Cavalcade of Risk #120: Risk/Aversion edition

Jason Shafrin presents a unique and wonderful Cavalcade of Risk. There's a set of posts for risk-takers, and another one for those of us who are a bit more risk-averse.

Either way, there's zero risk of disappointment.

But [gasp] that's . . . that's . . . that's . . . What IS that?

Research published this month in Health Affairs notes that women consume significantly more medical care than men.

“Except for children, total spending for and by females was greater than that for and by males, for most services and payers.”

Cheese, wouldn't that, you know, mean that medical insurance premiums should be higher for women?

No, silly - because that wouldn't be faaaairrr. It would be discrimination. And that's wrong. Isn't that right?

Who knew?

Georgia Docs Leave Medicare

Medicare. Don't leave home without it. But finding a Georgia doctor to treat you might be a real challenge. The problem?

Medicare pays docs less than private insurance, less than private pay (those who do not have health insurance). Only Medicaid pays less than Medicare which means those on Medicaid and Medicare, dual eligibles, are in real trouble.

The Atlanta Journal Constitution is reporting how some Georgia doctors are going to just say no to Medicare patients.

The instability of the system has already prompted some doctors to leave Medicare and has more thinking about it, just as the first wave of the gigantic baby boom generation begins to engulf the program. Without a fix, experts said, more elderly Americans will have a hard time getting an appointment with the doctor of their choice.

"Medicare is a mess right now," said Dr. Tom Bat, who practices with a group of physicians at North Atlanta Primary Care.

It is bad now and only going to get worse going forward.

Make no mistake, future cuts in Medicare will be made in order to fund Obamacare. Seniors will be sacrificed on the altar of budget cuts in order to provide health insurance for others.

Under any other name, this is robbing Peter to pay Paul.

Medicare pays about 80 percent of what private insurance pays, according to government reports. Currently, physicians in Atlanta get $67 for a typical office visit for a Medicare patient.

While Medicare payments for doctors have remained nearly flat for the past decade, the cost of running a medical practice has gone up by more than 20 percent, according to estimates by the American Medical Association.

This is a real problem that isn't going away.

"Rather than fixing it, the politicians just postpone the problem and each time that they do that, there is more uncertainly for the physicians and other providers," said Dr. Harry S. Strothers III, president of the Georgia Academy of Family Physicians

Strothers said it's common after speaking engagements for people to approach him seeking help finding a doctor, including several just last week. "Two had just retired and found out the doctor they have been seeing for years didn't take Medicare," he said.

My mother in law had the same issue 15 years ago, so this is not a new problem.

You may have trouble finding a Medicare doctor in Georgia but finding the lowest Medicare supplement rates is easy if you do your homework. Seek advice from a local agent familiar with all the Medigap plans in your area.

Grand Rounds is up...

Dr John Mandrola makes his Grand Rounds hosting debut, and it's a beaut! Check it out for the great posts, and enjoy the beautiful pics.

The Commonwealth vs ObamaCare©: What's it mean?

As I'm sure our readers already know, a federal judge in Virginia has ruled the (Evil) Individual Mandate unconstitutional. There are a lot of legal eagles already dissecting the various legal implications, but I'd like to share some thoughts about the ruling from the perspective of risk management. Of course, these are not incompatible, so please pardon my use of some legalistic terminology in this analysis.

Let's start with this: if one presumes (as I do) that the true goal of ObamaCare© is to destroy the health insurance system that over 85% of us currently enjoy, then this ruling is a boon to those who favor it. Since the judge has ruled that the precept of "severability" does not attach, then we are left with a system that will require insurers to ignore pre-existing conditions while driving away healthy folks who would represent a "cushion" against increased claims. As insurers face more expensive and frequent claims from those who are ill, premiums will escalate even faster than they already do, driving away healthy folks who know that, if and/or when they get sick, coverage will be readily and immediately available. What possible reason would they have to remain insured?

Of course, since we already know that this is the desired outcome of those who favor ObamaCare©, it makes perfect sense: once enough people leave the system, and premiums increase beyond our wildest imagination, the government will have little choice but to step in. Whether that's through price controls or simply moving everyone to a nationalized scheme, the result will be an insurance system far different than what we have now. The problem, of course, is that "different" doesn't necessarily mean "better;" as we've seen from (for example) the MVNHS©, such a system does little beyond rationing to rein in increased health care costs, while subjecting its victims, er, insureds to lengthy waits and poorer outcomes.

Obviously, Judge Hudson's ruling is merely a stepping stone; there are still approximately 4.8 million other lawsuits currently wending their way through the judicial system. I do appreciate that at least one jurist has "seen the light" regarding the Evil Mandate, but I'm less sanguine that this represents a meaningful step forward. Still, it's preferable to a ruling approving the mandate.

Absent imposition of severability, I give it a B-.

Oh Baby, Baby!

The LA Times has this breathtaking lede:

"Before Joanna Joshua and Kyle Winning started a family, they hunted for health insurance to cover the increasingly high cost of having a baby."

Let's reword this, shall we?

"Before Joanna Joshua and Kyle intentionally burned down their house, they hunted for homeowners' insurance to cover the increasingly high cost of rebuilding it."

There, isn't that better?

Of course, both circumstances are silly, but they underscore the principle of risk. Being pregnant is not a disease, and it is easily avoided (we'll leave rape out of the equation, since that is, in fact, an unforeseeable risk). Insurance companies know this, and know that the utilization rate for maternity riders approaches 100%. That's not risk, that's cost-shifting. So to the extent that such riders are available at all, carriers price and configure them to essentially refund (at best) the premium paid.

Here's where it gets dicey, though:

"The dearth of choices forces many would-be mothers into government insurance programs paid for by taxpayers ... All of this drives up costs for hospitals, insurers and consumers buying individual policies."

It's a heads-I-win-tails-you-lose proposition: folks see no problem with mandating birth control, and also want coverage for having a baby. Neither of these pass the test of "medical necessity," and both of them drive up health care costs for everyone. The result? Even more uninsured:

"The industry's trade group, the Assn. of California Life and Health Insurance Cos., pointed to a study that found the most recent maternity bill in Sacramento would drive up insurance rates as much as 28%, and would prompt more than 9,000 mostly young policyholders to give up their insurance."

But don't we want more people to be insured, not less?

Aetna Will Probably Abandon the Individual Major Medical Market

Aetna has made another stupid move that will most likely cause them to abandon the individual major medical market in the next 18 months. Always a pain in the butt to deal with and customer service that is really cuss-tomer service.

Their latest move will put their very small block of individual major medical business into a death spiral.

Obamacare is taking its' toll on the individual health insurance market, leading to fewer choices and higher premiums. Parent's looking for children's health insurance have almost no options except to add them on as a dependent to their own plan.

Obamacrap has also killed the maternity benefit as an option in Georgia.

Last week Aetna sent a notice to agents that compensation will be cut drastically. New business comp is half what it was before. As if that wasn't enough, they also are cutting existing comp on in force renewal business by 70%.

The result will be agents will be forced to abandon Aetna as a resource for new business (no big loss there) and will move as many healthy clients as possible to new health insurance companies leaving Aetna with only the sick people.

Aetna's block of business will deteriorate to the point that premiums will be insufficient to cover claims, leading to larger and larger rate increases going forward. The policyholder's left behind will be held captive with no place to go and few options. Either they will have to pay the higher premium or drop coverage and go without for at least 6 months until they can get into Obama's PCIP program.

This is just another stupid carrier trick.

Healthcare Shortages Coming up: Thanks Lots, ObamaCare©! [UPDATED]

FoIB Bob D tips us to this interesting (if disheartening) news:

"(C)hildren’s hospitals are facing drug price hikes that will cost them hundreds of millions of dollars to supply needed medicine to children with rare diseases."

This is a direct, if unintended, consequence of the rush to get ObamaCare© passed before anyone actually, you know, read it. Because it was rammed through so quickly, but haphazardly, crucial wording that would have allowed the discounts to continue was omitted. Already, two major drug manufacturers have announced that these deals will be "suspended."

And lest you think this is heartless of "Big Pharma," remember whose perfidy caused this problem in the first place. Here's a hint.

But it's not just "the children" getting the short end of the stick; New York-based internist Dr Marc Siegel reports that, in a recent survey of 2400 practicing physicians, two thirds were against ObamaCare©. Worse yet, three fifths expected to "close or significantly restrict their practices to certain categories of patients." Almost as many acknowledged what we already knew: that they'd be required to spend less time with their patients. So much for "if you like your doctor, you can keep your doctor."

Thump, thump, under the bus you go.

Piling On: In case you thought Dr Siegel's piece was an outlier, here's this from Investor's Business Daily:

"Four in nine doctors responding to an IBD/TIPP poll sent out in August 2009 said they "would consider leaving their practice or taking an early retirement" if Congress passed what has become known as ObamaCare ... Now a Merritt Hawkins survey of 2,379 doctors for the Physicians Foundation completed in August has vindicated our poll. It found that 40% of doctors said they would "retire, seek a nonclinical job in health care, or seek a job or business unrelated to health care"

Ooops.

Here's the bottom line: no matter how you slice it, ObamaCare© means less choice, less competition and higher health care costs.

And we all know what that means, right?

Cavalcade of Risk #120: Call for Submissions

Jason Shafrin hosts next week's Cavalcade of Risk. Submissions are due this Monday (the 13th). 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.

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).

Better in the Great White North?

Uh, maybe not.

This Sceptered Isle Part LXIV

But of course if WE do it, it will work out better.

Skin in the Game

A longstanding meme here at IB is that health insurance costs increase because health care costs increase; a corollary to this is that, because we are insulated from the true cost of health care, we have little or no incentive to demand its efficient delivery. That is, since the majority of (private) health insurance is subsidized by employers, we don't really know what it costs, and since most of us have some kind of co-pay plan, we don't know the true cost of the care we receive.

If, for example, your employer covered a third of your car payment, would you really know (or care much) what that payment is? And if your car insurance covered oil changes, would you know (or care much) what your mechanic charges?

Human nature suggests that the answer would be "no, not really." After all, if someone else is fronting the bill, we don't have much (or any) incentive to question it or look for a better "deal." We saw this most graphically in the lobster dinner allegory, and now Investors Business Daily puts hard numbers to the phenomenon:

"Nearly 60% of American adults are covered by an employer-based plan ... Because Americans who have employer-based coverage see little money coming out of their pockets when they visit a doctor or go to the hospital, they have little incentive to keep costs down."

Or, to put it more bluntly, "(a) primary reason why health care costs are soaring is that most of the time when people enter the medical marketplace, they are spending someone else's money," as Devon Herrick (of the National Center for Policy Analysis) notes.

There are certainly times, of course, when careful shopping is inappropriate: in the ambulance when suffering a heart attack, the CareFlight helicopter at the scene of the crash. But for the most part, and especially when it comes to routine and maintenance claims, why aren't we more involved?

Another example: the typical prescription drug card now carries a $15 co-pay for generics. But who pays $15 anymore? After all, (almost) all can be found for $4 at Walmart or CVS or Krogers (to name a few); yes, it may involve a little time and travel, but it's once a month (or every three months). Even at $3 a gallon, how far would you be willing to drive to save $11 per scrip? And if you're on several such meds, the cost is even less. So why aren't we using this model for other aspects of health care?

Here's why:

"According to Herrick, for every dollar of hospital care that is consumed, a patient pays only 3 cents. The rest is paid by a third party ... When a patient visits a doctor, less than 10 cents of every dollar of care consumed is paid by the patient. Again, a third party pays the balance."

That "third party" is, of course, one's insurance carrier. But even that's not completely accurate: for the most part, the routine claims are really just a transfer of one's premium to the provider; it's not the "house's money." Still, it obscures the actual cost of the care itself, which then further exacerbates the increase in those costs.

And, as IBD points out (and as we've noted), "Medicare and Medicaid have also had an impact on spending, as they too are third-party payers that ... hide from patients the true cost of medicine." These two schemes actually represent a double-whammy: the first (as IBD notes) is that they pick up the bulk of the tab, which hides the cost from the beneficiary. But that cost doesn't go away: a goodly portion of it is shifted to the private insurance sector, which must then recoup that cost by raising premiums.

So what's the solution?

Herrick takes a novel (and, I think, effective) approach: he considers the case of the plastic surgeon. In almost all circumstances, plastic surgery is elective, and thus not available for insurance reimbursement (and, as we've noted, ineligible for network discounts, as well). So the real cost is very easy to determine: it's what the doctor bills you. One would think that, since so few of these expenses are "outsourced," demand would remain fairly level (or even decrease as folks' disposable income plummets in this economy). But that's not the case:

"1.7 million cosmetic surgical procedures were performed in 2008, "more than 40 times the number performed two decades ago." Yet cosmetic surgeons' fees, he says, have remained relatively stable, rising only 21% from 1992 to 2008."

So there are two effects at work here: on the one hand, patients' demand is higher than ever, but the cost of the care isn't. Why is that? Well, it's pretty simple: when folks are spending their own money (as they almost certainly are in this instance), they have an incentive to find the best "bang for the buck." And since providers are truly at the market's mercy, there's an incentive to keep costs as low as possible. The key is that the patient, not a third party, is in control.

Isn't it time we took control of our other health care needs, as well?

Health Wonk Review: Year-End Wrap-Up

Brad Wright hosts this year's final HWR, and it's a doozy. Lots of great posts, and some interesting illustrations to illumine them.

Obamacare and Single Payer

For some reason, many think they want a single payer health care system. What they don't know is, Obamacare has already created that in some situations.

I had a call today from a lady looking for health insurance with maternity coverage. I told her how her options were limited to one carrier. When she asked why, I said this was due to Obamacare.

She became annoyed and said this is why we need single payer so the carriers won't hold us hostage.

At this point I had no desire to give singing lessons, so I thanked her for calling and went back to the business at hand. But that got me thinking.

If you consider states like Maine that have intense regulation and mandates with regard to health insurance then it doesn't take long to figure out the only choice other than a government plan is Blue Cross.

If you don't like or don't qualify for the taxpayer funded plan you buy from Blue Cross . . . and you pay some of the highest health insurance premiums in the country.

Obamacrap has come to Georgia already in a sense. Last spring if you wanted maternity benefits you could pick from about a half dozen health insurance companies and different kinds of maternity benefits.

Thanks to Obamacrap, now you have one choice.

Blue Cross.

If you want maternity coverage in Georgia you buy from Blue Cross. The additional premium (in addition to the regular premium on this "Cadillac" plan) is about $200 per month. You must pay that premium for 12 months before you conceive and then you can start to access the benefits.

Over a two year period (your one year waiting period plus another 9+ months waiting on the baby) you will pay in over $2,000 in additional premiums. Once the baby arrives and the bill is totaled, your share of a normal delivery will be about $5,000 and Blue Cross will pay less than $1,000.

Once Obamacrap became law every carrier but Blue Cross pulled out of the maternity market making them, in effect, a single payer.

Many will remember the days of Ma Bell when you got your service from AT&T (or one of their subsidiaries) or you didn't have phone service. Your phone came in a basic black (although they later added different colors for the Princess line), but your choices were limited.

And everyone complained . . .

Now we have phone service in all sizes and packages, and people still complain, but at least you have a choice. If you don't like your current phone company you can go somewhere else.

But in Georgia, if you want maternity coverage you pick Blue Cross. If you don't like what they have to offer you do without because Obamacrap has made them a single payer when it comes to maternity coverage.

So for those who think they want single payer, how is this working for you?

(Military) HealthcareGates

A fundamental premise of ObamaCare© is that government is a more efficient manager of health care costs. As we've already shown, this is simply not the case. Medicare, though, is only one existing federal health care scheme; another, lesser-known one is the military's health care "system," known as "Tricare."

To give readers a sense of how out of control government-sponsored health care is, one need only consider the words of a retired Marine who chose to stay in that system despite the very nice benefits package available from his current employer:

"(H)e and his family remain on the military’s bountiful lifetime health insurance, Tricare, with fees of only $460 a year. He calls the benefit “phenomenal” ... It is so cheap compared to what Booz Allen [his current employer] has ... acknowledging that premiums called for by private employers can run many times greater."

No kidding! Could that be because that cost is borne not by himself or his employer, but by thee and me (i.e. the taxpayer)? And the situation continues to worsen, since so many of those who are eligible opt for the less expensive (for them) Tricare.

But is it really less expensive?

Well, it depends on one's perspective: it sure seems like a good deal for enrollees, but for those of us who actually foot the bill, not so much. It's gotten so bad, in fact, that Defense Secretary Robert Gates "is seriously considering whether to ask for Tricare fee increases in next year’s budget."

"Seriously considering?" Are you kidding me?! At a time of unprecedented national debt, with unemployment consistently hovering around 10% (or, more accurately, 17%, as measured by the more accurate U-6), why is this even a question?

Here's why:

"The battle over Tricare pits the efforts of the Pentagon to contain the exploding cost of health care for nearly 10 million eligible beneficiaries against the pain and emotions of those who say they have already “paid up front” with service in uniform."

While I certainly respect and appreciate that service, not all (or even many) of those "10 million eligible beneficiaries" were front-line troops; in fact, many (most?) are the families of those who served. Yes, they made a sacrifice, but almost all of the service-members were volunteers. But even that's beside the point: the key phrase here is "exploding cost of health care." Now where have we heard that phrase before?

Oh, yeah.

So the Fed's are having no more success containing the cost of health care under Tricare as Medicare, yet we're supposed to believe that adding tens or hundreds of millions more folks to those programs will somehow magically solve the cost problem?

Sure.

Risk Management Gone Horribly, Horribly Weird

On the one hand, we've cataloged the unusual things that people seek to insure, and certainly protecting one's "money maker" (so to speak) is high on the list.

But this is just, well, creepy:

The Obama Waffle House

If you like the health insurance plan you have you can keep it, as long as you work at the Waffle House and have friends in Washington. It seems HHS Secretary Shebullshits is at it again, handing out exemptions from Obamacare like they are going out of style.

We are now at 222 groups that don't have to play by the Obamcrap rules like the rest of us and the number is likely to continue to rise. Among the new inductee's into the Obamacrap walk of fame is Georgia's own Waffle House. That means the almost 4,000 workers at Waffle House will be able to continue their mini-med

This begs the question, how many have asked for waivers and been denied, as well as how many more are awaiting approval?

Tax Carnival; Stocking Stuffers edition

This is a new one for us: the Tax Carnival is a monthly round-up of tax-blog posts. We're obviously no CPA's (although I understand Bob plays one on the radio?), but our post on new HSA rules made the cut. I apologize for being a bit tardy with the announcement: it actually went "live" yesterday but I just saw it today.

Do check it out.

Grand Rounds: Impact of Healthcare "Reform"

Over at Highlight Health, Walter Jessen presents this week's extensive round-up of medblog posts, focusing on the effects of "reform" not just today, but moving forward.

Mike and Bob on Medical Loss Ratios

Recently, I was privileged to observe a really interesting email exchange regarding the new Medical Loss Ration (MLR) rules which go into effect next month, and which promise to further erode the value of health insurance. The conversation was a result of an email I'd received from Cigna, and which I forwarded to Bob, who then forwarded it on to Mike. The email said, in part:

"On November 22, 2010, the Departments of Treasury, Labor, and Health and Human Services jointly announced Interim Final Regulations for the Patient Protection and Affordable Care Act’s (PPACA) Medical Loss Ratio (MLR) provision.

The provision states that beginning in 2011, insurers and HMOs must annually calculate their MLR and provide rebates to policyholders if their MLR (percent of premium revenue spent on claims/medical care) is less than 85 percent for large groups and 80 percent for small groups or individuals.

MLR applies to insured plans only, regardless of grandfathered status."

It also mentioned that "Non-U.S. insurance companies do not file MLR."

Bob immediately glommed on to that last bit:

"Go back 20+ years or so when self funded plans with stop loss insurance was becoming popular in groups less than 1000 lives. Because US based health insurance carriers were prohibited from offering such plans (stop loss) foreign companies, most notably Lloyds, were major players along with Swiss Re, NRG (Netherlands Reinsurance Group), Sun Life, Manu Life and a few others. Even saw Tokio Fire and Marine on some risks.

P&C companies quickly figured out the ban was on US health insurance companies so carriers like Safeco, Travelers and some minor players got in the game.

This makes me wonder if this opens the door for foreign companies to get in the game and spoil the market? They can apparently skate on the MLR issue but the plans themselves would have to comply with other issues (mandated benefits) or else the insured is subject to a fine."

I had focused on the way MLR will be calculated, but Bob immediately noticed something "under the radar."

Mike then responded:

"I've attached two paragraphs that I found in the preamble to the regulations, together with a full copy of the preamble & regulations. (The preamble is 230 pages long, the regs themselves 78 pages long. In effect, HHS takes three pages to explain each page of their regulation - think that will be enough?)

Anyway, it seems to me that the main thing is whether a health insurance policy is approved by any state, and only secondarily whether the health insurer is domestic or foreign. Therefore I think the CIGNA comment does not fully explain the situation and probably has raised a lot of questions.

As to stop-loss insurance, I don't find where the preamble addresses it. I think that's because the insurance reform law deals with health insurance policies and benefits, not stop-loss insurance. So I assume that none of this applies to stop-loss insurance because it's not "health insurance" and I doubt there will be any disruption in stop-loss insurance markets, whether the insurer is a US insurer, or not."

Which is at once comforting and disturbing: comforting to know that the stop-loss insurance market (a vital component for self-funded plans) is probably going to be alright. But disturbing because, well, as Bob points out:

"Let me see.

Obamacrap is 2200 pages, give or take.

Regs are 78 and preamble 230 pages.

And let's factor in the numerous exceptions (over 100 companies and counting) and this thing will make the tax code seem like a Readers Digest article.

So frustrating to see what they have done, and how they are seemingly clueless about, well, just about anything dealing with the real world."

Just so.