Tag: History

Managed Care History Part III: The Rise of Machine-Driven Managed Care

Dec 19, 2024

This is part 3 of Jeff Goldsmith’s history of managed care. If you missed it read Part 1 & Part 2

By JEFF GOLDSMITH

Two major changes in health insurance ensued as the US health system entered the 21^st century- a strategic shift of health cost risk from providers to patients and the emergence of machine driven managed care.

Insurers Shift Strategy from Sharing Risk with Hospitals and Doctors to Markedly Implicating their “Patients’.

After the 2008 recession, employers and their health plans shifted strategy from putting physicians and hospitals at risk through delegated risk capitation to putting patients at risk through higher patient cost sharing. In the wake of the recession, the number of patients with high deductible health plans nearly quintupled–to over sixty million lives. By 2024, 32% of the lives in employer-based plans (50% among small employers’) were in high deductible plans regardless of patient economic circumstances.

The stated intention of the High Deductible Health Plan movement was to encourage patients to “shop” for care. In real care situations, however, patients found it difficult or impossible to determine exactly what their share of the cost would be or which providers did the best job of taking care of them. For an extensive review of the literature on how healthcare “consumers” struggle to manage their financial risk, read Peter Ubel’s 2019 Sick to Debt: How Smarter Markets Lead to Better Care.

Employers and insurers, working together to “empower consumers”, rapidly shifted “self-pay” bad debts onto their provider networks. Some 60% of hospital bad debts are now from patients with insurance. Instead of “shopping for care”, consumers found themselves saddled with almost $200 billion in medical bills they could not pay, and hospitals and physicians ended up eating most of it.

This escalating “insured bad debt” problem forced providers to hire revenue cycle management (RCM) consultants to revise and strengthen their policies regarding patient financial responsibility, “revenue integrity” (meaning crossing all the “t’s” and dotting all the “I’s” in each medical claim and making sure care is coded properly) and rigorously monitoring the flow of claims to and from their major insurance carriers. As a result many providers found themselves spending 10-15% of their total operating expenses on RCM!

Medicare Advantage Enables Insurer Market Dominance

The movement from Ellwood’s vision of regionally-based provider sponsored health plans to market dominance by huge national carriers was cemented by the emergence of Medicare Advantage as the most significant and profitable health insurance market segment. In 2013, Medicare Advantage accounted for 29% of total Medicare spending. A decade later, in 2024, it was 54% (of roughly a trillion dollar program). And until a federal crackdown on MA coding and payment policies by the carriers, it was a 5% margin business, significantly more profitable than commercial insurance, ObamaCare Exchange or managed Medicaid businesses.

As Medicare Advantage emerged as the largest health insurance market, it was dominated by a cartel of large publicly traded carriers.

Managed Care History Part II- HMOs Give Way to Managed Care “Lite”

Dec 18, 2024

This is part 2 of Jeff Goldsmith’s history of managed care. If you missed it read Part 1

By JEFF GOLDSMITH

The late 1990s crash of HMOs opened the door to a major consolidation of the health insurance market controlled largely by national and super-regional health plans. While HMOs by no means disappeared post-backlash, the “movement” begun by Ellwood and Nixon fell far short of national reach. HMOs never established a meaningful presence in the most rapidly growing parts of the US- the Southwest, South and Mid-Atlantic regions, as well as the Northeast.

The exemplar, Kaiser Permanente, damaged its financial position with an ill-considered 1990’s (McKinsey-inspired) push to become a “national brand”. Today, over 80% of Kaiser’s 13 million enrollment is still in the West Coast markets where it began 80 years ago!

HMOs Go Public and Roll Up

Two little noticed developments accelerated the shift in power from providers to payers. One was the movement of provider sponsored health plans into the public markets. PacifiCare, the most significant hospital sponsored health plan owned by the Lutheran Hospital Society of Southern California, was taken public in 1995. A subsequent merger with FHP health plan destabilized the newly public company.

After PacifiCare crashed post the 1998 Balanced Budget Act cuts, and struggled to refinance its debt, it was acquired by United Healthcare in 2005, bringing with it a huge sophisticated, delegated risk contracting network. United then bought Sierra Health Plan based in Nevada in 2007, including its large captive medical group, its first medical group acquisition. Following these acquisitions, United rolled up PacifiCare’s southern California based at-risk physician groups in the late 00’s, and then capped off with its purchase of HealthCare Partners, the largest of all, 2017 from DaVita in forming the backbone of today’s $110 billion Optum Health.

United’s buying BOTH sides of the delegated risk networks-plan and docs-in high penetration managed care markets is not fully appreciated by most analysts even today.

It has meant that as much as 40% of Optum Health’s revenues, including almost $24 billion in capitated health insurance premiums, come from competitors of United’s health insurance business.

However, of greater strategic significance was Humana’s decision in 1993 to exit the hospital business by spinning its 90 hospitals off as Galen.

Back In the Day *

Mar 20, 2015• 1

By MARTIN SAMUELS, MD

Many people believe that neurologists are particularly attracted to detail. I prefer to think of the issue as one of precision rather than pointless obsessiveness. Some years ago, I was asked to discuss a case for the New England Journal of Medicine’s series of CPCs called the Cabot Cases.

In preparing the case for publication, I found myself in an argument with the editor about the placement of an apostrophe. There were two diagnoses in this case: aphasia from a cardiac source embolism to the left cerebral hemisphere and hypercoagulability as a paraneoplastic syndrome. In my view, aphasia is a Trousseau syndrome (i.e., the word “aphasia” was suggested by Trousseau), whereas hypercoagulability as a paraneoplastic syndrome was Trousseau’s syndrome, because Trousseau both described and suffered from the disease. I am very much opposed to the trend to remove eponyms from the names of diseases and syndromes as to do so strips medicine of some of its most illustrious history. But, only a handful of eponymic disorders deserve the apostrophe. Antonie van Leeuwenhoek’s disease (diaphragmatic myoclonus) is another example.

History in medicine is not a mere avocation. In addition to the old saw of helping to prevent the same errors from being repeatedly made, it provides us with the perspective needed to approach diagnostic and scientific challenges in our own era. It also combats hubris. In carefully researching my eleven New England Journal CPCs I have never encountered an idea that had not evolved from those before it.

In grand rounds, in medical journals, and particularly in the lay press, we are regaled with “revolutionary” ideas, but that they are completely new is an illusion. Throughout history, people have always been on the “cutting edge” and have repeatedly believed that they had some sort of huge advantage over prior generations.

Health Care Reform and the Laws of Unintended Consequences

Jul 25, 2012• 7

By Steven M. Gillon

When the Supreme Court ruled that President Obama’s sweeping overhaul of the nation’s health care system was constitutional, about the only thing critics and supporters could agree on was the historic importance of the legislation itself. But if history is any guide, there will be one other inescapable truth: The Affordable Health Care for America Act of 2010 will generate the same unintended consequences that have shaped, distorted, and even perverted so many other important pieces of legislation in our nation’s history.

Whether tackling social security, veterans’ benefits, civil rights or immigration reform, Congress has demonstrated over the past 75 years that when it addresses significant social issues with complicated legislation, the results will, more often than not, vary dramatically from what was originally intended. In some instances, as in the case of the GI Bill, the impact was broader than the original drafters could have dared to hope. More commonly, as in the case of social security or immigration reform, a small detail has ended up undermining the loftiest goals of the original bill.

A general rule of thumb for determining how likely a bill is to veer off course is to ask how ambitious the legislation is: the more far-reaching, the more likely it is to produce unanticipated consequences. As we saw with health care reform, big, complicated laws are often the product of partisan brokering and compromise that makes their “intent” ambiguous and open to interpretation. That gives enormous power to the government bureaucrats charged with enforcing the law, and to the courts that are inevitably called upon to settle the conflicts. The gap that opens between the bill’s lofty goals and its often haphazard implementation is the breeding ground for unforeseen results.

How Would Modern Medicine have Helped our Early Patriots?

Jul 5, 2010• 12

By ED PULLEN, MD

On Independence Day I thought it would be interesting to look at the causes of death of some of our famous Revolutionary era patriots. When I started researching this I anticipated early deaths from infections and untreatable chronic diseases like diabetes and hypertension. Interestingly many of the famous early Americans lived to a ripe old age, and died of causes that even today may well have been their demise.

George Washington: Washington is an exception to the comment above. Washington died at age 67, likely of a pharyngeal infection, possibly streptococcal disease. Today he would likely have received antibiotic treatment and survived this illness.

Are Cooperatives a Reasonable Alternative to a Public Plan?

Aug 20, 2009• 10

By TIMOTHY S. JOST

Jostt First, a word about history. We have tried cooperatives before.
During the 1930s and 1940s, the heyday of the cooperative movement in
the United States, the Farm Security Administration encouraged the
development of health cooperatives. At one point, 600,000 mainly
low-income rural Americans belonged to health cooperatives. The
movement failed. The cooperatives were small and undercapitalized.
Physicians opposed the cooperative movement and boycotted cooperatives.
When the FSA removed support in 1947, the movement collapsed. Only the
Group Health Cooperative of Puget Sound survived. Over time, moreover,
even Group Health, though nominally a cooperative, has become
indistinguishable from commercial insurers-it underwrites based on
health status, pays high executive salaries, and accumulates large
surpluses rather than lower its rates.

The Blue Cross/Blue Shield movement, which also began in the 1930s,
shared some of the characteristics of cooperatives. Although the Blue
Cross plans were initiated and long-dominated by the hospitals and the
Blue Shield plans by physicians, they did have a goal of community
service. The plans were established under special state legislation
independent from commercial plans. They were non-profit and, in many
states, exempt from premium taxes. They were exempt from reserve
requirements in some states because they were service-benefit rather
than indemnity plans and because the hospitals and physicians stood
behind the plans. They were exempt from federal income tax until the
1980s. In turn, they initially offered community-rated plans and
offered services to the community, such as health fairs. In some states
their premiums were regulated and they were generally regarded as the
insurer of last resort for the individual market.

Health-Care Reform and the “Culture Wars”

Aug 4, 2009• 13

By MAGGIE MAHAR

Friday, Politico.com editor Fred Barbash posed this question to “Arena” contributors: “Does the ongoing debate about healthcare reform reflect a :”kind of culture war” that can be traced to a “fundamental difference in world views?”

Barbash then pointed to a thought-provoking piece by Bill Bishop, titled “Health Debate Runs Along Familiar Lines” which was published on Politico.com in March. Bishop, who is the co-author of “The Big Sort: Why the Clustering of Like-Minded America Is Tearing Us Apart,” argues that “The health care discussion reveals that the country is still divided along lines drawn more than 100 years ago. . . divisions in the country were never about specific issues . . .. They were about ways of looking at this world (and the next), and those century-old differences are now shaping the health care discussion.”

Bishop frames the age-old religious debate this way: “Do you get to heaven by your good works, by what you do for your brothers and sisters on Earth? Or do you find salvation by your individual relationship with God? Does the world get better through public acts or private ones?“When Sen. Jim DeMint (R-S.C.) said recently that ‘this health care issue s D-Day for freedom in America’ he was talking from one side of this division. President Barack Obama says, ‘I am my brother’s keeper.’ That’s the view from the other bank. “This isn’t a policy issue or a disagreement about strategy,” Bishop adds. “It is a fundamental difference in worldview. It’s a division in what people expect out of life, and it’s been part of this country for more than 100 years.”

GOP to Uninsured: Drop Dead

Jul 16, 2009• 17

By MICHAEL L. MILLENSON By default 1

“We are now contemplating, Heaven save the mark, a bill that would tax the well for the benefit of the ill.”

No, that’s not Senate Minority Leader John Boehner, Rush Limbaugh or any of the other usual suspects complaining about the cost of health care reform. Rather, it’s the beginning of an editorial in the Aug. 15, 1949 issue of The New York State Journal of Medicine denouncing attempts to provide every American with health insurance. Sure, 90 percent were uninsured then, versus around 15 percent, today. But what’s amazing is the way the overheated arguments by conservatives have changed hardly at all in six decades, as evidenced by an op-ed in the July 15, 2009 Wall Street Journal entitled “Universal Health Care Isn’t Worth Our Freedom.”

Here’s the August, 1949 New York State Journal:

Any experienced general practitioner will agree that what keeps the great majority of people well is the fact that they can’t afford to be ill. That is a harsh, stern dictum and we readily admit that under it a certain number of cases of early tuberculosis and cancer, for example, may go undetected. Is it not better that a few such should perish rather than that the majority of the population should be encouraged on every occasion to run sniveling to the doctor? That in order to get their money’s worth they should be sick at every available opportunity? They will find out in time that the services they think they get for nothing – but which the whole people of the United States would pay for – are also worth nothing.

And here’s Dr. Thomas Szasz from the July 15, 2009 Wall Street Journal:

The idea that every life is infinitely precious and therefore everyone deserves the same kind of optimal medical care is a fine religious sentiment and moral ideal. As political and economic policy, it is vainglorious delusion. Rich and educated people not only receive better goods and services in all areas of life than do poor and uneducated people, they also tend to take better care of themselves and their possessions, which in turn leads to better health….We must stop talking about “health care” as if it were some kind of collective public service, like fire protection, provided equally to everyone who needs it….If we persevere in our quixotic quest for a fetishized medical equality we will sacrifice personal freedom as its price. We will become the voluntary slaves of a “compassionate” government that will provide the same low quality health care to everyone.

Of course, there’s been some progress. Six decades ago, the kind of views expressed by Szasz and the New York Journal represented the medical mainstream. Today, even the most troglodyte are not suggesting the repeal of Medicare and Medicaid.

On the other hand, in those “pre-spin” days so long ago the health-insurance-for-all opponents of the past were forthright about the consequences of their principles for others. Today’s conservative fulminators prefer to forego mentioning the 20,000 preventable deaths each year – about 55 people each and every day – among those without insurance coverage.

The other great difference sixty years has made is the racial and ethnic composition of the uninsured. The uninsured today are disproportionately minority. Nearly one in four (36 percent) are Hispanic, 22 percent are black, 17 percent Asian/Pacific Islanders and just 13 percent white. The impact of those figures is clear. While nearly one third of Texans have no health insurance, the Republicans who dominate its Congressional delegation have shown no particular urgency to address a problem primarily affecting low-income Hispanics. (Fifty-eight 58 percent of the uninsured in the state are Hispanic, according to Kaiser Family Foundation figures.)

It’s important to remember that none of the Republican presidential candidates in either the primary or general election presented a serious plan to cover all the uninsured, nor have any of the Congressional GOP critics of Obama’s plan done so. In other words, the difference between the Democrats and the Republicans on universal access to health care, then, is not a difference on government should help accomplish this goal but whether the goal itself is worth pursuing.

Put differently, for those Americans who can’t afford medical care (or are afraid that they won’t be able to in the future), the GOP has a clear reply: drop dead.

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Preventing Extortion

Jul 2, 2009• 5

By JACK CHURCHILL

The debate about a public health insurance option mirrors the debate
about public power in the 1920’s and 30’s. The arguments then were very
similar to the arguments we hear today.

The principal issue then was whether the federal government should
enter the public power business by investing taxpayers’ money to build
the Tennessee Valley Authority and to harness the Columbia and other
rivers for electrical energy, or whether the sites should be transferred to the
private sector. A second issue was who should build transmission lines
and set wholesale prices when the Federal government built dams.

The answer to the second question was first enunciated on the Senate
floor in the fight over the Wilson Dam in 1920 by Senator John Sharp
Williams of Tennessee. He said, “The government should have somewhere a
producer of these things that should furnish a productive element to
stop and check private profiteering.” Thus was born the yardstick
federal policy which later found its way into TVA legislation through
the efforts of Nebraska’s Senator George Norris. In a 1932 campaign
speech in Portland, Oregon, Franklin Roosevelt referred to his TVA and
other regional proposals as “yardsticks to prevent extortion against
the public.”

The Message Is The Medium

Jun 28, 2009• 5

By MERRILL GOOZNER

Emory University psychologist and political consultant Drew Westen in the weekend Washington Post offers a troubling view of the public’s role in health care reform. While reform’s reality involves complicated technical issues like insurance exchanges, public plan governance, physician and hospital payments and who will pay higher taxes, the public’s understanding of these issues is virtually non-existent, Westen assumes.