Healthy Policy

United Health Group and You

It's anecdotes like these that make me seriously question if profit should be in the health care industry at all.

When William McGuire switched careers in 1986, he was so restless that a pay cut of more than 30% didn't faze him. Health maintenance organizations were booming, and Dr. McGuire wanted to help run one. So he jettisoned a six-figure income as a pulmonologist in favor of an HMO management job that paid about $70,000 a year.

Savvy move. Today, the 58-year-old Dr. McGuire is chief executive officer of UnitedHealth Group Inc., one of the nation's largest health-care companies. He draws $8 million a year in salary plus bonus, enjoying perks such as personal use of the company jet. He also has amassed one of the largest stock-options fortunes of all time.

Unrealized gains on Dr. McGuire's options totaled $1.6 billion, according to UnitedHealth's proxy statement released this month. Even celebrated CEOs such as General Electric Co.'s Jack Welch or International Business Machines Corp.'s Louis Gerstner never were granted so much during their time at the top.

Dr. McGuire's story shows how an elite group of companies is getting rich from the nation's fraying health-care system. Many of them aren't discovering drugs or treating patients. They're middlemen who process the paperwork, fill the pill bottles and otherwise connect the pieces of a $2 trillion industry.

What's come of this $8 million a year, plus an estimated $1.6 billion in stock options?  Think how many extra people could be covered a year with that $1.6 billion.  Especially when the company also did this:

The Arizona Department of Insurance on Friday ordered United Healthcare to pay civil penalties totaling $364,750 — the largest fine in the department's history — for violations of state insurance laws. State regulators said United Healthcare illegally denied more than 63,000 claims by doctors without receiving all of the information needed to accept or deny a claim. The company also failed to follow state laws for promptly notifying doctors and patients about about decisions and appeals, the state said. United also violated a 2002 agreement to correct previous violations, the state said.
 

And the fact that they're doing this while the rest of us see our premiums rise 10%/year (if our employers don't drop coverage, that is):

The "risk" business has been a particular gold mine for UnitedHealth and its rivals in recent years. As health-care inflation eased, insurers still raised premiums at double-digit rates. UnitedHealth's stock price tripled between January 2003 and January 2006, helped by acquisitions, although it has fallen back somewhat since the beginning of this year. UnitedHealth's net income in 2005 totaled $3.3 billion, nearly four times the figure in 2001.

No, this all makes me quite angry, and really puts to question insurer's claims that health care costs are rising so quickly that they can't keep up with them. 

This is the kind of money I'd expect to see from an oil CEO (who are doing similarly well right now).  But in health care, this kind of profit is disgusting.  We have 45 15 (sorry quoted the percent on accident) million uninsured people in this country, we have a health care industry trying it darndest to shift costs to consumers with health savings accounts and high deductible plans, and we have insurance CEO's valued over a billion dollars for their efforts.  Not hospital groups, or entire organizations, but individuals. 

Is this the kind of system that fits with our ideals?  If health care is an expensive necessity, one that we join together to ensure for everyone, should health insurers be making these kinds of profits?

More ways to punish the poor

It's come to light that the 2005 spending bill contains a little-publicized new restriction:

Individuals seeking care through Medicaid beginning on July 1 will be required under federal law to show proof of U.S. citizenship -- such as a birth certificate, passport or another form of identification -- the Boston Globe reports. The requirement was included in the Deficit Reduction Act of 2005, which President Bush signed into law earlier this year. The provision's intent is to prevent undocumented immigrants from claiming to be citizens in order to receive benefits only provided to legal residents, according to the Globe.

Can we say Katrina??

It's well known that African Americans, not just "immigrants", often have no birth certificate or proof of citizenship (and they're certainly not using passports to go vacation in Europe).  And certainly recent natural disasters give us pause when considering these kinds of provisions -- imagine how many documents were lost last September. 

This bill is only going to make it harder for the most vulnerable and poor to get health care.  Any money it saves by denying illegal immigrants care will be far outshadowed by the extra pain we're shifting to other Americans, who are the victims of unfortunate circumstance.

Hospitals and price transparency

Tony Chen of Hospital Impact has a good list of why price transparency won't bring the earth shattering changes advocates promise:

(1) 10% of folks make up 70% of costs. and most of them won't be subject to financial incentives, so they won't be shopping too much.
(2) lots of folks just won't have time to shop given healthcare's urgency
(3) for a lot of services that would be very "shoppable" (e.g. a nose job), a face-to-face with the doc to get an estimate is necessary, adding too much work to shop
(4) healthcare just isn't that simple; one size does not fit all; price ranges (very big ones) seem appropriate.
(5) well, the cartoon above says it. oh, and one minor detail, what about quality of care?

I think people really underestimate the quality of care issue.  Who among us doesn't want to absolute best care for their loved ones?  This isn't a race to the bottom, and when life and death is concerned, people aren't thinking about which hospital offers the lowest price for the angioplasty that has to be done right now.   Their choices just aren't rational in this situation; it's not like when I call around to five different tailors asking how much a hem is.  You also enter into a personal relationship with your doctor, and the one offering the lowest price might not give you the most confidence. 

Also, we're big fans of cartoons here at Healthy Policy; head over to Tony's and see the great cartoon attached.

Massachusetts Mandate

Apparently someone was listening to my post from Monday, as Massachusetts has taken the leap and mandated health insurance for all of its residents. Ok, kidding, I know it's been in the works for months.  But I'm thrilled to see a state take such a drastic step in solving insurance problems.

Gov. Mitt Romney (R) supports the proposal, which would require all uninsured adults in the state to purchase some kind of insurance policy by July 1, 2007, or face a fine. Their choices would be expanded to include a range of new and inexpensive policies -- ranging from about $250 per month to nearly free -- from private insurers subsidized by the state.

Romney said the bill, modeled on the state's policy of requiring auto insurance, is intended to end an era in which 550,000 people go without insurance and their hospital and doctor visits are paid for in part with public funds.

"We insist that everybody who drives a car has insurance," Romney said in an interview. "And cars are a lot less expensive than people."

The health insurance as compared to auto insurance is a common meme, although I take issue with the author's phrasing elsewhere in the article that goes, "[this is] the first state to tackle the problem of incomplete medical coverage by treating patients the same way it does cars."  You know, or it's the first state to open up real options to make sure everyone can afford health insurance.  They make it sound like patients are going to treated like automobiles going through factory assembly when put like that.

In any case, this is a huge first step, and it makes allowances like I laid out in my earlier post: opening up low-cost insurance to everyone, subsidies for those who can't afford insurance, and financial punishment for those who continue to go without insurance.

In Iowa they've started a program (Iowa Care) where the uninsured are given all the information for signing up for the low cost insurance whenever they go to the hospital.  I hope lawmakers will adopt similar tactics in MA to get as many people enrolled before the deadline as possible.

What's more; this is a major experiment.  It will demonstrate how affordable these programs are, what major flaws the program didn't for see, what major benefits the program brought, even how easy or difficult it is to get the chronically uninsured into insurance.  Everything that goes on under the program will be carefully watched by universal insurance advocates. 

I would, however, really like to see an EMR initiative along with this legislation, but I guess that's too many birds to kill at once.  Hopefully HIT pushes can be adopted in the next few years.

Also, Shadowfax has more.

Pecking at nothing

Apparently Medicaid is now requiring all nursing homes to return "left over" medications:

CMS has ordered state Medicaid programs to require nursing homes to return unused medications to pharmacies and to ensure Medicaid is repaid for unused treatments when nursing home patients die, are discharged or have their prescriptions changed, according to a March 22 letter, the Atlanta Journal-Constitution reports. In the letter, Dennis Smith, director of the Center for Medicaid and State Operations at CMS, also wrote that state Medicaid programs should limit the amount of medications provided to nursing homes at one time to "help to curtail prescription drug waste."

It's not that anything is particularly wrong with with this program, but honestly, this is how we're going to cut back on waste in health care?  By ordering nursing homes to return medications? 

How much money will this actually save anyways?  Particularly once you factor in the administrative costs of such a program. 

It's just such a backward way of controlling costs.  Random comparison: my home state of Kansas recently legalized concealed weapons.   Some advocates claim that concealed weapons actually make people safer because "criminals" will be less likely to draw guns or use force because the person they're trying to rob/kill might have a concealed weapon.   Well, I guess on some weird planet that logic makes sense.  But not compared to simply much tighter gun control laws to get guns out of people's hands, period. 

Words of Wisdom

Everyone knows Paul Ginsberg is just freaking awesome.  Hop over to the Health Care Blog and read his testimony on price transparency and consumer directed health care. 

Exactly what price transparency isn't going to do

From the opening paragraph of this WaPo article:

Hospital bills are about to become less mysterious. Within a few weeks, the Bush administration plans to publish the prices Medicare pays for common medical procedures, a move that advocates for the poor say will pressure hospitals to give uninsured patients the discounts provided to people with insurance.

I hate to get all nit-picky on this, but I have to.

First of all, this is not going to make hospital bills less mysterious AT ALL.  There will still be five million billing codes, five million acronyms and foreign phrases, and lists and lists of things patients are charged for.  No, this has nothing to do with simplifying bills.

What it does do is list the price Medicare pays for certain procedures. 

But I'd like to see just exactly how, especially in the light of Medicare Part D, this listing is going to "give uninsured patients the discounts provided to people with insurance."

Really though, in the interest of fairness, let's look at how hospitals work with insurance companies.  The insurance company agrees to cover services at a given hospital, and the hospital agrees to charge discounted prices because of the guarantee of patients. 

What happens when an individual comes to the hospital?  They have no contract with the hospital.  If they're uninsured, they have no guarantee (nor can they make one) that they will return to the hospital for further business.  And lastly, if they're poor and uneducated, they have no access to these price lists, have never heard of these price lists, and certainly have no clue how to use price lists to leverage their payment.

That being said, Medicare, with its huge bargaining power, should have control over how much it pays for services, and use that as general tool to influence more uniform pricing.  Price transparency is generally a good thing, and something that we could certainly use more of.

But let's not be naive about what price transparency will accomplish. 

Association Health Plan Primer

cross-posted from tpm

The Senate Health, Education, Labor and Pensions Committee on Wednesday voted along party lines to approve an association health plan (AHP) bill.  President Bush pointed to AHP’s in his state of the union address as one of many reforms to help individuals attain health insurance.  But AHP’s expose individuals to another frontier of risk, where their health benefits are paltry, uncertain, and expensive. 

The key complaint driving the creation of AHP’s is that state regulation bars insurers from offering affordable health plans.  If insurers could offer plans on a national market, bypassing any state regulations, more plans would be offered and more individuals would become insured. Unfortunately, this type of thinking isn’t supported by reality.

Bare-bones plans have been offered for years, and people don’t want them.  But more than that, Ezra Klein takes a look at why we have state regulations in the first place:

The reason states mandate that insurers cover certain procedures is so insurers can't price folks who are likely to need those treatments out of the market. Insuring young women, if you didn't need to cover anything related to pregnancy, would be relatively cheap. Pricing the pregnancy package through the roof would be relatively easy. And denying the claims of those who bought the base package and then got pregnant would be trivial -- and would save you a ton of money. So almost all states mandate that you cover maternal care. And this goes across the board, from procedures the old use but the young don't need to packages that target specific lifestyles. If you allow the insurance companies to subdivide the market by treatment needs, what you'll have is bargain-basement pricing for the young and healthy coupled with unbelievable premiums for their less-lucky friends.

But this statement from Committee Chair Mike Enzi (R-WY) on the purpose of AHPs is the most revealing:

Let us put the power in the hands of small employers and family-owned businesses, rather than in the hands of insurance companies or the government. Let the consumers band together to drive the change that we want to see happen

Enzi is completely wrong about where the power in this situation is going.  It’s funneled directly to the insurers!  They’ll be offering bare-bones plans to these small businesses, who will have no ability to negotiate higher benefits.  Why?  Because there’s nothing barring them from trying to negotiate plans with insurers now.  Insurers simply aren’t interesting in offering an affordable but comprehensive product to small businesses. 

But why trust history?  Enzi wants consumers to band together and force doctors/ hospitals/ insurers/ employers to provide them with cheaper health care.  Because they surely haven’t had enough time to do so the last forty years. 

The bill has already passed committee.  If it passes the Senate, it will only continue to weaken health insurance as we know it.  The way to solve our health insurance problems isn't by cutting benefits, it's by fixing our fragmented system that costs twice as much as our more generous international counterparts.

More employers to offer HSA's

Via Kaiser, a recent survey  of mid-size to large employers found that 30% are currently offering high deductible health plans.  This is a significant increase over the previous year.

Keep in mind here, though, that a high deductible plan is not necessarily coupled with a Health Savings Account. 

I'll be interested to see what the pick-up rate is (i.e. how many employees choose these plans), and how many of those employees stay in the plans after a year. 

It's the specialists!

Matt Holt has an excellent post about the supply of doctors in the U.S. and the inefficiency they create:

Today in Health Affairs (or you can read the potted version in Forbes), Dartmouth researcher David Goodman and his team (including Wennberg) cry bullshit on the “we need more doctors” meme. While the big academic centers which get the money from training them would love to have more residents, by examining one type of intensive medical process — caring for patients at the end of life in ICUs — Goodman et al shows pretty logically that many major academic centers use far too many physician resources. In other words we could provide equally good (or probably better) care while using many many fewer physician “inputs”. Hence overall we need fewer physicians, more efficiently used.

But what Matt fails to address is the number of specialists.  Obviously if many Americans have unfettered access to specialists, the number of tests and procedures will be much larger.  So while in an ideal world we would just scrap a large number of doctors and med school spots, that's clearly not going to happen.  One thing that can change in terms of expensive supply, however, is providing greater incentives to encourage more newly minted M.D.'s to head into internal medicine or become general practitioners. 

That requires fee and reimbursement adjustments, but Medicare could easily lead the way.  As it is, doctors get paid more when they order things.  Increasing payment for good health status or  for general visits that don't involve ordering tests (i.e. I have a fever and need antibiotics) would encourage more doctors to become GPs.  We could even go so far as to substantially discount tuition for doctors that promise to become internists. 

Or you can go another route, which involves greater responsibilities for Nurse Practitioners and Physicians Assistants.  Their labor is cheaper and plenty capable for general check ups.