Tuesday, April 14, 2009

Health Plans - The Skunk at the Health Reform Party

What kills a skunk is the publicity it gives itself.

Abraham Lincoln

When it comes to health reform, major players agree health plans are an unwelcome guest at the party.

• The Obama administration plans to save $180 billion by having profiteering Medicare Advantage plans compete with traditional Medicare plans.

• Reformers often talk about having overly profitable health plans accept all comers regardless of pre-existing illness.

• Health plan members complain about having health plans cancel their policies in the name of the bottom-line after an episode of serious illness.

• The AMA and four other medical societies from California, Connecticut, Georgia, and North Carolian are suing WellPoint, the nation’s largest health insurer, to recoup physician pay for reduced out-of-network payments based on an Ingenix database.

• New York Attorney General Andrew Coumo has forced 10 plans to commit $93 million towards a new database to replace Ingenix.

• Senator Jay Rockefeller grills and tries to humiliate UnitedHealthGroup, CEO, Stephen Hemsley, fir shifting millions of dollars to consumers by rigging health data to avoid payment.

• Primary care physicians complain health plans have “disintermediated” them by cutting them out of the supply chain of those delivering health care services.

• Membership in traditional HMOs and PPOs plans is dropping as employers and patients shift to less tradititonal coverage vehicles such as high deductible plans linked to HSAs and innovative “basic “ plans providing bare-bones protection.

No Fun Being a Skunk

If you’re a health plan CEO, I’m sure it’s no fun being a skunk in the health reform fight. But deep down, these CEOs know how only they have the data and savvy to administer health benefits. Reformers and Obama officials may talk a big game, but do they have the game to administer public plans to compete with private plans?

Former Congressman Richard Gephardt, who witnessed close-hand the Clinton reform disaster has cautioned the Obama team to 1) think smaller; 2) seek less; 3) don’t fail.

Health care business lobbyists are still a powerful force and may yet expose fallacies in the Obama approach, as set forth by the Commonwealth Fund and other liberal think tanks.

According to Rodger Collier, former heath of a major health care consulting firm, these fallacies incued

Fallacy Number One: Small businesses will accept a “play-or-pay” proposal that forces them to pay a minimum of seven percent of payroll for health care. In the midst of recession, small business associations will fiercely resist paying more of payroll for health coverage.

Fallacy Number Two: The insurance industry will allow the creation of a “public plan” to compete with their own offering. The assumption that it would be the only FFS plan sold through the proposed insurance exchange is especially likely to leave AHIP leaders foaming at the mouth. Providers are unlikely to be too eager to go along with a proposal that slashes payment rates by thirty percent, either.

Fallacy Number Three: Government spending on IT of $120 billion over ten years will yield savings of almost $200 billion.The forecast savings are likely to be illusory. Integrated health care systems like Kaiser may be able to achieve savings, but most US providers aren’t Kaisers. A more realistic view is found in last year’s Congressional Budget Office report on health care issues, “By itself, the adoption of more health IT offers many benefits, but it is generally not sufficient to produce substantial cost savings because the incentives for many providers to use that technology to control costs is not strong.”

Fallacy Number Four:
Establishment of a “Center for Comparative Effectiveness and Health Care Decision-Making” will cut expenditures by more than $600 billion over the next decade. The savings projection seems wildly optimistic. I t’s hard to believe that those high-cost providers in major cities with high costs of living will go along with slashing their income as the CBO report notes: “it would probably take several years before new research on comparative effectiveness could reduce health spending substantially.”

Fallacy Number Five – Hospitals, physicians, and patients will behave the way reformers want them. This wishful thinking is at odds our current supply-driven health care system’ s incentives. Outside of big multispecialty clinics, improvements in provider efficiency are likely to cut incomes, not increase them. It’s no coincidence that areas with the greatest physician and hospital densities have the highest health care costs. Unless we can change the incentives—or control the introduction or distribution of new resources—we will never solve the health care cost problem.

Idealistic reformers may well consider health plans as skunks,

Smelling up reform plans by eating up money in unneeded chunks,

What reformers often neglect to mention,

Is an important management dimension.

When it comes to administering plans, Medicare flunks.

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