Letter, The New York Times, August 28, 2012

To the Editor:

Re “Truth and Lies About Medicare” (editorial, Aug. 19):

As a former chief executive and actuary of an insurance company that once sold both individual and group health insurance, I am particularly mystified by the effort to push Medicare participants into the individual health insurance market.

I thought that we wanted to reduce — or at least control — the cost of health insurance, but individual health insurance is by far the most expensive alternative.

Depending on the size of the vouchers, the government itself may save money, but the entire system will pay more. Someone has to pay for the costs of individual underwriting, marketing and so on, and those expenses will fall on the elderly themselves.

You are also correct in assuming that there is likely to be anti-selection, with the healthier people going to the insurance companies, leaving the sickest and most expensive people in the Medicare plan.

It is certainly true that health insurance needs reform and that President Obama is far from having all the answers, but the Romney-Ryan plan will increase the country’s health care bill with little or any of the increase going to more or better health care.

Stephen Brown
Brewster, Mass.

http://www.nytimes.com/2012/08/29/opinion/medicare-voucher-costs.html

Comment: 

By Don McCanne, MD

Today’s message is important because it comes from an insider in the health insurance industry. Not only does he indicate that it is a terrible idea for Medicare beneficiaries to use vouchers to purchase private, individual plans, but, of even greater significance, is “that health insurance needs reform and that President Obama is far from having all the answers.”

For private insurance reform, nobody has all the answers. The nature of the beast is that when you try to fix one defect, others open up. Instead of moving Medicare beneficiaries into private insurance plans, we need to move private insurance victims into Medicare.

Medicare Voucher Costs

Letter, The New York Times, August 28, 2012
To the Editor:
Re “Truth and Lies About Medicare” (editorial, Aug. 19):
As a former chief executive and actuary of an insurance company that once sold both individual and group health insurance, I am particularly mystified by the effort to push Medicare participants into the individual health insurance market.
I thought that we wanted to reduce — or at least control — the cost of health insurance, but individual health insurance is by far the most expensive alternative.
Depending on the size of the vouchers, the government itself may save money, but the entire system will pay more. Someone has to pay for the costs of individual underwriting, marketing and so on, and those expenses will fall on the elderly themselves.
You are also correct in assuming that there is likely to be anti-selection, with the healthier people going to the insurance companies, leaving the sickest and most expensive people in the Medicare plan.
It is certainly true that health insurance needs reform and that President Obama is far from having all the answers, but the Romney-Ryan plan will increase the country’s health care bill with little or any of the increase going to more or better health care.
Stephen Brown
Brewster, Mass.
http://www.nytimes.com/2012/08/29/opinion/medicare-voucher-costs.html

Today’s message is important because it comes from an insider in the health insurance industry. Not only does he indicate that it is a terrible idea for Medicare beneficiaries to use vouchers to purchase private, individual plans, but, of even greater significance, is “that health insurance needs reform and that President Obama is far from having all the answers.”
For private insurance reform, nobody has all the answers. The nature of the beast is that when you try to fix one defect, others open up. Instead of moving Medicare beneficiaries into private insurance plans, we need to move private insurance victims into Medicare.

Shareholders urge WellPoint to oust CEO Angela Braly

By Chad Terhune
Los Angeles Times, August 28, 2012
Investors in health insurance giant WellPoint Inc., which runs Anthem Blue Cross in California, are pressing for a change in top management as criticism intensifies about the company’s lagging stock, managerial missteps and disappointing earnings.
Shareholder complaints about WellPoint’s chairwoman and chief executive, Angela Braly, have grown louder since last month, when the Indianapolis company posted another anemic quarter and cut its full-year profit outlook as its enrollment fell again.
The investor unrest follows years of consumer fury that beset WellPoint as it repeatedly raised premiums on many families and small businesses by 10% or more.
A New York hedge fund, Royal Capital Management, sent a letter to WellPoint’s board last week saying that Braly has “failed miserably” as CEO and that “it is incumbent upon the board of directors to fulfill its fiduciary responsibility to shareholders by changing leadership.”
Other influential WellPoint shareholders, such as Leon Cooperman’s Omega Advisors hedge fund in New York, have expressed similar concerns about the company’s lackluster performance, particularly compared with its chief competitors’, and they have urged the board to replace Braly.
Thus far, WellPoint’s board has voiced strong support for Braly. “The board has been fully involved in the strategy WellPoint is pursuing and is supportive of the strategy and our management team,” Jacquelyn Ward, the company’s lead outside director, said in a statement last month after analysts began questioning management’s performance.
“Braly has presided over the most arbitrary and capricious health insurance rate hikes of our time,” said Jamie Court, president of Consumer Watchdog, an advocacy group in Santa Monica. “Now she is learning the rules of Wall Street: Cross policyholders all you want, but don’t step on the wallets of shareholders.”
http://www.latimes.com/business/la-fi-wellpoint-under-fire-20120828,0,4090962.story

Our politicians have left the private insurance industry in charge of our health care, but what is this industry really all about? As Jamie Court says, “Cross policyholders all you want, but don’t step on the wallets of shareholders.”
Addendum to today’s Quote of the Day on Angela Braly:
Angela Braly resigned today as president and CEO of WellPoint.
It would be a mistake to celebrate this action as some sort of elimination of an evil-doer. She will be replaced. From the perspective of patients, nothing changed.
The action that we need is from the President and Congress. They need to eliminate the private insurers and replace them with an improved Medicare for all. Hold the celebration until we can accomplish that goal.

Same Doctor Visit, Double the Cost

By Anna Wilde Mathews
The Wall Street Journal, August 26, 2012
… hospitals are increasingly acquiring private physician practices.
Hospitals say the acquisitions will make health care more efficient. But the phenomenon, in some cases, also is having another effect: higher prices.
As physicians are subsumed into hospital systems, they can get paid for services at the systems’ rates, which are typically more generous than what insurers pay independent doctors. What’s more, some services that physicians previously performed at independent facilities, such as imaging scans, may start to be billed as hospital outpatient procedures, sometimes more than doubling the cost.
The result is that the same service, even sometimes provided in the same location, can cost more once a practice signs on with a hospital.
With private insurers, hospital systems with strong market heft can often negotiate higher rates for physician services than independent doctors get. The differential varies widely, anywhere from 5% or less to between 30% and 40%, industry officials say.
When Hartford Hospital, in Connecticut, bought Constitution Eye Surgery Center from its physician owners last year, it told regulators the center’s operating profit was about $3.9 million in fiscal 2009, before the sale. According to James M. Blazar, a senior vice president of the Hartford HealthCaresystem, the operating income at the center is expected to grow to nearly $8 million in fiscal 2012, the first full year of hospital ownership, though surgery volumes are likely to be fairly flat. Higher reimbursement is justified because the system made significant upgrades, he said. “We have not done this for a financial reason, we’ve done this for a quality reason,” he said of the deal.
http://online.wsj.com/article/SB10000872396390443713704577601113671007448.html

Much has been written about consolidation of health care providers and how that gives them leverage during contract negotiations with private insurers. This article provides further confirmation of that reality.
Medicare has been drawn into this in that they often pay more for services performed in a hospital facility, but we can be reassured that appropriate adjustments will be made once the full impact of this manipulation is defined. That cannot be said for private insurers that depend on market negotiations. Those with clout prevail.
This would be fixed by simply establishing our own public monopsony – a single payer national health program – which would ensure value for all of us in our health care purchasing.

By Ryan Lore, Jon R. Gabel, Roland McDevitt, and Michael Slover
The Commonwealth Fund, August 2012

In the health insurance exchanges that will come online in 2014, consumers will be able to compare health plans with respect to actuarial value, or the percentage of health care costs that a plan would pay for a standard population. This analysis illustrates the out-of-pocket costs that might result from plans with various plan designs and actuarial values. We find that average out-of-pocket expense declines as actuarial values rise, but two plans with similar actuarial values can produce very different outcomes for a given person. The overall affordability of a plan also will be influenced by age rating, income-related premium subsidies, and out-of-pocket subsidies. Actuarial value is a useful starting point for selecting a plan, but it does not pinpoint which plan will produce the best overall value for a particular person.

Consumers anticipate some health care needs when choosing a plan, but many health care expenses are not predictable and some consumers are drawn to low cost-sharing plans because they prefer to minimize risk. Even when provided with information about the plans and their premiums, it can be hard for people to choose a plan that best meets their expected medical needs.
 
Although this analysis focuses on out-of-pocket expense, premiums, and affordability, it should be noted that there are other important considerations in judging the value of a plan. Health plans also differ in network access and quality of care. Exchanges are responsible for providing information to help consumers evaluate these dimensions, including the ability for consumers to search for particular providers in each plan’s network.

http://www.commonwealthfund.org/~/media/Files/Publications/Issue%20Brief/2012/Aug/1626_Lore_choosing_best_plan_HIE_actuarial_ib_v2.pdf

Comment: 

By Don McCanne, MD

The important contribution of this study is that it shows that choosing an exchange plan based on its actuarial value (bonze, silver, gold, platinum) does not necessarily predict what out-of-pocket expenses may be. There are so many other variables that out-of-pocket expenses can be quite different for plans with the same actuarial value.

Some of the variables include the size of the deductible, whether or not some services are covered before the deductible is met, the amount of copayments, the amount of coinsurance, the maximum cost exposure, the age of the patient, income levels in qualifying for premium subsidies and for out-of-pocket subsidies, and, most important of all, how much medical care you require during the year, much of which may be totally unpredictable.

Under a properly designed single payer national health program – an improved Medicare for all – none of these variables would apply. You would not be forced to choose each year from plans that are unaffordable, or that underinsure, or both. Insurance would not be an issue. When you need health care, you get it. Period.

Choosing the “Best” Plan in a Health Insurance Exchange: Actuarial Value Tells Only Part of the Story

By Ryan Lore, Jon R. Gabel, Roland McDevitt, and Michael Slover
The Commonwealth Fund, August 2012
In the health insurance exchanges that will come online in 2014, consumers will be able to compare health plans with respect to actuarial value, or the percentage of health care costs that a plan would pay for a standard population. This analysis illustrates the out-of-pocket costs that might result from plans with various plan designs and actuarial values. We find that average out-of-pocket expense declines as actuarial values rise, but two plans with similar actuarial values can produce very different outcomes for a given person. The overall affordability of a plan also will be influenced by age rating, income-related premium subsidies, and out-of-pocket subsidies. Actuarial value is a useful starting point for selecting a plan, but it does not pinpoint which plan will produce the best overall value for a particular person.
Consumers anticipate some health care needs when choosing a plan, but many health care expenses are not predictable and some consumers are drawn to low cost-sharing plans because they prefer to minimize risk. Even when provided with information about the plans and their premiums, it can be hard for people to choose a plan that best meets their expected medical needs.
Although this analysis focuses on out-of-pocket expense, premiums, and affordability, it should be noted that there are other important considerations in judging the value of a plan. Health plans also differ in network access and quality of care. Exchanges are responsible for providing information to help consumers evaluate these dimensions, including the ability for consumers to search for particular providers in each plan’s network.
http://www.commonwealthfund.org/~/media/Files/Publications/Issue%20Brief/2012/Aug/1626_Lore_choosing_best_plan_HIE_actuarial_ib_v2.pdf

The important contribution of this study is that it shows that choosing an exchange plan based on its actuarial value (bonze, silver, gold, platinum) does not necessarily predict what out-of-pocket expenses may be. There are so many other variables that out-of-pocket expenses can be quite different for plans with the same actuarial value.
Some of the variables include the size of the deductible, whether or not some services are covered before the deductible is met, the amount of copayments, the amount of coinsurance, the maximum cost exposure, the age of the patient, income levels in qualifying for premium subsidies and for out-of-pocket subsidies, and, most important of all, how much medical care you require during the year, much of which may be totally unpredictable.
Under a properly designed single payer national health program – an improved Medicare for all – none of these variables would apply. You would not be forced to choose each year from plans that are unaffordable, or that underinsure, or both. Insurance would not be an issue. When you need health care, you get it. Period.