For the last several weeks Kaiser Permanente has been running a series of TV and print commercials called “Thrive“. They ads contain a bunch of pap series of suggestions about living a healthier lifestyle and how Kaiser Permanente wants its members to “thrive”. This is apparently a $40m campaign, but given that Kaiser has been losing some market share and has been having trouble combating the high-deductible health plans on offer from its rivals like Wellpoint, Blue Shield, Healthnet et al, it doesn’t sound like an outrageous amount to spend. Of course, like every other health plan Kaiser is trying to get younger, healthier people to sign up as members. And while the commercials may not make much sense (be honest, which ones on TV do?), they are at least related to healthcare in some way, unlike an early 1990s campaign in which Roger Greaves, then Healthnet’s CEO, was shown kayaking next to a pod of killer whales.

Up to now I’ve ignored this as I think these type of ads are mostly irrelevant to the real health care market. But as with any big organization, Kaiser has its detractors, and there’s been some fuss about the campaign in the Oakland Tribune. One Kasier detractor has written to several health care bloggers suggesting that we cover it. Well, after confirming that my correspondent really is an ex-Kaiser employee, I’ve taken the bait, although I’m not sure my correspondent will be too happy with my conclusions. (Full disclosure–Kaiser was a client of organizations that I worked for back before 1999. I never worked for them on a dedicated project and have had no financial connection with them since).

Kaiser has made some basic if not serious missteps, and in the “Thrive” campaign it has left its detractors a few open goals. For a start, despite the name of the campaign, the URL KaiserThrive was not reserved and unfortunately for Kaiser was taken by a very upset Kaiser patient/member. And it gets a little worse, particularly as several of the internal powerpoints describing Kaiser’s communications issues were left openly available on the Internet. Now, having looked at what’s in one document I can’t find anything that reflects too badly on Kaiser. It’s mostly a series of suggestions as to how to position the corporate message and relate to members better. And those problems are basically the same ones Kaiser’s always had.

For as long as I can remember Kaiser has had a good reputation with a high percentage of its members, and a reputation amongst better-off socio-economic groups as a plan OK for working-class people but not for people like “you and me”. While the some of this attitude is down to class snobbery, part of it is due to the inherent structure of the Kaiser system which restricts its members to Permanente doctors and Kaiser facilities.

There are some genuine criticisms of the way Kaiser does business. Wellpoint’s Len Schaeffer has long criticized Kaiser’s commitment to charity care and providing care for Medicaid patients. This quote is from a 1995 interview:

Q: How does Kaiser Permanente fit into the changing market picture in California?
A: Kaiser Permanente has done a marvelous job for its membership, the bulk of which resides in California. But, as a nonprofit HMO, I don’t think it has done much for other Californians. Kaiser does not enroll those who cannot pay its premiums. In fact, I argue that Kaiser has taken all of the medical revenues of its California membership-almost, five million people-out of the state’s pool of available health care monies, put it in its own private health insurance system, and therefore made the rest of the system bear the burden of caring for all of the people who are uninsured.

However, despite criticism that it doesn’t do enough for non-members, Kaiser has been at the forefront of some genuinely innovative medical programs for those who are its members, even if it might be financially better off without them. It was one for the first to introduce a comprehensive HIV care program and introduced comprehensive disease management programs back in the 1990s, some way ahead of most of its competitors. That of course means that Kaiser’s sicker members tend to stay with it, which really is the opposite of what a health plan’s CFO might want, and what some of its more financially successful rivals have actually done.

And despite some criticism of the technology behind its HealthConnect program (for one dissenting view see here) and its tendency to inadvertently kill off smaller software vendors by bureaucratic mind-shifts, Kaiser is the private organization in America with the biggest initiative in health IT. The commitment to improving care by implementing electronic health records is genuine and huge, and at least by its own account (as reported in Health-IT World) is going quite well.

So overall I still believe that Kaiser is on the side of the Angels. There are though several issues that need to be cleaned up. One is the slightly obvious one of taking care that internal documents stay internal. While I haven’t read anything that showed malfeasance or bad intent in those documents that were left unprotected, that level of attention to detail doesn’t demonstrate too much security competence. As Kaiser is going to be creating probably the largest interconnected medical database in the private sector, they are going to have to make sure that that data is secure, and understood to be secure. Already some commentators are suggesting that outsourcing some of the technology to India will compromise data privacy. My correspondent has a weblog devoted to these and other issues. A quick perusal of that weblog shows an unhappy ex-employee, who is mostly upset at the internal office politics s/he experienced at Kaiser. But that doesn’t mean that all the comments can be dismissed out of hand, especially as some documents linked to on the web are clearly not meant for public viewing. Scratch this type of thing and it gets even weirder. There is one baffling web site which suggests that there’s a pattern of criminal and violent behavior apparently attributal to rogue employees within Kaiser, but I think this seems to be descending into conspiracy theory.

I suspect the truth is all much more mundane. Kaiser is a big bureacractic organization with all the turf battles and complications that you’d expect. Add to the mix the fact that Kaiser, for all the efforts of the corporate office, is still a collection of regional insurers and of regional medical groups that all have their own politics and agendas. Nonetheless, it has consistently scored well on NCQA and other quality measures, and has shown more innovation than most providers of its size and almost every health plan in terms of patient care, disease management programs and its IT initiatives.

Despite its well-publicized problems, particularly its big losses in 1997-8, Kaiser has been a massive net positive in the Western US health care system. Its success in the 1980s and 1990s certainly ushered in managed care–and there would be those that argue that wasn’t such a good thing–but you can’t blame Kaiser for what were almost all the failings of other managed care plans. You can credit Kaiser for delivering more cost-effective and higher quality care on a mass scale than almost anyone else in America, and for making the investments to ensure that they’ll be able to do that in the future.

Sure there’ll be problems as the new system is rolled out. Sure a new advertising campaign — while arguably needed to promote the organization’s viability — is no panacea and perhaps the money could be better spent elsewhere. But nothing I’ve seen from the detractors so far persuades me to believe that, silly ad campaign or not, Kaiser needs to do anything else than keep on its current course.

While the managed care backlash is mostly yesterday’s news (although some people think it may be coming back), Kaiser Family Foundation has a recent poll showing that managed care remains unpopular, and people still want to be able to sue their plan.

Politics continues to impact healthcare as California insurance commissioner John Garimendi continues to block Wellpoint’s merger with Anthem. The latest round is that Garmimendi has asked the court to throw out Wellpoint’s challenge to his decision. While there’s been plenty of industry tut-tutting about this, recall that the whole approach of Wellpoint/Anthem–which dangled the carrot of huge pay-offs to executives in front of a Democrat with both power over the merger and strong political ambitions–was not very smart.

I don’t know if it’s too late for them to sell off California Blue Cross’s Life and Health subsidiary, but I’d assume that they must be working on it.

Here’s the AP report on the fact that the workers at Group Health Cooperative of Puget Sound, the nation’s most famous staff model HMO, (and no I have heard of Kaiser but I’m being a smartass here) are on strike because they are being asked to pay a greater share of their health care costs. Given that labor is about 70% of system costs there’s something circular going on here, but I won’t investigate it for fear that smoke will start coming out of my ears.

The LA Times has an article about CDHPs which is called more choice, at a cost. This article baffles me. A pregnant couple is wondering what services (such as pre-natal ultrasounds) to buy and what not to buy. They need to get a clue. Within say six to nine months (and my sources tell me that it’s unlikely to take much longer!) they are going to bust out of their deductible (and probably also their out-of-pocket) payments for the year, so it doesn’t matter whether they save money on an unnecessary ultrasound or not–their total bill for care will be the same.

CDHPs only puts the onus on saving money on those people who aren’t going to spend beyond their deductible, or in other words those who don’t need much care. Of course in health care overall 80% of the money is spent on people (like the couple in the story) for whom it’s the dollars over $10,000 a year that matter, from which their catastrophic insurance completely inoculates them.

But I can say that until I’m blue in the face and no one pays any attention. It is a little different when someone else from the right side of the political spectrum notices and new-ish contributor Atlas does. He understands that there are some people who are going to cost much more than others, and he has a suggested solution–turbo charging the largely dormant state based risk-pools. It’s not my preferred solution but at least it acknowleges what’s been completely ignored in the CDHP and individual insurance market debates–some people are going to need expensive care and how we organize that care is going to impact how much it costs. Here’s Atlas:

Seekers of the truth have always been challenged by the healthcare field, as healthcare is used as a lever to power by public and private sector players alike. But it seems to me that the employer based model has some flaws that need to be addressed. In today’s world, loss of job often means loss of health insurance, which even to the libertarians among us may be too high a price to pay. In an attempt to aid a few friends in such straits, I have found that there are somewhat affordable policies available for those who don’t qualify for public assistance. But individual underwriting is a challenging barrier to access. Some sort of public pool seems to be the solution to that problem. I believe it exists in several states but a well publicized federal solution has merit.

Which leads to the next thought–the hypocrisy of public officials who write checks which they can’t cash for programs like Medicaid are the cruelest sort of joke on people who understandably don’t have a sense of humor. Those in the throes of poverty exacerbated by illness are least equipped to cope with misinformation, disinformation, and Kafkaesque demand deflators. If we’re going to have programs for the poor, they should be adequately funded and pro-actively promoted.

The overarching problem, though, is cost. My understanding of the economic rationale of consumer directed health plans is to force those happy, company insured campers to feel the pain of rising costs so as to exert market forces upon them as close as possible to the real world consumer pressure that has given us $25 bicycles at Wal-Mart. The high deductibles prevent the excesses of pure market dynamics–e.g., you can’t run up so much healthcare debt you declare bankruptcy because you have catastrophic coverage. Yet you get socked hard enough with the high deductible that you start to complain, which triggers the providers to respond by easing the sting.

If this contributes to overall cost reduction, I think it is positive for most if not all parties involved, even the uninsured. Lower premiums resulting from lower overall costs may make insurance more accessible to those in the uninsured zone–above the threshold for Medicaid coverage and yet not wealthy or wise enough to buy coverage.

The “if” which starts the last paragraph is of course the $1.7 trillion dollar question. Whether CDHPs will have anything to do with saving overall costs I find to be most doubtful. But at least Atlas has some concept that throwing people onto the individual market with no way of ensuring access to insurance for those less-than-desirable risks is not good public policy.

Last year the Health Insurance Association of America (HIAA), the trade group of small health plans that created the "Harry and Louise" commercials which helped torpedo the Clinton health plan, merged with the Association of American Health Plans (AAHP). At the time AAHP supported the Clinton plan. The new happy family is called AHIP (America’s Health Insurance Plans). But even though HIAA doesn’t officially exist any more, it doesn’t seem to stop it putting out its own press releases.they have a survey to prove that they’re wanted and needed! Here are some choice excerpts from the article called Receptive Market Among Individuals-Employers For Consumer Choice Health Plans:

In this case they are backing consumer-directed health plans, and

Almost half of those surveyed said they would consider switching to a new consumer choice health plan if given a chance, despite their satisfaction with their current employer-sponsored health insurance, results of two new surveys released by the Health Insurance Association of America (HIAA) found. And more than half of the businesses asked said they either currently offer a consumer choice health plan or intend to offer one sometime in the next five years, the survey conducted by Public Opinion Strategies found.

"This study clearly shows that consumers are ready to look at new alternatives for healthcare financing," said HIAA President Dr. Donald Young. "We expect consumer choice health plans will quickly and dramatically increase in acceptance over the next five years." The survey found that 67 percent of the people who have health insurance benefits through their jobs expressed satisfaction with their current coverage, up slightly from previous years. But 44 percent of those surveyed said they were at least somewhat likely to switch to a new consumer choice health plan. Those less satisfied with their current coverage and those with high deductibles or premiums expressed a greater likelihood of switching, according to the results.

Funnily enough these findings basically contradict what HSC and Kaiser FF have reported about CDHPs–which is that employers aren’t that keen on them and that they are just cover for cost shifting to employees. If you hadn’t guessed by now Public Opinion Strategies is a Republican polling firm –there are of course Democratic equivalents like Hart Research. Public Opinion Strategies has been accused of push polling (a venal sin amongst real survey researchers) and also was heavily involved in the 2002 Saxby Chambliss campaign in Georgia, the one that played fair and nice by comparing triple amputee and Vietnam war hero Max Cleland to Osama Bin Laden.

While this type of poll is clearly for sale, it even confirms that those most interested in CDHP’s are those who already have high deductibles and generally crappy benefits. In other words,

if you’ve got good coverage at work now, you are very unlikely to want to change it

. Several polls of employees show that to be true, and anyone watching the California grocery employees or the SBC unions know how important (even irrationally important) health benefits are to employees. But of course if HIAA/AAHP members can walk into their customers with this poll to talk about and a nice new set of shiny products to sell, then their trade association has done (at least some of) its job.

Meanwhile AHIP’s headline in their press release about last week’s Kaiser FF study on the health insurance market shows that spin from the AAHP side of the organization is very much alive and well too– and that there’s no tax in Washington on lying. Their

press release

is titled (I kid you not) Individual Insurance Market Study Finds Americans Have Access to Affordable Individual Health Insurance. AHIP President and CEO Karen Ignagni is quoted as saying that "This new study provides further evidence that millions of individuals have access to affordable and flexible individual health insurance." However, if they’d bothered to have someone stroll down the street in DC and listen in to the press conference they’d have noticed that the study explicitly was only looking at what was available and what was being bought in the market, predominantly of course by the 80% of healthy people in the population, and did not have any data on what was available to everyone in the market–including of course those people who are sick and might actually need health insurance. This of course is like saying that 80% of Iraq is peaceful, so despite the war raging in Najaf the place is in good shape.

On a minor historical footnote, some years back (in 1997 I recall), while fighting a losing battle against the demonization of managed care, AAHP put out a study claiming that managed care plans had saved the economy billions of dollars in comparison to what people would have spent on health care had the rate of premium increases in the mid-1990s been the same as it was in the late 1980s–when they were going up three times the rate of inflation. That was such a crappy piece of "research" that I wrote a special article for my corporate clients explaining why, and suggesting that they never allow this kind of stuff to get out with their name attached to it. Well with this latest press release it seems AHIP is at it again. Meanwhile I’m still waiting in vain for the AHIP study showing how much their members have cost the economy in the last five years by allowing health care costs and premiums to increase by over four times the annual rate of inflation!

The Kaiser Family Foundation does a great job in putting health issues out there in an objective matter. Unfortunately their latest effort on the individual insurance market is, in their own terms, an attempt to get out information without implications. And this is a place in which the implications are clear but politically unpalatable.What does the report say? Basically insurers in the individual market sell policies with higher deductibles and lower premiums compared to those in the group market. Of course the individual market place has higher underwriting and administration costs (and distribution fees–think brokers). I’ve recently helped 2 (college educated & female) people understand their quotes and options in recent weeks. Basically you’re better off buying the cheapest plan with the high deductible because there’s a very close to 1 to 1 correlation between adding premium to reduce deductibles/max out-of-pockets, and of course if you stay healthy you may not ahve to pay those out-of-pocket costs. In addition in any one series of quotes for an individual the range of premiums versus benefits versus deductibles and out-of-pocket costs is bewildering–which results in many of my friends asking me to figure it out for them.

How is this study being reported? Modern Healthcare pulled this lead sentence out of the report for their Daily Dose newsletter "Group health insurance for an individual was nearly twice as costly as individual coverage bought on the market" That’s true as far as it goes, but you actually have to watch the video and dive into the report before you figure out that, dollar for dollar spent on premiums, benefits in the individual market are worse than in the group market.The panel which included a KFF staffer, the CEO of eHealthinsurance and a California Blue Shield exec also distinguished between short term and long term policies. One stated difference between short-term and long term is that short-term ones are not renewable. The other issue not raised by the panel was that short-term policies are not individually underwritten….once you get past the few questions on the short-term form declaring you don’t have some dread disease, you’re in. Conseuqntly many people spend years stringing together short-term polcies from different companies. However most long-term individual policies are underwritten by the insurer which looks at your recent medical history, which of course may include several not quite so dread diseases/episodes which might still bump up your premiums drmatically.One audience question resulted in the answer that if an insurer cannot deny coverage to "sick people" it doubles the premium. The defensive answer from the panel was that it’s only bad in states where they have community rating (e.g New York), but that’s actually rubbish. I applied via eHealthinsurance for a Blue Shield policy in California (which couldn’t be more in this report’s wheelhouse given that those are the two companies taking part) in 2003. I was quoted $60 a month for a high deductible plan but when they found I’d had surgery the year before the exact same policy went to $300 a month.However, eventually Gary Claxton from KFF said the key point. In 90% of states sick people can be be excluded. Either insurers are not writing them insurance or charging them way way too much. In other words health insurance in the individual market isn’t available for many if not most of the people who actually need it. I’m a good example of this as I’ve been forced to find a trade association group to join via which I could join a buying group (PacAdvantage) so I can buy an expensive but not outrageous plan. Of course if I get healthier and can get away with a cheaper individual plan, I’ll leave the group and contribute to its own insurance death spiral.So depsite all the nice words, the individual insurance market continues to suck. That’s essentially the same conclusion that noted commie Mark Pauly came to in Health Affairs a couple of years back. Well he actually said that 80% of consumers in the individual market do OK, while 20% find it doesn’t work for them. As it stands the market is unreformable. Saying that it’s 80% OK is a little like saying that 80% of Iraq is OK because it’s not actually blowing up right this minute, and the situation there is all fine and dandy. But why would we want to just focus on the bad news?

So I assume John Garimendi went short on Wellpoint stock last week. The market marked Wellpoint down 7% on the opening on Monday following Friday’s hiccup in the merger process, but it ended down only 4%. I nearly bought some yesterday, but luckily I did not as today it’s down another 7% from roughly $115 last week to $98 now.  So it’s on its way down to the $85 a share it was at when the takeover/merger was announced in November last year.

All of this sounds a little like a typical Wall Street overreaction.  BC Life & Health only accounts for 10% of the California business of Wellpoint. Wellpoint’s 2003 10K (warning: huge file) showed that it had 15 million members nationwide with 6 million of those in California.  So, back of the envelope, if BC Life and Health is 10% of 40%, it’s only 4% of the business.  So it seems to me that they have their day in court and if they lose they prepare to very quickly spin it off, take it out of the merger and sell it.  Business Word) have for a while said that health plan stocks were overvalued–although no one’s been listening to us!  But it’s clear from the Anthem and Wellpoint management team that this merger is going ahead whatever it takes. If Wellpoint was worth $115 a share last week, it’s not worth only $98 with the cash from a sale of BC Life & Health rather than the small business it gets from it.  That doesn’t make logical sense, but then again when die Wall Street ever make logical sense?

I (along with Don Johnson at the

Sometimes you can sleep safe at night thinking that your elected representatives are going to leave some things alone.  But in the last couple of days it’s become apparent that political motivations are the only motivations left for those in government.  was as good as his word .  Now that’s not as bad as it sounds for the merger as a few years ago California set up a Department of Managed Health Care to regulate HMOs (which for some arcane reason had not been under the insurance commissioner but under the department of Corporations). The Department of Managed Health Care is part of the executive under Arnie the Guvornator, who is of course a Republican and in the pocket of state business interests (or at the least has taken a bunch out of their pockets– but as he says they’re "powerful interests" not "special interests"). So Managed Health Care’s approval, which OKs the sale of Blue Cross’ main health insurance businesses was a shoe-in, after a modest bit of back and forth.  Garimendi only has authority over the smaller Life and Health business which writes short-term indemnity policies and a few life insurance policies.  It can be easily jettisoned, but not before Wall Street had a fit about the ruling and knocked Wellpoint down 7% Monday morning. Given that Garimendi said his decision was final, expect this division to carved out and sold to someone else–there’s too much at stake for the Wellpoint and Anthem leaders to allow this to derail the whole thing. the front page of the New York Times. The Administration argument that has been actively pursued since 2002 is that essentially the FDA makes the best decision possible, hence you shouldn’t be able to sue a manufacturer for a product defect.

The first example is the Wellpoint Anthem merger.  There was a lot of fuss in California about the egregious package given to top executives at Wellpoint, and Democrat john Garimendi the insurance commissioner basically said he would not approve the merger unless Wellpoint paid out over $600m into public programs. And on Friday he

But you could tell exactly what was going to happen by who had power over what, and by what their political affiliation was.  But if you didn’t think that that ruling should have been so politicized (after all this is post-conversion and as part of its original conversion Blue Cross handed mega-billions over to the state for a couple of huge Foundations), you probably wouldn’t have thought that even this Administration would change the better part of a century’s practice and intervene in product liabiliy suits on behalf of big pharma.  But there it is on

Allowing consumers to sue manufacturers would "undermine public health" and interfere with federal regulation of drugs and devices, by encouraging "lay judges and juries to second-guess" experts at the F.D.A., the government said in siding with the maker of a heart pump sued by the widow of a Pennsylvania man. Moreover, it said, if such lawsuits succeed, some good products may be removed from the market, depriving patients of beneficial treatments.

Quite how that reconciles with the ability of the FDA to admit it made a mistake or didn’t have enough information when it first made a decision, I do not know. (Remember Rezulin perhaps?).  But it’s only the Administration’s politics (and the interests of its funders which amount to the same thing) taken to the extreme. And of course it’s not as if we’ve set up a rational system of Socratic dialogue to replace the legal system, we’re just now using the might of the Federal government to attempt to remove access to it from people attacking its friends.   It does make at least TCHB somewhat nostalgic for the days when apparently some decisions in government were made for vaguely commonsense reasons.  But I suppose that era has passed.

While the shareholders have approved the Anthem-Wellpoint merger, it looks like state insurance commissioner John Garamendi is likely to oppose it, causing a little embarrassment for a certain Governator. Meanwhile, the public hearing has been set for later next week.

Again, look for a deal with at least some of the money once headed to the pockets of Wellpoint executives instead ending up in the (bankrupt) state’s coffers.