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Shocker–Karen Ignagni almost tells the truth

The NY Times’ Robert Pear has an article on the politics of the Obama Administration introducing a public plan as part of FEHBP.

As you might expect a boat load of Republicans who were told in grade school that private is good and public is bad are concerned about this causing the demise of private health plans–even though that would clearly benefit the country. Of course Pete Stark is quite happy to say that it’s not that Medicare underpays (as Charlie Baker said here last week), but it’s that private plans over pay.

So why is that the case? Well you knew that I couldn’t resist the appearance of my favorite lobbyist. Here’s what Karen Ignagni says, and — this is the shocker– it’s half true.

Karen M. Ignagni, president of America’s Health
Insurance Plans, a trade group, said the consolidation of the hospital
industry in the last seven or eight years had increased the market
power of hospitals, thereby reducing the ability of insurers to
negotiate discounts.

Actually it’s been more
like twelve to fifteen years since big players started merging (IFTF’s
Ellen Morrison wrote a great report about that in 1994 called "The Six Americas").
By the late 1990s Sutter, for example, was facing down Blue Cross of
California on price and winning. And of course in Boston Partners was
getting bigger and bigger, and facing down Blue Cross and the other plans. (Leading occasional THCB contributor and Beth Israel Deaconess CEO Paul Levy to become a big whiner, according to Partners Chairman Jack Connors). So Karen is telling the truth.

But she’s missing out one minor piece of information which is even more important.

 

What she neglected to mention is that health insurers did very, very
well out of this increase in costs too. For example in Boston, as
Partners got fat and happily aggressive:

Blue Cross has prospered, too, gaining more members in 2000 than any
other year and watching profits soar from $82.7 million in 2002 to more
than $200 million a year in each of the next five years.

And
of course the same thing was true for all health plans over the past
few years (until very recently). The saw their Medical Loss Ratios fall
(in other words their percentage of the take went up) while the
overall cost of health care also increased. In other words they were
getting a bigger slice of a bigger pie. And after the 2003 Medicare
Modernization Act the insurers also got an windfall extra of more money from Medicare dumped on
them by the Bush Administration–that’s the $15 billion in subsidy
which Obama referenced so often in the debate.

So it doesn’t take a genius to see why health insurers did what they
did over most of this decade. After the managed care backlash and in
the boom of the late 1990s, employers eased up on the pressure on
insurers. It was way easier to turn around and pass the increases from
providers onto their clients–and kick a bigger percentage on top–than
to do what some managed care plans tried to do in the 1990s, which was
to reduce health care costs. (Of course many of them almost destroyed
themselves doing it).

But this doesn’t obviate the truth that Ignagni didn’t tell the NY Times.

Private insurers gave up any attempt to meaningfully reduce health
care costs over the 2000s. The fact is that Medicare made a slightly
better fist of it (but by the way it didn’t exactly see its costs plummet either).

So speaking as a productive citizen and a taxpayer (and aren’t those
Republicans supposed to care about them?), why shouldn’t I be
interested in having Medicare expand its role? After all that will
leave costs lower for those not in the the health care system.

Of course that would also mean less opportunity for private insurers to
demonstrate their relative incompetence in reducing health care costs,
and less opportunity for them to take relatively undeserved cut.
Something Karen Ignagni is bound to get upset about.

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Jeff Misnkelliottgfierabrian bradberryDeron S. Recent comment authors
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Jeff Misnk
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Jeff Misnk

Email Karen Ignani at kignani@ahip.org

elliottg
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elliottg

I want to know who Nate is reporting Matt to. I stopped reading there.

Nate
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Nate

money quote is at the end for you, after this realization I’m taking the day off. “But while we agree that health plans (in their AHIP sense) overall do fine when costs increase, I suspect that most of the “gains” that you show in health care costs for your clients are related primarily to the experience and composition of the clients employees. My guess is that you’re cream-skimming, much as Aon, US Healthcare and many others have done in the past.” AON is a broker/consultant, they wouldn’t cream skim because the risk is irrelevant to them, they get paid regardless… Read more »

Matthew Holt
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Wow Nate, reading through the reams of your verbiage, I almost spot an argument. So I’ll let you off saying that you’ve been “reducing costs for 30 years” when you meant “you’ve been increasing them slightly less than average”. And you concede that it’s OK to call the big carriers, health plans. Phew, I bet they’re relieved, after all the cost of changing the “P” in the “AHIP” graphics might be the straw that breaks the camel’s back. But let’s get to your serious (?) argument for a moment. Could a FFS plan for everyone run by a private TPA,… Read more »

Nate
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Nate

If this blog truly is frequented by wonks then why has there been no wonkish discussion of self funding as done by none carriers? “But given the choice between what we have now and Medicare for all, I’ll take the latter.” Correct me if I am wrong but I assume the choice your making is Medicare FFS over insurance carrier fully insured plans and carrier self funded plans. Again assuming you would do away with Medicare Advantage. What is Medicare and how does it operate; 1. Funded by multiple sources, majority of funding comes from the Government but most beneficiaries… Read more »

Nate
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Nate

You have crossed the line and I am reporting you Matthew, your constant and endless abuse of strawmen must stop. No matter how highly you think of yourself it is not your wonkish right to create strawmen then kill them mercilessly. Things I have never said yet you attribute to me; “large insurers would be very surprised to hear that they don’t sell anything to self-insured clients.” “a health plan is only a benefit structure appertaining to one employer group,” Most people with your ideology hate insurance companies yet will freely praise specific ones that conduct themselves in a manner… Read more »

Matthew Holt
Guest

Charlie, Your observation is true in that as far as the provider system is currently structured, it couldn’t survive on Medicare’s level of payment alone. I continue to remind people of British Steel in the 1980s. Workforce reduced by 60%–production overall increased! As for locking Medicare FFS into place for ever, of course that would be crazy. BUT it’s the single payer systems (and global budgeted ones like the VA) elsewhere that seem to be taking the lead in innovative pay for performance systems, not private insurers in the US. As an Enthoven/Fuchs/Emanuel disciple I’m all for blowing up the… Read more »

Matthew Holt
Guest

Nate, I think that the large insurers would be very surprised to hear that they don’t sell anything to self-insured clients. Especially as some of them think of ASO as being more than half their business. And if you ask 9 out 10 policy wonks or average readers of THCB they’ll call an insurer a health plan and vice versa….so I’m very sorry that you are so ticked off about the difference, but I write this blog to communicate with real people–not pedants like you. And for them the big “carriers” are health plans. Just because in your pedantic world… Read more »

fiera
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fiera

I’m with Nate. Let the old folks pull themselves up by their own bootstraps. Besides, I think the importance of teeth has been hugely overestimated.

Nate
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Nate

Brian, Medicare was an insurance program not a healthcare delivery program. Back when Medicare was created people understood what the word insurnace meant. If you know your going to have to get a dental cleaning every year or get an eye check up it is foolish to pay 120% of the cost to have an insurnace company cover it versus paying for it yoruself, you save 20%. What your really asking for is the tax payor to further subsidize the elderly. I’m always curious at what point these request end? We already cover electric scooters and Rx which today’s receipiants… Read more »

brian bradberry
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brian bradberry

As a medicare recipient, I feel that the current government definition of ” health care” needs some expansion.Good physical health includes sensory perception,i,e, hearing and sight. hearing aids and spectacles should be included in Medicare, and any other single-payer plan as they are in the UK national health. another component of good health which current policy ignores is the ability to ingest propder nutrition, including Dental health. My Father came close to starving in his ’80’s, as he could barely chew because his dentures fit so badly. Now that I too am a denture wearer, and have been lucky or… Read more »

Nate
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Nate

I’ve always thought providers should have a check list like the ones used on nurse lines loaded on a PDA. If they go down the list and check through the different steps they should be imune from malpratice suits. From what I hear providers refuse to do this as it detracts from the art of praticing medicine. This could still be easily accomplished by the malpratice insurers pricing their policies differently for those that complied and those that didn’t. I would think patients would also take something away from going through the pratice. Providers need to learn if they insist… Read more »

Nate
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Nate

Matthew, Can you please learn the proper use of terms or shut up. A health Plan is what the employer set’s up in a self funded arrangment. A self funded health plan doesn’t purchase services from a health plan it is the health plan. Second their are thousands of TPAs in the US. The vast majority don’t have fully insured plans, well over 60% don’t have fully insured plans. “and they purchase services from health plans and TPAs which are pretty much identical to the ones the same plans provide their fully insured customers.” When 60% of TPAs don’t have… Read more »

Deron S.
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Reading an article about the healthcare portion of Obama’s $775 billion stimulus plan triggered another thought. The local Blue Shield plan in my area just paid us $35,000 to invest in HIT and we’re just a small 10 provider practice. The larger multi-specialty groups got far more. Providers/hospitals and health plans footing the bill for HIT is another example of cost shifting. Shouldn’t Medicare and Medicaid be chipping in for that considering the fact that the systems are being used for their beneficiaries’ benefit as well. I’m certainly not attempting to say that private insurers are angels. I just feel… Read more »

Deron S.
Guest

The transitional costs of disbanding the private insurers and moving to Medicare for All would be well into the $100s of billions. I think we’re going to need a much stronger argument that the investment would pay off than the arguments that have been put forth to date.