Private health insurance exchanges will save employers money but not make health insurance cheaper.
Because private health insurance will save employers money, they will grow.
Will Private Insurance Exchanges Reduce Health Insurance Costs?
There's lots of buzz these days about private insurance exchanges. The idea is to give employees more choice in purchasing their own individual coverage from a big menu of insurance companies and plan alternatives, and as a result, create more robust competition and thereby help control costs.
But I think private insurance exchanges will have just the opposite effect on the price of large employer health insurance plans.
Showing posts with label Consumer Driven Care. Show all posts
Showing posts with label Consumer Driven Care. Show all posts
Tuesday, October 9, 2012
Wednesday, January 28, 2009
"Consumer-Driven Health Care: Promise and Performance"
I am always struck by the difference between the salesmanship of health plans offering consumer-driven health products and the reality of the data.
James Robinson and Paul Ginsburg have an article in the January 27th edition of Health Affairs with an objective review of the consumer-driven movement of recent years.
Here is the central point of the article:
But consumer-driven principles have not changed the fundamental dynamics of our health insurance system nor have they turned out to be a silver bullet solution. In my mind, the fundamental fault with the logic that they would was the belief the consumer could do what insurance companies, employer benefit managers, and even providers at risk before them, could not.
June 27 Post: Wall Street Journal Sends Shockwaves Through the Health Insurance Markets With the Headline "Health Savings Plans Start to Falter"
James Robinson and Paul Ginsburg have an article in the January 27th edition of Health Affairs with an objective review of the consumer-driven movement of recent years.
Here is the central point of the article:
The performance of consumer-driven health care has fallen short of both the aspirations of its proponents and the fears of its critics. Growth of the favored organizational forms, including HDHPs and individually purchased insurance, has been anemic. The forms of insurance and sponsorship originally embodied in the consumer-driven vision have mutated into forms far from those originally envisaged. This process is not unique to consumerism, but one well known to managed care, where the original group-/staff-model HMO was diluted into the loosely structured independent practice association (IPA)-model plan and the sponsorship framework of managed competition into the "total replacement" purchasing format of self-insured employers.They also point out that:
- Enrollment in HDHP/HSA plans grew from 400,000 in September 2004 to 6.1 million in January 2008--"a large absolute increase but still small in relation to overall enrollment in private insurance." By comparison, HMOs continue to hold 20 percent of the employer market and POS plans 12 percent.
- "The consumer-driven health care movement has been obliged to dilute its principles in light of the overuse of inappropriate services and underuse of appropriate services in the real world. HDHPs now incorporate elements of disease management for enrollees with chronic conditions; case management for enrollees with complex or comorbid conditions; and utilization management for patients using particularly costly drugs, devices, or procedures. Most of these medical management programs are obtained from the same diversified insurers that offer HMO and PPO products. Indeed, the potential for integration with claims databases is leading insurers to acquire many formerly independent medical management vendors."
- "The blind spot in the consumer-driven analysis of market performance concerns the importance of coordination in insurance, delivery, and sponsorship. The obdurate insistence on á la carte choice and retail purchasing pushed the theorists of consumerism into positing organizational and market dynamics that have not been observed in the real world."
But consumer-driven principles have not changed the fundamental dynamics of our health insurance system nor have they turned out to be a silver bullet solution. In my mind, the fundamental fault with the logic that they would was the belief the consumer could do what insurance companies, employer benefit managers, and even providers at risk before them, could not.
June 27 Post: Wall Street Journal Sends Shockwaves Through the Health Insurance Markets With the Headline "Health Savings Plans Start to Falter"
Tuesday, April 22, 2008
Is the Bush Administration in Favor of Provider Transparency and Accountability or Aren't They?
Brian Klepper has shared an open letter he and Michael Millenson have written to HHS Secretary Leavitt regarding the issue of provider information transparency and the Department of HHS's apparent contradiction with its own policies.
An Open Response To HHS Secretary Michael Leavitt
by Brian Klepper and Michael Millenson
A few months ago, the two of us – both long-time advocates for transparency and accountability – posted separate comments on Secretary Mike Leavitt’s blog. Brian asked Secretary Leavitt to square his support of "Chartered Value Exchanges” with the attempt to block release of physician-specific Medicare claims data to Consumers’ Checkbook, which wants to rate doctors. After a court ruled that the data should be provided to the group, HHS appealed. Michael urged the secretary to go beyond supporting Consumers’ Checkbook and use his “bully pulpit” to promote sophisticated data analysis that could be used to create national quality comparisons.
Secretary Leavitt graciously asked us to consider and comment on the department’s proposed "Medicare trigger legislation" calling for the release of physician performance measures. We are delighted to continue the conversation.
First, let’s give credit where credit is due. We agree that the proposed legislation is a major step in the right direction.
Yet the legislation’s intent seems at odds with the department’s turn-back-the-clock arguments in Consumers’ Checkbook vs. HHS. There, the department asserts that physicians have a right to privacy, and that the quality of medical care they provide in return for taxpayer dollars does not have to be disclosed — despite its importance to consumers and other purchasers of care. Interestingly, this privacy is a privilege hospitals do not enjoy.
In a December 10, 2007 American Medical News article (since revised), the American Medical Association’s board chair gloated that HHS had taken the AMA's “advice” in appealing the original August 22, 2007 District Court ruling for Consumers’ Checkbook. Moreover, as the Los Angeles Times pointed out, while the department proclaims in press releases that it simply wants legal clarification on its authority to release the physician data, the government's legal brief in the case calls for the appeals court to reverse [the August] ruling, leaving the restrictions on the release of data in place.
This is not a partisan issue. Most objective health care experts across the political spectrum believe that transparent pricing and quality information is critical to transforming the current crisis-ridden system into one that is stable and sustainable. Without the kind of information sought by Consumers’ Checkbook, a health care marketplace simply cannot function. President Bush virtually said as much in his August, 2006 executive order.
HHS has said it “recognizes and shares the goals of Consumers’ Checkbook.” If that is so, HHS should match words with deeds. That means dropping its appeal of the Checkbook ruling and challenging purchasers, health plans and individual consumers to use the marketplace to reward doctors and others who provide or contribute to safer, higher quality, more efficient care.
Respectfully,
Brian R. Klepper, PhD
Healthcare Performance, Inc.
Atlantic Beach, FL
904.246.9643o
bklepper@gmail.com
Michael L. Millenson
Health Quality Advisors LLC
Highland Park, IL
847.681.1476
mm@healthqualityadvisors.com
Secretary Leavitt's Original Response to Brian and Michael:
An Open Response To HHS Secretary Michael Leavitt
by Brian Klepper and Michael Millenson
A few months ago, the two of us – both long-time advocates for transparency and accountability – posted separate comments on Secretary Mike Leavitt’s blog. Brian asked Secretary Leavitt to square his support of "Chartered Value Exchanges” with the attempt to block release of physician-specific Medicare claims data to Consumers’ Checkbook, which wants to rate doctors. After a court ruled that the data should be provided to the group, HHS appealed. Michael urged the secretary to go beyond supporting Consumers’ Checkbook and use his “bully pulpit” to promote sophisticated data analysis that could be used to create national quality comparisons.
Secretary Leavitt graciously asked us to consider and comment on the department’s proposed "Medicare trigger legislation" calling for the release of physician performance measures. We are delighted to continue the conversation.
First, let’s give credit where credit is due. We agree that the proposed legislation is a major step in the right direction.
Yet the legislation’s intent seems at odds with the department’s turn-back-the-clock arguments in Consumers’ Checkbook vs. HHS. There, the department asserts that physicians have a right to privacy, and that the quality of medical care they provide in return for taxpayer dollars does not have to be disclosed — despite its importance to consumers and other purchasers of care. Interestingly, this privacy is a privilege hospitals do not enjoy.
In a December 10, 2007 American Medical News article (since revised), the American Medical Association’s board chair gloated that HHS had taken the AMA's “advice” in appealing the original August 22, 2007 District Court ruling for Consumers’ Checkbook. Moreover, as the Los Angeles Times pointed out, while the department proclaims in press releases that it simply wants legal clarification on its authority to release the physician data, the government's legal brief in the case calls for the appeals court to reverse [the August] ruling, leaving the restrictions on the release of data in place.
This is not a partisan issue. Most objective health care experts across the political spectrum believe that transparent pricing and quality information is critical to transforming the current crisis-ridden system into one that is stable and sustainable. Without the kind of information sought by Consumers’ Checkbook, a health care marketplace simply cannot function. President Bush virtually said as much in his August, 2006 executive order.
HHS has said it “recognizes and shares the goals of Consumers’ Checkbook.” If that is so, HHS should match words with deeds. That means dropping its appeal of the Checkbook ruling and challenging purchasers, health plans and individual consumers to use the marketplace to reward doctors and others who provide or contribute to safer, higher quality, more efficient care.
Respectfully,
Brian R. Klepper, PhD
Healthcare Performance, Inc.
Atlantic Beach, FL
904.246.9643o
bklepper@gmail.com
Michael L. Millenson
Health Quality Advisors LLC
Highland Park, IL
847.681.1476
mm@healthqualityadvisors.com
Secretary Leavitt's Original Response to Brian and Michael:
Claims Data from Medicare
The proposal I made last week is also relevant in another way. A couple of commenters asked about a lawsuit involving the use of Medicare claims data by people outside of government.
Brian Klepper said: “On Friday the Memphis Business Journal reported you saying that we ought to have ‘a Travelocity for health care’ that would ‘give a quality grade for doctors and show how much they charge for services.’ I'm wholeheartedly with you on this. But how do you square this proposal with the fact that, though you're the nation's largest payor, you acquiesced to the AMA's interests and then refused to release physician data?
Can you please explain these discrepancies?”
Michael Millenson of Highland Park, IL agreed with Brian. He said, “It's past time for HHS to be an aggressive, whole-hearted mover towards release of more information and more timely information. Meanwhile, one easy, no-cost step would be for Secretary Leavitt to use his bully pulpit to call for states to collect ‘all payer’ data. It sounds like a technical issue, but what it will do is allow valid national comparisons of quality of care, as well as enable better state efforts. A local/nation win-win.”
I want to use Medicare claims data for this purpose. And I have been advocating the states provide their data for this purpose. However, I have a problem. A federal court in Florida, some years ago, prohibited HHS from publicly disclosing certain Medicare claims data. Specifically, HHS was prohibited from disclosing annual Medicare reimbursement rates for individually identifiable physicians.
A few months ago, another federal court — this time in D.C., ruled the opposite — that I must provide the data to a specific party. This leaves me sandwiched between two differing courts.
We are working to develop a solution. However, the real fix will need to be legislative.
In the Medicare trigger legislation I sent to Congress, I have included language that would allow HHS in a thoughtful, consistent way to enhance quality improvement efforts in our Chartered Value Exchanges with physician performance measurement results. This needs to happen. I think there is a potential for bipartisan action on at least this part of the legislation I sent up.
Michael and Brian, take a look at the legislation linked above and tell me what you think.
Thursday, November 1, 2007
Why Consumers’ Checkbook v CMS is a Sideshow--Bush Administration Refuses to Release Provider Data
Brian Klepper joins us again today with another one of his welcome posts. This time he points out the hypocrisy in CMS, which has been calling for market transparency, refusing to provide provider data to a consumer group.
Why Consumers’ Checkbook v CMS is a Sideshow
by Brian Klepper
There are people who call for market solutions as the answer to every societal problem, but who then work to restrict the information that markets (and societies) must have to function effectively. Often, the truth is that these supposed market advocates need secrecy and opacity to protect their current advantages. If markets were to work as they claim they want, their actual behaviors (or pricing, or performance) would become known, and their positions compromised.
Which brings us to the new, interesting development in the case of Consumers’ Checkbook v CMS. You may remember that Consumers’ Checkbook (CC) is a consumer advocacy organization that sued CMS for the Medicare physician data in 4 states and DC. Seemingly arguing against their previous position, the Bush Administration – which actually has a good record for promoting health care pricing/performance transparency – took the opposite stance in this case, arguing instead that physicians have a right to privacy. (It is tempting to suggest that the AMA’s fingerprints must be all over this, but I don’t know that for sure.)
In any case, much to the surprise of me and, I’m sure, a lot of other people, on August 22nd, the court held with CC and ordered CMS to release the data by September 21st or appeal the decision. CC promptly promised to provide public access to the data, and sued again, this time for the Medicare physician data from the rest of the country.
On October 19ths, CMS appealed the ruling. This means the Administration will fight to keep physician data out of the public’s hands.
As I’ve said before, in the short term the symbolic importance of this battle cannot be overestimated. Currently, there are few, if any, freely available, robust sources of claims data. Health plans and clearinghouses have the largest data sources, but these are typically proprietary.
If a startup company wants to identify the best performing physicians in any market – the ones who, in a given specialty, consistently obtain the best outcomes at the lowest costs – there is no easy way to independently do that.
Or let’s say you have a family member with a complicated condition or who needs a particular procedure. There is no direct way for you to objectively determine which community physician has the best track record with that condition or procedure. (You CAN get information on which car has the best repair record, which house repair contractor gets the best reviews, and which pizza restaurant delivers the fastest.)
The good news is that the Administration’s position is weak, at best, and won’t last long, even if they win this round. Hospital data is already publicly available and states are now actively publicly reporting key measurements of hospital quality and safety. Why should physicians have a special status that keeps their track records secret from the patients who depend on them? How can this Administration, which argues incessantly for market-based solutions, suppose that the health care marketplace can resolve the crisis when, as the great economist Adam Smith would have pointed out, there is no information to drive the decision-making that healthy markets require.
It is ironic that we’re even still having this discussion. In the first years of the 20th century, the famous surgeon Ernest Codman MD began to campaign for “the end-result system of hospital standardization.” He said,
Hospitals [and surgeons], if they wish to be sure of improvement...must analyze their results, to find their strong and weak points, [and] must compare their results with those of [their peers]...[They should] make this information publicly known so that the future patients might make informed decisions.
In the end, it won’t matter what this Administration does. There is now widespread acknowledgment that much of the health care crisis can be traced to an inability to see what is going on behind the curtain. A tidal wave of sentiment is building in the marketplace, with calls for making the information available, so that decision-makers of all types can make responsible, informed decisions.
It is difficult to imagine that this stonewalling can last much longer. If transparency doesn’t occur through policy change, it will surely happen in the marketplace through vendors with the heft and resources to see it through. If the recent Health 2.0 conference in San Francisco made any point emphatically, it was that a slew of companies are focused on infusing health care with unprecedented levels of transparency and decision-support.
The transition away from an opaque market to one that makes relative pricing and performance known and that rewards the good providers is the real health care reform we’re all looking for. Yes, we need to find a way to re-enfranchise everyone into the system. But that will be much easier if there is reason to believe that we can get excessive care and cost under control.
And to that end, Consumers’ Checkbook v CMS is a sideshow, not a pivotal decision. On this issue, the Bush Administration and whoever is urging them on are anachronisms that will soon be swept away with the buggy whip and White-Out. The real change agent here is technology and the long-overdue realization by purchasers of all kinds that, when markets are opaque, value becomes secondary and many vendors will act most assertively in their own interests first.
Brian Klepper PhD
www.brianklepper.net
Why Consumers’ Checkbook v CMS is a Sideshow
by Brian Klepper
There are people who call for market solutions as the answer to every societal problem, but who then work to restrict the information that markets (and societies) must have to function effectively. Often, the truth is that these supposed market advocates need secrecy and opacity to protect their current advantages. If markets were to work as they claim they want, their actual behaviors (or pricing, or performance) would become known, and their positions compromised.
Which brings us to the new, interesting development in the case of Consumers’ Checkbook v CMS. You may remember that Consumers’ Checkbook (CC) is a consumer advocacy organization that sued CMS for the Medicare physician data in 4 states and DC. Seemingly arguing against their previous position, the Bush Administration – which actually has a good record for promoting health care pricing/performance transparency – took the opposite stance in this case, arguing instead that physicians have a right to privacy. (It is tempting to suggest that the AMA’s fingerprints must be all over this, but I don’t know that for sure.)
In any case, much to the surprise of me and, I’m sure, a lot of other people, on August 22nd, the court held with CC and ordered CMS to release the data by September 21st or appeal the decision. CC promptly promised to provide public access to the data, and sued again, this time for the Medicare physician data from the rest of the country.
On October 19ths, CMS appealed the ruling. This means the Administration will fight to keep physician data out of the public’s hands.
As I’ve said before, in the short term the symbolic importance of this battle cannot be overestimated. Currently, there are few, if any, freely available, robust sources of claims data. Health plans and clearinghouses have the largest data sources, but these are typically proprietary.
If a startup company wants to identify the best performing physicians in any market – the ones who, in a given specialty, consistently obtain the best outcomes at the lowest costs – there is no easy way to independently do that.
Or let’s say you have a family member with a complicated condition or who needs a particular procedure. There is no direct way for you to objectively determine which community physician has the best track record with that condition or procedure. (You CAN get information on which car has the best repair record, which house repair contractor gets the best reviews, and which pizza restaurant delivers the fastest.)
The good news is that the Administration’s position is weak, at best, and won’t last long, even if they win this round. Hospital data is already publicly available and states are now actively publicly reporting key measurements of hospital quality and safety. Why should physicians have a special status that keeps their track records secret from the patients who depend on them? How can this Administration, which argues incessantly for market-based solutions, suppose that the health care marketplace can resolve the crisis when, as the great economist Adam Smith would have pointed out, there is no information to drive the decision-making that healthy markets require.
It is ironic that we’re even still having this discussion. In the first years of the 20th century, the famous surgeon Ernest Codman MD began to campaign for “the end-result system of hospital standardization.” He said,
Hospitals [and surgeons], if they wish to be sure of improvement...must analyze their results, to find their strong and weak points, [and] must compare their results with those of [their peers]...[They should] make this information publicly known so that the future patients might make informed decisions.
In the end, it won’t matter what this Administration does. There is now widespread acknowledgment that much of the health care crisis can be traced to an inability to see what is going on behind the curtain. A tidal wave of sentiment is building in the marketplace, with calls for making the information available, so that decision-makers of all types can make responsible, informed decisions.
It is difficult to imagine that this stonewalling can last much longer. If transparency doesn’t occur through policy change, it will surely happen in the marketplace through vendors with the heft and resources to see it through. If the recent Health 2.0 conference in San Francisco made any point emphatically, it was that a slew of companies are focused on infusing health care with unprecedented levels of transparency and decision-support.
The transition away from an opaque market to one that makes relative pricing and performance known and that rewards the good providers is the real health care reform we’re all looking for. Yes, we need to find a way to re-enfranchise everyone into the system. But that will be much easier if there is reason to believe that we can get excessive care and cost under control.
And to that end, Consumers’ Checkbook v CMS is a sideshow, not a pivotal decision. On this issue, the Bush Administration and whoever is urging them on are anachronisms that will soon be swept away with the buggy whip and White-Out. The real change agent here is technology and the long-overdue realization by purchasers of all kinds that, when markets are opaque, value becomes secondary and many vendors will act most assertively in their own interests first.
Brian Klepper PhD
www.brianklepper.net
Wednesday, October 24, 2007
New Study Shows Lower Costs in Consumer-Driven Plans--But the Findings Won't Settle the Debate Over Just How Effective C-D Plans Are
HealthPartners, a highly regarded not-for-profit Minnesota health plan, has issued an important report on its consumer-driven care book of business. It includes Health Savings Accounts (HSAs) and Health Reimbursement Accounts (HRAs).
Their findings include:
The good news is that at Partners the people who use these plans are making good use of preventive care and health information tools--there is no evidence that the quality of care is less.
I have always felt that consumer-driven care offers consumers incentives to use care more efficiently--especially for first dollar kinds of services and drugs. However, I have never seen CDHPs providing those financial incentives in any kind of effective way for those who incur the vast majority of health care costs--the very sick who blow past their deductibles and into the full pay areas. An overall 4% savings is what I would have expected in this context.
I have also repeatedly warned employer benefit managers who self-insure to be careful in how they design these plans because they have the potential to draw the healthiest people out of the employer pool leaving a disproportionately expensive remnant group and a higher overall program cost for the plan sponsor. The data on just how much healthier the consumer-driven group is only re-enforces that concern.
I was disappointed to see that the study, "excluded catastrophic claims above $100,000 to reduce random variation." That may make statistical sense but I would have hoped they could have found a way to investigate the contention that the bigger the claim the smaller the impact CDHPs has on cost management.
Thanks to HealthPartners for this valuable information.
You can download their PDF here.
Their findings include:
- After adjusting for "illness burden," HealthPartners found that heath care costs were 4.4% lower for members in a consumer-driven plan compared to its traditional co-pay-style plans.
- "Researchers found the lower costs were driven by CDHP [consumer-driven health plan] members receiving care from lower cost providers and that providers used fewer resources such as diagnostic imaging and other procedures."
- "The rate of preventive care services [at Partners] was nearly the same among members in CDHPs and traditional plans."
- "Members with CDHPs were more likely to use Web-based tools that provide information on health care costs and quality."
- "Members in CDHPs appear to be significantly healthier." They "were expected to use 28% fewer health care services compared to members enrolled in traditional plans."
- "CDHP members are slightly younger."
- Consumer-driven plans are more popular among mid-size companies. About 70% of the CDHP market at Partners is in the individual, 1-500, and 500-1000 employee market.
The good news is that at Partners the people who use these plans are making good use of preventive care and health information tools--there is no evidence that the quality of care is less.
I have always felt that consumer-driven care offers consumers incentives to use care more efficiently--especially for first dollar kinds of services and drugs. However, I have never seen CDHPs providing those financial incentives in any kind of effective way for those who incur the vast majority of health care costs--the very sick who blow past their deductibles and into the full pay areas. An overall 4% savings is what I would have expected in this context.
I have also repeatedly warned employer benefit managers who self-insure to be careful in how they design these plans because they have the potential to draw the healthiest people out of the employer pool leaving a disproportionately expensive remnant group and a higher overall program cost for the plan sponsor. The data on just how much healthier the consumer-driven group is only re-enforces that concern.
I was disappointed to see that the study, "excluded catastrophic claims above $100,000 to reduce random variation." That may make statistical sense but I would have hoped they could have found a way to investigate the contention that the bigger the claim the smaller the impact CDHPs has on cost management.
Thanks to HealthPartners for this valuable information.
You can download their PDF here.
Thursday, October 4, 2007
An Important and Disciplined Review of the Health Care Marketplace--The Latest Site Visit Report From 12 Markets
Good health care market intelligence is hard to come by. Information tends to come in the form of detailed and narrow, often backward looking, surveys that give us little texture for what key players are thinking. Or, at the other extreme, market information is often based on a relatively few almost random anecdotal impressions by "experts" as they do their work in the market.
The highly respected Center for Studying Health System Change (HSC) has been conducting detailed and disciplined surveys of 12 metropolitan health care markets since 1996. HSC's work gives us a perspective into the U.S. health care market unlike anything I know of. For more than ten years, they have used the same techniques to drill down into these markets talking to insurers, employers, providers, and other key players. As a result, they can give us a historical perspective and objective analysis like no one else I know of.
Their latest report is now available and required reading for anyone in this business.
Here is a quick summary of their findings taken from the report's abstract:
The highly respected Center for Studying Health System Change (HSC) has been conducting detailed and disciplined surveys of 12 metropolitan health care markets since 1996. HSC's work gives us a perspective into the U.S. health care market unlike anything I know of. For more than ten years, they have used the same techniques to drill down into these markets talking to insurers, employers, providers, and other key players. As a result, they can give us a historical perspective and objective analysis like no one else I know of.
Their latest report is now available and required reading for anyone in this business.
Here is a quick summary of their findings taken from the report's abstract:
- Little has changed in local health care markets since 2005 to break the cycle of rising costs, falling insurance coverage and widening access inequities.
- Intense competition among hospitals and physicians for profitable specialty services continues.
- Employers and health plans are looking to consumers to take more responsibility for medical costs, lifestyle choices and treatment decisions.
- While consumer-directed health plans have not gained widespread adoption, other developments—including a heightened emphasis on prevention and wellness, along with nascent provider cost and quality information—are advancing health care consumerism.
- However, concerns exist about whether these efforts will slow cost growth enough to keep care affordable or whether the growing problem of affordability will derail efforts to decrease the rising number of uninsured Americans and stymie meaningful health care reform.
Friday, July 20, 2007
New York AG Objects to Insurer's Method for Ranking Doctors by Cost and Quality--Just What We Need in Health Metrics--Lawyers
At the core of any market-based ability to control costs--pay-for-performance or consumer-driven care--is the notion that patients and payers have information available to them on a health care provider's cost and quality results.
Too often the health plan rhetoric--or marketing brochures--have got out ahead of anyone's real ability to measure cost and quality both accurately and in a way that is useful.
These efforts have also been plagued by providers too often more interested in undermining these efforts to protect their interests than cooperating in solving the complex challenges that crafting an effective system entails.
And it is not just the private markets that depend on progress here. Medicare has entered the world of pay-for-performance as well and it is likely that any government-run system would have to be use these kinds of metrics.
The latest evidence that we have a long way to go can be found, of all places, in the New York attorney general's office. From a New York Times article: "In a sharply worded letter, the New York State attorney general's office asked a health insurance company yesterday to halt its planned introduction of a method for ranking doctors by quality of care and cost of service, warning of legal action if it did not comply."
The letter was sent to UnitedHealthcare--but it could have been sent to any number of health plans looking to use provider performance information as a means to rank those in their networks.
But here's where this whole episode gets to the core of whether provider performance will ever matter. The AG said in the letter: "To compound the situation, we understand that employers may act on these 'ratings' to offer financial inducements such as lower co-payments or deductibles to promote 'cost-effective' doctors to their employees."
Well what else would they use it for?
Health care providers have complained that the United program just measures cost and not quality. Of course they would.
United has said cost and quality is "exactly what this is about." Of course they would.
When the day is done, it is in both the provider community's and the health plan community's interest to come to an agreement on how to measure both cost and quality.
While no one is riding any "white horses" in this business, I have to tell you that the provider community would have a disproportionate impact on developing a useful system if they could come to the conclusion that health metrics are here to stay and critical to our getting our health care system under control and take a leading role in their development--no matter if it is a private market system or a government-run system.
Good faith cooperation on both sides is crucial to getting a health metrics system that works for patient, payers, and providers.
We sure don't need an attorney general getting into the health care economics business--it's hard enough anyway.
Brian Klepper has also done a post on this issue. Brian makes a point I am not qualified to make arguing that the United tool suffers from a basic component needed for provider/payer relations to exist in good faith--transparency. He also makes a good argument for the importance of objectivity.
I suggest going over to, "The Doctor Weighs In" for a very good post and another perspective.
Too often the health plan rhetoric--or marketing brochures--have got out ahead of anyone's real ability to measure cost and quality both accurately and in a way that is useful.
These efforts have also been plagued by providers too often more interested in undermining these efforts to protect their interests than cooperating in solving the complex challenges that crafting an effective system entails.
And it is not just the private markets that depend on progress here. Medicare has entered the world of pay-for-performance as well and it is likely that any government-run system would have to be use these kinds of metrics.
The latest evidence that we have a long way to go can be found, of all places, in the New York attorney general's office. From a New York Times article: "In a sharply worded letter, the New York State attorney general's office asked a health insurance company yesterday to halt its planned introduction of a method for ranking doctors by quality of care and cost of service, warning of legal action if it did not comply."
The letter was sent to UnitedHealthcare--but it could have been sent to any number of health plans looking to use provider performance information as a means to rank those in their networks.
But here's where this whole episode gets to the core of whether provider performance will ever matter. The AG said in the letter: "To compound the situation, we understand that employers may act on these 'ratings' to offer financial inducements such as lower co-payments or deductibles to promote 'cost-effective' doctors to their employees."
Well what else would they use it for?
Health care providers have complained that the United program just measures cost and not quality. Of course they would.
United has said cost and quality is "exactly what this is about." Of course they would.
When the day is done, it is in both the provider community's and the health plan community's interest to come to an agreement on how to measure both cost and quality.
While no one is riding any "white horses" in this business, I have to tell you that the provider community would have a disproportionate impact on developing a useful system if they could come to the conclusion that health metrics are here to stay and critical to our getting our health care system under control and take a leading role in their development--no matter if it is a private market system or a government-run system.
Good faith cooperation on both sides is crucial to getting a health metrics system that works for patient, payers, and providers.
We sure don't need an attorney general getting into the health care economics business--it's hard enough anyway.
Brian Klepper has also done a post on this issue. Brian makes a point I am not qualified to make arguing that the United tool suffers from a basic component needed for provider/payer relations to exist in good faith--transparency. He also makes a good argument for the importance of objectivity.
I suggest going over to, "The Doctor Weighs In" for a very good post and another perspective.
Tuesday, July 3, 2007
The Market Has a Place in Health Care But It Also Has Its Limits
Every leading health care proposal today includes a place for the market. Some believe government should run it all and then there are those who believe the real solution lies in just letting an unfettered market get it all done.
Health care is not like buying a set of tires. We lose our market-driven objectivity pretty quickly when we are faced with scary medical decisions for ourselves or for someone in our family.
The notion that if you just let an insurance plan rate consumers for their risks, with no rules, is market simplicity taken to the ridiculous.
Two Cato authors recently proposed just letting the market take its course:
"If companies [insurers] can charge more to cover people who are likely to need more care — smokers, the elderly, etc. — then it won't make any difference who does or doesn't buy insurance."
Two of my good friends, Joe Paduda and Richard Eskow, both highly familiar with the advantages and disadvantages of the marketplace quickly pointed out the deficiencies in such a unilateral approach.
From Joe's recent post:
"One of the more puzzling arguments against universal coverage is that advanced by the worthies at the Cato Institute. They argue that if insurance companies could just charge people based on their risk profile, the market would solve the problem of coverage."
This from Richard's recent post:
"The Invisible Hand does many wonderful things, but the notion of the free market as a Universal Solution Machine is closer to theology than it is to economics. The United States has the most deregulated and privatized health system of any OECD country, and we also lag in virtually all major health measures. Don’t think there’s a correlation? Then you have an argument to prove. The Cato authors don’t succeed."
Joe's full post: 'Free markets' in health insurance just don't work
Richard's full post: Daydream Believers: Libertarians and Healthcare
If it's raining where you are this 4th of July, their posts are worth a read.
Have a safe and fun holiday.
My take on the right mix of government and private markets: There is a Health Care Reform Plan That Doesn't Duck the Big Issues--and More Than 100 Heavyweight Stakeholders Support It!
Health care is not like buying a set of tires. We lose our market-driven objectivity pretty quickly when we are faced with scary medical decisions for ourselves or for someone in our family.
The notion that if you just let an insurance plan rate consumers for their risks, with no rules, is market simplicity taken to the ridiculous.
Two Cato authors recently proposed just letting the market take its course:
"If companies [insurers] can charge more to cover people who are likely to need more care — smokers, the elderly, etc. — then it won't make any difference who does or doesn't buy insurance."
Two of my good friends, Joe Paduda and Richard Eskow, both highly familiar with the advantages and disadvantages of the marketplace quickly pointed out the deficiencies in such a unilateral approach.
From Joe's recent post:
"One of the more puzzling arguments against universal coverage is that advanced by the worthies at the Cato Institute. They argue that if insurance companies could just charge people based on their risk profile, the market would solve the problem of coverage."
This from Richard's recent post:
"The Invisible Hand does many wonderful things, but the notion of the free market as a Universal Solution Machine is closer to theology than it is to economics. The United States has the most deregulated and privatized health system of any OECD country, and we also lag in virtually all major health measures. Don’t think there’s a correlation? Then you have an argument to prove. The Cato authors don’t succeed."
Joe's full post: 'Free markets' in health insurance just don't work
Richard's full post: Daydream Believers: Libertarians and Healthcare
If it's raining where you are this 4th of July, their posts are worth a read.
Have a safe and fun holiday.
My take on the right mix of government and private markets: There is a Health Care Reform Plan That Doesn't Duck the Big Issues--and More Than 100 Heavyweight Stakeholders Support It!
Friday, June 15, 2007
Wall Street Journal Sends Shockwaves Through the Health Insurance Markets With the Headline "Health Savings Plans Start to Falter"
It's the kind of headline I would have expected to see in the New York Times instead of the Wall Street Journal but there it was in Tuesday's edition.
Vanessa Fuhrmans' article seems to have unleashed some pent-up frustration in the health benefits market on the subject of health savings accounts (HSAs) specifically and consumer-driven care generally. It is as if it represents a turning point for how health savings accounts (HSAs) and consumer-driven care are going to be seen by the benefits market from this point forward.
The article points out that HSA growth may have stalled--the number of workers enrolled in HSAs through work grew only slightly, from 2.4 million in 2005 to 2.7 million in 2006. When employees had a choice of plan type, only 19% picked an HSA. The surveys also show low satisfaction rates for these plans. The managing director of Towers Perrin's health care practice: "If I were a product manager in any other industry and saw the scores this low in customer satisfaction and understanding, I'd be thinking of pulling that product from the shelves and retooling it."
Just to get my own bias on this issue out in the open, I have never believed that consumer-driven health care was any kind of silver bullet for solving America's health care problems. That said, I don't see much harm in making these plans available--particularly to consumers who can afford the extra financial risks they can create. These plans enjoy better consumer acceptance in the individual health market--particularly among higher paid consumers because they are a fantastic tax preference and a great way to fund the high deductible plans this higher-earning market tends to want anyway.
But HSAs as a health policy tool to fix the American health care system? Give me a break.
Consumer-driven care is a concept built on a free market foundation. And that foundation is turning out to be one that is pretty weak.
We are at an interesting place in the national health policy debate.
One Democrat after another--so far Obama and Edwards--is proposing comprehensive health reform built around the Massachusetts health reform plan. That plan now has its challenges in getting off the ground and proving-out its proponents' ideas.
On the Republican side, we already have two candidates--Giuliani and McCain--who have said they want to work toward a more market-driven health care system with the consumer-driven concepts and HSAs at its core. But now even the Wall Street Journal is challenging the bottom line in that health care philosophy.
We have two big competing health reform ideas--one Democratic and one Republican--facing off in the upcoming national election just as real life results from both of these models are becoming available.
The candidates had better be careful to connect their rhetoric to the reality.
Vanessa Fuhrmans' article seems to have unleashed some pent-up frustration in the health benefits market on the subject of health savings accounts (HSAs) specifically and consumer-driven care generally. It is as if it represents a turning point for how health savings accounts (HSAs) and consumer-driven care are going to be seen by the benefits market from this point forward.
The article points out that HSA growth may have stalled--the number of workers enrolled in HSAs through work grew only slightly, from 2.4 million in 2005 to 2.7 million in 2006. When employees had a choice of plan type, only 19% picked an HSA. The surveys also show low satisfaction rates for these plans. The managing director of Towers Perrin's health care practice: "If I were a product manager in any other industry and saw the scores this low in customer satisfaction and understanding, I'd be thinking of pulling that product from the shelves and retooling it."
Just to get my own bias on this issue out in the open, I have never believed that consumer-driven health care was any kind of silver bullet for solving America's health care problems. That said, I don't see much harm in making these plans available--particularly to consumers who can afford the extra financial risks they can create. These plans enjoy better consumer acceptance in the individual health market--particularly among higher paid consumers because they are a fantastic tax preference and a great way to fund the high deductible plans this higher-earning market tends to want anyway.
But HSAs as a health policy tool to fix the American health care system? Give me a break.
Consumer-driven care is a concept built on a free market foundation. And that foundation is turning out to be one that is pretty weak.
- First, for people to act in an efficient way, they have to have information. They have to know their options and be able to assess the options. The medical directors of the leading health plans can hardly manage care optimally. How did we ever expect regular folks to figure it out. The information just doesn't exist--beyond some marketing brochures.
- Second, the consumer-driven movement assumed that patients would want to take more control of their health care challenges if there was a financial incentive for them to do it. We are finding that the opposite is true. The health care delivery system is a hugely complex tangle and consumers are more interested in finding providers and/or insurers they can trust to guide them through it than thinking this needs to be their preoccupation. Ask anyone who has had a serious illness, or managed one for a close relative, and they will recount one nightmare after another about trying to get the best care and their frustration in trying to untangle bills and insurance documents. Who would actually want to do this?
- Third, and you have all heard this a million times but we have to keep it on the list, 75% of all health care costs are incurred by the 15% sickest people. Look at all the consumer-driven financial incentives and you will find they are first-dollar oriented. Those people with all the high health care claims, and most of the costs, blow through those corridors very quickly and into full-pay areas where they no longer have financial incentives to better manage care--if they wanted to and could.
We are at an interesting place in the national health policy debate.
One Democrat after another--so far Obama and Edwards--is proposing comprehensive health reform built around the Massachusetts health reform plan. That plan now has its challenges in getting off the ground and proving-out its proponents' ideas.
On the Republican side, we already have two candidates--Giuliani and McCain--who have said they want to work toward a more market-driven health care system with the consumer-driven concepts and HSAs at its core. But now even the Wall Street Journal is challenging the bottom line in that health care philosophy.
We have two big competing health reform ideas--one Democratic and one Republican--facing off in the upcoming national election just as real life results from both of these models are becoming available.
The candidates had better be careful to connect their rhetoric to the reality.
Wednesday, April 25, 2007
Humana Caps Annual Increases on Consumer-Driven Plans--Too Bad it Isn't a Real Guarantee
Humana says it will cap annual increases on self-insured consumer-driven plans for three years.
Two problems:
Apparently, Humana agrees with my concern that their 4.2% trend rate won't be sustained. If they believed in their 4.2% trend rate, they'd be guaranteeing a lot better than a 6% to 9% cap.
Humana Caps Annual Rate Increases on Some Plans (bizjournals)
Post: More Than 10 Million Now Using Consumer-Driven Health Care Accounts--We Will Soon Have Enough Data to Know How Well HSAs and HRAs Work
Two problems:
- Humana is capping the costs of its "SmartResults" self-insured plans and only putting 40% of their fees at risk. If they were really putting their money where their mouth is they would be capping the cost of fully insured plans--and if they are so confident on their self-insured product, why not put all fees at risk?
- Humana is guaranteeing that the consumer-driven employer plans total health costs will rise by no more than 6% to 9% during the next three years (based upon how aggressive the employer plan is). Since they have consistently said employer trend is now in the 5.5% to 6.5% range, I wouldn't call that one of the bigger risks I have ever seen a health insurer take.
Apparently, Humana agrees with my concern that their 4.2% trend rate won't be sustained. If they believed in their 4.2% trend rate, they'd be guaranteeing a lot better than a 6% to 9% cap.
Humana Caps Annual Rate Increases on Some Plans (bizjournals)
Post: More Than 10 Million Now Using Consumer-Driven Health Care Accounts--We Will Soon Have Enough Data to Know How Well HSAs and HRAs Work
Monday, April 16, 2007
More Than 10 Million Are Now Using Consumer-Driven Health Care Accounts--We Will Soon Have Enough Data to Know How Well HSAs and HRAs Work
Consumer Driven Market Report (CDMR) has issued a report on the success of consumer-driven care in the marketplace.
CDMR reports that over 6 million people are participating in health plans that have a health savings account (HSA) as part of their plan—that is an increase of 2.85 million in the last year.
Similar health reimbursement accounts (HRAs) now total 4.1 million and are growing at a rate of 1.2 million per year according to CDMR.
Eleven insurers now have over 100,000 covered lives in HSAs and HRAs.
The top five include:
United Health Group 2,145,000
Wellpoint 821,000
Aetna 627,000
CIGNA 500,000
Assurant 400,000
Having ten million people in consumer-driven care today reflects huge growth for a market that is just a few years old.
It also reflects a consumer-driven market that is still only 5% of the U.S. private health care system.
At 5% of the private market, consumer-driven care, with its HSAs and HRAs, does not make up enough of the market to make a real difference in reducing our nation’s huge health care bill.
My own opinion about HSAs and HRAs has always been that they are no silver bullet solution. While HSAs and HRAs do little if any harm, I question just how much good they will do in improving either health care quality or cost.
The old rule is that 15% of the people incur 75% of all health care costs. Once these people blow through their HSA or HRA deductibles, they are in a full-pay area and their incentives haven't changed one bit.
That said, HSAs and HRAs can certainly have a positive impact on smaller dollar costs below that threshold. Consumer-driven plans have done a lot to move the country to use more cost effective generic drugs, for example. And, HSAs are one heck of a good tax preference especially for people who are going to have a high deductible health plan anyway. I have also told my insurer clients that they have to offer these plans if for no other reason than to stay current with market demands.
I also know that HSA and HRA programs are often priced lower than conventional plans. But that is generally explained away by the higher out-of-pocket expenses these plans incur and the likelihood of the healthier joining (positive risk selection). There is yet no definitive evidence just what an HSA or HRA does to control cost and improve quality.
Am I right in my pessimism that HSAs and HRAs are not going to have a fundamental impact on either health care cost or quality?
Well, at 5% of the market and 10 million people, we should be at a point where we will soon have enough data to know. We won't have to argue about it much longer.
CDMR reports that over 6 million people are participating in health plans that have a health savings account (HSA) as part of their plan—that is an increase of 2.85 million in the last year.
Similar health reimbursement accounts (HRAs) now total 4.1 million and are growing at a rate of 1.2 million per year according to CDMR.
Eleven insurers now have over 100,000 covered lives in HSAs and HRAs.
The top five include:
United Health Group 2,145,000
Wellpoint 821,000
Aetna 627,000
CIGNA 500,000
Assurant 400,000
Having ten million people in consumer-driven care today reflects huge growth for a market that is just a few years old.
It also reflects a consumer-driven market that is still only 5% of the U.S. private health care system.
At 5% of the private market, consumer-driven care, with its HSAs and HRAs, does not make up enough of the market to make a real difference in reducing our nation’s huge health care bill.
My own opinion about HSAs and HRAs has always been that they are no silver bullet solution. While HSAs and HRAs do little if any harm, I question just how much good they will do in improving either health care quality or cost.
The old rule is that 15% of the people incur 75% of all health care costs. Once these people blow through their HSA or HRA deductibles, they are in a full-pay area and their incentives haven't changed one bit.
That said, HSAs and HRAs can certainly have a positive impact on smaller dollar costs below that threshold. Consumer-driven plans have done a lot to move the country to use more cost effective generic drugs, for example. And, HSAs are one heck of a good tax preference especially for people who are going to have a high deductible health plan anyway. I have also told my insurer clients that they have to offer these plans if for no other reason than to stay current with market demands.
I also know that HSA and HRA programs are often priced lower than conventional plans. But that is generally explained away by the higher out-of-pocket expenses these plans incur and the likelihood of the healthier joining (positive risk selection). There is yet no definitive evidence just what an HSA or HRA does to control cost and improve quality.
Am I right in my pessimism that HSAs and HRAs are not going to have a fundamental impact on either health care cost or quality?
Well, at 5% of the market and 10 million people, we should be at a point where we will soon have enough data to know. We won't have to argue about it much longer.
Thursday, February 8, 2007
Don't Forget Consumer Choice in Reforming the Health Care System!
Bill Boyles is the publisher of Consumer Driven Market Report and Health Market Survey. He is one of the most effective spokesmen for the consumer driven movement and the effectiveness of the market in managing the cost and quality of care.
Today, he reminds us that those offering the new reform proposals shouldn't forget consumer choice:
The Uninsured Need Consumer Choice First
The only humane way to help the uninsured is to let them choose how much they can afford out-of-pocket and then enroll in that plan. Dozens of studies show why: the vast majority of people lacking insurance simply cannot afford it. Offering them unaffordable options is not only unworkable, it’s cruel.
Allowing people to choose high deductibles is never mentioned by all the Wal-Marts and coalitions and pious employer alliances. That’s too much detail. Once the cameras are packed up the job is over and the pious groups are delighted by headlines saying the issue is reaching new heights.
The worst example of this cruelty is the Massachusetts plan and its progeny in other states. They give the uninsured no choice at all under the guise of allowing them to choose their plan in brightly-colored brochures. The victim then finds out they cannot choose a low-premium plan which matches how much they can afford in out-of-pocket costs for their own family. It’s a false promise – hiding under the guise of “we know how much you need and we won’t offer you a cheaper plan because it’s not good enough.”
Surprise. You can’t force Americans to buy health insurance they can’t afford -- even if it is what they need. Even if it is what’s best for “the system.”
The irony here is that a better solution is endorsed by both Sen. Kennedy on the left and conservative health economists on the right. The new Kennedy plan offers all families a choice of plans via the federal employees program model, including varying deductibles, copays and premiums. The same distribution model is endorsed by the Heritage Foundation and others.
The state plans do not even have to go that far. They could offer the uninsured a choice of five plans with five levels of out-of-pocket costs and five levels of premium. These plans can easily be mandated to have low-cost prevention coverage too. No government-developed standardized benefits package can outguess the personal selection of a health plan when family income is so low that comprehensive coverage is out of the question.
For 30 years Americans have been told they cannot be offered things like high deductibles with low premiums because it’s bad for them and the system. It’s time for all of these companies and coalitions and Wal-Marts to stop the self-righteous talk and give the people a choice of what they can afford.
Today, he reminds us that those offering the new reform proposals shouldn't forget consumer choice:
The Uninsured Need Consumer Choice First
The only humane way to help the uninsured is to let them choose how much they can afford out-of-pocket and then enroll in that plan. Dozens of studies show why: the vast majority of people lacking insurance simply cannot afford it. Offering them unaffordable options is not only unworkable, it’s cruel.
Allowing people to choose high deductibles is never mentioned by all the Wal-Marts and coalitions and pious employer alliances. That’s too much detail. Once the cameras are packed up the job is over and the pious groups are delighted by headlines saying the issue is reaching new heights.
The worst example of this cruelty is the Massachusetts plan and its progeny in other states. They give the uninsured no choice at all under the guise of allowing them to choose their plan in brightly-colored brochures. The victim then finds out they cannot choose a low-premium plan which matches how much they can afford in out-of-pocket costs for their own family. It’s a false promise – hiding under the guise of “we know how much you need and we won’t offer you a cheaper plan because it’s not good enough.”
Surprise. You can’t force Americans to buy health insurance they can’t afford -- even if it is what they need. Even if it is what’s best for “the system.”
The irony here is that a better solution is endorsed by both Sen. Kennedy on the left and conservative health economists on the right. The new Kennedy plan offers all families a choice of plans via the federal employees program model, including varying deductibles, copays and premiums. The same distribution model is endorsed by the Heritage Foundation and others.
The state plans do not even have to go that far. They could offer the uninsured a choice of five plans with five levels of out-of-pocket costs and five levels of premium. These plans can easily be mandated to have low-cost prevention coverage too. No government-developed standardized benefits package can outguess the personal selection of a health plan when family income is so low that comprehensive coverage is out of the question.
For 30 years Americans have been told they cannot be offered things like high deductibles with low premiums because it’s bad for them and the system. It’s time for all of these companies and coalitions and Wal-Marts to stop the self-righteous talk and give the people a choice of what they can afford.
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