The California Department of Managed Health Care has fined Wellpoint $1 million because it says Wellpoint "routinely" violated state law when it canceled (or rescinded) individual health insurance policies after the policyholders filed claims. The state said that Wellpoint made no attempt to determine whether the policyholders merited such "harsh" treatment when it canceled the policies.
From a recent LA Times story:
"The state investigation found that Blue Cross used computer programs and a dedicated department to systematically investigate and cancel the policies of pregnant women and the chronically ill regardless of whether they intentionally lied on their applications to cover up preexisting medical conditions — a standard required by state law for canceling individual policies.
"Regulators examined 90 randomly selected cases of policy cancellations — out of about 1,000 a year in California — and found violations in each one."
The standard provisions in health insurance policies, that enable an insurer to cancel a policy when the applicant is untruthful during the enrollment process about prior health history, are appropriate. No one has a right to commit fraud in filling out an insurance application.
But how many of us remember every single doctor appointment or minor illness we have had in the last five years?
California clearly believes Wellpoint has gone too far by canceling policies irregardless of whether the omission on the application was intentional or not.
But did Wellpoint go too far in the way it has rescinded these policies?
Wellpoint responded that they have not rescinded any individual health insurance policies just because the policyholder inadvertently overlooked prior health information:
"California law is clear that rescission generally does not require a showing of intent to deceive or willful misrepresentation," WellPoint spokeswoman Shannon Troughton said. "All that is required for misrepresentation to be 'intentional' is that the true facts be known to the applicant. If the applicant had no present knowledge of the facts sought or failed to appreciate the significance of information, an incorrect or incomplete response would not constitute grounds for rescission."
It's that last sentence that matters: "If the applicant had no present knowledge of the facts sought or failed to appreciate the significance of information, an incorrect or incomplete response would not constitute grounds for rescission."
If Wellpoint indeed did what it has said in their response, they were fair in their application of the policy provision. If Wellpoint has been canceling policies even when the applicant did not intentionally lie on the application, as the state charges, then shame on them.
Looking at both sides and trying to figure out the difference between "intentionally lied" and having "no present knowledge...or failed to appreciate the significance of information" is more than I can understand with what is on the table.
The California Department of Managed Health Care and Wellpoint will now battle this out.
But in the end, Wellpoint has a duty to be fair to its policyholders and not use this otherwise fair fraud provision to cancel people's policies who acted in good faith in filling out the application and now find themselves very sick--and without coverage.
Rescission of a health insurance policy--particularly when someone is going through the trauma and expense of a serious illness--is a harsh punishment even when it is justified by a fraudulent act.
If Wellpoint did what the state said they did it would also be very stupid--just as the country is about to enter a major debate over how we will deliver health care to our people and the place the private sector insurers have in that future.
When the fine points of these positions are sorted out, I hope we find that Wellpoint was as fair as they said they were.
A Health Care Reform Blog––Bob Laszewski's review of the latest developments in federal health policy, health care reform, and marketplace activities in the health care financing business.
Friday, March 30, 2007
Tuesday, March 27, 2007
Medicare Advantage “Overpayments”—Not As Simple As It Seems
Bill Boyles, Publisher of Health Market Survey, gives us another insider's view of the day-to-day debate over the appropriateness of the Medicare Advantage payments to HMOs.
It seems that when you have seen one Medicare Advantange Plan you have seen one Medicare Advantage Plan. The "overpayments" reported by MedPAC and the CBO are nowhere near across the board.
The debate is clearly getting into the nitty gritty. But with many leading Democrats so focused on rolling back the Republican privatization of Medicare, will it matter?
Here's Bills latest message from deep inside the Beltway:
MEDPAC Still Wondering About MA Plan Rate Cut
The MEDPAC conclusion that Medicare Advantage (MA) plan rates should be cut by $65 billion to mimic fee-for-service spending is being revisited in MEDPAC private meetings, HMS sources reported this week. The problem for MEDPAC is that there are multiple very large and very small contractors who can prove conclusively that they are not being paid more than fee-for-service by anybody’s calculations.
This means if Congress insists on cutting MA rates across-the-board to finance a massive expansion in SCHIPs for healthy children, the plans which are not supposed to be part of the target will be thrown into the pot. That’s a problem: tons of the so-called “guilty” plans [who are arguably overpaid] are in rural areas where fee-for-service cost is simply way-low, and many of the “innocent” plans [those not getting excessive payments] are often in the inner cities and will also be cut.
“They don’t want to cut the plans they now see are not overpaid,” a lobbyist said. But if they simply exempt the innocent plans “there would be a huge bloodbath.”
MEDPAC is not the only one finding this out. Other leading independent think tanks have been holding private meetings for two weeks with leading companies now giving them actual rate data sheets never seen before. In all cases we are hearing that it is an eye-opener – it was assumed all rates over excessive and all MA plans were being overpaid. That is clearly and provably not the case.
Unfortunately, this all may still mean squat when push comes to shove in late November when the final deals will be cut. But it could also indicate a slight glimmer of hope that the whole thing will bog down just like what is now happening with the immigration bill--which everyone predicted would pass this year but is now stuck in the Senate. Or another fallback, a 5-year phase-in like under risk adjusters.
It’s just starting to feel different. Could be nothing, or everything.
It seems that when you have seen one Medicare Advantange Plan you have seen one Medicare Advantage Plan. The "overpayments" reported by MedPAC and the CBO are nowhere near across the board.
The debate is clearly getting into the nitty gritty. But with many leading Democrats so focused on rolling back the Republican privatization of Medicare, will it matter?
Here's Bills latest message from deep inside the Beltway:
MEDPAC Still Wondering About MA Plan Rate Cut
The MEDPAC conclusion that Medicare Advantage (MA) plan rates should be cut by $65 billion to mimic fee-for-service spending is being revisited in MEDPAC private meetings, HMS sources reported this week. The problem for MEDPAC is that there are multiple very large and very small contractors who can prove conclusively that they are not being paid more than fee-for-service by anybody’s calculations.
This means if Congress insists on cutting MA rates across-the-board to finance a massive expansion in SCHIPs for healthy children, the plans which are not supposed to be part of the target will be thrown into the pot. That’s a problem: tons of the so-called “guilty” plans [who are arguably overpaid] are in rural areas where fee-for-service cost is simply way-low, and many of the “innocent” plans [those not getting excessive payments] are often in the inner cities and will also be cut.
“They don’t want to cut the plans they now see are not overpaid,” a lobbyist said. But if they simply exempt the innocent plans “there would be a huge bloodbath.”
MEDPAC is not the only one finding this out. Other leading independent think tanks have been holding private meetings for two weeks with leading companies now giving them actual rate data sheets never seen before. In all cases we are hearing that it is an eye-opener – it was assumed all rates over excessive and all MA plans were being overpaid. That is clearly and provably not the case.
Unfortunately, this all may still mean squat when push comes to shove in late November when the final deals will be cut. But it could also indicate a slight glimmer of hope that the whole thing will bog down just like what is now happening with the immigration bill--which everyone predicted would pass this year but is now stuck in the Senate. Or another fallback, a 5-year phase-in like under risk adjusters.
It’s just starting to feel different. Could be nothing, or everything.
Friday, March 23, 2007
House Ways and Means Health Subcommittee Goes After Medicare Advantage Payments on Wednesday and Humana Stock Up 5% by Thursday Close
Apparently Wall Street doesn’t take Pete Stark and the Congressional Democratic Majority very seriously.
The House Ways and Means Health Subcommittee held hearings on Medicare Advantage payments to HMOs on Wednesday morning. It’s no secret the Democrats have every intention of cutting those payments.
No health plan has made the strategic bet on the Medicare Advantage program that Humana has. And nothing has driven the HMOs earnings more than the private Medicare business.
Between noon on Wednesday and the Thursday close, the stock had gone from $57 to almost $60—an increase of 5%!
Wall Street is wrong.
Earlier posts:
Medicare Advantage HMOs Gearing Up For Payment Cuts--Could They Come as Early as 2008?
If Medicare Advantage Rates Are Going to Be Cut, Why Have the Big Medicare HMO Stock Prices Been Up Since the Election?
The House Ways and Means Health Subcommittee held hearings on Medicare Advantage payments to HMOs on Wednesday morning. It’s no secret the Democrats have every intention of cutting those payments.
No health plan has made the strategic bet on the Medicare Advantage program that Humana has. And nothing has driven the HMOs earnings more than the private Medicare business.
Between noon on Wednesday and the Thursday close, the stock had gone from $57 to almost $60—an increase of 5%!
Wall Street is wrong.
Earlier posts:
Medicare Advantage HMOs Gearing Up For Payment Cuts--Could They Come as Early as 2008?
If Medicare Advantage Rates Are Going to Be Cut, Why Have the Big Medicare HMO Stock Prices Been Up Since the Election?
Thursday, March 22, 2007
The Latest Health Wonk Review
For all of you health care policy addicts, who spend your free time cruising cyberspace in search of the latest health care policy ruminations, the latest Health Wonk Review is up over at Matt Holt's "The Health Care Blog."
Wednesday, March 21, 2007
The Reauthorization of the State Children's Health Insurance Program (S-CHIP)--A Surprising Contrary View
Bill Boyles, the publisher of Health Market Survey, fills the role of guest commentator again today reporting on a very different view on the issue of the reauthorization of the State Children's Health Insurance Program (S-CHIP).
His report just goes to show that nothing in health care policy is simple:
House Black Caucus Not Buying S-CHIP Expansion
It seems like every interest group in the country is backing a huge expansion of the Medicaid child health program as a “first step” in covering the uninsured. From hospitals to heart surgeons to health plans everybody is finally nodding in agreement – the way to cover the uninsured is by “covering children first” to the tune of at least $50 billion over 10 years. It’s easy and it’s cheap. And most important it let’s politicians help children and appear to help families.
But wait. I found out this morning that there is a huge political force against expanding SCHIP, and it’s not Bush or the right wing – it’s many members of the Black Caucus in the House, the very people with large Medicaid populations in their own District. That’s right, many of the very members of Congress who have the most Medicaid members are fuming over the idea of pumping $50 billion into expanding the Medicaid children’s health program at a time when the chronically-ill uninsured are ignored and should get the money first.
The way it was described privately at a meeting led by a senior staff member for House Ways & Means Committee Chairman Rangel Tuesday, all of that money going to cover healthy children should be used for the people who really need it – the “55-year-old like me” who has diabetes or heart failure of mental illness. Medicaid funds are being used to send hundreds of thousands of healthy children of the chronically ill, near-poor diabetics to a doctor -- while the actual sick person in the family sits on park bench and can’t afford to go anywhere except the ER or a public hospital, if they can afford the copay.
Independent policy experts and a few economists who study Medicaid were not surprised. For years they have been criticizing S-CHIP as a give-away to the “primary care lobby” such as pediatricians who stand to gain big time. Two weeks ago the American Academy of Pediatrics even came out of the closet and began criticizing high-deductible health plans as bad for children. No coincidence that the source of funding for the big boost in S-CHIPs is the same insurers offering high-deductible plans alongside Medicare Advantage plans. Pediatrician lobbyists know that cutting Medicare private plans is the only way to fund the huge expansion in SCHIP that will increase their incomes.
The latest issue of the prestigious journal Health Affairs plays along with the sudden power of the primary care specialist lobby, with an entire issue devoted to how to cover children -- and not a word about what to do about their parents.
What would the Black Caucus members and Rangel and the policy analysts do instead? No mystery about that – give the money to the people who really need help, the low-income chronically-ill who don’t quality for Medicaid. But that involves the much less-attractive and tough-nut options such as expanding Medicaid to cover this desperate population, or encouraging states to use existing S-CHIP money for parents, or giving public hospitals and clinics – or health plans – money to find the chronically-ill poor and get them in the system.
Unfortunately, a poor older diabetic just can’t match a poster child.
His report just goes to show that nothing in health care policy is simple:
House Black Caucus Not Buying S-CHIP Expansion
It seems like every interest group in the country is backing a huge expansion of the Medicaid child health program as a “first step” in covering the uninsured. From hospitals to heart surgeons to health plans everybody is finally nodding in agreement – the way to cover the uninsured is by “covering children first” to the tune of at least $50 billion over 10 years. It’s easy and it’s cheap. And most important it let’s politicians help children and appear to help families.
But wait. I found out this morning that there is a huge political force against expanding SCHIP, and it’s not Bush or the right wing – it’s many members of the Black Caucus in the House, the very people with large Medicaid populations in their own District. That’s right, many of the very members of Congress who have the most Medicaid members are fuming over the idea of pumping $50 billion into expanding the Medicaid children’s health program at a time when the chronically-ill uninsured are ignored and should get the money first.
The way it was described privately at a meeting led by a senior staff member for House Ways & Means Committee Chairman Rangel Tuesday, all of that money going to cover healthy children should be used for the people who really need it – the “55-year-old like me” who has diabetes or heart failure of mental illness. Medicaid funds are being used to send hundreds of thousands of healthy children of the chronically ill, near-poor diabetics to a doctor -- while the actual sick person in the family sits on park bench and can’t afford to go anywhere except the ER or a public hospital, if they can afford the copay.
Independent policy experts and a few economists who study Medicaid were not surprised. For years they have been criticizing S-CHIP as a give-away to the “primary care lobby” such as pediatricians who stand to gain big time. Two weeks ago the American Academy of Pediatrics even came out of the closet and began criticizing high-deductible health plans as bad for children. No coincidence that the source of funding for the big boost in S-CHIPs is the same insurers offering high-deductible plans alongside Medicare Advantage plans. Pediatrician lobbyists know that cutting Medicare private plans is the only way to fund the huge expansion in SCHIP that will increase their incomes.
The latest issue of the prestigious journal Health Affairs plays along with the sudden power of the primary care specialist lobby, with an entire issue devoted to how to cover children -- and not a word about what to do about their parents.
What would the Black Caucus members and Rangel and the policy analysts do instead? No mystery about that – give the money to the people who really need help, the low-income chronically-ill who don’t quality for Medicaid. But that involves the much less-attractive and tough-nut options such as expanding Medicaid to cover this desperate population, or encouraging states to use existing S-CHIP money for parents, or giving public hospitals and clinics – or health plans – money to find the chronically-ill poor and get them in the system.
Unfortunately, a poor older diabetic just can’t match a poster child.
Tuesday, March 20, 2007
Senate Budget Committee Adopts Budget Blueprint––Need for Revenue Continues to Endanger Medicare Advantage Funding
The Senate Budget Committee voted along party lines this past week to adopt a 2008 budget blueprint that includes substantial funding for the State Children’s Medicaid Program (S-CHIP), additional veterans care, and many other health care needs.
Most notably, the blueprint has only identified $15 billion of the $50 billion needed to expand the S-CHIP program. They plan to get that $15 billion from "certain overpayments to health care providers." The other $35 billion would need to come from “spending reductions.”
Target number one for picking up that needed money is the Medicare Advantage program that both MedPAC and CBO say is over funded--CBO says by $65 billion.
The managed care industry is picking up their lobbying efforts in response focusing on all the extra benefits Medicare Advantage seniors get and the popularity of the program. But that begs an important question. Just when did we decide that seniors in private Medicare Advantage plans should get better benefits than seniors in the traditional Medicare program? The industry had better have a good answer for that one.
The budget process is just beginning and has a long way to go. But Senate Democrats have started down the course we have been predicting since October—Medicare Advantage funding is in trouble.
Most notably, the blueprint has only identified $15 billion of the $50 billion needed to expand the S-CHIP program. They plan to get that $15 billion from "certain overpayments to health care providers." The other $35 billion would need to come from “spending reductions.”
Target number one for picking up that needed money is the Medicare Advantage program that both MedPAC and CBO say is over funded--CBO says by $65 billion.
The managed care industry is picking up their lobbying efforts in response focusing on all the extra benefits Medicare Advantage seniors get and the popularity of the program. But that begs an important question. Just when did we decide that seniors in private Medicare Advantage plans should get better benefits than seniors in the traditional Medicare program? The industry had better have a good answer for that one.
The budget process is just beginning and has a long way to go. But Senate Democrats have started down the course we have been predicting since October—Medicare Advantage funding is in trouble.
Thursday, March 15, 2007
Bush Administration Rejects Bipartisan Health Care Reform Recommendations From "Citizens' Working Group" Created by Medicare Act
The 2003 Medicare Modernization Act the Bush administration pushed through--it also created Part D--included a provision that established a "Citizens' Working Group" to study the American health care challenge and report back to the President and the Congress with suggested solutions.
Their mission was to "promote a public debate" on solutions to the cost, coverage, and quality challenges we face. The group included people from all the relevant stakeholders including doctors, hospital administrators, union leaders, benefit managers, and others. They held a number of hearings around the country for a year and issued their conclusions this past September.
Their recommendations fell far short of offering any kind of comprehensive reform proposal. Instead, the group's most specific proposal was to set up an independent commission to create a core set of benefits that every American should have access to by 2012 as a first step toward reform they never defined in any detail.
Their key recommendations:
1: Establish Public Policy that All Americans Have Affordable Health Care
2: Guarantee Financial Protection Against Very High Health Care Costs
3: Foster Innovative Integrated Community Health Networks
4: Define Core Benefits and Services for All Americans
5: Promote Efforts to Improve Quality of Care and Efficiency
6: Fundamentally Restructure the Way End-of-Life Services are Financed and Provided
Perhaps most telling is this from the first recommendation to establish affordable care for everyone, "The Working Group is proposing immediate action to establish the policy that all Americans have affordable health care." There were no details on how to do it, how much it would cost, and how it would be paid for.
Speaking for the administration, HHS Secretary Leavitt rejected the notion of a core set of benefits instead reaffirming the administration's focus on consumer choice and options rather than benefit mandates.
The "Citizens' Working Group" wasn't able to come to any meaningful proposal on health reform. They simply said we have a big problem and we need a comprehensive solution. Now, there's a headline.
A year of work, tons of hearings, and all they can tell us is that we have a huge problem we need to fix?
The Bush administration was right to reject this flimsy piece of work. But that doesn't make them heroes. For six years they have virtually ignored America's health care crisis with half-hearted and flimsy proposals of their own.
In the end, I guess the lesson is that health care reform is really hard. Anyone who wants to effectively tackle health reform is going to hit some very uncomfortable issues head-on--and spend some big time political capital.
Neither the Bush administration or the "Citizens' Working Group" appears to have that kind of gumption.
See our recent post: A Health Reform Plan That Can Work.
Their mission was to "promote a public debate" on solutions to the cost, coverage, and quality challenges we face. The group included people from all the relevant stakeholders including doctors, hospital administrators, union leaders, benefit managers, and others. They held a number of hearings around the country for a year and issued their conclusions this past September.
Their recommendations fell far short of offering any kind of comprehensive reform proposal. Instead, the group's most specific proposal was to set up an independent commission to create a core set of benefits that every American should have access to by 2012 as a first step toward reform they never defined in any detail.
Their key recommendations:
1: Establish Public Policy that All Americans Have Affordable Health Care
2: Guarantee Financial Protection Against Very High Health Care Costs
3: Foster Innovative Integrated Community Health Networks
4: Define Core Benefits and Services for All Americans
5: Promote Efforts to Improve Quality of Care and Efficiency
6: Fundamentally Restructure the Way End-of-Life Services are Financed and Provided
Perhaps most telling is this from the first recommendation to establish affordable care for everyone, "The Working Group is proposing immediate action to establish the policy that all Americans have affordable health care." There were no details on how to do it, how much it would cost, and how it would be paid for.
Speaking for the administration, HHS Secretary Leavitt rejected the notion of a core set of benefits instead reaffirming the administration's focus on consumer choice and options rather than benefit mandates.
The "Citizens' Working Group" wasn't able to come to any meaningful proposal on health reform. They simply said we have a big problem and we need a comprehensive solution. Now, there's a headline.
A year of work, tons of hearings, and all they can tell us is that we have a huge problem we need to fix?
The Bush administration was right to reject this flimsy piece of work. But that doesn't make them heroes. For six years they have virtually ignored America's health care crisis with half-hearted and flimsy proposals of their own.
In the end, I guess the lesson is that health care reform is really hard. Anyone who wants to effectively tackle health reform is going to hit some very uncomfortable issues head-on--and spend some big time political capital.
Neither the Bush administration or the "Citizens' Working Group" appears to have that kind of gumption.
See our recent post: A Health Reform Plan That Can Work.
Tuesday, March 13, 2007
Medicare Advantage HMOs Gearing Up for Payment Cuts--Could They Come as Early as 2008?
Bill Boyles--Publisher of Health Market Survey--returns as a guest commentator. Bill keeps a sharp eye on the Medicare Advantage business and on Capitol Hill. Here's his take on what the Congress--and the health plans --are up to:
We are hearing that the health insurers are getting ready to dump markets in response to the Democratic threat to cut Medicare Advantage payments. But first they will try to stop it. The word is that millions of dollars have already been raised to fund a major grass roots campaign to lobby Congress against making any major cuts to the popular—and profitable—program.
Some of the insurers are not waiting. Some large plans are already starting to pull back from less profitable markets in 2008 to minimize the hit they expect to take in 2009. Budgets for marketing MA plans are being shifted. One of the biggest HMOs is already slowing its growth in the MA product and has told Wall Street to expect a change.
It is likely that 2008 Medicare Advantage rates will not be significantly impacted by any Democratic budget action. The 2008 Medicare Advantage rates will be settled between CMS and the HMOs this summer with final agreement occurring in September. That would be well before Democrats have a chance to cut HMO payments through the annual budget process that will take place later in the year following Senate action.
That timing makes it very likely that the first chance the Democrats will have to change the way Medicare Advantage HMOs are paid – and grab the budget savings -- will be in the 2009 budget.
However, we are also hearing that House Democrats would like to begin the process of cutting Medicare Advantage payments through the budget resolution that is expected within weeks. That is the broad spending roadmap the Congress agrees to prior to filling in all the details later in the year.
If the House and Senate both were to agree to reduce MA payments early in the budget resolution process, that would force CMS to negotiate with the HMOs at the reduced rates this summer. While it is more likely the House will take this course, it is less likely that the Senate would go that far this year. Senate Finance Chair Max Baucus (D-MT) has already told the industry the Senate won’t act until the later date, and he is not inclined to do anything for 2008 -- but that 2009 Medicare Advantage payments may be on the table.
So, it will be important to watch the early stages of the budget process. Right now it appears that Medicare Advantage payments will not suffer any major change in 2008. But the industry is not waiting to find out how deep the cuts will be
Expect to hear more about insurers “adjusting” their Medicare offerings – starting now. But the actual budget savings won’t arrive for at least two years--after the election. That could play out poorly for Democrats if the timing is off and seniors start complaining too soon.
Read more: Why the Democrats Will Cut Medicare Advantage Rates
We are hearing that the health insurers are getting ready to dump markets in response to the Democratic threat to cut Medicare Advantage payments. But first they will try to stop it. The word is that millions of dollars have already been raised to fund a major grass roots campaign to lobby Congress against making any major cuts to the popular—and profitable—program.
Some of the insurers are not waiting. Some large plans are already starting to pull back from less profitable markets in 2008 to minimize the hit they expect to take in 2009. Budgets for marketing MA plans are being shifted. One of the biggest HMOs is already slowing its growth in the MA product and has told Wall Street to expect a change.
It is likely that 2008 Medicare Advantage rates will not be significantly impacted by any Democratic budget action. The 2008 Medicare Advantage rates will be settled between CMS and the HMOs this summer with final agreement occurring in September. That would be well before Democrats have a chance to cut HMO payments through the annual budget process that will take place later in the year following Senate action.
That timing makes it very likely that the first chance the Democrats will have to change the way Medicare Advantage HMOs are paid – and grab the budget savings -- will be in the 2009 budget.
However, we are also hearing that House Democrats would like to begin the process of cutting Medicare Advantage payments through the budget resolution that is expected within weeks. That is the broad spending roadmap the Congress agrees to prior to filling in all the details later in the year.
If the House and Senate both were to agree to reduce MA payments early in the budget resolution process, that would force CMS to negotiate with the HMOs at the reduced rates this summer. While it is more likely the House will take this course, it is less likely that the Senate would go that far this year. Senate Finance Chair Max Baucus (D-MT) has already told the industry the Senate won’t act until the later date, and he is not inclined to do anything for 2008 -- but that 2009 Medicare Advantage payments may be on the table.
So, it will be important to watch the early stages of the budget process. Right now it appears that Medicare Advantage payments will not suffer any major change in 2008. But the industry is not waiting to find out how deep the cuts will be
Expect to hear more about insurers “adjusting” their Medicare offerings – starting now. But the actual budget savings won’t arrive for at least two years--after the election. That could play out poorly for Democrats if the timing is off and seniors start complaining too soon.
Read more: Why the Democrats Will Cut Medicare Advantage Rates
Monday, March 12, 2007
United Health Buys Sierra Health Plans--The Consolidation Begins Again--But What's the End Game?
After a period of quiet on the merger and acquisition front, it seems to be beginning again.
Today, UnitedHealth announced an agreement to acquire Sierra Health Plans for $2.4 billion.
With little in the way of growth in the commercial health insurance markets, and the recent surge in Medicare products about to settle down as the new Medicare Part D and Medicare Advantage opportunities reach a plateau, the only way a big health plan can grow is acquisition.
Wall Street wants earnings growth and the acquisition game does it again and again for them.
But where is the real value? If health plans can increase their earnings only by buying the next guy, what’s the end game?
Real value can be accomplished by better managing the $2 trillion health care economy that is now up to 16% of GDP. That is also the kind of value that would secure a place for the private sector in America’s health care system.
We are already hearing that Wellpoint is back in the acquisition saddle as well.
Who's next?
Today, UnitedHealth announced an agreement to acquire Sierra Health Plans for $2.4 billion.
With little in the way of growth in the commercial health insurance markets, and the recent surge in Medicare products about to settle down as the new Medicare Part D and Medicare Advantage opportunities reach a plateau, the only way a big health plan can grow is acquisition.
Wall Street wants earnings growth and the acquisition game does it again and again for them.
But where is the real value? If health plans can increase their earnings only by buying the next guy, what’s the end game?
Real value can be accomplished by better managing the $2 trillion health care economy that is now up to 16% of GDP. That is also the kind of value that would secure a place for the private sector in America’s health care system.
We are already hearing that Wellpoint is back in the acquisition saddle as well.
Who's next?
Bush Administration Ducking Its Own Commission on Health Care Reform
Joe Paduda reminds the Bush administration of its obligation to pay attention to its own commission over at "Managed Care Matters" today:
Bush's non-response
Actions, or lack thereof, speak louder than State of the Union addresses.
From California HealthLine comes the news that the Administration has failed to comply with it's legal obligation to respond to the Citizen's Health Care Working Group.
The Group was created by the 2003 Medicare Part D legislation and tasked with creating a national public debate on universal coverage to high quality care. It also produced an action plan that the Congress and President are supposed to consider in their legislative efforts. The President is required by law to respond to the report within 45 days; the deadline passed over four months ago.
Read the rest.
Bush's non-response
Actions, or lack thereof, speak louder than State of the Union addresses.
From California HealthLine comes the news that the Administration has failed to comply with it's legal obligation to respond to the Citizen's Health Care Working Group.
The Group was created by the 2003 Medicare Part D legislation and tasked with creating a national public debate on universal coverage to high quality care. It also produced an action plan that the Congress and President are supposed to consider in their legislative efforts. The President is required by law to respond to the report within 45 days; the deadline passed over four months ago.
Read the rest.
It's a New Day in the Health Care Debate--New Efforts to Reform the U.S. Health Care System are Real and Serious
The following is a guest column I authored which recently appeared in the Employee Benefit Adviser:
It Is a New Day in the Health Care Debate
by Robert Laszewski
March 1, 2007 - New efforts to reform the U.S. health insurance system are real and serious, and it would be wise not to ignore what's happening.
Health insurance reform is breaking out everywhere; 2007 is shaping up to be the "Year of the Possible" with notable health care reform efforts coming from a number of places almost at once:
Remainder of Article
It Is a New Day in the Health Care Debate
by Robert Laszewski
March 1, 2007 - New efforts to reform the U.S. health insurance system are real and serious, and it would be wise not to ignore what's happening.
Health insurance reform is breaking out everywhere; 2007 is shaping up to be the "Year of the Possible" with notable health care reform efforts coming from a number of places almost at once:
Remainder of Article
Friday, March 9, 2007
The Latest "Health Wonk Review"
The best and the brightest in the health blog world are at it again with their latest "Health Wonk Review" over at Joe Paduda's "Managed Care Matters."
Thursday, March 8, 2007
Part D Was “Financially Irresponsible”—The Medicare Part D Drug Plan Liability is Twice That of the Social Security System!
The passage of the Medicare prescription drug benefit—Part D—was a “financially irresponsible” thing to do. Those were the words of U.S. Comptroller General David Walker on CBS’ “60 Minutes" this past weekend.
Amen to that.
The Medicare Trustees, in May of 2006, reported that Medicare’s long-term debt is estimated to be $32.4 trillion dollars (over 75 years). The new Part D drug benefit is a quarter of that—$8 trillion.
This will blow you away: The Part D Medicare drug benefit’s long-term liability alone is almost twice as large as the entire long-term debt of the Social Security System!
President Bush spent a good part of his political capital two years ago trying to reform Social Security when his Medicare Part D drug program added twice the Social Security debt to the national balance sheet all by itself!!!
There is no doubt that seniors deserve good drug coverage inside Medicare. But they, and we, also deserve to see Medicare get the overhaul it will need to sustain the “baby boomer” retirements.
How “conservative” Republicans like George Bush and Tom DeLay could have forced this Part D program through and onto the nation’s troubled books is beyond me.
Amen to that.
The Medicare Trustees, in May of 2006, reported that Medicare’s long-term debt is estimated to be $32.4 trillion dollars (over 75 years). The new Part D drug benefit is a quarter of that—$8 trillion.
This will blow you away: The Part D Medicare drug benefit’s long-term liability alone is almost twice as large as the entire long-term debt of the Social Security System!
President Bush spent a good part of his political capital two years ago trying to reform Social Security when his Medicare Part D drug program added twice the Social Security debt to the national balance sheet all by itself!!!
There is no doubt that seniors deserve good drug coverage inside Medicare. But they, and we, also deserve to see Medicare get the overhaul it will need to sustain the “baby boomer” retirements.
How “conservative” Republicans like George Bush and Tom DeLay could have forced this Part D program through and onto the nation’s troubled books is beyond me.
Wednesday, March 7, 2007
The Massachusets Health Plan's Inability to Offer Affordable Health Insurance Premiums Will Stall-Out Other State's Efforts in Health Reform
Now that we know Massachusetts is not going to be able to offer affordable health insurance to the middle class, we can expect to see other similar state health reform efforts stall-out.
Both California and Pennsylvania have already started down the Massachusetts health care reform road. But when state legislators find that families making $50,000 or $60,000 a year would be mandated under state law to spend $6,000 to $8,000 out of their own pockets, for plans that require a $2,000 deducible for all but a few services, they will be hard pressed to force their voters into a mandated system.
We haven't had this kind of excitement about health care reform in 15 years.
It will be a shame if Massachusetts now pours a cold bucket of water over it.
My earlier post on the high premiums in Mass: The Massachusetts Health Plan Will Turn Out to Be Little More Than a Fancy Expansion of Medicaid--Bids Come In At $250 Per Person Per Month
Both California and Pennsylvania have already started down the Massachusetts health care reform road. But when state legislators find that families making $50,000 or $60,000 a year would be mandated under state law to spend $6,000 to $8,000 out of their own pockets, for plans that require a $2,000 deducible for all but a few services, they will be hard pressed to force their voters into a mandated system.
We haven't had this kind of excitement about health care reform in 15 years.
It will be a shame if Massachusetts now pours a cold bucket of water over it.
My earlier post on the high premiums in Mass: The Massachusetts Health Plan Will Turn Out to Be Little More Than a Fancy Expansion of Medicaid--Bids Come In At $250 Per Person Per Month
Tuesday, March 6, 2007
More on the Massachusetts Health Plan's Unaffordable Costs
My old friend and colleague, Richard Eskow, has a great post on the affordability problems with the new Massachusetts health plan over on his blog, The Sentinel Effect.
The Massachusetts Health Plan Will Turn Out to Be Little More Than a Fancy Expansion of Medicaid--Bids Come In At $250 Per Person Per Month
For weeks we have been warning that the Massachusetts health reform plan is at a critical point. The second round of health plan bids came out no better than the first. That did nothing to alleviate concerns that Massachusetts will not be able to mandate that its citizens buy the costly coverage.
The first health plan bids averaged $380 per person per month. A family of three would have to pay about $13,000 per year at those rates and would receive no subsidy assistance if their household income exceeded $48,000 per year. That would clearly be a non-starter.
So the Massachusetts regulator––the "Connector"--appealed to Massachusetts insurers to come back with better rates.
The result was that most insurers bid between $222 and $288 per person per month (at the average age of 37) for a health plan in eastern Mass. They got the rates down by adding a whopping annual individual deductible of $2,000 ($4,000 for a family). At $250 per month, that would cost the same family of three about $8,000. Over $48,000 per year in family income, there would be no subsidy.
Since adopting a $2,000 deductible would cause the rates to drop by about 20% to 30% anyway, the reduction in the average monthly premium from $380 to $250 is really not a much better deal for Massachusetts consumers than the first bids.
One plan, the Neighborhood Health Plan, bid $156 for a plan without first dollar drug coverage and $175 per person per month with drug coverage--both have a $2,000 individual deductible. However, Neighborhood is primarily a Medicaid provider serving its clients out of a limited number of community health clinic sites that provide very limited coverage in the state. To get one of the mainstream insurers providing access to a broad range of medical providers, plan on spending the $250 monthly premium if you are the average of 37 years old. If you are over age 56, plan on spending $350 to $461 per person per month for one of the mainstream Mass health plans.
Massachusetts will not be able to implement its mandate that all citizens have health insurance at these prices.
Can you imagine going to a middle class family of three making about $50,000 a year and telling them they have to spend $8,000, or even $6000 for the Neighborhood plan, out of their already taxed budget? To boot, the plan you are requiring them to buy has an annual deducible of $2,000 per person.
Between 100% and 300% of the poverty level, a family will receive premium assistance. However, how will a family making $35,000 per year be able to pay even half of these monthly premiums toward the cost of health insurance--and still have to pay a big deductible before getting any meaningful coverage?
The short answer is that Massachusetts can not force their people to buy a health insurance plan they cannot afford and likely will not want.
In fact, I traveled to Boston yesterday for a meeting. As I was driving down the Mass Pike the local news radio station, WBZ, led a report on the new rates and big deductibles with the line, "In the Commonwealth, a health care curve ball."
That about sums up the reaction the Massachusetts political leaders can expect to get from the people this thing is intended to help.
What are the politicians going to do?
For now, they will let the new health plan go forward. There aren't any big penalties for being uninsured in the first year. So there is no downside to just let it begin and hope for a miracle.
As the more meaningful penalties appear in the second year, they either won't be enforced or they will be repealed.
Massachusetts politicians will eventually declare victory and lift the health insurance mandate on the middle class.
They will point to the Massachusetts Health Plan's success in providing access to "affordable" health insurance plans and simply encourage people to buy it. But even that could be a problem if Massachusetts leaves the new health plans "guarantee issue" and doesn't require everyone to join the pool. The participating insurers could get the worst combination of guarantee issue health insurance and adverse selection if consumers have the option of buying.
The local health plans who have been cooperating with the "Connector" could be walking into an untenable underwriting outcome if the mandate is not enforced and a smaller pool of sick people is the outcome.
When the day is done, Massachusetts will likely have only succeeded in expanding coverage for those near 100% of the poverty line--those who will receive the most comprehensive subsides.
By making it possible for more people to have insurance, Massachusetts will have made some important progress. However, the Mass plan will not be the template for national health care reform its authors had hoped for.
Instead of being a grand plan to insure virtually everyone through a more efficient market and a set of mandates, all the Massachusetts plan will turn out to be is a fancy, but modest, expansion of Medicaid.
In the end, it's all about the cost of health care.
The Massachusetts "Connector" wasn't able to get a cheaper price for health insurance because there isn't a cheaper price for health insurance.
The number of those uninsured is the symptom--and cost is the problem.
Every other health reform plan that pretends the problem is just one of access doesn't know the difference between a symptom and a problem.
The first health plan bids averaged $380 per person per month. A family of three would have to pay about $13,000 per year at those rates and would receive no subsidy assistance if their household income exceeded $48,000 per year. That would clearly be a non-starter.
So the Massachusetts regulator––the "Connector"--appealed to Massachusetts insurers to come back with better rates.
The result was that most insurers bid between $222 and $288 per person per month (at the average age of 37) for a health plan in eastern Mass. They got the rates down by adding a whopping annual individual deductible of $2,000 ($4,000 for a family). At $250 per month, that would cost the same family of three about $8,000. Over $48,000 per year in family income, there would be no subsidy.
Since adopting a $2,000 deductible would cause the rates to drop by about 20% to 30% anyway, the reduction in the average monthly premium from $380 to $250 is really not a much better deal for Massachusetts consumers than the first bids.
One plan, the Neighborhood Health Plan, bid $156 for a plan without first dollar drug coverage and $175 per person per month with drug coverage--both have a $2,000 individual deductible. However, Neighborhood is primarily a Medicaid provider serving its clients out of a limited number of community health clinic sites that provide very limited coverage in the state. To get one of the mainstream insurers providing access to a broad range of medical providers, plan on spending the $250 monthly premium if you are the average of 37 years old. If you are over age 56, plan on spending $350 to $461 per person per month for one of the mainstream Mass health plans.
Massachusetts will not be able to implement its mandate that all citizens have health insurance at these prices.
Can you imagine going to a middle class family of three making about $50,000 a year and telling them they have to spend $8,000, or even $6000 for the Neighborhood plan, out of their already taxed budget? To boot, the plan you are requiring them to buy has an annual deducible of $2,000 per person.
Between 100% and 300% of the poverty level, a family will receive premium assistance. However, how will a family making $35,000 per year be able to pay even half of these monthly premiums toward the cost of health insurance--and still have to pay a big deductible before getting any meaningful coverage?
The short answer is that Massachusetts can not force their people to buy a health insurance plan they cannot afford and likely will not want.
In fact, I traveled to Boston yesterday for a meeting. As I was driving down the Mass Pike the local news radio station, WBZ, led a report on the new rates and big deductibles with the line, "In the Commonwealth, a health care curve ball."
That about sums up the reaction the Massachusetts political leaders can expect to get from the people this thing is intended to help.
What are the politicians going to do?
For now, they will let the new health plan go forward. There aren't any big penalties for being uninsured in the first year. So there is no downside to just let it begin and hope for a miracle.
As the more meaningful penalties appear in the second year, they either won't be enforced or they will be repealed.
Massachusetts politicians will eventually declare victory and lift the health insurance mandate on the middle class.
They will point to the Massachusetts Health Plan's success in providing access to "affordable" health insurance plans and simply encourage people to buy it. But even that could be a problem if Massachusetts leaves the new health plans "guarantee issue" and doesn't require everyone to join the pool. The participating insurers could get the worst combination of guarantee issue health insurance and adverse selection if consumers have the option of buying.
The local health plans who have been cooperating with the "Connector" could be walking into an untenable underwriting outcome if the mandate is not enforced and a smaller pool of sick people is the outcome.
When the day is done, Massachusetts will likely have only succeeded in expanding coverage for those near 100% of the poverty line--those who will receive the most comprehensive subsides.
By making it possible for more people to have insurance, Massachusetts will have made some important progress. However, the Mass plan will not be the template for national health care reform its authors had hoped for.
Instead of being a grand plan to insure virtually everyone through a more efficient market and a set of mandates, all the Massachusetts plan will turn out to be is a fancy, but modest, expansion of Medicaid.
In the end, it's all about the cost of health care.
The Massachusetts "Connector" wasn't able to get a cheaper price for health insurance because there isn't a cheaper price for health insurance.
The number of those uninsured is the symptom--and cost is the problem.
Every other health reform plan that pretends the problem is just one of access doesn't know the difference between a symptom and a problem.
Monday, March 5, 2007
Sierra Health Announces It's Already Losing Money in its 2007 Part D Medicare Prescription Drug Plan
Sierra Health, the leading health plan in Nevada, is already losing money in its 2007 senior Medicare Part D prescription drug program.
For 2007, Sierra offered two primary Part D programs--a basic Part D drug plan and an enhanced plan that covers senior's medication in the "gap" or "donut hole." This "gap" lies between the first layer of coverage and the catastrophic insurance that Part D offers.
Sierra announced last week that, just based upon one month of data in January, they can already tell that their "enhanced" gap coverage plan will be a big money loser for the full year. The health plan announced that they lost $3 million in the first month on just the enhanced plan. They pointed to "adverse selection" in the enhanced plan for the big losses--the plan was disproportionately purchased by sicker people.
Their basic Part D product is expected to earn $11 to $14 million for the full year in 2007.
How the two enhanced and basic programs will end up netting each other out is unclear. However, losing just $3 million in the first month on the enhanced program doesn't bode well for the combined product effort.
You will recall that Humana had a terrible year in its Part D product line last year because of poor results with its enhanced gap plan. Humana reported an overall 2006 Part D medical cost ratio of 92.5% (116% in the gap plan alone). Adding on 15 more points for expenses, Humana's likely Part D medical cost ratio for all of its offerings was close to 108%--well into the red.
Clearly, seniors are savvy Part D buyers--they are careful to find the plan they can make the most money on. No surprise there.
It is clear that pricing Part D plans is no small challenge. Sierra is a very well run managed care company. So, being so far off in its 2007 Part D pricing is notable.
With the Democrats now in charge of the Congress, and no friends of the managed care companies offering the Medicare Part D drug plan, there isn't a lot of hope that Part D payments to the health insurance industry are going to get a lot better in the next few years.
Against that outlook, starting out in the red is not the place to be.
For 2007, Sierra offered two primary Part D programs--a basic Part D drug plan and an enhanced plan that covers senior's medication in the "gap" or "donut hole." This "gap" lies between the first layer of coverage and the catastrophic insurance that Part D offers.
Sierra announced last week that, just based upon one month of data in January, they can already tell that their "enhanced" gap coverage plan will be a big money loser for the full year. The health plan announced that they lost $3 million in the first month on just the enhanced plan. They pointed to "adverse selection" in the enhanced plan for the big losses--the plan was disproportionately purchased by sicker people.
Their basic Part D product is expected to earn $11 to $14 million for the full year in 2007.
How the two enhanced and basic programs will end up netting each other out is unclear. However, losing just $3 million in the first month on the enhanced program doesn't bode well for the combined product effort.
You will recall that Humana had a terrible year in its Part D product line last year because of poor results with its enhanced gap plan. Humana reported an overall 2006 Part D medical cost ratio of 92.5% (116% in the gap plan alone). Adding on 15 more points for expenses, Humana's likely Part D medical cost ratio for all of its offerings was close to 108%--well into the red.
Clearly, seniors are savvy Part D buyers--they are careful to find the plan they can make the most money on. No surprise there.
It is clear that pricing Part D plans is no small challenge. Sierra is a very well run managed care company. So, being so far off in its 2007 Part D pricing is notable.
With the Democrats now in charge of the Congress, and no friends of the managed care companies offering the Medicare Part D drug plan, there isn't a lot of hope that Part D payments to the health insurance industry are going to get a lot better in the next few years.
Against that outlook, starting out in the red is not the place to be.
Friday, March 2, 2007
Medicare Payment Advisory Commission (MedPAC) Finds Medicare Advantage Plans “Overpaid” by 12%
Told you so—Part Deux.
On top of this week’s CBO report saying Medicare could save $65 billion by equalizing Medicare Advantage payments made to HMOs with the traditional Medicare plan, MedPAC dropped the second shoe saying the very same thing in their annual report released yesterday.
MedPAC is a commission created by Congress to advise on Medicare payment policy. It is composed of 17 members from throughout the health care economy and is seen as non-partisan and well staffed.
MedPAC is recommending that the Congress implement payment changes for Medicare Advantage plans that create, “Neutrality between types of MA plans, including eliminating the stabilization fund for PPO plans [$3 billion remains in this fund] and making bidding rules consistent across plan types.”
“Further, the Commission has recommended a pay for quality performance program for MA plans, and calculating clinical measures” for the traditional Medicare plan that would better enable the government to compare quality between the traditional plan and the Medicare Advantage plans.
MedPAC also challenged the way CMS pays the Part D Medicare drug plans pointing out that CMS did not fully weight plan bids in 2007, which had the effect of not allowing “the full benefits of competition to be realized and thus, the cost to Medicare will increase.”
MedPAC also made recommendations regarding hospital and physician reimbursement calling for increases at about the “market basket” rate after expected gains from a quality incentive program are accomplished—which means small up-front reductions in payments to hospitals and physicians. The MedPAC report also said that the cuts the Sustainable Growth Rate formula requires of physicians fees would threaten beneficiary access over time.
The bottom line: We need to make Medicare cuts and the best opportunity to find extra fat is in the Medicare Advantage and Part D drug plans.
MedPAC has given the Democratic Congress both the road map and the rational to begin to cut what HMOs get—both for Medicare Advantage and Part D.
No surprise.
The full MedPac Report on Medicare Payment Policy
Why Bush administration support for Medicare Advantage Plans is of little help.
Why Congressional Democrats want to cut Medicare Advantage plans.
Why the Democrats need the Medicare Advantage money.
So why aren't HMOs stocks suffering with all of this news.
On top of this week’s CBO report saying Medicare could save $65 billion by equalizing Medicare Advantage payments made to HMOs with the traditional Medicare plan, MedPAC dropped the second shoe saying the very same thing in their annual report released yesterday.
MedPAC is a commission created by Congress to advise on Medicare payment policy. It is composed of 17 members from throughout the health care economy and is seen as non-partisan and well staffed.
MedPAC is recommending that the Congress implement payment changes for Medicare Advantage plans that create, “Neutrality between types of MA plans, including eliminating the stabilization fund for PPO plans [$3 billion remains in this fund] and making bidding rules consistent across plan types.”
“Further, the Commission has recommended a pay for quality performance program for MA plans, and calculating clinical measures” for the traditional Medicare plan that would better enable the government to compare quality between the traditional plan and the Medicare Advantage plans.
MedPAC also challenged the way CMS pays the Part D Medicare drug plans pointing out that CMS did not fully weight plan bids in 2007, which had the effect of not allowing “the full benefits of competition to be realized and thus, the cost to Medicare will increase.”
MedPAC also made recommendations regarding hospital and physician reimbursement calling for increases at about the “market basket” rate after expected gains from a quality incentive program are accomplished—which means small up-front reductions in payments to hospitals and physicians. The MedPAC report also said that the cuts the Sustainable Growth Rate formula requires of physicians fees would threaten beneficiary access over time.
The bottom line: We need to make Medicare cuts and the best opportunity to find extra fat is in the Medicare Advantage and Part D drug plans.
MedPAC has given the Democratic Congress both the road map and the rational to begin to cut what HMOs get—both for Medicare Advantage and Part D.
No surprise.
The full MedPac Report on Medicare Payment Policy
Why Bush administration support for Medicare Advantage Plans is of little help.
Why Congressional Democrats want to cut Medicare Advantage plans.
Why the Democrats need the Medicare Advantage money.
So why aren't HMOs stocks suffering with all of this news.