On Terrorism, Risk and Mumbai

[Welcome Hugh Hewitt readers!]

A few years ago, I realized that although there are "carnivals" (hosted collections of blog posts on a specific subject or issue) for sports, medicine, politics, even religion, there were none for posts related to "risk." Thus was born the Cavalcade of Risk, the next edition of which will be posted Wednesday.

And throughout the life of this blog, risk has been a fundamental theme, as well (e.g. IVF). We've examined risk through the prism of insurance, of course, and wondered whether or not it still held a place even there.

But risk is about more than mortality tables, player injuries and MRI side-effects: it's about life and death in the real world. And this past week has brought the issue into sharp focus (again) with the tragedy in Mumbai. One of the poli-blogs I regularly read is Hugh Hewitt's (in fact, it was Hugh's book, Blog, that got me started blogging). In addition to blogging, Hugh has a radio show, often inviting interesting guests to be interviewed. Last week, one of his guests was "Frank Dowse...the head of Agemus Group, a security-consulting firm. Frank's been in the business since his retirement as a Lt.Col from the Marine Corps a few years back."

Mr Dowse later emailed a follow-up to Hugh, with real, tangible advice for CEO's whose employees are, or could be, in such perilous straits. I'm posting a snippet, but I urge our readers to "read the whole thing."

And yes, it's that important:

#1: Initiate/Designate a Crisis Response Team: If this is not an inherent function or area of responsibility within your organization, then assign a Point Man (COO/Vice President Level, with PR reps to assist) who can lead, authorize, and decide on behalf of the management, in order to best affect plans and responses as events unfold, and information is gathered. This needs to be a 24 hour operation, and should be given top priority for resources, and manpower.

#4: Establish Contact with Families/Significant others: If information is forthcoming (from the Embassy, federal authorities), tell what you know, and ensure it is not premature, rumor, or simply press reports. Ensure the Crisis Response team is the “releasing” authority for all info coming from the team. Keeping the families in the proverbial “loop” is one of the most important and valuable things an employer can do in a situation like this. This is best accomplished if a “pre-trip” brief has been conducted, in which emergency info and contacts are acknowledged, and the (now) victims have agreed and know that the people who have the need to know their status will, in fact, be contacted.

This is the essence of risk-management: identify, quantify and qualify the potential danger(s) and how to deal with them. I suspect that, unfortunately, we'll be needing this kind of information a lot more now.

Cavalcade of Risk #66: Call for submissions

"Ironman" of Political Calculations hosts next week's Cavalcade of Risk. Submissions are due this Monday (the 1rst), and he asks that you include:

■ Your blog's url

■ Your post's url

■ The post's trackback URL (if available)

■ A (brief) summary of the post

PLEASE remember: ONLY posts that relate to risk (not personal finance tips and the like).

You can submit your post via Blog Carnival or email.

Thanks!

We have hosting slots available for early '09 - just drop us a line to reserve yours.

WellSphere Update

Because we apparently don't have enough to keep us busy, IB has been selected as a "Health Maven" at WellSphere. This means that we'll be "on-call" to answer relevant questions from that community.

As always, we're happy to take our readers suggestions, questions and comments directly, via comments and email.

Have a terrific Thanksgiving!

PC Diseases?

Whatever one may think of the efficacy of targeting specific diseases for charitable contributions, isn't it important to at least treat the disease itself as something to be eradicated, and not made into a (cheap) political statement?

"The Carleton University Students' Association has voted to drop a cystic fibrosis charity as the beneficiary of its annual Shinearama fundraiser, supporting a motion that argued the disease is not "inclusive" enough."

Turns out, CF apparently affects only white males, and is therefore "suspect" as a disease worth eliminating. Of course, one presumes that Carleton will also refuse to fund breast cancer research, as well as cycle cell anemia and prostate cancer.

Right?

UPDATE: Some folks mistakenly believe that the student council has reversed its decision to politicize a dreaded disease and those who suffer from it.

Unfortunately, this is not the case; rather, some students "decided to turn the situation into something positive, marching across campus, handing out information about cystic fibrosis and collecting money for the cause."

Obviously, this does nothing to absolve their leadership from its cynical decision to score cheap political points at others' expense.

Hey, MVNHS©: Can You Hear Me Now?

For those who continue to think that a nationalized health care scheme is the cat's meow, some bad news:

"HUNDREDS of parents do not realise their babies are deaf because they are not given hearing tests, it was revealed today."

Although such screening tests have been mandated for almost 2 years, "(t)he risks are that maybe 60-70 deaf children per year are missed and have reduced life chances," according to a recent report from the MVNHS©. In London alone, only a third of the systems' hospitals made their "quota" of screening at least 98% of all newborns. That means even more children may be at risk than previously thought.

And the National Deaf Children's Society is now calling for drastic and immediate action on the problem. One significant issue is that late diagnosis can hinder both treatment and the child's language and social development. They single out London area hospitals as the worst case examples: "only 72 cases of deafness in newborn babies was reported last year, against an expected 140." And it goes downhill from there, because even those children that are identified as at-risk often face lengthy delays in obtaining proper treatment.

Doesn't sound like such a great system to me.

Lehman, AIG, CitiGroup and The Hole

We are, by definition, a blog (primarily) about insurance. But that risk management tool doesn't exist in a vacuum: it's part of the larger economic system to which we all contribute. For the past few weeks, the news has been about the $700 billion "bail out" (Latin for: "You own it now, sucker!"), which is itself a rather improbable number.

Now comes word that our political class is considering upping that ante, to the tune of almost 8 trillion dollars:

"The U.S. government is prepared to provide more than $7.76 trillion on behalf of American taxpayers after guaranteeing $306 billion of Citigroup Inc. debt yesterday."

Words fail.

But thankfully (?), video comes through:

In The Know: Should The Government Stop Dumping Money Into A Giant Hole?

'Nuff said.

Pre-Thanksgiving LinkFest

From time to time, we like to send a little link-love to folks whose work we find valuable:

■ Our good friend Joe Kristan, host of the Tax Update blog, has some timely and helpful news about S Corporations and how owners' comp can affect insurance premium reimbursement. This is a good time of the year to start considering these issues.

■ If you're a realtor, the Specialty Insurance Blog warns that it's not just the economy, credit crunch and housing market that could do you in: your E&O (errors and omissions) policy needs to be kept up to date, as well. Host Bob Sargent has some news on that front.

■ Dr Devon Herrick, though not a blogger, has an interesting Op-Ed which stresses that most Americans want the freedom to make their own health care choices. This is, of course, in direct contradiction of the nanny-staters. Recommended.

[Hat Tip for the Op-Ed to Jordan Tuch]

From the Mailbag: We'll Have a Gay Ol' Time!

[Welcome Industry Radar readers!]

We get some interesting, often provocative email here at IB. For example, we're constantly bombarded with offers to host advertising links for various products and services (which we always decline). We also get a lot of "insider info" from various politicos and lobbying organizations, some of which make good blog-fodder.

Today's mail, however, brought something completely different:

"Market to the Gay Friendly Insurance Agents Community-One of the fastest growing market today.

...They would also like to secure the services of all the professionals who are a part of the process in securing and protecting their dream home...We don't request an exorbitant premium to be listed on our directory, nor do we demand a portion of your commissions, like some other gay sites do."

Frankly, I think this is a tremendous idea: while this isn't a new market, per se, it seems to me that it's most likely an underserved one. The email seems to imply that they're really looking for P&C agents as opposed to life and health, although that would certainly be an interesting niche, as well.

As noted above, we'll decline this offer (because we do no paid advertising here), but if there are any P&C agents who'd like to know more about it, just drop me a line and I'll send you the site's info.

180th Carnival of Personal Finance

Living Almost Large hosts this week's edition of the venerable collection of personal finance posts.

Enjoy!

The Case for Nationalizing Whatever-It-Is

For the record, this article appeared in the Washington Post Tuesday, November 18. Coupla comments -

1) Mr. Kennedy has been an advocate for nationalized health insurance, or nationalized something-or-other, since at least the early 1970’s. And his Elmer Gantry persona continues to preach “legislation that would vastly expand health coverage.” That sounds like he's talking about health insurance. But . . .

2) But . . . strangely, for someone who claims to have immersed himself in this issue for nearly 40 years, the Senator from the People's State of Massachusetts serves up a garbled message. For that matter, so does the Post reporter. Just look at this mess of reportage. First paragraph, health care. Second paragraph, coverage – that is, health insurance. Third and fourth paragraphs, health care. Fifth paragraph, health insurance again. What the heck is Mr. Kennedy talking about? Does he know? Does he have some reason to pretend health insurance and health care are synonymous? Does he think the public either won't pay attention to what he says or won't care? It's impossible to tell from this article whether Mr. Kennedy's confusion is deliberate - or results from carelessness or ignorance.

Right now, Mr. Kennedy's positions do not show that he understands the difference between health care and health insurance. Doesn't the public deserve better? Shouldn't the Elmer Gantry of nationalized whatever-it-is be able to clearly articulate whatever it is?? There are lots of ways Mr. Kennedy could fix his own message. He could ask someone on his staff. Better yet, he could read this.

Mind-Numbingly Stupid Industry Tricks

Question for America’s Health Insurance Plans and the Blue Cross and Blue Shield Association: What part of "risk" don't you rocket surgeons understand?

Recently, the largest industry trade group (which represents the carriers, not the agents) and one of the largest insurance conglomerates got together and decided that we no longer need health insurance here. Insurance, as regular readers know, is a risk management tool. Absent risk, there's no need for insurance:

"The health insurance industry said Wednesday that it would support a health care overhaul requiring insurers to accept all customers, regardless of illness or disability. But in return, the industry said, Congress should require all Americans to have coverage."

Um, NO: these geniuses do not speak for "the health insurance industry." They speak for themselves, and represent only a portion of our industry. They certainly don't represent those of us on the front lines, dealing with real people very day. And yet they're perfectly willing to state that we no longer need an entire industry.

Oh, Henry, you're over-reacting; this isn't so bad.

Yes, in fact, it is.

Think of it this way, if you have no nails, you need no hammer.

Now this would be fine if you're, say, an accountant. After all, what difference does it make to a CPA whether or not someone's making and selling hammers? But it's mighty important if you're Stanley Tools or Home Depot. Wouldn't it be, um, ill considered for the folks at Stanley to suddenly announce that hammers are no longer necessary? And why would Home Depot then applaud such a move?

Well, that's precisely the policy position taken by the folks who "make" insurance (Blue Cross/Shield) and those who market it (AHIP). And how pathetic is it that the most liberal Senator, now our President-elect, espouses a plan that's actually less draconian (at least initially)?

Words fail.

I often tell clients that not all insurance companies are run by idiots: some are run by morons. This is usually said half in jest, but this example serves to truly underscore its seriousness. The problem here is not just in what these deep thinkers are saying, but in what they've left unsaid:

■ How do you enforce such a law (cf Massachusetts)?

■ Who defines adequate coverage?

■ What mandated benefits are going to get tacked on, increasing the costs?

■ How and when will pre-existing conditions be covered?

■ How does this address the underlying problem of rising health care costs? [hint: it doesn't]

After the AIG debacle, I was certain that nothing my industry could do would surprise me.

Guess I was wrong.

[Hat Tip: Holly Robinson]

Health Care Costs: Part of the Story

As mentioned previously, health insurance biggie Humana has begun producing some interesting videos as a sort of "Newby's Guide to Health Insurance." We'll continue to post the ones we feel most relevant to our readers. This one is pretty good, although I had some reservations about it. Take a look, and then I'll share some of my co-bloggers' reactions:

As I said, I have some reservations, chief among them being the implication that simply choosing a network provider will generate a discount. As we've learned, this is not always true.

Bill's concern was that "IPA’s [Individual Practitioner Associations] are not mentioned and the implication is that a sole practitioner is always more expensive." On the other hand, he noted that, while "(i)t may not be 100% technically accurate...it’s a good way of presenting things in an understandable way."

And Bob said that he "wouldn't use the word "discount" but apparently the attorney's don't care. One could also infer that network docs are "better" (certified) than out of network docs, but lets not go there."

Finally, Mike had no major objections: "The only thing that sounds off-key to me is the statement (actually made twice) that network doctors agree to lesser fees in return for more patient volume. Doctors may acquiesce to lesser fees, but I think it's mainly because they are afraid that if they don't go along, they will lose patients. If additional volume were the whole story, no doc would sign with any but the insurer having the greatest membership - and that clearly isn't true.

And based on conversations with our family docs I doubt docs see a net gain of new patients - if they do, it's small. What Humana is not saying is that sometimes docs lose patients to other networks and some of the patients they "gain" thru a particular network were already their patients anyway."

We'd be very interested in our readers' thoughts on this.

Group Insurance and "Voluntary Data Sharing"

Just got an email from one of our carriers updating us on the (formerly voluntary) "Data Sharing Agreement." For some time, carriers have been "legally permitted to provide eligibility data for its customers' employees to the Centers for Medicare and Medicaid Services (CMS)." [emphasis added]

Come this January 1, however, the "rules of engagement" change dramatically; "the previously voluntary data exchange program will become mandatory and all employers, insurers and plan administrators will be required to share eligibility data with CMS."

Required.

And this little gem has teeth:

"Failure to report eligibility data and Social Security numbers...may subject...insurers, third-party administrators, employer and/or plan administrators to civil monetary penalties up to $1,000 for each day of noncompliance for each individual for which data exchange is required."

That could add up to some pretty hefty fines. And these requirements apply to all insured and self-insured groups, large and small. No ERISA skirts to hide behind.

I'm actually okay with this: if nothing else, it should help weed out some of the illegals, and perhaps folks making a run at double-coverage.

Got questions? Then click here.

Doctors Acting Pragmatically

"Primary care doctors in the United States feel overworked and nearly half plan to either cut back on how many patients they see or quit medicine entirely, according to a survey released on Tuesday."

Question: would we see more or less of this under a nationalized health care scheme?

Shortsighted Gummint Tricks

On the face of it, the new CincyCare health benefit program would seem to be a dream come true:

"CincyCare will provide primary care, a prescription drug benefit, and care coordination for 2,000 workers in Cincinnati who need affordable healthcare, but currently are not eligible. Best of all, this program will come free of charge to participating employers."

And how many of those employers will now drop their group cover in favor of this scheme? Yes, it excludes major (read: hospital) claims, but how many employees will understand that? And it's aimed directly at the folks who'll be most affected: groups with high premiums due to major, on-going claims. Heck, who wouldn't bail under those circumstances?

And it's an over-utilization nightmare in the making, featuring unlimited $10 co-pays (whatever happened to "skin in the game?") for primary care. On the bright side, it limits drug reimbursement to $100 a year.

Now, there's a way for this to actually work: couple it with a mandatory high deductible plan to cover those catastrophic claims and non-reimbursed rx expenses (hello chemotherapy?!). But of course, that would involve a) some forethought and b) cash, two things apparently in short supply in the Queen City. As it stands, however, the plan is destined to draw the most claims-prone groups; one wonders how long that "free to employers" component will last.

Cavalcade of Risk #65 Up and Running

Joe Paduda presents this week's compendium of risky-related posts. As usual, he's done a great job of culling through the submissions to bring us the best of the best.

Do check it out.

And do consider hosting your own Cav: it's fun, easy and a nice traffic boost. Just drop us a line to reserve your early 2009 slot.

MVNHS© Be Not Proud...

First, a point of order: this post is not about the efficacy, necessity or morality of organ donation. I happen to think that it's a good idea, and my driver's license affirms that. However, it was, and is, my choice to make available whatever body bits for which medical science can find a use after my demise.

My choice.

But our Cousins Across the Pond may have other ideas about that; at the beginning of this year, British Prime Minister Gordon Brown opined:

"(A) system of presumed consent could save thousands of lives and “close the aching gap” between the benefits of organ transplants and “the limits imposed by our current system of consent.”

In Britain, as here, the current default position regarding the ownership of one's organs is that they are the individual's, the citizen's, to do with (pretty much) as they please. That is, doctors do not have the power of the state to force folks to donate their own, or other's, organs or anatomical parts. But PM Brown proposes to turn that very fundamental right on its ear (or spleen, etc), arguing that indeed the state is the best judge of how we dispose of our bodies.

And that, I'm afraid, is a slippery slope indeed. Because we're not just talking about post-mortem remains here, but living tissue and organs (and arms and legs, for that matter). Don't want to donate one of your two well-functioning kidneys? Too bad, you have no say in the matter.

That's all very interesting, Henry, but what does that have to do with insurance?

Over the years, we've catalogued a lot of misfires undertaken by the MVNHS©, and this is precisely the agency that would be responsible for implementing this widespread initiative. The good news is that, PM Brown's authoritarian leanings aside, said initiative is unlikely to be implemented in the near future. But it is instructive that the discussion is even taking place: what kind of government would presume to excercise ownership rights over the individual?

And while we're on the subject of health care, death and the MVNHS©, regular reader and commenter Scott M tips us to this gem:

"Jack Rosser's doctor says taking Pfizer Inc.'s Sutent cancer drug may keep him alive long enough to see his 1-year-old daughter, Emma, enter primary school. The U.K.'s National Health Service says that's not worth the expense." [emphasis added]

Mr Rosser's advanced kidney cancer could be treated by the drug, but the $4,650 per-treatment price tag was apparently too much for the compassionate, gummint-run health care system. And for those folks who still believe, despite all the contradictory evidence, that a nationalized system is the way to go, there's this to chew on:

"The NHS...is spending about 100 billion pounds this fiscal year, or more than double what it spent a decade ago, as the cost of treatments increase and the population ages."

So they've had no more success in reining in costs than we have, and since health care costs drive health insurance costs, the British taxpayer's taking more than one shot to that famed stiff upper lip. Which then exacerbates the problem thusly:

"The higher costs are forcing the NHS to choose between buying expensive drugs for terminal patients and providing more services for a wider number of people."

For proof, one need only look to the Canterbury-based charity Rarer Cancers Forum, which claims that over 25% of cancer patients "lose their appeals for regulator-approved drugs each year because of cost."

Or, as we might more succinctly call it: "rationing."

Still want to go there?

[Hat Tip: reader Scott M]

In a more perfect world...

Cartoon by Marshall Ramsey, ©2008

[Hat Tip: Bill M]

Providers Behaving Badly, Part 2

Guest Blogger "Roland" offers us an inside look at how some health care providers "game" the system for monetary gain, often at the expense of the patient. In Part 1, we learned that many providers sell medication at a greatly increased price as an additional "profit center." Today, we see first hand how this impacts their patients:

Unknown to us, the patient had another chemotherapy session slated for this past Thursday. She called us at 8 a.m on Thursday (her treatment was at 10), crying that the facility was refusing to treat her unless we kowtowed to their demands by then.

My manager immediately got onto the phone with our PBM, who attempted to call the facility. They would not return my manager's calls. She then called the provider herself. They also would not return her calls. Finally, she was able to get hold of the provider's account manager, who was forced to admit that the real reason behind their not cooperating was the cost, *not* because there was no longer any real concerns about the PBM or how the drugs were shipped. She actually admitted that it was about the cost.

My manager quickly stated "I think what we need to do is for you to tell us how much you'll be charging for the drug and then we'll take it to our PBM and see what they would reimburse for it. If what you're charging is lower than that...we'd be foolish not to accept your billing."

Which, unbeknownst to the facility, we already knew they were billing well above AWP. They had put the NDC number [National Drug Code Directory, a list of all drugs manufactured, prepared, propagated, compounded, or processed by drug manufacturers] on one of their claim submissions for a drug billed with a miscellaneous HCPCS code [Healthcare Common Procedure Coding System, a Medciare initiative to identify various treatments and medications]. They charged $450. The AWP was $210. I doubt that was a fluke.

The account manager stumbled and said she'd have to run it by her superiors, and as of now that's where the situation stands. They did, however, give the patient her treatment that day, so that's something.

All through this, however, the facility was painting us out to be the bad guys on this to the patient. That we were being unreasonable and all the usual insurance stereotypes. The fact is, we were trying to bend over backwards to work with the facility to ensure that the patient got the maximum benefit allowable under her plan. Which is a contract. The facility seemingly won't accept less than what they normally mark a drug up for, yet the insurance carriers are supposed to pay above and beyond what the contract would allow because of that?

I take no pleasure in the fact that this poor woman is having to deal with this when she's going through chemotherapy. It's been on my mind all weekend. Yet, if physicians and facilities weren't continuously marking up the costs of their services well beyond a reasonable margin of profit, carriers wouldn't have to do things like this, either. I've been running AWP on many chemotherapy claims that come in, some from well-known cancer treatment facilities, and the drugs are sometimes marked up $10,000 above AWP. AWP which is already artificially inflated and was the subject of a lawsuit against the manufacturers of some of these drugs.

So this is the other side of the story whenever you hear about the evil insurance companies. There's not one person in our office who didn't feel for this poor woman. However, we are also obligated to do our jobs and make sure that the terms of the contract apply. That's what insurance is. It's not an ATM card doctors and facilities can swipe anytime they want reimbursement.

Until we start holding them accountable for some of their actions...national health care would be a complete and utter joke.

Thank you, Roland, for your insights and information. It truly underscores the distinction that must be made (as we do so often here at IB) between health care and health insurance.

Grand Rounds: Music to One's Ears

Dr. Deb presents this week's roundup of interesting medblog posts. Do check it out.

Providers Behaving Badly

We're quite privileged to present our latest Guest Blogger. Regular reader and commenter "Roland" (not his real alias) worked for over 10 years for a major insurance carrier, transitioning to a TPA (Third Party Administrator) in the past year. Because of his unique perspective from the claims side of the business, Roland has graciously agreed to share a recent situation, in which he played a pivotal part, in order to present "the rest of the story" for our readers:
I had a file at work this week that's been bothering me all weekend and I'd like to share it to tell the other side of the coin that the MSM always seems to ignore: physicians and hospitals behaving badly.

A few of our groups have elected to use a Specialty RX Program through their PBMs [Pharmacy Benefit Managers: companies hired by insurers to handle the procurement and disbursement of meds] to control the cost of some of the more expensive drugs/injectables out there and, of course, chemotherapy drugs are at the top of that list.

As it stands now, when we receive a claim for chemotherapy case management is immediately initiated and we administratively cover the first visit. We then send a letter to both the facility and the patient stating that, on subsequent visits, the facility will have to purchase the chemotherapy drugs through the PBM. The reason for this (for people outside the industry) is that providers tend to jack up what they actually paid for the drug well over AWP [Average Wholesale Price], sometimes up to 500% over that amount. To which of course then the facility usually has a contact with a network that just knocks X% (normally anywhere from 5% to 15%) off whatever they bill, a thorn in my side that's a discussion for another time.

When we initiated this procedure on one file, we got a letter from the facility with two complaints. The first was that, by the time they got the letter, the patient had already had 5 chemotherapy treatments, and the provider had already bought and supplied those drugs.

While this seems like a valid argument, we didn't know that this patient was receiving chemotherapy until we got the claims in. Considering in today's health care world that there isn't an insurance carrier out there who isn't utilizing case management on chemotherapy files, I find part of the fault of that lies at their feet. A simple phone call before the patient had begun chemotherapy (even by the patient) would have averted that issue.

The second complaint was that they refused to participate in what they term "brown bagging" situations. This term comes from the fact that some PBMs will ship the drugs to the patient's normal pharmacy (say Walgreen's) and then the patient picks them up and brings them to the facility themselves. They claim there are major liability risks in this and quite honestly, I tend to agree since the drugs have to be handled carefully.

However, our PBM is a step "above" some of its competitors, and will work with the facility to ship the drugs directly to the provider, thereby avoiding the "brown bagging" issue. Which means that the only difference between the facility buying it from their vendor and buying it from our PBM is...cost. When they buy it from the PBM, the PBM will cut it down to AWP plus a certain percentage over it (anywhere from 150-200%). When the facility buys it from their own vendor, we don't know what they actually paid for it and can mark the drug up as much as they want and then get their PPO "discount".

[ed: Think of it like a furniture store. They buy the mattress for $100, tag it at $500, then have a 50% off sale. They're still making a $150 profit on the item, but it "looks" like a "deal."]

The facility basically stated that unless we agreed to cover the claims business as usual, they would no longer be able to treat the patient.

The Friday before last, I sent a letter to the facility offering them three options:

1. I detailed that this PBM would ship the drugs directly to their facility and therefore since their concerns about "brown bagging" were unfounded due to that, implored them to work with the PBM.

2. Stated that if they still decided not to cooperate with the PBM, they could then supply the drugs as usual. However, we would then deny those charges until the invoices and/or NDC numbers of those drugs were supplied and we would internally apply AWP to them and not honor any PPO percentage discount.

3. The patient could pay for the cost of the drugs themselves (an unlikely scenario due to the cost of some of them), and then we would still request the same information as in number two, but send the payment directly the patient.

What we really wanted was a paper trail, a way to show the patient that we were doing our best to get the facility to cooperate so she would get the maximum benefit allowable under the terms of her contract. We stated that we would need a written response within thirty days stating what they would do, otherwise we didn't see how it would be feasible for the patient to continue treatment there.

Stay tuned for Part 2 to learn more about this heart-breaking example of health care run amok.

Carnival of Personal Finance now online

MoneyNing hosts this week's roundup of personal finance posts.

Michael Crichton, M.D. 1942 - 2008

May he rest in peace.

Although it is well-known that Crichton trained as a physician it's likely most people think of him as an author. My first encounter with any of his writings was in this March 1970 Atlantic Monthly article. Crichton was 27 years old when he wrote it.

The article is lengthy but you really should read the whole thing. Here is a sampling:

1. "Most research scientists in history are alive today; therefore most of the discoveries in history are being made today. But the consequences of this vast outpouring of information and technology have yet to be grasped. Major questions are raised in such widely diverse subjects as medical education and euthanasia."

2. "welfare reimbursements are always less than the true costs of care. In this situation, the hospital makes ends meet by overcharging private patients and their insurance companies to cover the welfare deficit-in the case of the MGH, roughly $10 [15%] a day overcharge."

3. "to pass on costs to insured patients and make them augment insufficient tax funding for welfare . . . all works out to the same thing: one can pay the money either in taxes or in higher health insurance premiums. But in such a situation, it is probably more efficient to choose one or the other -- and the trend is toward universal health insurance in this country, unmistakably. "

4. "the American medical system . . . has never been able to structure the kind of competitive situation which encourages and rewards economies. Nor has American medicine tried. The American physician has been grossly irresponsible in nearly all matters relating to the cost of medical care. One can trace this irresponsibility quite directly to the American Medical Association."

5. "Other countries are doing better, and most of them have some form of socialized medicine. The United States is extraordinarily backward in this respect. However, many American observers have looked at European socialized systems and have come away shaking their heads; and there is a widespread doubt whether any European system can be adapted to this country. Very likely, America will have to work out its own system. The combination of group insurance with a group-practice system seems a feasible, economical, and practical, method, acceptable both to doctors and patients."

The first half of the article is as clear an explanation as you will find anywhere of the stunning challenges and successes of modern medicine. And the second half remains, after all these years, a valuable critique of the organization and leadership of American medicine, from the AMA, to hospitals, to individual practitioners. I think it's fair to ask: aside from the costs stated in 1970 dollars, what has fundamentally changed in the 38 years since this article appeared?

Health Insurance is not health care. So what?

[Welcome Kaiser Network readers!]

InsureBlog consistently points out that health care and health insurance are different animals. When media and pundits and politicians confuse the two – and it happens with depressing frequency – we think that’s misleading, and we say so. Maybe you believe that's just semantics. Or maybe you reply, so they’re different, so what? Well, let’s look at it.

1. Observe that high health insurance premiums result from high health care costs. If health care were not expensive, health insurance would not be expensive. If the cost of health care were not rising, the cost of health insurance would not be rising. The cost of health care is the deeper problem.

2. The problem of high health care costs is not solved by finding clever ways to shift costs to somebody else via insurance premiums. Insurance is inherently a cost-shifting device, whether private or public. And sometimes the cost-shifting is just politics. Either way, shifting of health care costs does not reduce them by a nickel.

3. It's fine to seek the best & fairest way to allocate health care costs via insurance premiums. But even the optimal manner of setting premiums won't reduce health care costs by a nickel.

4. The problem of high health care costs is not solved by a strategy to subsidize health insurance premiums. That is an aspirin tablet that treats a symptom (high insurance premiums) but ignores the disease (high health care costs). When one has a bad headache, an aspirin is helpful. But if the headache persists for, say, FORTY YEARS, perhaps stronger medicine is needed.

5. And so understanding the distinction between health insurance and health care leads us to the insight that the high cost of health insurance is not primarily an "insurance" problem - it's one of the problems within our present health care delivery system. And in order to eliminate some significant part of the high cost of health care, our attention must be focused on reforming the delivery system.

If there is confusion from the start between health insurance and health care, the analysis will be confused and still more ineffective "solutions" will result. This is why we think understanding the distinction between health care and health insurance is so important.

File under Good to Know

The Wall Street Journal Best of the Web Today reports that Gerry Spence, a prominent California plaintiffs attorney, has this advice for us: legal representation is essential, even more important than health care.

He has more to say here:

"I want to ask you which would be more important: If all of the doctors in the country somehow disappeared or all the trial lawyers in America somehow disappeared?" he asked. "We can live without medical care, but we cannot live without justice."

As Jack Benny said, “I’m thinking! I’m thinking!”

Cavalcade of Risk #65: Call for submissions

Managed Care Matters host and CoR veteran Joe Paduda hosts next week's Cavalcade of Risk.

Please send in your risk-related post by this coming Monday (the 17th). As usual, Joe asks that you include:

■ Your blog's url

■ Your post's url

■ The post's trackback URL (if available)

■ A (brief) summary of the post

And remember: ONLY posts that relate to risk (not personal finance tips and the like).

You can submit your post via Blog Carnival or email.

Thanks!

Oh! We have hosting slots available for early '09 - grab yours while you can!

Consumer Driven Health Care: Interesting Update

[Welcome Kaiser Network readers!]

We've been vocal proponents of Consumer Driven Health Plans (CDHP) for a long time, and have seen some of the positive results of putting consumers into the health care driver's seat. Since these plans are relatively new, long term trends have been difficult to ascertain, but that's beginning to change.

Recently, health insurance leviathan WellPoint (WP) published a report that showed some interesting (and hopeful) results. The folks at WP surveyed almost 8,000 of their groups that offered some kind of CDHP in 2007, and made some startling finds:

■ Those employers that adopted a CDHP in 2006 saw their health care spending decline, while those in non-CDHP plans saw spending increase from 7% to 10%

■ Most employers that offered a CDHP also offered other, more "traditional" choices, and families with children were still more likely to opt for the CDHP

■ One of the most oft-cited objections to CDHP plans is that they discourage folks from seeking preventive care (although the logic of this canard has always escaped me). Contrary to "conventional wisdom," however, the study found that "consumers enrolled in CDHPs had higher utilization of preventive care than consumers enrolled in non-CDHPs."

One of the things I most appreciated about the report was that it generally avoids industry jargon; that is, it's understandable to non-insurance-geeks. And it's not an overwhelming amount of information, so it's easy to go through fairly quickly.

Kudos, WellPoint!

[Hat Tip: NAABC]

Post-Election Health Wonk Review now online

Louise Norris, co-blogger (co-blogress?) at Colorado Health Insurance Insider, has an outstanding edition of the HWR. It's obvious that she's read each and every post, and has taken the time to add insightful context to every one.

Kudos, Louise!

All in the Family(Care)

Did you know that Illinois offers low-cost health insurance to parents of young children? Based on family income, rates run from $15 to $40 a month; plans include low ($2!) co-pays for doctors' visits and meds.

Sweet deal.

But that particular gravy train has hit the bumper:

"The Blagojevich administration has stopped payment on most state-subsidized health care, asking a judge to clarify his order to shut down an illegal expansion of the FamilyCare program."

It seems that Gov Blagojevich (pronounced "Schwarzenegger") wanted more folks to qualify for the plan, and so raised the eligibility limits. For example, a family of four could have over $80,000 of income and still qualify for the plan. Seems to me that $80,000 is not "poor," but solidly middle class. This kind of "expansion by fiat" is why a lot of people find the programs themselves so offensive. If the goal is to help "the poor," then let's have a realistic definition of "poor."

And that's exactly what Cook County Circuit Judge James R. Epstein has done: after Gov Blagojevich "unilaterally reinstated the coverage and expanded it to 400 percent of the poverty level, or $83,000 for four," Judge Epstein issued a restraining order, putting the brakes on the expansion. As a result, FamilyCare officials "stopped submitting vouchers it receives from health care providers to the state comptroller for reimbursement."

The net result is that, because the Gov got greedy, even folks who, by almost anyone's definition, really are poor will now suffer. Something about the baby and the bathwater? What is it that drives politicos to take reasonably designed programs and turn them into personal causes?

Sheesh.

"Better Late" Update

Last week, I wrote about North Carolina's new high risk insurance pool. While I liked the plan overall, I did have some reservations about some key features.

Turns out, Colorado's had a similar plan in place for almost 2 decades, and experienced fewer of the problems I mentioned than one might imagine. Louise Norris, co-blogging at Colorado Health Insurance Insider, has the full story, as well as some observations and suggestions for her Tar Heel State colleagues.

Do check it out.

MVNHS© vs AARP

Okay, not really the AARP (that's an American thing), but ailing English seniors in general. The MVNHS© (Britain's "Much Vaunted" National Health Service) has taken aim - again - at its seasoned citizens, opting to deny them needed health care:

"[O]lder people will be left vulnerable to discrimination and could miss out on life-saving treatment in favour of younger patients."

Seems that Parliament was considering new legislation that would ban health care discrimination based on age. But that's now on hold for at least another year and a half, leaving elder Britons without protection against the kinds of shenanigans for which the MVNHS is so famous. In a move reminiscent of our own brilliant governing class, the "Minister of State for Care Services said the Government will set up an advisory group to look at the issues around age discrimination in health and social care."

But of course: a committee!

And also of course, said committee will use the next 18 months to study the issue, and then (perhaps) issue some guidelines and/or recommendations, which may or may not be implemented some time iin the hazy, distant future.

Which doesn't do sickly seniors much good [ed: maybe that's the point?]

I'll leave the last word to His Right Honorable Phil Hope (the aforementioned Minister), who provides the most authentic example of genuine gummint-speak we've seen in quite a while:

"The Government will undertake consultation on possible exceptions to the ban on harmful age discrimination (in health and social care) taking account of the findings of the advisory group when it has completed its work."

Couldn't have said it better myself, Gabby.

Video Bonus Round!

Aside from passing references, we haven't written much on Humana. Perhaps that's because they've been relatively well-behaved, and thus stayed out of our sights. That may be a good thing, and this definitely is: Humana's launched a new PR drive to help educate the public about ways we can help control health care costs. As regular readers know, this is key to holding down health insurance costs. The carrier's rolling out a series of 10 educational videos "designed to deliver guidance, and to support awareness and understanding of the healthcare industry."

The first one is entitled "Why is Healthcare So Expensive?" Since we've recently done several posts on this very topic (here and here, for example), this seems quite the timely addition:

We'd be very interested in any feedback on this, especially whether our readers found it interesting and/or helpful, and whether we should continue to post them as they come out.

Unintended Consequences (AIG Style)

In the comments section at our latest (well, 'til now) post on the AIG debacle, regular reader Brad Ford observes:

"As someone who competes with AIG, I find it is hard competing with the government."

Exactly!

When the gummint is your reinsurer, you're pretty much bullet-proof as to claims, reserves, you name it. And talk about intimidating: how does one level the playing field when one's competitior is Uncle Sam? Not to mention, yourself: remember, it's taxpayor dollars propping up AIG, and agents are taxpayors, too.

And there's a domino effect here, as well: what if another carrier loses so much business to AIG that it goes under? Do they get bailed out, too?

As I asked before, where does it end?

Please sir, could I have some more?

[BUMPED - SEE UPDATE BELOW]

Although it's hard to imagine erstwhile insurance behemoth AIG in the role of the hungry naif, that's precisely the request being made by the head of that brain trust:

"AIG is asking the US government for a new bail-out less than two months after the Federal Reserve came to the rescue of the stricken insurer with an $85bn loan, according to people close to the situation." [free reg required]

Well sure, better get in there before those irresponsible auto industry chaps drain the well completely dry. It's just government money after all, not actually paid for by the blood, sweat and tears of the American taxpayer.

Sigh.

AIG rocket surgeons were huddled late in the week with gummint pencil pushers, working out a deal that would tranfer millions (billions?) of dollars of "troubled mortgage-backed securities" from AIG's books to ours. And, like the poor saps who opted for those "troubled" mortgages, AIG is now complaining about the interest rate of the original loan. Currently 8 and a half percent over the London Interbank Borrowing Rate (LIBOR), AIG points to the "5 per cent interest rate paid by the banks that recently sold preferred shares to the government." [emphasis added] Um, geniuses, what part of "troubled mortgage-backed securities" don't you get?

If you sense a bit of sarcasm here, it's because we pointed out at the beginning that this was a bone-numbingly bad idea, and this latest installment just underscores that.

But wait, it gets better:

"The U.S. government was near a deal Sunday night to scrap its original $123 billion bailout of American International Group Inc. and replace it with a new $150 billion package, according to people familiar with the matter."

Of course this makes great sense, since the rocket surgeons who run AIG have shown themselves to be such thoughtful stewards of our money. One supposes that this 20%-plus increase will come with a lower interest rate [ed: natch!], thus transferring even more of our wealth to the coffers of the insurance giant.

But that was then, and this is now:

"The Federal Reserve and Treasury Department Monday upped the stakes in the government's role in American International Group to more than $150 billion with a restructuring of its loan package that includes $40 billion in new funding from the financial rescue package and other measures to help the ailing firm."

But of course.

In addition to the extra bucket of moola, our gummint is lowering AIG's interest rate by an additional 5.5%, which comes out to 3% plus the aforementioned LIBOR rate (currently at 2.39%). Not a bad deal, all things considered.

And because just throwing more money at something isn't nearly sufficient, The Fed is ponying up another $22+ billion of our cash to set up a special LLC (limited liability corporation) to buy those "troubled mortgage-backed securities" for us.

Where, exactly, does this end?

Oh, one more thing.

Bob just emailed this to me:

"The Federal Reserve is refusing to identify the recipients of almost $2 trillion of emergency loans from American taxpayers or the troubled assets the central bank is accepting as collateral."

On the one hand, this is unconscionable. On the other, these are the people that many folks want running our health care system. Where, exactly, is the transparency in this transaction, and why would we want this kind of thinking when we look at our health?

"Careful Stewards" UPDATE: Fresh on the heels of "poor mouthing" the raw deal they were offered, looks like AIG execs have some 'splainin' to do:

"Even as the company was pleading the federal government for another $40 billion dollars in loans, AIG sent top executives to a secret gathering at a luxury resort in Phoenix last week."

CORRECTION: Apparently, these folks were "independent financial advisors," not AIG execs. Still, this demonstrates the kind of brilliant thinking that goes into the AIG "decision making process:" let's see if we can frivolously spend even more of the taxpayors' dollars.

After all, figuring out how to spend $150 billion (with a "b") of the taxpayor's money isn't a piece of cake (or torte, to be precise): it takes a lot of soul-searching, and what better place to cogitate on this dilemna than the Pointe Hilton Squaw Peak Resort . Gee, life sure is tough, isn't it?

Life Insurance at Risk

Although we do link to outside articles (e.g. USA Today, WSJ, etc), and to fellow bloggers, we generally don't link directly to commercial websites. It's not that we fear competition (remember, we accept no paid advertising here), but generally find the articles to be self-serving and therefore suspect.

But there are exceptions, and this is an exceptional article:

"As part of its 'Health Shame' study, the British firm polled 5,000 existing policyholders, inviting them to review their original applications and change any information they knew to be incorrect. The result was that one in fourteen admitted to making some kind of error when initially completing forms."

That's a lot of misleading applications. We've blogged before on what can happen when one "fudges" an app, but Chris Brooks actually interviewed industry insiders, and shares some startling information with his readers. Chris emailed us today, inviting our readers to partake, as well.

Do read the whole thing.

And then double-check the last application you completed.

Carnival of Personal Finance: The Struwwelpeter Edition

And what, you may ask, is Struwwelpeter? Carnival of Finance host SVB (proprietor of The Digerati Life), explains that it's "a rather strange and bizarre collection of mid-19th century children’s poems (from Germany)." It's actually pretty fascinating, as is this week's Carnival.

Was it a very good year?

A recurrent theme at InsureBlog has been the distinction between health care and health insurance. A closely-related theme is that, as with all things that are purchased, the purchaser’s cost equals the supplier’s gross income. So I thought everyone might like to see this article from Modern Healthcare. The article reports that total hospital profits reached a record level in 2007 – despite the continuing decline in the number of hospitals.

Most people would be astonished to learn that the average reported hospital profit margin for 2007 (6.9% of revenues - reported by Modern Healthcare) was higher than the average reported profit margin of the top 13 health insurance companies (5.3% of revenues - reported in Fortune magazine) and almost as high as the top 9 oil company profits (8.0% of revenues - reported to Congress by the Congressional Research Service). Why would most people be so astonished to learn that? Well, you know perfectly well why.

Understanding that health care and health insurance are different is only the first step on a hard road. To understand why health insurance in the U.S. is so costly, one must understand why the underlying cost of health care is so high. Suggestions are plentiful, and all have some truth to them. For example, we hear about high-tech medicine (e.g., advances in pharmaceuticals or in radiology), the steady growth in utilization of services from year to year, the preponderance of specialists, and the aging of our population.

This Modern Healthcare article reminds us we rarely see a probing analysis of the incomes of service providers – especially as compared to provider incomes in other countries with nationalized health care or health insurance mechanisms to which the U.S. is so often unfavorably compared. Why not? Well, you know perfectly well why not.

Drivers

No, not those kinds of drivers. Regular readers know our mantra: health insurance costs increase primarily because health care costs do.

But what causes health care costs to rise?

The "usual suspects" generally include over-utilization, malpractice suits that prompt excessive testing, even prescription drug costs. And there's no doubt that all of these factors play a role. But according to a new report from the Robert Woods Foundation, they're not the primary culprit:

"Technology ... is the key driver of health spending, accounting for an estimated half to two-thirds of spending growth."

Of course, if we could just implement some kind of national health care scheme, that wouldn't be a problem, right?

[Hat Tip: Sarah Goodell]

UPDATE: For another perspective on health care cost drivers, be sure to check out Mike's post on the subject.

Questionable Carrier(?) Tricks, Part 2

In Part 1, we became acquainted with a new self-funded plan for local physicians offices. Now, we'll look at some of the other major problems facing folks who opt in.

Back in the day, MEWA's were a popular option. Multiple Employer Welfare Arrangements made it possible for smaller companies in the same industry to band together to purchase self-funded insurance plans. The idea was that none of them individually were large enough to make the numbers work, but taken as one large group, such an arrangement was economically feasible. Unfortunately, many of these arrangements were poorly run, and soon went belly up.

While I'm more familiar with MEWA's and self-funded plans than many of my colleagues, I knew that I was far from expert in either. So I turned to someone who is such an expert, and who just happens to be my co-blogger. I called Bob, and together we noodled around the PHA site. In the meantime, I'd also gotten a quote from another carrier which was actually quite a bit lower than the PHA numbers (even factoring in pre-existing conditions). Armed with our newfound knowledge of the PHA plan, and the new quote, Bob helped to crystallize some important points:

First, the plan is not subject to state insurance laws, but rather the Federal law called ERISA (Employee Retirement Income Security Act of 1974). This means that, if something goes wrong, there'll be no access to the state's guaranty fund if PHA goes down the tubes. Thus, if one is in mid-claim, and the plan runs out of cash, to where would one turn?

Well, one place is directly back to the employer, which could be liable for any unpaid claims. Not a comforting thought.

Second, there are some significant adverse selection issues. For example, who's switching to this "new" plan? That would be groups that can't get lower rates elsewhere. And why would this be? Well, if they've had some major claims and pre-existing conditions. So it's likely that only groups with "issues" are going to jump onto an untried "new" plan.

And since PHA will have no idea what these problems are [ed: well, at least not until the claims start rolling in], how will these conditions be handled? Again, poking around the site, there's no mention of how (or indeed, if) pre-existing conditions will be covered.

Third, the site very prominently (indeed, proudly) displays the rates for its products. These are based solely on family status (single, married, etc), not based on age or sex. That's a great deal for young pregnant women, and older males with heart problems.

Not such a good deal for most folks.

And exactly how do they know that $313 is the appropriate premium? Remember, there's NO underwriting info. As I cautioned my client, since they can't disclose on-going conditions or claims, how many of the other groups are also withholding this crucial info? How many claims are going to be sitting on Mr Kenrick's desk on January 2nd? How likely is it that they'll ALL be paid?

Fourth, absent any written guarantee (and it is indeed absent here), when are rates going to go up to cover the unanticipated claims? There's no way to know for sure (since this is not disclosed), but perhaps this item (from the "What happens after I apply for membership" section) provides a vital clue:

"A PHA Board Meeting is held every three months where applications to the PHA are reviewed and approved. These occur the first Friday in February, May, August and November."

Is this when they change rates, as well?

Finally [ed: yay!], Bob asked, "since we already know the rates for the [insured] plan are at best lower and at worst the same as PHA's, why would they roll the dice to go from a known entity to something untested and unguaranteed?"

Indeed.

This morning, Bob emailed to add "No stop loss would be a deal breaker in my book. Good chance they can't get a carrier to bite off on it. I can't think of any that write MEWA's any more, much less a virgin one.

This thing could blow up in 6 months. This is 6 o'clock news stuff."

'Nuff said.

Mountain State News...

Regular reader, commenter and colleague Jeff M sent me this update on West Virginia's high-risk health insurance plan, ByrdCare.

I keed, I keed!

Actually, it's called AccessWV, and it currently provides state-subsidized health insurance for about 600 of that state's citizens. Unsurprisingly, the original plan was beginning to get expensive (d'unh!), and one way to address this was to offer a more stripped-down version, a quasi-HDHP (High Deductible Health Plan). Key features of this new option include a $4000 deductible for major med expenses, and an additional $2000 rx deductible.

The current plan costs its participants up to $1200 a month, which seems to me rather self-defeating (and helps explain the paltry participation numbers). Of course, with $10 office visit co-pays, "free" child wellcare, and deductibles as low as $400, it's not rocket surgery.

This new plan should cut that, but we don't yet know by how much.

One very neat feature of the AccessWV plan: agent referral fees. As of last spring, the state will pay agents $50 for every participant they sign up on the state health plan. On the one hand, I'm not crazy about encouraging folks to opt out of the commercial insurance pool and into the public trough, but at least they recognize that the agent provides more service than just quoting and proof-reading. And it's the first such program I've seen that seems to recognize the inherent value the agent brings to the table.

Hear that, Washington?

[Hat Tip: Jeff M]

Questionable Carrier(?) Tricks

First, a little background: a self-funded (aka self insured) group plan can be an attractive way for an employer to save money. Simplified, there are four parties to such an arrangement: the employer, the employee(s), an administrator and an insurance company. If an employee has a $100 claim, the administrator collects $100 from the employer, then pays the claim. On a $1 million dollar claim, the administrator collects $1 million from the insurance carrier, and then pays the claim.

But what happens if there's no insurance company involved?

Recently, one of my groups was approached by a new "carrier" that promised to save them big bucks on their coverage. This outfit, called PHA, is actually owned by one of our area's larger hospital networks, and has targeted physicians' offices as their market. Many of these offices are small, with just a handful of covered employees, and PHA has leveraged its relationship as a subsidiary of this hospital network as an incentive to come onboard.

By banding together, the pitch goes, all of these little offices will have the insurance buying power of a big company, and enjoy some major rate reductions, as well.

So far, so good.

The problem is that the numbers and the premise just don't add up.

After asking my client a lot of questions, I learned that the plan has no "stop loss" carrier (the insurance company's role). This means that claims are paid out of cash on hand.

Or not.

But certainly the folks running the plan have extensive experience with insurance and with self-funded arrangements, and a proven track record in this area, right?

Sadly, no: according to my client, the gentleman in charge has no such experience.

This does not bode well.

But it gets worse:

Currently, PHA has signed up a local physicians office group, comprised of some 25 offices. They're on board, and expecting coverage to begin on January 1. I asked my client if these offices were similar to hers; that is, a handful of employees, expecting to pay about $2500 a month in premiums. She agreed that this was so, and we did a little math:

The 25-office group, with 5 covered employees (plus some dependents) at $2500 (per office) is $62,500 a month.

And although unlikely, let's presume that he's successful in persuading another 25 such offices to sign up, contributing another $62,500.

This means that, assuming everyone pays on time (right!), PHA will have $125,000 on hand to pay whatever claims come in on January 2nd. And 3rd. And so on. Will that be enough?

Well, there's no way to tell, because the enrollment form (not an application) asks no health questions. Who knows how many diabetics, cancer and MS patients and pregnant women are signing up for this? There's just no way for them to know.

But surely, you may ask, there's some way for PHA to know ahead of time what they're getting into? How else would they know how to price the plans?

Nope:

The employer application does ask about any known claims and health conditions. But as my client pointed out, as a physicians' office, she's precluded by HIPAA from disclosing these (especially since PHA specifically asks for names attached to those conditions). Presuming that the other physicians' offices also comply with HIPAA, PHA will have zero underwriting information going in.

I'm sure they'll be well-informed by, say, January 2nd.

In Part 2, we discuss some of the other major problems with this new program.