Tuesday, November 30, 2010

The (Doc) Fix is in....Or is it?

FoIB Holly R tips us that the so-called "Doc Fix" is in, meaning that (as we discussed over the weekend) providers' fees have once again been spared the axe:

"Congress agreed to a one-month delay in Medicare payment cuts to doctors yesterday, giving a short-term reprieve to a looming crisis over treatment of the nation’s senior citizens."

Except that it really doesn't. Let's ask Kelley Beloff, our resident Medical Office Manager, what this really means:

"What was passed was the extension of the current fee schedule that was supposed to expire today, to go to the end of this year. However, we are still facing a 29% cut on Jan. 1, 2011. That was not in this piece of legislation. While history is not always an indicator, Congress has let cuts go into effect at least 3 times since the cuts were started in the mid 1990's. I am anticipating the cut to go through on Jan. 1, 2011.

As to physicians opting out of Medicare. Now is the time to opt out. In fact I have sitting on my desk the CD with the forms in it to opt out of Medicare. Once the New Year begins, the physician is locked in for another year. So the physician has to ask himself, does he feel lucky, do I opt out on the chance the cuts will go into effect, or do I stay in and hope that Congress reverses themselves. My guess is that physician's will not opt out in the numbers predicted and continue to see Medicare patients, though on a more limited basis

Gee, good news all around.

Thanks, Kelley!

And what is the most significant way the Federales control their medical care costs ?

Milliman has calculated the cost-shift from Medicare and Medicaid into the private sector as roughly $90 billion a year, or 15% of private insurance costs.

In brief, this happens because:

(1) the government plans pay less than what the medical service providers think their services are worth (2) How does the government get away with this? Just as Hank says, "because they're the government". (3) service providers then increase the fees they bill their privately-insured patients, to make up as much of the difference as they can, meaning that (4) there is a significant shift of costs actually incurred under Medicare and Medicaid, but which emerge as private insurance costs and are then paid for by private insurance plan sponsors and privately-insured people.

This so-called "cost-shift" makes Medicare and Medicaid appear less expensive and makes private insurance appear about 15% more expensive. Private plans would have 15% lower premiums in the absence of the cost-shift and Medicare and Medicaid would have higher premiums. The Milliman work reveals this difference is a serious amount of money.

This cost-shift from the public sector into the private has been going on for as long as I've been in the business. In fact, I first learned of it in
this iconic 1970 Atlantic Monthly article.

You’ll find the cost-shift mentioned toward the end of this article, just click to page 4 and read the author’s 4th and 5th conclusions. He calls the cost shift "welfare reimbursements". The amount in his analysis is $10.00 added to the daily hospital cost of $60.00, resulting in a total billed charge of $70 per day (remember this was 40 years ago) - - in other words, the need to recover federal cost underpayments in 1970 resulted in a daily hospital charge 16% higher than it would otherwise have been. Remarkably, just about the same as Milliman finds today.

The author of the article was a 27-year-old physician. You will recognize his name - and you'll do yourself a big favor if you take the time to read his entire article.

So there is no doubt that this cost shift has existed for decades, and that it makes private insurance premiums roughly 15% higher than they need to be. Its existence raises important questions that need to be answered. Here are some of the questions:

1. What will Medicare do, if or when there is no longer a private sector into which it can shift a meaningful share of its costs? How would the Federales explain the noticeable increase in required funding that will emerge? Who would the Federales then blame? Who would the Federales then tax?

2. What will medical service providers do, if they can no longer recover from private insurance plans some or all of the revenues they cannot collect from Medicare or Medicaid? How might threats of reduced incomes affect medical professionals' fee negotiations and their willingness to participate in Medicare and Medicaid? How would community hospitals survive? How many physicians might simply retire early? How many talented young students might decide not to pursue careers in medicine?

Where have you seen these questions addressed? Where have you even seen them asked?

Post-Thanksgiving Grand Rounds

Our friends Jay and Louise Norris of the Colorado Health Insurance Insider blog host this week's terrific round-up of interesting and diverse medblog posts.

Monday, November 29, 2010

In Vino....What?

At the Jewish New Year, which we call Rosh HaShannah ("Head of the Year"), we celebrate by dipping apples in honey. There are various interpretations of this ritual, but the most prevalent one is that the apple represents life ("the circle of life") and, of course, the honey represents sweetness.

We also offer a "kiddush," a blessing over wine as we toast the New Year.

And how, exactly, does any of this relate to health, much less insurance?

Turns out, more than is immediately obvious:

"Supplements derived from apple skins, red wine and tumeric might someday help slow the onset and progression of Alzheimer's and related diseases..."

Apple parings and a nice Merlot contain within them copious amounts of a "compound that, in Petri dishes at least, sops up type-2 alkenes and protects nerves from harm."

Although scientists still have no idea what causes Alzheimers, neurotoxicologist Richard LoPachin believes that stopping type-2 alkenes holds promise, and both apple skins and red wine are able to drink them up and throw them off.

L'Chaim ("To Life")!

Presenting Ezra the (Not So) Magnificent!

Once again, Ezra the Disingenuous demonstrates his inability to prove an argument. Last time out, he tried to (re)sell the snake oil that is RomneyCare, only to be taken to the woodshed by Bob. This time, he wants us to believe that the federally implemented national health care system known as Medicare is just hunky dory, and actually better than insurance companies at controlling health care expenses.

Here's his "evidence:"

And here's his interpretation of said "evidence:"

"One of the dirty little secrets of the health-care system is that Medicare has done a much better job controlling costs than private health insurers." [emphasis added]


Medicare, owing to the power that is the Federal Government, can control expenses in a way that no insurer can, simply because the law says that it can. Not the marketplace, not the free and unencumbered exchange of goods and services: simply, The Law. Which Law, by the by, means that the costs aren't gone or even lower, they're just shifted to thee and me.

So again, Ezra, you're certainly entitled to your own (wrongheaded and disingenuous) opinions, but you are not entitled to your own facts.

[Hat Tip: FoIB Holly R]

The (True) Cost of Health Care

An overarching theme here at IB has been that health care costs drive health insurance costs. While this may seem obvious to us, it bears repeating.

Why, you ask?

Well, a fundamental precept of ObamaCare© is that by controlling health insurance costs, health care costs can be better controlled. This is patently and (more important) demonstrably untrue:

"What Anderson might not know, however, is how Sutter's battle for market share in her corner of suburbia is affecting her bottom line. Hospital prices in the Sacramento region are among the highest in California, driven in large part by the negotiating clout of the hospital chain Sutter Health."

The Anderson family lives in a suburb of Sacramento, California, but their plight is far from unique or geo-specific. As hospital "chains" grow, competition is reduced, and prices increase. That's basic economics, of course, but a lesson lost on many folks who continue to believe that "reforming" health insurance will have any impact on the cost of care. In fact, the opposite is true. As we've previously discussed, ACO's (Accountable Care Organizations) threaten to dramatically change how health care is delivered, and the price we pay for that delivery. Bob sent me an interesting link, from an outfit called American Medical News, which underscores just how insidious these new entities really are. Here's what they want us to see and believe:

"Accountable care organizations ... generally involve a combination of physicians and hospitals taking responsibility for a defined population, working together to improve care and cutting costs."

Can you see the problem in that very short statement? A "combination" implies a partnership of co-equals. But that's laughable on its face. In any such "relationship," the hospital (and more likely, the chain of hospitals) is going to be the Big Dog, and is going to determine how the organization behaves. The doc is simply another vendor in this equation, with precious little say-so in how (and how much) health care is delivered.

And there's this little tidbit:

"Though ACOs are primarily defined as cooperative agreements between hospitals and physicians, health plans are keenly interested in the model and need to keep on top of developments because they will be the ones to reimburse the new entities for care."

Once again, what they want you to see and what's really happening are two very different things. The primary problem is that there's still that pesky third-party (the insurer) sandwiched betwixt the provider and the patient. Let's ignore for a moment the lack of consumer participation in this equation; if consumer-centric health care is predicated on choice (and it is), then it's DOA when it comes to ACO's. That is, what choice does one have when, as in the Anderson's case, there are only one or two plans that include the biggest ACO, er, hospital chain in the area?

And then apply that to the whole country.

This is a recipe for economic disaster: less choice (competition) means higher health care prices, which means higher health insurance premiums. And, as Bob's pointed out, this is exacerbated by the looming shortage of carriers.

Talk about your death spiral.

[Hat Tip for NPR item: FoIB Holly R]

Karma's a (W)itch

Looks like somebody didn't send in their WaiverMania check to HHS Secretary Shecantbeserious:

"One of the largest union-administered health-insurance funds in New York is dropping coverage for the children of more than 30,000 low-wage home attendants ... The union blamed financial problems it said were caused by the ... new national health-insurance requirements."

Looks like they won't be #112 on "the list."

I found this little tidbit interesting:

"Currently about 6,000 children are covered by the benefit fund, some until age 23."

"Age 23?" Under ObamaCare©, that's supposed to be "age 26." Someone miss the memo?

For its part, the union is pointing the finger of blame at the Empire State, claiming that, under directives that took effect 2 years ago, "it expected that ... many of its members would qualify for state assistance for health-insurance coverage." So the wonderful gunion members counted on saps, er taxpayers to foot their bills?

State officials, on the other hand, are having none of that:

"The state is not forcing 1199 to do anything regarding its employee health insurance,” said Jeffrey W. Hammond, spokesman for the New York Department of Health."

Classic Mexican standoff, or missed opportunity? You be the judge.

Sunday, November 28, 2010

MVNHS©: A Most Deadly Game

Our Cousins Across the Pond©, whose "health care" scheme we're attempting to emulate, have a little problem:

"Nineteen hospital trusts are today exposed as having alarmingly high death rates in a major report that also reveals how hundreds of people are dying needlessly because of substandard NHS care."

Okay, so not so "little," after all. A new report, compiled by the British Department of "Health," and Dr Foster Intelligence ("a public-private partnership ... that aims to improve the quality and efficiency of health and social care through better use of information") casts an unflinching eye on the debacle that passes for health care in the UK, finding that tens of thousands of innocent Brits "developed avoidable blood clots, suffered from obstetric tears during childbirth, had objects left inside them after operations or were not given immediate treatment after a stroke."

Still not convinced? Then click here for the gory details.

Told ya so.

We have to pass this bill so that you can find out what is in it

Perhaps missed in the excitement over other wonderful things we have been finding out about health insurance reform, here is a snippet from the Institute of Medicine:

"At the request of the Secretary of HHS, the IOM is undertaking a study that will make recommendations on the criteria and methods for determining and updating the essential health benefits package."

At first I misread this. At first I misunderstood that the Institute of Medicine was asked to define essential medical services. I am relieved to find out instead that IOM has been assigned to work on the design of insurance benefits.

Saturday, November 27, 2010

Medicare and Cancer: Both Underwater

The first being metaphorically, of course:

"Want an appointment with kidney specialist Adam Weinstein of Easton, Md.? If you're a senior covered by Medicare, the wait is eight weeks ... Top-ranked primary care doctor Linda Yau is one of three physicians with the District's Foxhall Internists group who recently announced they will no longer be accepting Medicare patients."

So why is our Medicare health delivery system beginning to look like the MVNHS©?

Well, when you have a limited supply and a (virtually) limitless demand, systems tend to end up that way. And if you think it's bad now, well, "that's not even taking into account a long-postponed rate-setting method that is on track to slash Medicare's payment rates to doctors by 23 percent Dec. 1."

The so-called "Doc Fix" is due in a few days, unless it's postponed (again). Hey, it's only (our) money, right?

The good news is that, if seniors manage to survive Medicare, they may also live long enough to benefit from some wonderful treats from the sea:

"Cyanobacteria live in every ocean and on every continent in both salt and fresh water. One species causes a rash known as swimmer’s itch; another blooms in lakes and reservoirs, expelling a neurotoxin that can be fatal to humans."

Ooops, that wasn't the good news. This is:

"(A) family of cyanobacteria called Symploca emits a toxin that attacks tumors."

Apparently, and this is still in the initial testing phase, these little sea assassins can target bone and breast-cancer cells (among others), destroying them without harming healthy cells or tissues. Unfortunately, it could be another 10 years before it can be approved and manufactured.

Keep your fingers crossed.

Friday, November 26, 2010

Cavalcade of Risk #119: Call for Submissions

Nina Kallen makes her CavRisk hosting debut next Wednesday (December 1). Submissions are due this Monday (the 29th). Please remember to include:

■ Your blog's url
■ Your post's url
■ The post's trackback URL (if available)
■ A (brief) summary of the post

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

NB: The Cav is about risk, but not necessarily or exclusively about insurance. So feel free to think outside-the-box (e.g. driving and texting, the environment, vaccination, etc).

You can submit your post via Blog Carnival or email.

Wednesday, November 24, 2010

Your New Health Care Plan

(Click to embiggen)
[Hat Tip: FoIB Jeff M]

About that "You can keep it" Promise

As with so many others, this one has not only gone under the bus, but the driver backed up to make sure it was good and dead:

"No matter how we reform health care, we will keep this promise to the American people. If you like your doctor, you will be able to keep your doctor, period. If you like your health care plan, you'll be able to keep your health care plan, period. No one will take it away, no matter what."

As Bob has most recently, and effectively, illustrated, none of these are true. But that's just us, right?


"The New York Times reports ... Consumer advocates fear that the health care law could worsen some of the very problems it was meant to solve"

Increased regulation leads inexorably to decreased competition, and thus higher rates and fewer choices. That's a threat, not a promise.

[Hat Tip: FoIB Holly R]

Tuesday, November 23, 2010

Trickle Down Effect of Obamacare

Hurricane Obamacare is a category 5 storm that will make landfall in January, 2014 but already we are feeling the effects of the feeder bands buffeting the country. On Monday HHS confirmed that the MLR (medical loss ratio's) as defined in Obamacrap would go into effect in 2011 without modification. We explored some of the impact of this MLR in yesterday's post.

But the MLR is much more insidious than just limiting the amount health insurance companies can spend on overhead. It is a jobs killer. 

Already several smaller health insurance companies have either exited the market or have announce they will soon leave. More will follow.

Giants like Aetna, Humana and others have already slimmed down by laying off hundreds of workers that service their health insurance block. Many of those are still unemployed and more will follow over the next few months.

These layoffs affect their ability to service prospective and existing clients. Already those of us on the front line have seen a noticeable impact on the ability to secure answers to service issues or have problems handled in a timely fashion.

Agent commissions are due to be cut drastically in January of 2011. Some say this is a good thing, but all that glitters is not gold.

Agents are 1099 employees and as such, cost the health insurance company nothing until a service is performed. The carriers do not pay our rent, or insurance or salaries. We pay all of that from our revenue.

Already it is anticipated that half the agents who are working the health insurance market will leave. That number may be low. The rest have already decided they can no longer afford to provide a high level of client service due to the fact our compensation will be cut in half and in many cases even more than that.

This lack of "free" service will shift the burden back to the home offices who are already trying to do more with less staff. If you think customer service is bad now, just wait.

It will also lead to increased complaints about the responsiveness of the health insurance companies. Complaints that will filter to state agencies who have also cut staff due to lack of state funds.

Health insurance will become a self service commodity. Some think that is a good thing. Some believe insurance companies should not profit from health care. They point to executive compensation packages, total profits and stockholders and blame them for the high cost of health insurance.

But in doing so they ignore the facts.

Executive compensation will be mostly unchanged although some will inevitably lose their job as departments are cut or eliminated. If profits suffer too much those carriers that remain in the business will withdraw, leaving less competition and higher premiums.

For what it is worth, the profit margin on health insurance averages 3%. If you look at what is commonly quoted as an average health insurance premium of $350 per month per individual then if there were $0 profits premiums would decline by about $10.

And how will stockholders be impacted?

Well, it depends.

You need to realize that stockholders are mostly retirement plans. Roughly 80% of all publicly traded stocks are held by employee retirement plans. In spite of all the media attention on Wall Street "fat cats" and their massive stock holdings, most stock is held by Joe and Mary Lunchpail. When stocks take a hit the little people suffer.

We touched on some of the issues of the MLR in yesterday's post but the impact on businesses, both large and small, is quite far reaching.

Starting in 2011 health insurance companies will have to track premiums, claims, and administrative fee's and provide a year end accounting on how much was spent on each item. This report will go to HHS but most likely also to the IRS.

If the health insurance company failed to meet the mandated MLR they must issue refund checks, and 1099's, to all covered participants. That cost will be factored into their overhead which means even less for customer service.

The checks that go out to businesses are quite complicated. Starting in 2012 business owners will start to receive refund checks for premium overcharges if things go as planned. The money received by the business means a possible amended business tax return, but it also means each business must pro-rate the refund over each individual that was a plan participant during the year and issue refund checks to those individuals.

If the premium was deducted by the employee on a pre-tax basis that means an amended return for them, and even more work for the IRS.

So far it seems as if the only winners in this deal is the IRS.

These checks and the headache that goes with this grand scheme will hit in 2012. How many businesses, both large and small, will decide to terminate health insurance plans rather than continue doing battle with the government?

All of this hits in 2012, which coincidentally happens to be an election year . . .

I wonder how many voters, already disenchanted with what they have seen of Obamacrap and who voiced their opinion at the polls a few weeks ago will return in November of 2012 and throw the bums out?

Hurricane Obamacrap has not yet made landfall but already the disruptive forces of this category 5 storm are being felt.

Monday, November 22, 2010

Obamacare Puts the Squeeze on Health Insurance

The Spectator informs us that HHS has finally spoken with regard to the MLR (medical loss ratio) guidelines for health insurance companies. The MLR dictates how much of every premium dollar health insurance companies must spend on claims.

On the surface this may sound nice but in practicality it is smoke and mirrors.

When you consider that health insurance is marketed in (at least for now) a free market where carriers are free to set prices for their product, it would seem foolish for a carrier to arbitrarily attempt to mark their product up more than their competitors. But the folks in DC and the media would have you believe just that.

The decreed loss ratio's are 80% for individual major medical and 85% for group health plans. But this comes with a hidden price.

These requirements were at the root of the controversy that arose in September over McDonald's having to drop 30,000 workers from its health plans. Eventually, they were granted a waiver from the requirements. But a lot of businesses won't receive a waiver, meaning that insurers will have to stop offering some policies, and many of them will decide to exit the individual market entirely, due to the nature of the way the financing works. This will translate into less choice and competition, and is another way that the law will lead to people losing coverage they may like.

As the article points out, not everyone got a waiver. So many who currently have health insurance will lose that benefit.

If you like the plan you have you can keep it . . . . but only if  HHS grants it a special waiver.

If the carriers fall short of those payout's they have to cut refund checks.  HHS estimates the refunds will total about $1.4 billion or about $164 per insured.

Think about this for a moment.

Each carrier will have to incur ADDITIONAL costs to comply with this stupid rule in order to calculate IF they owe a refund. Once they complete that task they will have to track down anyone who has been covered by their company, calculate their pro-rata share of the refund, and cut them a check.

If you are a business that get's a refund after you have filed your tax return that means adjusting your return to reflect the lower outlay you had for health insurance. More costs and hidden taxes associated with Obamacrap.

And then there is this little goody.

Also, it's no accident that the requirements were set at 85 percent and 80 percent. Last December, the Congressional Budget Office issued a memo saying that if the requirements were set any higher than that, health insurers would have to be considered part of the federal budget -- driving up the cost estimate of ObamaCare. As the CBO put it, referencing proposals for even more stringent requirements, "this further expansion of the federal government's role in the health insurance market would make such insurance an essentially governmental program, so that all payments related to health insurance policies should be recorded as cash flows in the federal budget." At the time, the Cato Institute's Michael Cannon pointed to the memo as a "smoking gun," revealing that Democrats had deliberately hidden the true cost of ObamaCare by making sure the CBO wouldn't factor in the cost of the private sector mandates imposed by the legislation.

Well isn't that interesting?

The MLR thing is a heated battle that will result in fewer health insurance companies offering fewer choices and higher rates overall. Somehow that doesn't match up with what was promised.

ACO: Told ya so!

ACO's (Accountable Care Organizations) are an ObamaCare© invention purportedly designed to increase access to, and affordability of, health care. As we've seen, of course, they do neither. But why take just our word for it? Writing in the New York Times (hardly a bastion of right-wing thinking), Robert Pear notes:

"Consumer advocates fear that the health care law could worsen some of the very problems it was meant to solve — by reducing competition, driving up costs and creating incentives for doctors and hospitals to stint on care, in order to retain their cost-saving bonuses."

Gee, ya think?

On the other hand, if you're Donald Berwick, this is a feature , not a bug:

"Judith A. Stein, director of the nonprofit Center for Medicare Advocacy, said she was concerned that some care organizations would try to hold down costs by “cherry-picking healthier patients and denying care when it’s needed.” [emphasis added]

And since over a quarter of Medicare beneficiaries exhibit multiple conditions, the system is ripe for rationing, not to mention financial abuse:

"Hospitals and doctors have also asked the administration to waive laws intended to prevent fraud and abuse in Medicare."

Wonder why that is.

On second though, no, I don't.

And by the way, be sure to check out Mike’s take on this, as well.

We have to pass this legislation so that you can find out what is in it

"Consumer advocates fear that the health care law could worsen some of the very problems it was meant to solve — by reducing competition, driving up costs and creating incentives for doctors and hospitals to stint on care, in order to retain their cost-saving bonuses."

Nawwww . . . . Reeeally?

Didn’t consumer advocates tell us back when that Obamacare would increase competition, reduce costs and increase access to health care?

Didn’t 60% of the American public - including InsureBlog - doubt those things would happen?

And didn’t the advocates respond that we were naysayers, sadly misinformed, immoral, and didn’t know what was good for us?

Gotta hand it to those advocates, they have principles.

And if their principles don’t work - - well, they have others.

Sunday, November 21, 2010

Do you see it? I don't see it . . . Part 2

[Part 1 is here]

Only this July, Kathleen Whatshername at HHS told the nation that
$5 billion was now available for the hundreds of thousands of people who can't get insurance because of a pre-existing condition. The average person could be forgiven for believing that this was a crisis of near-Biblical proportions. OK, so what happened?

Well, on November 12, I read that a grand total of 8,011 people had signed up for government-subsidized individual insurance having no pre-existing conditions exclusion.

The Wall Street Journal had some fun with the enrollment of 8,011, stating that “HHS created a program designed to operate at a loss and still can’t lure customers”. The Journal added that “HHS won’t take this for an answer, so . . . it said it will cut premiums by 20% and expand benefits . . . to encourage more people to enroll.”

In other words HHS takes as a given that the government’s failure to solve the crisis - - calls for more government.

The way I see it, appropriating $5 billion to meet the medical care needs of less than 10,000 people shows something is terribly wrong within HHS. And besides, the way I see it, this HHS insurance plan suffers from the same basic flaw as the government’s unemployment insurance strategy: overreliance on “government subsidies”. Government subsidies can only come from taxes paid by productive workers. Increasing subsidies means increasing taxes. Higher taxes dampen economic activity. So I still see reducing taxes as a better strategy than increasing taxes. Of course that also means reducing government spending and that is not in the lexicon of most lawmakers.

I have the same view about the uninsured. I still don’t see why a 2,000-page statute that commandeers virtually 100% of the U.S insurance and health care delivery systems is necessary to assist the 15% of the population who are uninsured. I don’t see why helping that 15% should cost anywhere near a trillion dollars a year. And I also don't see how that trillion dollars of annual spending ends up “saving” us money.

My lack of vision in these things probably explains why I could never be successful in government.

Do you see it? I don't see it . . . Part 1

Barack Obama, in an interview with "60 Minutes" recorded 11/4/2010 said several important things - - but in my opinion this is not one of them:

(scroll down to #3) "unemployment insurance, most economists will tell you, is probably the single most important thing we can do to improve the economy.”

The President’s statement prompted me to look up some history about earlier recessions in America. I did not find what the President’s comment suggested I would. For example, I found that James Monroe did not implement any unemployment insurance during the Panic of 1819. Yet somehow the American economy recovered. Not only that, Monroe was re-elected the very next year, in 1820. And for example I found that many states enacted unemployment insurance during the Great Depression and Congress enacted Social Security. Yet that Depression lasted for a decade. So I have my doubts that unemployment insurance is truly as important as the President says – despite the President’s belief that most economists think so. Am I saying the insurance is not important? No. I’m just saying I doubt it's the single most important thing the President can do to improve the economy.

Apart from history, unemployment insurance is paid using so-called government funds. Government funds come from taxation of productive workers, which unemployment insurance diverts to people who are not working. That may well not be their fault. Nevertheless they are unproductive while not at work. The very act that the President suggests is the single most important thing that he can do, in fact siphons money out of the productive parts of the economy – that’s the only place he can get the money. (Yes, he can print more, but that produces inflation which is just a sneakier tax).

Even if a company has oodles of cash, why would it hire or invest knowing that higher tax rates reduce the odds of gaining income from additional hiring or investment? Oh hello, we DO have companies right now with oodles of cash that are not hiring or investing. We read almost daily that the illuminati wonder why that is. Maybe their wonderment arises from the failure of reality to obey their theories.

I just don't see a tax on productivity as the best way to stimulate productivity. Do most economists disagree with this? Really?

[Part 2 is here]

Friday, November 19, 2010

Oy Canada! Part #1,387

So CanuckCare© is superior to our own (soon-to-be-replaced) system? By one metric, at least, sure:

"Canada does guarantee its citizens ... access to a Web site to check on wait times for surgeries."

Well, that's helpful!

Of course here, we have no need for such a site, since we don't really have wait times for necessary surgery. Ooops.

As noted health policy wonk David Hogberg notes, "Ms. Gorsuch in fact had her surgery canceled twice and was waiting for her third one went she suffered a fatal heart attack ...On the upside, she’s no longer on the waiting list."

Now that's comforting!

It seems that the key difference between CanuckCare© and ObamaCare© is that the former is a reality, and the the latter is merely a probability.

Feel better now?

Thursday, November 18, 2010

Medical Necessity vs (Stupid) Mandates

A dear friend sent me the link to this story:

"Regence BlueShield has been ordered to pay $148,000 to nearly a thousand women who were wrongly denied coverage of prescription birth control ... Regence had denied coverage of IUDs, or intra-uterine devices"

As a tried and true liberal, she was pleased that the carrier was "punished" for failing to provide coverage for these devices. The problem, of course, is that they fail to meet the very basic test of "medical necessity," and should not be covered in the first place. However, liberals like their freedom to indulge consequence-free, and were able to convince the state of Washington to make other people pay for them.

There are virtually no circumstances under which these units are used other than to prevent pregnancy. As we know, pregnancy itself is not a disease or injury. Of course, common sense has no place in these kinds of discussions: like IVF, Viagra and Rogaine, we want what we want when we want it. And just like those three, birth control per se does not meet the definition of medical necessity.

My friend then claimed that Viagra is a covered expense; I replied that this is true only under collective-bargaining agreements and self-funded plans. In other words, you have to specifically add it to get around the fact that there is no medical necessity associated with it.

To put this in its proper perspective, consider this: would you expect your auto insurance to pay for your broken air conditioning? Yes, it's inconvenient and uncomfortable, but one can always roll down the window. And it doesn't necessarily affect your gas mileage (in fact, leaving it off may improve your mpg). Regardless, it's not an essential component, and I can guarantee that you wouldn't like your premium if coverage was required.

Obviously, the carrier had an obligation to abide by "the rules," so I lay the blame for this at the feet of ignorant state legislators who passed the bill mandating this coverage. Their rationale, by the way, was that "failure of insurers to cover prescription contraceptives had amounted to gender discrimination, and that women of childbearing years were spending nearly 70 percent more than men for health-care costs."


"We're from the gummint...."

Reader Sam B offers this frustrating tale of how new IRS regulations cost him a day's work. It's important to understand, however, that Sam's no ordinary businessman: he's a successful small business owner and an SBA Small Business Development consultant. In other words, he's an actual expert in starting and growing small businesses, and an accomplished one, at that. The following tale is relevant to our readers because it is exactly the kind of experience we can expect under ObamaCare©:

I own a microbusiness (less than 20 employees – in fact, I have only two other than myself). On Monday, November 15th I received a letter from the US Government’s new Electronic Federal Tax Payment System (EFTPS). I am now to pay my monthly 941 federal withholding taxes on-line (as opposed to paying them with a coupon through my bank). Ironically, that same day (the 15th, mind you) my local bank ceased taking coupons. They told me that they had been announcing the end of coupon acceptance through signage in their lobby. Oh well, I only use the drive-thru or go on-line. I wonder why they didn’t announce it on-line? Perhaps their ad encouraging me to take another loan out on my house got in the way. But I digress.

I spent 3 hours and 47 minutes on the phone, bouncing between three 1-800 numbers. None of them would give me the login information the EFTPS website said I needed to login. At that point, I sent a brief but humorous email off to my congressman (it never does any good to be discouraging or mean when communicating with federal legislators – so be of good cheer). Being a good congressman, his staff put me directly in communication with an IRS employee who is charged with assisting people like me through government Labyrinths.

I then spent an additional 3.5 hours on the phone with my empowered IRS rep, as we dialed several additional 1-800 numbers and spoke with at least four live people (aside from the computer generated voices I dealt with yesterday). I must say, having a live IRS rep try to get you through the system is like riding next to Darth Vader as your Imperial Base repulses yet another Rebel attack. You feel invincible. As such, I was absolutely confident that I would be making my 941 payment by the end of the day – no problems! Well, let me tell you – “Darth” was just NAILED at every turn of his modified TIE fighter (I really shouldn’t call her that, she was very kind and skillful and I’m sure she’s an excellent government employee). However, after 3.5 hours with an “expert”, it was decided that I should wait for my “snail-mail” letter that contained yet a new login number to use, and then get on-line. Either that or use the down-load-able same day payment form and take it to my bank to wire money for the payment. Now I have to decide what’s cheaper; my bank’s considerable charges for wiring money, or any assessed late fees if I pay when I get my new number.

This brings me to my point. I was just about to scream “DON’T YOU SEE THE INSANITY?!?” at my IRS rep when it dawned on me. This is NORMAL to her. It’s her daily job to do what she just did. She has NO relevant understanding that, for a microbusiness, it makes absolutely NO sense to spend 7.25 hours unsuccessfully trying to pay an entity. How much money have I lost not working on other money-generating projects? Of course, she wouldn’t understand. It’s her job to spend 8 hours a day doing this.

THE POINT: All business people discussing the impact of changes in their lives generated by greater government involvement need to understand government bureaucracy: they will be dealing with a level of worker that has NO sense of the value of time. The phrase TIME IS MONEY is a foreign language to them. After all, this is their job 8 hours a day.

Sadly, I don’t see a “fix” to this problem. Especially as larger and larger programs like Obama-Care is rolled out. We are truly almost at a crises point. Luke, my force is broken!

Thanks, Sam, for sharing. There are some important lessons here, and we appreciate your time and willingness to point them out.

The Rest of the Story . . .

Bloomberg is reporting that a non-profit cooperative to "help small businesses in South Carolina find affordable health insurance for their workers."


If they expect to operate as a MEWA (Multi Employer Welfare Association) good luck. Most of those have either been declared illegal or have gone out of business, often due to shady business practices.

Perhaps all they will do is operate as a "super" broker. Getting something like this off the ground is challenging and more often than not, unproductive. Trying to negotiate favorable rates with a carrier on a rag tag group of businesses covering a wide range of industries is virtually impossible.

PEO's (Professional Employer Organization) have mostly failed when it comes to establishing favorable offerings of group health insurance.

And there is this . . .

Unless Obamacrap is unwound, gutted or outright repealed, all these efforts become moot in 2014.

I fail to see how this is news or what they will accomplish.

Wednesday, November 17, 2010

Medicare Premiums Headed North

FoIB Roger D sent us some very interesting information regarding 2011 Medicare premiums and benefits. To review, Medicare Part A covers hospital expenses, and is subject to an annual deductible. Starting in January, that cost goes up to $1132, an increase of some 3%. While that may not seem like a big hit, keep in mind that a lot of seniors will see no offsetting increase in their Social Security checks.

Part B, which covers non-hospital expenses, will cost $115.40 per month in 2011 for those going on Medicare for the first time, but the premium will remain the same for those currently on Medicare ($96.40 for most folks). Here's where it gets strange: according to Mercer Grist (an international HR consulting firm), CMS is using a little-known "twist" in the law to delay increases for certain beneficiaries.

It works like this:

Medicare rules prohibit year-to-year Social Security benefits reductions that are deemed to have been a result of increased Part B premiums. Since Social Security benefits are flat from this year to next, this law effectively "freezes" Part B premiums for these beneficiaries. That's actually a good thing (for them); otherwise, they'd end up with another unanticipated tax (the increased premium).

Of course, those seniors who don't fall under the benefits of that little "tweak" will see their premiums go up. Nice.

Part D (for "Debacle") is also undergoing some growing pains: premiums for higher income beneficiaries are going up. Call it a "tax on the successful," which of course it is. It's a nice little sleight-of-hand, too: the "success tax" is deducted from its victims' Social Security check and walked down the hall to HHS Secretary Shecantbeserious's office.

What a system!

Cavalcade of Risk #118 now online

Louise Norris presents a special pre-Thanksgiving Cavalcade of Risk. It's stuffed full of great risk-related posts, but it's sure not a turkey!

Tuesday, November 16, 2010

Big News for Grandpa

Well, well, well. Perhaps HHS Secretary Shecantbeserious is a closet IB reader. A while back, we reported that one way for a group to quickly lose "Grandfathered" status would be to switch carriers (while keeping benefits essentially the same). This is a tried-and-true strategy, with a long history of success. Unfortunately, it appeared that Ms Shecantbeserious had put a stop to it. Can't have folks saving money on their health insurance, after all.

Now comes word that the gummint is backing off of this silliness:

"Officials ... issued yesterday an amendment to interim final rules on grandfathered health plans under the Patient Protection and Affordable Care Act ... allows employers to provide the same level of coverage through a new health plan carrier and keep their grandfathered status."

Power to the people!

Sir Willy Wonka to the rescue!

Recently, we discussed the terrific new "Twinkies Diet," which demonstrated that even those spongy treats hold promise. Now comes word that another perennial IB favorite, chocolate, has even greater health potential. Scientists working with candy giant Mars are even now busy deciphering the genome of cacao, from which chocolate is processed:

"Researchers ... are scouring the genome of the tree Theobroma cacao to find ways of enhancing the health benefits of cocoa beans ... They believe they can boost the levels of compounds known as flavonols in the beans. Flavonols have been found in recent research to improve blood pressure and have beneficial effects on the cardiovascular system."

So a chocolate covered Twinkie would be the perfect health food, right?

Grand Rounds visits Dr Who

Nurse Kim, proprietess of Emergiblog, presents this week's collection of great medblogging.

Monday, November 15, 2010

Microcephalic Mongoloid Idiots

In 2005, my wife was tripped by a stray dog's leash, fell and fractured her wrist. As part of the recovery, she needed some minor physical therapy. At the time, we were covered by Health Net. Our doctor recommended a local PT company, and after verifying that they were a participating provider, she went for some treatment.

Health Net bounced the claim. Almost six months and countless hours of phone calls later, they agreed that providers shown on their web site as being in-network, who have a contract with Health Net, should actually be paid. Problem solved.
I should have known better...

Over the weekend, FIVE YEARS AFTER TREATMENT (and almost five years after I switched my company to Anthem), I received a reprocessed EOB again denying the claim. The message on the back of the EOB reads, "Recouped Payment Due to Incorrect Provider Selection".


PS: I apologize if you actually happen to be a microcephalic mongoloid idiot. It's really an unfair comparison.

Comin' up short

Supply and demand can be a real, um...bear. A major goal of ObamaCare© is to provide health insurance to more people. This may or may not be a laudable goal, but it's a pretty naive one. When more people are insured, there is a greater demand for medical services.

But is there an ample supply to meet those increased needs?

Short answer: No.

According to Dr Mark Siegel, a professor of medicine and Doctor Radio's medical director, "(t)here is a new disease spreading like a cancer in doctors' offices and hospitals throughout the U.S. ... Doctor Unavailability Syndrome (DUS). It is characterized by a rising shortage of doctors, both specialists and primary care, as well as the growing inability of the doctors we do have to take care of patient needs."

It's a point that can't be made enough: what good is a new insurance policy if you can't find a provider that will accept it?

And DUS is quickly getting worse, spreading to, of all places, Scranton, PA. There, the Catholic Church plans to sell off three hospitals, at least in part as a result of ObamaCare©. Remember, these kinds of hospitals generally represent the last, best hope for inner city medical care.

And lest one believe that gummint-run health insurance is exempt from the foibles of the marketplace, think again:

"Bauserman ... insured by a Medicaid managed health care plan ... says she had trouble finding an orthopedist in her plan who would see her ... Primary care physicians in the area say a shortage of specialists in Medicaid managed-care networks makes it difficult sometimes to refer patients."

That's because, just like "regular" insurers, Medicaid relies on networks of providers to help manage claims costs. Unfortunately, the kinds of specialists who accept Medicaid patients (and the below-par reimbursements that come with them) are few and far between. And it's going to get worse: "In many cases, Medicaid recipients will be required by their states to enroll in managed-care plans."

Told ya so.

Flawed premise, Predictable results

Over the past few months, Bob's done a yeoman's job of tracking the Epic Fail that is the PCIP (Pre-Existing Condition Insurance Plan). The stated purpose of said plan is to make health insurance available to the (approximately) 375,000 Americans whom HHS Secretary Shecantbeserious claims are currently uninsured because of pre-existing medical problems.

At least, that's how many folks Ms Shecantbeserious claimed would purchase health insurance through the much vaunted PCIP program. After all, the plans are guaranteed issue and chock full of great bennies (including maternity!). What's not to love?

Plenty, as it turns out:

"The $5 billion program started in July ... in North Dakota ... (l)iterally, one person has signed up ... Four people have enrolled in West Virginia ... 8,011 nationwide as of November 1."

As I said, Epic Fail. Offhand, I can think of a handful of reasons for this underwhelming response:

1) The requirement that one must have been uninsured for at least 6 months prior to applying.

2) The fact that (in most cases) coverage is not immediate.

3) Premiums that rival anything in the open market.

4) For the most part, insurance is not bought, it is sold. A while back, Mike keenly observed that there are thousands of people eligible for Medicaid (including SCHIP) who never bother to apply. Why would this program be any different?

There is one potential solution, with which Ohio has sort of flirted: why not sell these plans? Call me crazy, but what if there was already in place a network of professionals who could help these folks make informed choices, help them with claims or other issues which arise, and hold their hands through the process?

Yeah, that's just crazy talk.

[Hat Tip: Hot Air]

Sunday, November 14, 2010

ObamaCare© Waivering: 111 and counting...

As previously noted, HHS Secretary Shecantbeserious has no compunctions about handing out ObamaCare© waivers to select businesses, including McDonald's and Local 25 SEIU. In fact, over 100 such waivers have already been granted, on a completely rational, fair and transparent basis.

And if you believe that last part, I've got a great deal on some primo real estate for you.

The truth is far more disturbing:

[Video courtesy of Gateway Pundit]

For those playing along at home, here's a list of "the usual suspects."

Friday, November 12, 2010

Social Security Cuts?

The bi-partisan deficit reduction report is getting a lot of play, especially the part about cutting Social Security and Medicare. As someone on the precipice of Medicare (but not Social Security) I can identify with the backlash.

So why am I close to Medicare eligibility but not Social Security?

Because in 1983 Social Security benefits were amended to cut benefits for people born after 1937. The amended act also increased Social Security tax rates, established an earnings test which has the effect of reducing Social Security benefits for those with post-retirement income, and proposed a number of "fixes" to keep Social Security solvent.

So much for that move . . .

But the important point is, advancing the age at which full Social Security benefits can be collected is not new. This was implemented 27 years ago!

This Social Security calculator illustrates how the 1983 change impacted the gray panthers. You can also see how early or delayed benefits can impact your monthly check.

Damn Lies and Statistics

In 2001, Joel Best published a book called: “Damned Lies and Statistics: Untangling Numbers from the Media, Politicians, and Activists”. It, or the successor volume, should be required reading for everybody in High School civics class.
A recent letter crossed my desk that reminded me of that book. Written by the NAIC Consumer representatives to the Chairs of the NAIC Exchange Subgroup, it cites some rather unbelievable statistics and then goes on to draw some rather “interesting” conclusions. The entire letter can be found here.

Normally I ignore this type of hyperbole, but given the recipients of the letter, I thought it best to respond on a point-by-point basis.
“The National Association of Insurance and Financial Advisors released the results of a survey on health claims assistance provided by agents on October 15, 2010. The survey polled 806 NAIFA members who serve health insurance clients. It found that agents assist clients with an average of 223 claims per year.”
NAIFA represents licensed LIFE insurance agents and Financial Advisors. Although there is certainly some overlap in membership, there is a different organization, the National Association of Health Underwriters (NAHU) that represents Health Insurance professionals. I know of few health insurance agents who belong to NAIFA and it is unknown if the professional cross-section of NAIFA membership is at all representative of the health insurance agent community.
Although the NAIFA suggests that its findings are representative, the 223 claims per year per agent is much higher than seems reasonable. My own experience has about 0.75% claim assistance request per client per year. Based on that number, the average NAIFA agent would have almost 3000 active clients…a number far too high to be sustainable without substantial clerical assistance. Based on this alone, it appears that NAIFA membership is tilted towards larger agencies.
“The huge number of requests for assistance, multiple agent calls, and tens of millions of agent hours agents spend on claims indicate something is seriously wrong with the health insurance system.“
“Getting a claim paid should be straightforward with clear rules that are readily understandable to consumers.”
“If agents are in fact calling insurers more than 138 million times a year so that consumers get the coverage they contracted for, the problems that plague the health insurance system are even more serious than is commonly recognized.”
In general, claim problems fall into three categories: Inaccurate submission by the provider or insured; Services provided outside of the insurance policy; and Insurance company errors.
Claims are almost always filed by the medical provider and, in my experience, the bulk of problems arise from PROVIDER error. Claims are processed with minimal human intervention. That means that they have to be properly coded and the necessary information supplied…last week, a client had a claim rejected when his daughter's name was misspelled. If submissions are not properly prepared, they’re rejected.
Insurance policies are complex. They have to be to cover the myriad of conditions that can arise without providing blanket unlimited and unaffordable coverage. Unfortunately, that also means that occasional claims fall outside of the policy boundaries. Sometimes those limits can be appealed and a way found to provide additional services. Sometimes not. Claim problems can arise from the use of non-preferred providers. Depending on circumstances, that can sometimes also be fixed.
Insurance company errors happen. They’re inevitable given the sheer number of claims processed. Even Medicare has been known to occasionally mess up. I see nothing that will change in any system that involves humans.
“NAIFA notes that agents assist clients with claims “at no additional cost…while reducing the burden on state offices of insurance.” Agents may not directly charge clients for their assistance, but the cost is built into the price of coverage.”
The assistance that agents provide comes out of their own pocket. Agents and agencies are paid by the insurance companies, but the payments are independent of expenses. If I pay a person to help me with claim problems, I pay that salary. The carrier is out of the picture.
“The NAIFA survey confirms the extraordinary expense and inefficiency of the current system. The Affordable Care Act provides the basic tools for a better system—navigators, ratings of plans, greater use of the internet, standardization of administrative forms and processes, state insurance consumer assistance and ombudsman offices, and effective and efficient appeals systems.”
There is nothing on this list that isn’t here today.

Navigators are merely a replacement for agents. Without compensation levels to support them, the services provided by agents won’t be available.

Plan Rating has nothing to do with claims processing. Plans don’t process claims, carriers do.

All carriers already have internet access. Claims and plan descriptions can be viewed online.

Standardization of forms – Convenient, but how many claims are bounced because a Aetna form is used instead of an Anthem one? Especially since most claims are already being submitted electronically?

State Insurance Consumer Assistance and Ombudsman Offices – Call your local Insurance Commissioner's office. There's nothing new here.

Effective and efficient appeals – English translation: The insurance company is wrong and easily gives in.
Claims MUST be scrutinized. Failure to do so is an invitation for fraud and abuse…Look at the statistics on Medicare. The flip-side of looking at claims is that some are going to be rejected.
Agents provide a valuable service. We choose to spend time and money helping our clients resolve problems. Just like CPAs work with the IRS, it's a normal part of our business that isn't going to go away soon.

Cavalcade of Risk #118: Call for Submissions

Jay Norris hosts next week's Cavalcade of Risk. Submissions are due this Monday (the 15th). Please remember to include:

■ Your blog's url
■ Your post's url
■ The post's trackback URL (if available)
■ A (brief) summary of the post

And 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.

Thursday, November 11, 2010

Latebreaking LTCi Market Update

From FoIB Jeff M:

"MetLife Inc. says it will no longer sell new long term care (LTC) insurance policies in either the individual or group markets after the end of the year."

Citing "the financial challenges facing the LTCI industry in the current environment," the carrier is folding up and walking away. The "good" news is the carrier will continue to service existing clients (for now - we'll see how that goes).

Nothing, however, happens in a vacuum, and this move buy a carrier of this size will have ripple effects in the market. It also puts additional pressure on the carriers "left behind:" on the one hand, it's an opportunity to pick up additional market share; on the other, it doesn't bode well for the long term health of the industry.

Or maybe it does: after all, Darwin's Law isn't just for people.

Veteran's Day Health Wonk Review now online

Heather Kelley makes an excellent hosting debut with her Veteran's Day Edition of Health Wonk Review at her INQRI Blog. It's always exciting to welcome a new host into the fold, and Heather does not disappoint.

Wednesday, November 10, 2010

It's for the children...

Although this particular item is local to the Cincinnati area, it could very well hold lessons for other venues:

"Disagreements over health care benefits could unravel 10 months of progress ... The district wants teachers to pay more than twice as much for health care costs"

In a classic example of unstoppable force versus immovable object, the district, facing substantial budget shortfalls, wants its teachers to pony up more towards their own premiums. In the real world (i.e. the private sector), this isn't even a question any more - you will pay more, it's only a question of how much. But in the bizarro world of teachers' unions (among others), being asked to help out the taxpayer is tantamount to falling on one's own sword.

The Queen City's school system faces a $20 million budget deficit; in a bone-numbing display of understatement, the article observes that "[t]he teachers’ contract is important because it can ultimately affect the way schools operate and how kids are taught."

No kidding.

UPDATE: It looks like the Queen City and the Garden State are on the same page:

[Hat Tip for Cincinnati story: FoIB Holly R]

Tuesday, November 09, 2010

Tuesday Afternoon Linkfest

First up, regular readers may recall our recent post on John Hancock's substantial (unprecedented?) rate hike. Thanks to FoIB Jeff M, we learn that they've also announced a moratorium on new group LTCi cases. Not to be outdone, fellow LTCi biggie GenWorth has announced that it's "seeking an increase of 18% on PCS I and PCS II LTC products." They cite "lower than expected lapse rates."

That's an interesting point, by the way: rates are set based on a number of factors, and most of us would recognize things like return on investments and overall claims costs to be near the top. But carriers also have a "fudge factor" built in that relies on a certain percentage of policyowners "bailing" over time; that this rush to get out of the pool never materialized is telling.

Second, FoIB Bob D alerts us to thus far under-the-radar news that many of the newly-minted Republican governors are on track to opt out of ObamaCare©. According to the Wall Street Journal's Janet Adamy:

"Newly elected Republican governors are planning to blunt key parts of the federal health overhaul and join lawsuits against it ... Mr. Walker, along with new GOP governors in Wyoming and Oklahoma, said they planned to join in the legal fights against the law's requirement that most Americans carry insurance or pay a fine."

Good on them!

Joe Barton Hits, Misses

Over at RedState, Rep Joe Barton (R-TX), opines on the potential future of ObamaCare© under the (not so) tender ministrations of a Republican House. He scores with his suggestion that the bill itself be repealed [ed: fat chance of that, for now], and offers what he considers some good alternatives for future consideration. It's with some of these "suggestions" that I take issue:

■ "ban insurers from rescinding coverage when their policyholders get sick and need to use their insurance."

This is an oft-repeated but discredited canard. The reality is that there are already laws in place which prohibit this. About the closest one can find to a "real life" example might be association plans, but these are not, in fact, contractual agreements between the carrier and the insured.

■ "an updated Patients’ Right to Know Act makes sense so that patients can know the actual price and quality of the care when making their healthcare decisions."

Again, we've been vocal and vociferous proponents of transparency for many, many years. The reality is that it doesn't take another gummint mandate for this to occur - the marketplace itself has already begun to ensure its widespread acceptance. It also fails to recognize that these tools, in and of themselves, are of limited value.

■ "Purchasing health insurance across state lines"

This is another problematic "solution:" the very first roadblock on the way to that utopia is called McCarran-Ferguson, which our own Mike Feehan explains "was enacted primarily to maintain each state’s right to regulate insurance issued for its residents ... Complete repeal of McCarran-Ferguson would remove the limited exemption from federal antitrust regulation this law requires for the insurance industry . It would of course pave the way for complete federal regulation of insurance." Which would apparently put Rep Barton squarely in the ObamaCare© camp. Ooops.

I would also add that his gratuitous slam that "Only in the restrictive world of health insurance do we find that goods and services don’t flow from one state to another state without restriction" is demonstrably false.

On the other hand, his call to revisit (and rescind) the draconian cuts in Medicare bear consideration, as does his support of the Medicare Advantage program.

Finally, he he specifically targets the (evil) individual mandate, as well as abortion funding and the employer fine. Unfortunately, he completely misses the MLR (Medical Loss Ratio), which is (at best) a dubious metric.

Over all, a good, solid B-, which means that there's great potential for improvement. Looking forward to that.

Veteran's Day Grand Rounds

Now up at Nurse Ratched's Place, a tribute to those who have served our country, including some that may surprise you (Jimi Hendrix??!!).

Monday, November 08, 2010

Outstanding Food Pyramid News

Pee on the MVNHS©? There's an app for that!

Unfortunate Industry Tricks: PBM's vs Common Sense

Let's start with a premise and a fact:

Premise: increasing health care costs lead to increasing health insurance costs (premiums).

Fact: most (all?) insurance carriers use Pharmacy Benefit Managers to help both the cost of care and of insurance.

By way of background: PBM's are (allegedly) a cost-efficient way for carriers to offload the administrative functions of filling prescriptions. Now, one might ask why the carrier "owns" that task in the first place: they don't handle brain surgery or give tetanus shots, so why are they dispensing (even vicariously) medications?

The stated reason for this business model is that it helps carriers to rein in the cost of medications, which make up a disproportionate percentage of claims. That's a good thing, because (as we've noted), lower health care costs can lead to lower insurance costs. The problem is that we don't really know that the PBM's fulfill this function; all we know is that carriers believe that they do.

In researching for this post, it became readily apparent that this is a more complex issue than it would at first appear; so I'm going to focus simply and exclusively on one subset of the model:

I have a client who suffers from MS, and is covered under a High Deductible, HSA-compliant health plan. His annual deductible is $3500, after which the carrier pays 100%. His deductible starts anew every January 1, and he meets the deductible by mid-February, after which the carrier pays the tab for the rest of the year.

So where's the beef?

In case it's not obvious, January 1 is right after "the holidays," when coming up with $3500 is often a challenge. Now, he understands this, and begins saving for it around Thanksgiving, but it's still a heavy load. His insurer requires him to use their PBM, and the med's cost about $2500 for a month's supply [ed: something to consider when you're thinking about going "bare" or believe that a discount card is all you need]. He found the same medication on-line for a much lower price, and would prefer to go that route. In the grand scheme of things, it would seem to be six-of-one, a half-dozen of the other: after all, he still has to come up with the $3500. But this way, he can spread that cost over a few extra weeks or months. It also means that, once he's met the deductible, the insurer would save money, as well.

It'd be a win-win.

But alas, one of the key components of the insurer-PBM contract is "exclusivity;" that is, the insurer agrees to count towards the deductible (and future reimbursements) only those scrips filled by the PBM (with rare exceptions). On the one hand, this makes sense: the PBM is in business to make money, and insurer to save it. This model apparently serves both purposes. The problem is that the insured is the one who pays the price: if he finds a better price for a particular med at, say, his neighborhood pharmacy or at Amazon, he's free to buy it, but it most likely won't count towards his deductible.

This is a double whammy for the savvy insurance consumer that opted for the HSA plan: after all, it's his money being spent (at least at first), not the insurer's. Haven't we been told that one of the most important aspects of consumer-driven health care is that the insured has an incentive to shop more carefully for it? In this instance, though, he's being actively punished for doing so.

So how do you resolve this dilemna? I have no reason to doubt that, in the big picture, PBM's can help insurers control their costs, but it's also obvious that this puts the insured at a disadvantage. I've often half-joked that one should never confuse "insurance" with "common sense," but it seems to me that this particular question has yet to be addressed. I am most definitely not arguing for government intervention in this - we have enough screwy laws and mandates, and enough government meddling already, thank you very much. But I would like to see this addressed by the industry, and perhaps by organizations like the NAIC (which I grant you is a quasi-governmental entity).

What say you?

PCIP Rate Reduction

The folks in Washington, the ones who gave us Obamacare, have figured out a way to spur growth in the pre-existing health insurance program (PCIP). When PCIP was created they estimated 4 million citizens would qualify for the plan but expected 200,000 would eventually enroll.

To date, only 8,000 have actually signed up with 1,657 coming from Pennsylvania (161 in Georgia).

Why Pennsylvania?

The Keystone state charges a $283 monthly premium — one of the lowest rates in the country. Pennsylvania is also the only state to charge the same rate regardless of age. Other states have higher rates for older people.


Charge lower rates and the same rate regardless of age.

This must be part of the group that thought up Cash for Clunkers where you could trade in your $500 car for $4500.

So now the Wall Street Journal reports that HHS wants to encourage expansion of the failed PCIP idea by lowering premiums.

The federal government said Friday it will cut insurance premiums by nearly 20% for people in high-risk pools, a program under the health overhaul that insures those with pre-existing health conditions.

So what about folks that already bought? Will they get a retro-active rate adjustment?

If a 20% fire sale doesn't get the influx, how low will they go? Don't they realize the folks who wanted this plan expected it to be free?

But wait, there's more!

The Department of Health and Human Services said it will offer three types of plans beginning in 2011, instead of just one offered now. The existing standard plan will offer premiums almost 20% lower than this year's plan, according to the department, with a $2,000 medical deductible and a $500 drug deductible.

The agency will add a second plan with higher premiums and lower deductibles of $1,000 for medical and $250 for prescriptions. A third plan will include a tax-advantaged health savings account and carry a $2,500 deductible.

HHS also carved out a new category of premiums for children with pre-existing conditions. 

New plans, lower rates, child only plans.

What a country.