Over twenty years ago I sat in the office of one of the most famous CEOs in the world. He had gathered a group together to redesign the health benefits for 100,000 employees. A lot of ideas were being thrown around: cafeteria plans, increased out-of-pocket costs offset by savings accounts, multiple plan options. He was famous for both his brilliance and his nastiness, which may be why I was the only one who asked exactly what he was trying to accomplish.
"Simple," he said. "I want to give them less and make them think it's more."
Part of my job back then was to analyze health care costs and model ways those costs might change under different plan designs. I'd written a textbook chapter on the way medical information and financial incentives affect doctors and patients, but this work wasn't theoretical. Business people wanted answers. I worked for health insurers and large employers. They wanted to know what they were buying for their health care dollars, how much those dollars were likely to go up in the next few years, and what they could do about it.
Predicting's a tricky business, but I had a reputation for being good at it. A big part of the job was knowing which proposed changes would really affect costs and what wouldn't, which would keep employees healthy and happy and which would affect their health adversely. (Even the most hard-nosed executives don't want absenteeism to go up. It's bad for productivity.)
I've thought about those days a lot as I've watched health reform work its way through the political process. A lot of the theoretical arguments for some of the more specious aspects of reform are retreads from those old days in the 1980s. Like big-hair bands, they're a part of that decade that just won't go away.
Those ideas didn't work then, and there's no reason to believe they'll work now. Then, as now, people had far too much faith that we could design a health plan so efficient that it would, in effect, manage itself and reduce its own costs. Instead, here's what really happened in the 1980s: HMOs and other managed care techniques created a sharp, one-time reduction in costs (much of which wasn't really reduction at all, but a shifting of those costs from insurers to individuals). But the pace of health care inflation continued as before - sometimes slowing, sometimes increasing, but always racing far beyond what we could afford. We thought we were improving the system, but in many cases we were only adding to the problem.
Take the excise tax, which people claim affects only "Cadillac plans": The idea that it will "bend the cost curve" is based on studies that were new and exciting back in the Duran Duran days, but have since been seriously challenged. (I'll be writing more about that.) The excise tax will actually cut benefits - mostly very standard benefits, the kind most of us enjoy - from plans that have older or sicker members, people in certain industries, or members in the wrong part of the country. And they won't reduce overall costs at all.
Which gets me to another aspect of my old job: If we made a change and people didn't like it, we got a lot of angry phone calls and insurers lost customers. So we developed a very good sense of what people will and won't accept. I see a lot of ideas, especially in the Senate bill, that may look good on paper in Washington but will be very unpopular out there in the real world. (Surveys confirm that suspicion.)
Then there's the "to catch a thief" principle: If you don't know how insurance companies can work around regulatory obstacles, you have no idea how fragile or even counterproductive some ideas can be. Take the Senate proposal to hold insurance company profits and administrative costs to 15 cents on every dollar collected. It sounds great, but as I told David Dayen of Firedoglake , it wasn't hard to come up with five ways the insurance companies could get around it.
As David writes, those ideas included tinkering with the "incurred but not reported" cost reporting system the industry uses, and re-labeling some administrative costs as "medical" in nature (which is already being done by some workers' compensation insurers). Nationwide companies could move more of their corporate expense load (including executive pay) to divisions and regions of the country that are already ahead of the Senate's target (like these Florida HMOs). An even simpler approach would be to simply pay more in medical costs than they are paying today.
I see something else that reminds me of the old days, too: I see the footprints of people wanting to "give them less and make them think that it's more." We've seen that behavior in the actions of some small-state Senators with big insurance contributors.
These aren't abstract or ideological concerns. They're based on real-world experience. If Congressional leaders and the White House leadership are serious about creating effective reform, they need to pay more attention to how some of these proposals will play out in the rough-and-tumble arena of medical economics. They'll need to fix what's wrong in these bills, and then turn their attention to an area we've haven't discussed enough: oversight and monitoring of the health insurance industry.
I tried to be a voice of reason in the old days. But if I had anything to do with cutting your health benefits back then, apologies won't be enough. So consider these suggestions an attempt to make amends. Because, if there's one thing I know, it's that ideas that sound good on paper can cause real problems when they're carried out.
Trust me on that.
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RJ Eskow is currently working with the Campaign for America's Future to stop the health excise tax. He blogs at:
No Middle Class Health Tax
A Night Light
The Sentinel Effect: Healthcare Blog
Website: Eskow and Associates
Follow Richard (RJ) Eskow on Twitter: www.twitter.com/rjeskow
Why are people so upset about the public insurance option? Do they really love their private insurance companies? I have had CareFirst off and on for 40+ yrs with various employers. Now that I have to obtain it for myself, I pay $600 per month with a $2400 deductible, even though I have a good medical history -- but the problem is that I'm a 62 yr. old woman. I would just like the great medical care my relatives enjoy in Australia. Our political leaders are influenced too much by all the insurance lobbies.
People need to demand more!
Sorry, but everything You wrote is kind of influenced by that line.
And as it is the firs one I read - linking from Huffpost Newsletter - I couldn`t get it out of my head. The first thought reading it was "is that guy trying to raise "naive"" to an artform?
Read that sentence now. What sounds ridiculous in there? - All evidence - and I mean every shred of evidence from Congress, White House, and Senate tell us the exact opposite. They give us, the people, exactly what little they have to not to be skinned alive while giving everything over that to their own and their friend's and paylord's special interests. Every single discussion is about how little we will take and how the rest is distributed among the parasites.
So to me a line that implies ANYONE in office has the slightest interest in serving the ones who voted for him sounds like the 79 year old granny dreaming about the knight in shining armor who will whisk her away to everlasting happiness.
I know, I know. They all intend well. And it is a coincidence that every single time we get sicker, poorer, die sooner, lose jobs, lose benefits, lose dignity - while every single time the parasites get what we just lost. - Yea, right.
Thanks to the VHA, I enjoy single-payer on my major medical...and it's world class health care.
THERE IS NO BILLING. Collecting revenues and hassling with insurers comprises approximately 7% of a community hospital's budget. For the VHA, every patient's bill is a sign off, so the VHA does not need a utilization review department to check if excess tests or procedures have been performed, and it does not need a corporate compliance department to check if patients are over-billed for Medicare.
THERE IS NO ADVERTISING. This sends another 5% of a hospital's budget down the drain. Since all community hospitals advertise in order to compete, this becomes a zero sum game.
THE VHA CAN'T BE SUED IN STATE COURT. All VHA malpractice cases go to binding federal arbitration. Thus every VHA hospital does not need risk management department.
ALL VHA CHARTS ARE ELECTRONIC. Not only that, all VHA hospitals have instant access to each others' electronic charts.
THE VHA GETS ENORMOUS DISCOUNTS ON MEDICINE. You can thank President Bush for the lousy deal the very same government got for Medicare Part D.
The "US" business pays a middleman 35% and 3-5 times more for inventory than the "RESTOFWORLD" business whihc pasy a middleman just 3%, eventhough they both provide the same product and The "RESTOFWORLD" business makes a better product.
Its easy to figure which business is going to go out of business!
Republicans in reality make very bad businessmen. If you doubt that look at the last 8 years or the history of job growth and return on investment under Repugs versus DEMs over the last 100 years... DEMs win hands down.. not even close.
Regards
posted Jan 05, 2010 at 15:44:58
It's a health care plan that actually pays your medical bills when you get sick.
We have rationing and death panels, they're called insurance companies. The "premium" service your Cadillac Plan offers still includes copays and I can tell you from personal experience that when you have a pharmacy benefits problem the person on the other end of the phone is no more qualified from the one in the neighboring cubicle who doesn't take Cadillac calls. They're just the ones who got a 30-minute class on your plan.
Off the call floor we had a phrase for some of these "Cadillac" callers: "star-bellied sneetches." No difference in service; just permission to be snooty.
A Congressional Operations Office, if you will -- Similar to the CBO, but to provide US with clear, concise records of what our government is actually doing.
I want to have, weekly, a Congressional Operations Officer's Legislative Report including:
- Plain English summary of the bill (5-10 sentences, please)
- Line item adds, changes, deletes, with who did it, when, and what it will cost
- Links to the Congressional Record, with the written on-the-record comments by anyone who spoke before the Congress, even at 2 AM.....
I want to have, weekly, a Congressional Operations Officer's Activity Report including:
- Summary of all office visits to every elected official by anyone not in the government
- Summary of every elected official's travels, and what that cost, and the reason for it
- Full list of all non-government people admitted to every building in the capitol and who their employer is, with web links, please
Online, and updated weekly:
- List of all donors, with web links, amounts
- Full business intelligence style reports on who gave what, to whom, when
- Full business intelligence style reports on who voted for what bills, with history from the COO's documents above
We pay for the government.
We should expect that it reports what it is doing in a clear, concise manner.
In order to get the kind of legislation you're suggesting, we'd have to completely vote out ALL of the incumbents and vote in totally new people who understand that the only way they'll be voted for another term will be if they go to Washington to do what we sent them there to do. With our votes we elected the first black President. Could we use that same vote to make a clean sweep of Congress? Totally...but we won't.
Special interests have big money, but each of us has a vote. We could vote all the incumbents out and form ourselves a fresh new legislature. But I believe pigs will fly before that happens because while individual voters are smart, people are stupid. They vote for corrupt incumbents based on stupid reasons like "I like what the guy stands for", but usually can't elaborate on what that actually means.
Believe me, I know. I'm from the broke state of Illinois. That's how King Blagojevich got two terms and why all our governors go to jail.
This much repeated idea that "average profit of health insurers is around 3-4%, well below the industry average of 7-8%" is completely misleading. It's propagated by financial and policy analysts who have no idea how insurance companies play accounting games to appear less profitable than they really are.
They count YOUR medical expenses - which you have paid through premiums - as THEIR operating costs. It's as if I wrote a check on your behalf for $100,000, charged you $100 for writing the check (which took a second and cost me nothing), then complained to everyone that I only made $100 in profit on income of $100,100.
Everybody falls for it - because they don't know how to do analyze insurance numbers.
That is where insurers make most of their profit.
They make much more in Investment income than Underwriting results?
Thanks for that explanation about the profits. I knew that the 3-4% meant nothing.
The author is correct -- We could have easily created ways to not only slide by that kind of language but to profit immensely from it.
Bottom line, business management is smarter than the regulators because the best people are coin-operated -- We used to run circles around tax auditors, Big 8 (dating myself) auditors all the time; it was never a fair fight.
So, Washington could try all kinds of 'stuff' only to get end-run by insurance firms daily.
Look, if health was the actual issue, how many free public primary care clinics could we operate for, oh, $100B per year?
And if drug costs were such a real concern, why are we not discussing a deal with pharma to control those? (And why are drugs in Canada cheaper? Price controls)
The fight is about money, plain and simple.
Look at those who say the rich guys at the top work hard for their money, they must be worth it, they are the producers!
Some up us know it's bullony but I see that all the time. It's actually the workers who are the producers and the execs who make all the decisions frequently run their businesses into the ground. It was GM's lousy management that brought them down, not workers salaries.
No, look at the scorn poured on the poor, and the resentment that they are getting something for nothing (although most of the poor are children, disabled, or uncared for mentally ill).
No, if it's free most Americans won't like it. Or they will trash it.
Actually this bill has $10 billion for new Community Health Centers with all types of primary care, preventive care, prenatal, mental health, and dentistry. They take any insurance, Medicaid and Medicare and sliding scale fees. There Doctors are salaried so don't benefit from ordering excess care. They keep people out of the ERs.
There are 1400 in operation and are superb.
Yeah, it's about money. them that has it just wants more. And they will kill to keep what they got. Literally.
How can insurance be the solution to health care when it's one of health care's biggest problems, if not THE biggest? I'm currently sitting around on disability. Why? Because during a period of unemployment, one of my chronic conditions got bad enough that I *had* to have care and local PUBLIC health REQUIRED insurance. Being sick, I knew better than to even try to apply for an individual or family policy, so the doctors and administrators told me to apply for Medi-Cal. Since I don't have children, that meant getting declared disabled - preferably by the Social Security Admin. - just to get insurance to get what is FOR ME basic/maintenance health care. Without some sort of guarantee of timely access to appropriate care, there's no chance I'll ever return to work without a miraculous healing. Which ultimately means that I'm stuck on disability until retirement, until TRUE health reform kicks in or until I land a job that pays well enough that I can afford to pay out of pocket for all of my health care during an pre-existing condition exclusionary period. What a waste of my time and life - and what a drain on society since I'm college educated and both trained and certified in Unix and Cisco.
I will always wonder why we didn't just change the rules for Medicare eligibility and be done with it.
PROPER health care reform, reform that truly guarantees timely access to appropriate care for ALL, would fulfill a human right and save a lot more money than the tiny amount being discussed because the costs of failing to have proper health care go far beyond the costs of health care itself. A leading cause of disability right now is exactly what I endured - landing in that trap where getting access to medical care, because you've managed to find a place where at least the specialty you need at Public Health requires insurance, means getting declared disabled all because you're an adult without dependent children in your home. This wastes lives, wastes money, violates human rights and discriminates against those of us who don't have children in our homes for whatever reason(s).