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.

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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21 replies »

  1. 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 of performance.
    That being said if anything you could accuse us of sludge-skimming. The unhealthier the group and the higher their cost the more likely they are to become a client. Most employers don’t pay enough attention to their benefit plan until it becomes a problem. Employers won’t go with us for 4-5 years when they have single digit rate increases but as soon as they get hit with a 20-30% increase they want miracles. If they had gone with us in good times they might never have found themselves in the situation to start with but so is the nature of people.
    I never disputed that the big carriers are health plans. It was your usage of the label when referring to self funded administration. Health Plans do not encompass all payors and the services they provide are far different then that of health plans. You still seem to refuse to admit a TPA is not a health plan and does not act in the way health plan bother you so virally.
    A FFS plan should never cover everyone. What if that plan sucks, has bad customer service, doesn’t keep up with technology? There should be 1000s of FFS plans that compete with each other, this is a critical factor.
    “The answer is of course, “maybe” or “perhaps.” It’s no knowable without doing it.”
    Why? This is being done tens of thousands of times right now. Why can’t you compare the performance of today’s self funded plans to governmental plans? This is what the entire argument really boils down to, for 30 years self funded plans administered by TPAs have done exactly that yet you refuse to admit they exist. Why can’t the performance of SF Plans be studied and discussed? Why are single payor and reform advocates so quick to hide the existence of a major part of our health system? Do you forget Medicare was modeled after the insurance industry at the time? Medicare is a mirror of the private self funded market, lets compare the two and see how performance stacks up.
    “Just maybe you’ll take all comers but my bet is that your system only works after you’ve had a damn good look a the previous and likely future experience of the groups you’re taking on.”
    Your perception of the industry is so far off I can’t imagine where it came from. Very few states require carriers to disclose employers claim information, and what you do get is usually garbage. Contrary to your assumption in 90% of our clients we had no idea what their past or future experience was. Our “system” is fundamentally more efficient. Once our system is in place we then do have claims information. Contrary to one of your earlier arguments, once we have claims data then we can actively manage risk and try to positively impact it with UM/UR, DM, provider changes, etc. One of my selling points is how ridiculous it is to send these huge checks to “Health Plans” each month and have no idea what your getting in return. If you don’t know what your premium bought how do you know your paying a fair price?
    “Of course with a single social insurance pool which contained everyone, those games wouldn’t be possible.”
    That’s because in single social pools cost doesn’t matter. If a provider is over billing or submitting fraudulent charges who cares, it’s not anyone’s money. If a member is buying brand name and hasn’t tried generic who cares. If an elderly patient goes to the doctor monthly for no legit medical reason because it is nice to get out of the house and the provider said to come in for follow up, again who cares.
    Private insurance will always be more efficient then single social insurance pools because it is someone’s money being wasted. People just accept rationing and denial better when it comes from the government instead of a for profit company.
    We also have decades of “healthcare reform” to show how inflationary government involvement is, are you onboard with eliminating that as well?
    What’s a better way to run a system? Capitation didn’t work. Put everyone on government salary? We have countless examples of what that does to efficiency. FFS didn’t fail because of the model it failed because of the delivery and allocation. NO SYSTEM WILL EVER WORK WITHOUT PERSONAL RESPONSIBILITY. You can make some changes that might work for a decade or two, some tweaks the fix the problem today but any system that provides mass amounts of service to a consumer with minimal responsibility will fail. It’s basic evolution that segments of the system will evolve and compete with other segments for resources. As long as the consumer is detached from the payment they will be manipulated and co-opted against other segments.
    79 years? I don’t see inflation in healthcare picking up until the 70s. At that time the inflation in government plans was almost double private plans. Then something happened in the 70s which reduced inflation in Public plans but increased it in Private plans. What would you call it when a government plan drives down it cost by moving liability to private plans….ah cost shifting. I assume you have read all those studies about how private insurance pays more to make up for the low reimbursement of Medicare and Medicaid. What it boils down to is private insurance is inefficient because Medicare and Medicaid shifted billions in cost to them and they couldn’t stop it. So by doing away with private insurance and making those shifted cost magically disappear we will be left with a better more efficient system.
    It just dawned on me how similar Healthcare reform is to CitiGroup. Let’s take all this risk and liability off our balance sheet and put it in a company called Private Insurance, LLC. Wow look how great our performance and books are!
    Matthew what happened in the end to CitiGroup?…

  2. 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, but heavily regulated, with UM and other cost reducing services being used, be as effective as Medicare in terms of reducing the rate of cost increases? The answer is of course, “maybe” or “perhaps.” It’s no knowable without doing it.
    Having said that, the closest we came to that was back before Nixon & Kennedy ruined your plans for 100% market domination with that pesky HMO Act, and I don’t recall the rate of healthcare inflation being too slow then
    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.
    Just maybe you’ll take all comers but my bet is that your system only works after you’ve had a damn good look a the previous and likely future experience of the groups you’re taking on.
    Of course with a single social insurance pool which contained everyone, those games wouldn’t be possible.
    But when (well, if) we get to that state, as I said to Charlie Baker, I would not be a proponent of any FFS, open access system–no matter what controls you try to put in its place. We have 79 years of evidence that that’s an inflationary and dumb way to run a health care system—unless of course you’re one of the many who can take advantage of it!
    So I dont accept your premise, but at least you can say I can’t disprove it.

  3. 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 have supplement polices funded by employers, unions, or paid out of pocket.
    2. Claims processed by Intermediaries, often the insurance companies you hold in such contempt.
    3. UM/UR done by QIOs, previously PROs.
    4. Subrogation outsourced on % of savings
    5. Network managed separate from administration and UR/UM
    6. Fraud detection also outsourced, done after the fact and poorly.
    Now lets look at self funded plans not administered by carriers;
    1. Funded by multiple sources including employers, unions, government, and individuals
    2. Claims processed by TPAs who only job is to process claims, if they don’t do a good job, provide good service, or aren’t cost effective they are easily replaced. Highly competitive and low margins, i.e. efficient
    3. UM/UR done by UM/UR companies similar to Medicare
    4. Subrogation outsourced on % of savings
    5. Network managed separate from administration and UR/UM
    6. Fraud detection also outsourced, done prospectively as well as retro.
    It seems self funded employers not using carriers are already doing everything Medicare does just cheaper and better. Why are they not even discussed as an option? Your arguments are either carrier centric or Medicare/Government/Single Payorcentric. You completely overlook the tens of millions of people in self funded plans. This refusal to acknowledge the elephant in the room shows your message of reform is politics not results. There is a proven solution that has worked for over three decades you can’t even bring yourself to discuss. You have no desire to improve healthcare you only wish to enlarge government and it’s control over our lives.
    What if the administration of all claims where handled by TPAs who only responsibility it was to handle claims? What if risk was segregated and the insurance companies only role was reimbursement to the plan after care has been rendered, no say in care to be delivered? What if people could choose their providers based upon the providers credentials and not a book or the backroom deal of the insurance company? What if UM/UR and fraud companies could bust bad providers without fear of the provider boycotting their patients?
    The most efficient system this country ever had was self funded indemnity plans administered by TPAs, with patients free to see who they liked and being reimbursed RBRVS. Throw in a Federal clearing house for transmission of data and payment, some independent UR/UM companies and we would be set.
    Here’s hoping you can engage in meaningful educated debate Mattew…

  4. 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 you approve of, Kaiser for example. So when it benefits you you’re quit capable of distinguishing between different players in a market and doing so by structure, philosophy, and business conduct. Yet in our discussion of self funding and TPAs you insist they are a monolithic pile of crap with no variance in conduct or operation.
    I have never once denied that almost every major carrier and most minor carriers in a market will offer self funding. They provide a tremendous amount of ASO. I compete with these people on a daily basis. You on the other hand have insisted on dishonestly refusing to acknowledge that the vast majority of TPAs are not carriers, do not offer “the same services (network creation, customer service, claims payment, disease management, etc, etc) that are provided to the people who buy full insurance from Blue Cross.” It’s like you never heard of the SPBA. If you where to admit to the existence of these other TPAs you could then not deny the differences between them and the carrier’s we mutually despise.
    I have a Taft Hartley client we consult and do eligibility and premium admin for, they use BCBS of MI for their claims. BCBSM charges then 3 times in admin what we would charge for the same service and we would do it better. They are also getting taken to the cleaners on PPO access where the Blues like to keep a portion of the savings. The reasons employers use carriers for ASO is ridiculous and they deserve to be ripped off for doing it. That being said doesn’t change the fact independent TPAs exist, are a major segment of the market, and do a better job then insurance carriers and Medicare.
    Do you still insist all self funded plans are administered by carriers who also provide the PPO, DM, and other services? Are you still claiming there isn’t an entire market of service providers who offer defined services assembled with other service providers, non related, to help employers administer plans? The best performing health plans I see are those that hire the best TPA, the best PPOs for each market, the Best UR company, the best UM, and contract with the top ancillary service providers, seldom are these companies related.
    If you where worth your weight in digital ink as a wonk instead of deny the market exist you would be discussing how much better a TPA not tied to the PPO performs. Those that know the business are aware of the conflict between plans and PPOs that crater to provider demands. Our clients have fired numerous PPOs that contracted with hospitals at silly 5% discounts just so their name would be in the directory, or paid questionable claims so the provider didn’t get upset. When the TPA is the PPO there is an inherent conflict of interest, it has been shown time and again to keep providers satisfied payors will act outside the best interest of their client. Break the bond between payor and network and you are more likely to get honest unbiased advice.
    The best UM company I work with does nothing but UM. Providers HATE them, they are constantly being fought and sued. That’s because they are doing their job. Not beholden to anyone but the employer that hired them they are free to piss off as many dishonest providers as they can, it’s their job, something that couldn’t happen if they where also the TPA and PPO.
    We had a PPO in the Carolinas threaten to cancel a mutual client of ours because we kept denying illegitimate bills. The employer was a couple thousand lives so it was serious money. The Provider threatened the PPO they would pull out if our UM and us kept denying their charges. Even though we had endless clinical proof what they where doing was wrong the PPO had no choice they couldn’t afford to lose that health system. The group changed PPOs.
    That’s the exact type of example you refuse to admit happens. Your argument would fall apart if every plan wasn’t administered by one of the evil carriers. You gladly deny the success in the system to berate the system as a whole. Then define yourself a wonk to top it off.
    A health plan, since the wonks on this blog, by your claim, are to stupid to look a word up;
    “Health plan means an individual or group plan that provides, or pays the cost of, medical care (as defined in section 2791(a)(2) of the PHS Act, 42 U.S.C. 300gg-91(a)(2)).”
    Again in your arrogance as a wonk you appear to think you can redefine terms as you please. I can see how this comes in handy when your deny major segments of the industry and trying to confuse less knowledgeable readers but your still getting called out on it. An insurer is only a health plan when they are taking the risk. It’s quit simple not sure why you struggle so much with it.
    What does this say about the quality of our policy wonks if 9 out of 10 don’t even grasp they basic structure of the system they are rabid to overthrow?
    HCC and the other major stop-loss carriers that don’t pay claims are going to be hurt to hear they don’t exist according to you.
    “you’re making a distinction without a difference, but aren’t you proud of yourself…”
    HCC, which does not pay claims, writes well over $500 million in stop-loss premium. The plans they insure pay claims in the tens of billions. Comparing them to fully insured carriers they are as big as all but the couple largest national carriers. And they are only 1 stop-loss carrier. There is a major difference in the distinction your just not knowledgeable enough to see it.
    Apparently your math skills are as lacking as your healthcare knowledge. If trend averages 10% and we reduce that to 8% there would still be substantial growth over 30 years. I never claimed we killed inflation, just our clients have lower inflation then carrier administered plans. Can we all please have a moment of silence for Matthew’s latest strawman victim…
    Why don’t I own 100% of the market;
    1. For 20+ years there was a federal law that said no matter how well I did my clients still had to offer an HMO. Thank you Ted Kennedy and HMO ct 1973.
    2. Numerous states have laws dictating the size of groups that can self fund and the insurance they are required to purchase.
    3. In many geographic regions the Providers won’t offer us PPO access or if they do at rates that make us non competitive with the carriers you mention. It’s strange it’s almost like the providers and carriers I compete against work together to drive up cost….but there’s no proof of that http://www.boston.com/news/local/massachusetts/articles/2009/01/01/state_panel_to_examine_payments_to_partners/?p1=Well_MostPop_Emailed2
    4. Carriers can buy business subsidized by the profit from other suckers
    5. client ignorance
    Those are the top five off the top of my head.

  5. 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 current Medicare FFS system, give everyone a voucher, and let rational intermediaries (which would look like cooperative health plans like HCHP or GHC) figure out how best to spend the money.
    But given the choice between what we have now and Medicare for all, I’ll take the latter. Better for the financial health of the country and of the people in the system…

  6. 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 a health plan is only a benefit structure appertaining to one employer group, does not mean that you’re correct in the use of the word.
    To make the actual point rather than the pedantry clear–when I say that a large employer purchases ASO or TPA services from, say a Blue Cross, those services (other than holding the money which is just an administrative function given that all the really expensive stuff is often re-insured through the same organization) are the same services (network creation, customer service, claims payment, disease management, etc, etc) that are provided to the people who buy full insurance from Blue Cross. That’s the important thing–you’re making a distinction without a difference, but aren’t you proud of yourself…
    I just wonder that despite your wisdom about technical terms, none of which are commonly shared by the dumb wonks that accumulate here, it appears, Nate, that you have no concept of how health care actually works?
    After all you tell us that “you’ve been cutting health care costs for 30 years”, when for everyone else they’ve gone up in real terms by about 500%. So how come Nate doesn’t own 100% of the market, having put Aetna, Cigna, Kaiser, the Blues et al out of business? After all you should be offering exactly the same coverage for 20% of the cost.
    You should have done to the health care insurance industry what Walmart did to Sears? How come you aren’t famous and a billionaire? Or is that you’re just playing modest games that shift the risk onto some other sucker?

  7. 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.

  8. 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 never contributed a penny for. Your leaving us a 10 trillion dollar debt. We have terrible schools, super fund sites in need of cleaning, terrible infrastructure, poor enviromental laws, and countless other problems I personally am much more concerned about then you having to sheel out a couple hundred a year. If we do cover dental and vision for you what are you going to demand next? I would love to see a study along the lines of what states get back for their fedeeral tax contribution but comparing generations.
    Just once it would be nice to have a retiree thank me for all the taxes I pay to support them and all of their debt I am assuming instead of always haveing their hand out asking for more. You guys have had a nice run of things, why don’t you let us insure that the future, the kids, have dental and vision and quality healthcare.

  9. 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 foresighted enough to accumulate enough cash to buy myself a well-fitting set of dentures, I can understand my father’s problem better. I wonder why dental health was left out of LBJ’s original medicare proposals, and why no one in the past40 years has been clear-sighted enough to correct this iommission. any new universal health plan must inc lude visual and dental health to be truly effective.

  10. 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 on practicing their art attorneys are going to pratice theirs.

  11. 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 fully insured customers how do you balance your statement? You show no knowledge of the subject matter. If you had any experience with self funding you would know the administration provided by Insurance carriers, what you erronously seem to think is a health plan, and TPAs are night and day different.
    2 out of 3 TPAs are privately owned and the remainder corporate.
    Since TPAs are an easily replaced conponet of a health plan they must offer a high level of service or be replaced, not something you see with carriers.
    No I don’t think big insurers are trying to reduce cost, that is the sales pitch we give fully insured employers on why they need to hire us and go self funded becuase we do try to cut cost. We have been cutting cost for almost three decades.
    It’s laughable you would pick an argument with a TPA about what it is a TPA does. It really has nothing to do with facts with you, you have an incredible arragance that you know everything about a field it appears you have never worked a day in.
    When we use to own our own PPO we would kick providers out who played billing games. For some of our larger self funded clients we rewrote the plan document to specifically exclude providers that abused the plan. If a PPO was tied to closely to a hospital and not getting the savings we expected we would change PPOs, something carriers seldom can do. If we had a big enough portion of a market we would cut side deals for additional discounts over what the normal PPO customer gets.
    I have a client in GA now, a county who has a direct contract with the local hospital for additional discount over and above the PPO.
    I can’t imagine how someone who knows as little about insurance as you do has been able to run your mouth so long. In just a week I have caught you in enough lies and ignorant statements to ruin any creditablity.
    I don’t care what conference you spoke to I have owned a TPA and done it everyday for years and your going to try to tell me how the industry works?

  12. 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 it’s important to point out that the arguments of those on the left, and those on the right for that matter, are lacking in balance and depth. It’s one of the big reasons we’re in this mess to begin with. When did we stop searching for the whole truth folks?

  13. 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.

  14. “that does NOT mean that we couldn’t provide care for the US population for way way less than we currently do”
    I agree with Matthew on this, but I think the key here is to find ways to drive down unnecessary and cost-ineffective utilization of healthcare services as opposed to just paying less for each service, test, or procedure. Yes, there is some gold to be mined from negotiating drug prices, streamlining and simplifying insurers’ offerings and computerizing medical records to reduce duplicate testing and adverse drug interactions, especially in hospitals.
    The real focus, however, at least in my opinion, has to be in narrowing the broad range of regional practice pattern variations, not paying for ultra expensive specialty drugs if they can’t pass a reasonable QALY metric (the UK’s NICE approach), redefining what constitutes good, sound medical practice as it relates to end of life care, and protecting doctors and hospitals from lawsuits based on a failure to diagnose as long as national (not local community) evidence based standards were followed. Payment reforms like and tiering co-pays for hospitals and doctors and episode pricing for expensive surgical procedures would help to steer patients to the more cost-effective providers and drive the system’s incentives toward rewarding providers for value (outcomes relative to cost) and not just resource utilization.

  15. Matthew – An observation and a question. First, I think you underestimate how much Medicare would have to raise rates if Medicare was the only payor. It wouldn’t be sustainable as is – operationally, financially or politically. Second, do you really think using Medicare’s approach to payment – literally locking it in for all health care services – would make health care in this country better, less expensive or more effective?

  16. As usual I agree with Barry at least on the visible and somewhat dedicated taxation part. I think he’s probably right that there is cost-shifting going on to private from public payers, but that does NOT mean that we couldn’t provide care for the US population for way way less than we currently do.
    Nate, you really are in dreamworld if you think that insurers, plans, fiscal intermediaries or whatever you want to call them operate differently towards the health care system based on whether their customers are self insured or fully insured. Try talking to all the employer members of the largest effective purchasing group in the country, as I did last year. You’ll discover that all of them (like almost all large firms) self-insure for reasons of cash-flow, taxation and regulation, 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. (And by the way both sets of customers are equally pissed off).
    The point is that the insurers treat providers exactly the same way irrespective of whether their business is at risk or self-insured. Do you really think that the big insurers are trying really hard to reduce costs with the providers serving their fully insured business, and not bothering to care with their self-insured clients–when it’s the same set of providers?
    All you seem to be doing is playing financial games and not impacting the provider system at all. That’s why you’re a parasite.
    And of course you can extrapolate Medicare-type pricing over the whole system. Have you heard of Canada, Germany, Japan, etc, etc, etc…

  17. Is it to much to ask that a healthcare blog use terms properly?
    Health Plan does not equal insurance company.
    “Fifty-four percent of covered workers in 2004 are in a plan that is completely or partially self-funded (Exhibits 10.1, 10.2).”
    That makes this statement completly untrue;
    “And of course the same thing was true for all health plans over the past few years (until very recently).”
    No, your theory, which is true and I agree with, only applied to fully insured health plans where the insurance company was taking the risk. Less then half of the market according to Kaiser Family Foundation. It would be nice if we are to have honest discussions on reform if you stopped pretending half the market didn’t exist.
    It’s funny that in this post you rail about the abuse of insurance companies and how they take advatage of their pricing power but then call me a parasite of the system for fighting them. My entire business, 28 years old, is based on taking employers away from insurance companies so they can’t do such things. Self funded plans are the anti-insurance company you preach we need but you deny their existance and lump them in with the evils of private insurance. Why are you trying to scrap the entire system for the ills of 46%?
    This statement is also false;
    “(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.”
    Medicare is not cheaper then a large self funded plan in any measure except the discounts they regualte on providers. Any hospital or provider will quickly tell you they could not live with Medicare reimbursement on their entire patient base so any suggestion Medicare for all would lower cost is false. You can’t extrapolate Medicare pricing over the entire system and Medicare has higher administrative cost and considerably higher fraud/waste rates.

  18. “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.”
    Most hospital CEO’s, especially those who oversee academic medical centers, would probably tell you that their profit margins are quite low and that they could not make ends meet or continue to provide the quality of care they do now if they had to accept Medicare rates from all comers, even with no uncompensated care. I think the fallacy of composition is at work here. Medicare can get away with cost shifting to the private sector because there is a private sector to shift costs to, at least to some extent. I’m more inclined to believe the CEO’s know their costs and what would happen if Medicare rates prevailed for all patients than to believe Pete Stark.
    Separately, if we do ever move to complete taxpayer financing of health insurance and healthcare, I think we would be much better off with a highly visible and transparent payroll tax or dedicated VAT or some combination of the two than with progressive income taxation. While we would need to integrate payroll and income taxes to make sure that wage earners were not significantly overtaxed relative to those who derive their income from interest, dividends, capital gains, rent and other non-wage sources, resource allocation is likely to be much more efficient if the cost of healthcare and the associated taxes are highly visible to each taxpayer.

  19. Would it be fair to say that payers cannot, within their scope of control, reduce health care costs? After AWP laws and state coverage mandates the utilization controls of managed care were effectively neutered.
    I believe that health plans can improve the health of their populations through wellness initiatives, collaborating with employers on consumer (patient) engagement and other things, but providers have 90% of the control of how efficiently care will result in improved health.

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