic, divisive setting for providing medical care. Little or no communication took place between those who purchased medical insurance plans and those who provided medical services—physicians, dentists, hospitals, and other providers. Promotion of managed care plans took on an excited, carnival atmosphere generating promise that a glorious, new era was approaching.
    Since doctors order most medical care, managed care proponents emphasized the importance of controlling practices of doctors. They claimed extensive changes were needed, that almost any criticism against the profession of medicine was warranted. Enterprising economists, entrepreneur consultants and a host of others became self-styled experts and advisers to hospitals and businesses over the issue of “cost containment” and invented the imperative “runaway costs.” Accusations leveled against physicians by advocates of managed care were puzzling, disturbing, and frustrating. We were told that “managed care is what’s out there,” “business likes managed care,” and managed care is “here to stay.” The new ethic became marketplace competition, cost containment, prevention, and control.
    Although most doctors at one time objected to the idea of managed care, rising sentiment against regular fee-for-service practice eventually took its toll to the point many physicians became convinced that it was up to doctors to make managed care work. Corporate benefits managers at first were opposed to the notion of managed care, but gave in to pressure from corporate management.
    Managed care advocates created fear, uncertainty, and division by telling physicians that the only possibility of survival in “changing climate of health care” was to “embrace” managed care. Economists and politicians charging outright criminal activity by all physicians became the norm. Doctors and public were told that a new age had dawned, the old order was out, we had better get on board or be left behind. By declaring managed care an “unassailable truth,” managed care was propelled into a revolution, a mass movement. Yet, physicians who “embraced” managed care found themselves in an ethical and practical bind.
    Enthusiasm that led to the managed care mass movement followed the same course as other mass movements—a restructuring of medical care was called for, the old was suddenly outdated, a “crisis” proclaimed, a social transformation declared!
    Wyndham Hall Press, Lima, OH
    Nova Science Publishers, Hauppauge, NY

  2. I am willing to bet that the larger insurers (Wellpoint, United, Aetna, Cigna) are looking at the CA and MA plans as this: lose a little now vs. potentially losing alot more in the near future if some kind of single-payer system gains real political viability. Plus, none of these state plans affect the cash-cow of Medicare Part D and Advantage plans. The CA plan is less preferable to health insurers due to the 85% medical loss ratio and mandatory coverage issues.
    While these state plans may help to address access and the uninsured rate, no one really seems to want to talk about the real bogeyman in healthcare: costs. Bernanke mentioned Medicare and Social Security the other day but the cost obligations of Medicare are just staggering.

  3. Barry,
    I second all of your points. I would add that even the big for-profit insurers aren’t going to fight very hard this time (or at all) so long as they are guaranteed a place at the table (or the trough). The Massachusetts model opened the door for health plans to get behind universal healthcare. Not just opened the door, but flung it open and jammed a door stop in it.
    Where I tend to agree with Matt is that I don’t think universal healthcare is coming soon at the Federal level. Congress is not going to get its act together quickly on a consensus package; they’re content to let the states lead the way; and in any case Bush is likely to veto anything sensible. That man has a radar for bad policy and makes a bee-line for it.
    So, universal healthcare will make steady progress in the next two years, but on a state-by-state basis. I work on the insurance side in New York, and from what I hear Spitzer is going to push for some or all of the elements of the Massachussetts model here: expanded SCHIP and Medicaid, subsidized group purchasing pools, and perhaps individual and employer mandates as well.
    My prediction: in the next 2-3 years state after state will adopt some variant of the Mass model until nearly every blue and purple state has it. When only the red states are left, a slightly stripped-down Federal version will be adopted in the 2nd or 3rd year of the next President’s term (roughly 2010).
    Expansions to the stripped-down version will only happen as the economic misalignments in healthcare are reformed to make the additional access affordable at greatly reduced additional cost. Ideally, there will be a trade-off that becomes more and more explicit: The govt will increase access, coverage, administrative simplicity and ease of payment so long as providers accept reduced per patient incomes and insurers accept lower margins. The providers and insurers should come out fine after restructuring because their volume should go up and cost of business should go down.
    I get the feeling that the insurance industry is just becoming ready to make this bargain.

  4. Matthew,
    I am more optimistic than you are. While Wellpoint is one of the two largest health insurers (along with United HealthGroup), the company only has 42,000 employees. Approximately 150 million people get their health insurance through their employer, and at least 50 million of those are from employers who self-insure. Most of these employers would like to either get out of the business of providing health insurance for their workforce and switch to taxpayer financing or at least sign on to a package of reforms that might be able to reduce cost growth (per insured person) to something closer to the general inflation rate. If a package emerges that the Business Roundtable, the unions, and the AARP are willing to embrace and lobby for, do you really think Wellpoint can stop it? I don’t. The Big Four insurers – Wellpoint, United, Aetna and Cigna provide either full risk insurance or administrative services (on behalf of self-funded employers) for 85-90 million people or about 35% of Americans with health insurance. Combined, they employ a bit over 150,000 people. As you pointed out, quite a few of the Blues are non-profits and will bring a different perspective to the issue. Reform will probably not be a good thing for insurance brokers and agents, but how hard are politicians likely to fight to protect their commissions? Not very hard, I suspect.
    As for the California proposal that would require insurers to spend 85% of revenue on healthcare, United already meets this requirement, I believe, because of its large Medicare and smaller Medicaid business. Moreover, disease management and cost management currently count as administrative costs, though one could argue that they are really healthcare costs since they include coaching, advice, reminders to come in for checkups, etc.
    The really big administrative costs are in the individual and small group (ISG) market. These include the costs of medical underwriting and commissions paid to insurance brokers. Under community rating and moving everyone into large pools, these costs can be cut very sharply.