Fun and games were had by all at the America’s Health Insurance Plans
(AHIP) conference yesterday. (BTW Now I have a real journalist working
with me on THCB and she says I have to spell out those acronyms!!)
Outside a couple of thousand single payer advocates noisily demanded a ban on greedy health plans. Now I know that the AMA has a running battle with the insurers (Read Michael Millenson’s hilarious piece about that on THCB yesterday). It’s also the case that certain Democratic Senators have it in for them, although as Bob Laszweski notes, that too is "not quite yet" an issue. But it wasn’t them outside!
Still it was rather fun going to an event that had
a real rather than a software demo going on!
Now the single payer crowd’s time has not yet come, and there is a chance that the private health insurance industry won’t screw itself into oblivion. (Although my guess is that they’ll be ascendant in 10-15 years)
Yes, while Jonathan Bush called HIMSS "a boat show", the AHIP exhibit hall had a software vendor I’d never heard of offering an actual boat
as the prize to the lucky winner who sat through their presentation! (I
wanted to win the boat, but sitting through a demo for the chance to
get a lottery ticket was just too much like work!). Good to see that
there’s no fat in the system here!
There was only one more thing that could possibly make AHIP more fun
for me. Would per chance there be a public statement of some sort from
my favorite trade group President? Imagine my joy when I get to the
letters’ section of the New York Times Friday and find there a missive from the alternate universe inhabited by Karen Ignagni! She’s responding to the NY Times’ highlighting
of the recent Commonwealth study showing that lots of people with
insurance also spend more than 10% out of pocket on health care–this
is called "underinsurance".
The loonies on the right think that this underinsurance is a good
thing. (Can’t find the link to Scandlen’s piece but it was in his
email).But Ignagni has a different explanation.After much hard research
Karen and her crack team have discovered the cause of high health care
Costs have skyrocketed because of wide variations in care, treatments
that are inconsistent with medical evidence, a proliferation of new
drugs and technologies with no system to evaluate their safety and
efficacy, and an out-of-control medical liability system.
That’s fantastic analysis. She also thinks that her members are fighting the good fight!
Health insurance plans are promoting
prevention and early intervention, coordinating care for individuals
with chronic conditions, rewarding high-quality health care, and
investing in health information technology that improves efficiency and
reduces medical errors.
However, analysts in this universe rather than the one AHIP’s research crew comes from may be puzzled by her conclusion.
Federal data show that these efforts are
working, as health insurance premiums grew last year at their lowest
rate in a decade.
Now, I’m prepared to accept that some health plans–although several AHIP members are gross exceptions — have some programs rewarding prevention, chronic care management, and some are investing in IT. It’s a long stretch, though, to say that they’re investing in IT to prevent medical errors–that’s almost all on the hospital side. Some, mostly those health plans who are closely closely allied with provider organizations–and we’re basically talking about two oddities on the West Coast — are actually integrating those efforts with real life doctors and patients.
Saying that it’s being done generally and that it’s working is just another Ignagni lie. But to prove the lie, you just change the goal. The goal is no longer cost reduction, via eliminations of "wide variations in care, treatments that are inconsistent with
medical evidence, a proliferation of new drugs and technologies with no
system to evaluate their safety and efficacy." After all, there’s only 30%-50% fat and waste in the system depending on who you believe. Instead, the goal is now reducing the fast rate of increase in insurance premiums. In other words, doing a little better than awful performances of the last decade!
Unfortunately the crack AHIP research team seems to have missed a couple of recent minor reports. So let me help attune them to what’s happening in this universe.
First, the rate of decrease in the increase of health insurance premiums is over. So said those single-payer commies at PriceWaterhouseCoopers. Apparently the health plans have failed in the role that Ignagni thinks they’ve done so well in, whatever "Federal data" says. In fact, as the rate of decrease in the increase has stopped, they’re not even succeeding by their own low, low standards!
And then there’s the real matter of what AHIP’s members care about, which is pleasing the investor class–not many of whom were outside rallying for single payer! Wall Street thinks health plans are failing too!
After Coventry became yet another insurer to miss its numbers this week, the word from the investor community was this:
The news renewed concerns over insurers’ ability to price their health plans
high enough to keep pace with rising medical costs, and appeared to bolster the
view among some on Wall Street that the companies now have little room to absorb
missteps or outside pressures that might have done little harm in years past. "Five of the seven largest companies in the group have reduced guidance
materially in the past three months, making it tough to argue that there isn’t
an industry issue," Oppenheimer analyst Carl McDonald wrote, although he said
data do not support fears of cut-rate pricing to boost enrollment or of
accelerating cost increases. Oppenheimer believes that for the first time in many years, the group is not
benefiting from slowing increases in medical costs,(MH-my emphasis) meaning that "there is no
longer any cushion in the spread between pricing and cost trends, so whenever
something goes against the group, like a worse than expected flu season or
falling interest rates, it shows up on the bottom line."
So in other words, the insurers got lucky earlier in the decade. And now that luck has run out. So expect them to turn around and start sticking it to their customers even more. As the head of a major employer group said to me last week (paraphrased only slightly) insurers don’t manage anything. They just bill you next year for what they didn’t manage to get out of you this year.
This was confirmed for me in a conversation I had with health industry veteran Gene Drabinski who runs care management at vendor Trizetto and before that was at information vendor Healthwise. He told me that interest in care management (i.e. all that good stuff that Ignagni is talking about) only ramps up when the insurers’ ability to pass along increased costs diminishes towards the end of the underwriting cycle. Which is why there’s been interest in care management solutions in the last couple of years. We agreed that with the latest news from PWC, it appears that the underwriting cycle is at the trough, so we can expect costs to increase, and attention from insurers to shift elsewhere (Gene suggested that the resources tend to get put into marketing at that point!).
What did Gene think health insurers biggest problem was? "Being relevant." Sounds like he shared that view with the crowd outside.
Now, here I part company with my friends protesting outside AHIP, I do think there’s a rational role for intermediaries (call them plans, payers, what you will). And it does involve doing something about the "wide variations in care, treatments that are inconsistent with
medical evidence, a proliferation of new drugs and technologies with no
system to evaluate their safety and efficacy."
But it sure doesn’t involve lying boldfaced about what’s they’ve done–when they’ve done nothing to justify the huge amounts they’ve made so far this century.
I discussed this with someone who’s sensible the other week, and she said "It’s a trade association, what do you expect?" I guess if it’s just a trade association, then let’s not worry about fact checking them! After all no one’s paying Ignagni $1.3m a year to tell the truth! But should we have to hear about it unchallenged in the NY Times?
Health costs are continuing to slow, if the main drivers, hospitalization and pharmaceutical spend, are to be believed. I don’t believe the forecasts of a return to double digit premium increases discussed elsewhere. However, unless these plans can demonstrate that they add value to the subscriber’s life in proportion to the amount they take off the top before they pay docs, hospitals, etc., they are both politically and economically vulnerable. A few of the bigger players (Humana and CIGNA) seem to get this, but it’s a huge cultural change. The days of living off copay/deductible increases and “network savings” are over.
John. You are right–there is “over insurance” & there is under-insurance. It’s not contradictory. Having a 10% of income go out of pocket costs matters greatly if your poor and much less if you’re rich. like the rest of the uninsured/uninsurance mess, it’s mostly a function of income. As we both agree, the incentives in the system promote overuse of unneccessary care–usually well beyond any deductible or out of pocket cost that prevents use of necessary care by those on low incomes — as the data about chronic care meds for diabetics in HDHPs makes all too clear.
But if health plans were so good at innovating new ways of solving these problems, a)why have the doctors managed to stop them, and b) why should they be given more money than the Federal program to care for exactly the same people (as in Medicare Advantage). In which other industry does private sector innovation get out performed on cost by the government program, and so the taxpayer gets to pay them more. Care to come up with an example?
Looking forward to my $10 on Nov 4th!
Matthew, how can the health plans “innovate” (in Ms. Ignagni’s term), or “manage care”, when they are forbidden from “practicing medicine” by a furious doctors’ lobby?
Your post today has internal contradictions: If you think those of us “loonies on the right” are incorrect to reject the idea of “underinsurance” in favor of “overinsurance” (which is far more prevalent), how do you explain what Wall Street is telling us? I.e. that health insurers are unable to keep costs down?