Matthew Holt

Karen Ignagni tells the truth, unfortunately

There’s a big to-do about whether there are really any cost-saving measures in the House and Senate bill. Most people say that the answers are “no” and “sort of”. There’ll be much more discussion about that on THCB this week, and I suspect the answer will really come down to whether or not pilot programs which have the potential to reduce costs can be both successfully piloted, then extended by CMS and then protected from Blue Dogs, reps from academic medical centers, Republicans saving Medicare and basically everyone in Congress carrying the industry’s water. So “sort of” may well mean no.

But let’s not dwell on that. Instead let’s have some fun. Regular THCB readers will know that AHIP’s Karen Ignagni has told half-truth after half-truth after outright lie to protect the position of her members. All the while somehow holding together a coalition that really should have broken apart long ago (and may yet still do that). And she gets paid very well for that role.

But today in the WaPo she told the truth:

Karen Ignagni, president of America’s Health Insurance Plans, said the Senate bill includes only “pilot programs and timid steps” to reform the health-care delivery system, “given the scope of the cost challenge the nation faces.” Unless lawmakers institute changes across the entire system, Ignagni said in a statement Wednesday, “Health costs will continue to weigh down the economy and place a crushing burden on employers and families.”

Don McCanne (who runs the Quote of the Day service from the PNHP) puts the boot in:

There could not be a more explicit admission that the private insurance industry is not and never has been capable of controlling our very high health care costs. <snip> Karen Ignagni says that the lawmakers must institute the necessary changes across the entire system (because the insurers can’t). Let’s join her in demanding that Congress take the actions necessary, and then thank her for her efforts, as we dismiss her superfluous industry from any further obligations to manage our health care dollars.

And it’s basically true. Health plans have no ability to overall restrict health care costs. And worse, because they’ve been able to charge more to their customers than the increases they’ve received from their suppliers, they do better in a world in which costs go up.

Of course Ignagni knows that gravy train can’t roll on forever, so she’s trying to craft a future in which the health plans can continue to make money, yet not bankrupt their customers outright. Whether it’s good for the rest of us remains a very open question.

Meanwhile, in another example of catching someone saying something that they don’t really understand the meaning of, Uwe Reinhardt busts Sen. Kay Bailey Hutchinson (R-TX) as saying that not having insurance coverage is rationing and shouldn’t be allowed. Well she may know have thought she was saying that, but that’s what she was saying.

24 replies »

  1. rbar there has never been a meaningful study to prove co-pays fail. There have been bias polls done to confirm someone’s preconceived notions but never a serious and supportable study.
    If someone is going to claim they didn’t take their medicine becuase of the co-pay you then need to study their entire financial portfolio to gauge the value. If someone forgos their Rx and instead buys a pack of cigs is the co-pay really the problem? You can give everything away for free but we know that leads to waste far greater then some savings from preventing disease. There needs to be just the right mix of personal responsibility and charity, our system lacks way to much of the personal responsibility

  2. Barry,
    I agree with your statements, but to my best recollection, there is quite good empirical evidence that copays backfire – i.e. that they curb both necessary AND unnecessary care.
    I think one solution could be that docs can fall back on rigid rules, sthg like: “Axial backpain for 2 weeks? Well, your MRI is not approved, but if you want to pay for it out of pocket” (I am talking about guidelines here). Of course, every kind of cost control will be hugely unpopular, with patients and docs alike. I have seen narcissistic docs at work who spread their unnecessary MRIs like candy to the receptive patients.

  3. For all those interested this is where the blowhard Nate works
    Apparently he is the director of marketing…and he went to UNLV. Not exactly stellar credentials, but it wouldn’t matter anyway, since he is always correct.

  4. See Barry, my intuition is that the cost of “sniffle” visits is negligible compared to the cost of no early treatment, not to mention that the results of the latter can be lethal.
    I really think someone should start collecting and analyzing data on all these things. Maybe there are a few millions somewhere left over from the HIT bonanza…

  5. rbar,
    I think a good case can be made for eliminating copays for maintenance drugs like those to control blood pressure and others to manage chronic disease that patients are supposed to take every day. Some plans have done just that, at least for generics and other first tier formulary maintenance drugs. Eliminating the copay for a discretionary office visit such as to seek reassurance that a sniffle is nothing serious and will resolve itself in a couple of days is a different matter. Particularly with respect to health insurance plans that are financed with tax dollars, my preference would be to require copays. I think the savings from controlling utilization will exceed the costs of not catching problems early because patients didn’t seek timely care. I don’t have any data to prove this, but it makes intuitive sense to me and is a financial risk I would be willing to take as a taxpayer, at least until it is proven that it makes sense to switch gears.

  6. Barry,
    The low copays don’t help much. The well off worried well go to the doc w/o 2nd thought, but the people in financial stress will hesitate to go and have their antihypertensives refilled.
    I thought of exactly that reason that you suggested (have mandatory substantial copays that the doc may waive), but at the end, the patients will expect that docs will waive the copays for all “legitimate visits” and will be devastated when it doesn’t happen.
    Dr. Kirsch, I understand that HMOs were not popular for thje reasons that you mentioned. Is our current system popular or effective? is it possible that patients might accept an HMO type model if they know that their costs are reduced and that they otherwise would have no coverage at all.
    But again, that’s not what I find the best solution anyway as I mentioned above … and I agree with Pam.

  7. “Barry, do you view co-pays as a method to control utilization or spread the cost of healthcare more to those that use it most? “
    Peter – The answer is primarily the former. I think utilization driven by a combination of defensive medicine and the desire to make money under the fee for service structure are issues that as I’ve said before could be addressed by changes in payment policy – bundled payments, tiered co-pays, capitation, etc rather than fee for service.
    I’m somewhat skeptical about the magnitude of healthcare costs that are accounted for by people who deferred needed care because they couldn’t afford or didn’t want to pay a modest, often $10 or $15, co-pay. As a short term expedient, people also have the option of putting the co-pay on a credit card if they don’t have cash or adequate funds in their checking account or on their debit card. When I made my co-pay comment, I was thinking about those who rush to the doctor for every sniffle. Most minor ailments resolve themselves in a couple or a few days, but if one could see a doctor or even an NP quickly, not have to travel far, and not have to pay anything out of pocket, lots of people, sometimes including myself, might be inclined to go to the doctor just to seek reassurance. At the margin, a co-pay makes the patient think twice and, the vast majority of the time (but not always) that’s a good thing from a system cost control perspective.
    I just don’t think it’s feasible to make healthcare free at the point of service without either lots of rationing or government keeping track of utilization at the individual patient level like in Taiwan and then sanctioning people who are deemed to make too much inappropriate use of the system.

  8. ” I think we should have co-pays coupled with the opportunity for doctors and hospitals to waive them on an ad hoc case by case basis.”
    Barry, do you view co-pays as a method to control utilization or spread the cost of healthcare more to those that use it most? If the purpose of co-pays is to control over-utilization and you recognize that lower income folks may once again avoid early treatment due to financial circumstances, then how are we to reduce costs that arise from delayed medical treatment which could have been handled by a PCP rather than an ER? Contol of utilization should be done where it’s most aptly done, by medical professionals on medical need. Now Canada had a problem with the ER being used by patients too lazy to wait for their PCP. They then set up a triage system to vet those in real need. Canada also has universal budgets that in themselves control utilization. I can maybe see a ER/Hosptial co-pay, but can’t see the value of one for your PCP. If docs and hospitals become the co-pay police then how would they make that determination fairly. And who would the co-pay go to, the doc/hospital, the system administrator (gov/insurance)?

  9. What are the costs of patient induced overutilization?
    What are the costs of “defensive medicine”?
    What are the costs of abusive self referrals?
    etc. etc.
    I don’t think there can be any conclusions without data. All we have are wildly different opinions based largely on anecdotal evidence. How can we start cutting costs if we don’t understand EXACTLY how we spend, or misspend, our dollars?

  10. Of course the private insurance industry doesn’t have the capability to cut health care costs the way the system is currently set up. The past several decades are proof of that. Maybe if there was more actual competition between insurers private market forces would do what theory suggests and motivate insurers to cut costs better. As it is, individuals do not have the real ability to choose their health plans and switch between them. The dominance of employer-sponsored insurance in the US system motivates insurers to set up plans that appeal to large employers and what is best for their business and the higher up executives in these companies purchasing insurance. If the private insurance industry could be set up in such a way that individuals had more power in choosing their health plans, insurance companies would be forced to cater their plans to meet the needs of individuals, ie. making health insurance more affordable by finding ways to cut costs. For such a system to work, individuals would need the tax benefits currently associated with employer-sponsored insurance and a way to purchase and change insurance plans without having to deal with preexisting condition clauses and exclusionary periods (at least if they were switching between insurers if not when purchasing new insurance). These changes could give better motivation to insurers to make necessary adjustments to payment schemes (example: capitation), etc, which would lower healthcare costs.
    Alternatively, the US would benefit by doing away with the whole private insurance industry which has admittedly only contributed to rising health care costs in the US over the past several decades. A single-payer system could reduce administrative waste and more efficiently reform payment schemes throughout the system that pay doctors adequately while removing incentives for unnecessary and expensive care (salary, capitation, etc.).
    Either way, the current US reliance on employer-sponsored insurance and private insurance is not working for our healthcare system.

  11. “HMO patients often had no copay and, therefore, overutilized the system. They came to the office after 2 sneezes and a sniffle”
    In Taiwan, patients who overutilize the system get a visit and a talking to from a member of the government. That would go over like a lead balloon in the U.S. Personally, I think we should have co-pays coupled with the opportunity for doctors and hospitals to waive them on an ad hoc case by case basis.

  12. I was in the country during the HMO era. The patients hated it and so did we physicians. It was a disaster for the doctor-patient relationship. The patients thought they we were holding back care to save money. Indeed, there were some improper conflicts of interests where physician compensation was directly tied to utilization. I realize that fee for service medicine has its own conflicts. HMO patients often had no copay and, therefore, overutilized the system. They came to the office after 2 sneezes and a sniffle. If patients under any system had some ‘skin in the game’, then utilization and costs would decrease. They might hesitate before demanding a $1,200 MRI test, if they had some responsbility for its cost. When patients pay nothing,the demand and entitlement for care rises. This is like having dinner out on the expense account. Wine and filet mignon for everyone.

  13. “I have many clients that are paying less today then they where 5 years ago.”
    Who are your clients, employers or emplyees? It would help Nate if you detailed how those clients are paying less and how much. Right now I assume you found a way to off load their risk to their employees or some other entity.

  14. I don’t get Nate’s argument about bringing up the point about insuring 20-29 dependents as the major cost driver. By far the lowest cost group bar none. Not uncommon that an overwhelmingly majority of individuals in this age group will not use a single health care resource in an entire year.
    As for his other ones, Nate brings up pretty of valid points. Private insurance companies get made out to be one of the principal bogey man of health insurance costs. There is some truth to that portrayal (e.g., increased administrative complexity, etc) but Nate rightly brings up the point that any time insurers did largely try to bring up an effective means to slow down costs the past 15 years, it was thwarted nearly every time at the state/federal level due to backlash from patients and providers.

  15. I have to admit that I wasn’t in the country at that time, but from what I have heard (from colleagues) and read, HMOs aggressively negotiated (occ overly so)contracts with medical providers and did cut cost for unnecessary services (such as those MRIs for axial back pain, for instance). That they also denied reasonable care did happen in some cases, but these cases probably are somewhat overrepresented in our collective memory.
    Not to be misunderstood: I hate money driven medicine and personally, I am in favor of sthg like medicare for everyone willing, with an adjusted fee schedule (higher for cogn. services, much lower for procedures) and emphasis on EBM. But I am sure that insurers could compete on price, even constructively so, if the market was set up for that.

  16. Nate, I don’t understand what “cost” the insurers are so able to control. Is it the cost the insurers are incurring? It seems to me that capping out of pocket and life time maximums are just shifting the “cost” from insurers to people. Am I missing something?
    As to HMOs and similar ideas, I guess you can always cut costs by cutting access and quality….

  17. rbar is correct insurers can cut cost. Barry I would disagree that we need cover as much as we need congress to stop outlawing;
    We cut inefficient and expensive providers from our networks…states passed AWP laws
    Capitation and bundled payments…illegal in most states unless the payor or provider holds an HMO license
    Steerage or provider preference is great until one of those providers makes a mistake then the network gets sued for “forcing” the patient to see that provider
    We would play smaller feeder hospitals against the large academic facilities until they where all gobbled up either by purchase or operating agreements. Remind me which side has anti trust exemption?
    Our new way of controlling cost is to limit what we pay to 120% of Medicare, this prevents these large monopoly hospitals from overcharging our plans 300-400% of Medicare. Guess what happens, there is congress proposing bills to cap out of pocket and lifetime max.
    There has never been a shortage of ideas or ability to control healthcare cost, just a shortage of will to admit we can’t have everything all the time.
    How the left manages to deny this is beyond me…well it is the same group that can’t even read a thermometer accurately so I guess we shouldn’t be surprised.

  18. No Matthew it is not true, it is more left wing propoganda by people that don’t have any clue what they are talking about. If your going to bust balls for telling half truths then run head long into your own lies I hope your wearing a cup cause your balls bout to be busted.
    I, and those in my industry, can do an exceptional job of controlling cost. I have many clients that are paying less today then they where 5 years ago. Controlling our cost has never been a problem.
    What I can’t control is government changing the laws to shift their cost onto our plans. I would hope the left was inteligent enough to see the difference but apparetnly not.
    When states and now the federal government tell me I need to cover 20-29 year old adults who happen to be born to my members as dependents that is not a failure in our ability. That is State and Federal Medicaid trying to push cost off their books.
    When the state government raises their premium taxes that again is not our failure.
    When states and the Feds decide wigs, or massage therapy, or other treatments must be covered to their specifications that is not my failure.
    When the EEOC and ADA tell me I can’t charge a smoker who is a higher risk a higher premium that is not my failure.
    It’s sad the left must be constantly schooled in the basics of logic and facts.

  19. I think any CMS pilot program that shows some positive results toward controlling healthcare costs can probably be adopted by private insurers whether Congress prevents CMS from rolling it out more broadly or not. I’m especially interested in the tiered co-pay concept which has worked very well in the prescription drug space. By contrast, both bundled payments and capitation arrangements require providers to agree to them. Both strategies put providers at financial risk even if they offer the potential to earn bonus payments for good results. That’s why these will be much harder to actually implement. Tiered co-pays, by contrast, could be more easily introduced by insurers. The insurers’ challenge will be market acceptance by members which will be influenced mainly by how much lower the premiums are than traditional PPO products.
    Insurers all claim they can distinguish between the high utilizers and the cost-effective practitioners. We know that some doctors practice more defensive medicine than others. We know that some are more money driven than others, especially those who own their own imaging equipment. As long as insurers offer providers a transparent process for determining which tier they fall into, give them a fair opportunity to rebut information they feel is incorrect and make the criteria available to both insured members and the general public, I think a tiered co-pay product could gain acceptance in the market especially if the premium is enough below the traditional PPO products to gain attention. There is always likely to be quite limited acceptance of narrow network HMO’s because most customers prefer broad network products.
    I agree that doctors drive virtually all healthcare spending through their ability to order tests, prescribe drugs, admit patients to the hospital, refer to specialists, consult with patients and perform procedures themselves. Tiered co-pays could get their attention and broader use of electronic records over time could provide the infrastructure that would help us improve the analytics that enable us to better determine what works and what doesn’t and then incorporate the information learned into coverage and payment policy.

  20. We have overutilization and cost explosion because (some, but not all) docs benefit from superfluous medical services … and because of patient desire/culture and medicolegal issues (did doc X meet the “standard of care” when he “failed” to order service Y that in retrospect might have helped the patient?).
    If insurance companies really competed on cost and outcome and had negotiating power, and the insured benefitted from savings of a more cost effective plan, we would see true savings. We would probably start seeing walmart health plans with motel 6 hospitals that would be unpleasant for everyone involved, but probably have outcomes similar to today’s plans, at lower cost. Of course those insurance would still have higher administrative cost than medicare (for costs of new enrollments alone, let alone profits).
    Didn’t the HMOs prove that insurers can cut costs? (not that I find that the ideal solution…)

  21. I think you are missing the point. Private health care plans have limited limited ability to control costs because it is the fundamental health care delivery and payment system that is the problem. A public option is no better and given it is subject to the whims of each successive Congress is ti much worse at controlling anything, need I say Medicare. All of the pilots in legislation aimed at future cost control or quality improvement are within the context of Medicare and as I am sure many readers here know it takes over a decade for any many treatment changes to filter through the entire health care system so any hope of controlling costs under the current legislation is ten years away at least and in the meantime there are numerous provisions that will increase costs and reinforce the idea that health care should all be paid by someone else, even basic preventive services. Furthermore the track record for such pilots ever producing anything positive or actually being implemented is not good.
    Regardless of what Ignani says the problem is the system and the costs generated by it, not the premiums charged by insurance companies. Want proof, just look at employer self insured plans where costs go up as fast as premiums and there is no insurance company or profit motive involved.
    The idea that we can solve all these problem with a public option is quite silly, all that does is put 40 million people into a flawed system, drives up costs and gives Congress the ability to muck things up on a larger scale. I put I lot of time into this if anyone is interested.

  22. I think the main reason that it’s hard for insurers to control costs is that they perceive, probably correctly, that they lack the moral authority to do so independent of Medicare. That’s why they need CMS to take the lead and to provide political cover. I’m talking about strategies like bundled payments for expensive surgical procedures, tiered co-pays for doctors and hospitals based on cost and quality, and partial or full capitation for the management of chronic disease like diabetes and asthma, among others. Tiered co-pays would have the added benefit of providing some countervailing power against the brand name Academic Medical Centers, large hospital groups and physician practices that have amassed large market shares in their operating areas. We don’t need CMS to take over the whole system. We just need it to provide some leadership. The only reason Medicare appears (to seniors) to work as well as it does is because there is still a large private sector to shifts costs to. With literally thousands of billing codes between the CPT-4 and ICD-9 (even more with ICD-10) systems, it is inconceivable that CMS could get every price in every geography even close to right without creating both surpluses and shortages as some procedures are overpaid and many others are underpaid through the use of dictated or administered prices with a political overlay to boot.
    We know that the incremental costs, mainly for subsidies, of implementing the proposed reforms are certain to occur while the efficacy of the ideas and strategies to bend the cost curve bring to mind the title of the song by the late Dusty Springfield – “Wishin’ and Hopin.”

  23. First of all, if Ignani is telling ‘half-truths’, that’s already more truth than we’re getting from most folks in the arena. It seems that ‘quarter-truths’ and ‘eight-truths’ are the standard. It’s convenient to demonize certain stakeholders as being the responsible villain for health care cost escalation. Remember, that the common pathway for all medical care costs is the prescribing doctor. Why do we order so much excessive medical care? There is so simple answer to this fundamental question. See

  24. Matthew: I’m very glad to hear Karen Ignani say loudly and clearly that the health insurance industry has limited, if any, ability to control health care costs. This is something we’ve known for a long time, but since the health plans were making a lot of money passing through the costs to employers and employees, they had little incentive to oppose the flows. It made a lot of health executives very, very rich.
    This admission is another brick in the foundational thinking we’re laying for the design of a realistic and affordable health care system. As I’ve said many times before, the cost increases are structural, due to the way our health system pays for quantity, not quality; for specialty care not primary care; and the lack of transparency about what works, what doesn’t, and at what cost to whom.
    However, I do think that SOME health plans, the ones that are aligned with and supporting risk-taking provider organizations, can be part of the solution. People forget that Kaiser is a health plan, as well as a provider organization; that Group Health has a health plan component; etc. We cannot have accountable care organizations without financial and risk management, i.e. without a health plan component.
    Perhaps this is part of the future that Karen I. is hoping for? In any case, let’s give her credit for telling the truth.
    Regards, DCK