Short-term customers boosting health costs

By Kay Lazar
The Boston Globe
April 4, 2010
Thousands of consumers are gaming Massachusetts’ 2006 health insurance law by buying insurance when they need to cover pricey medical care, such as fertility treatments and knee surgery, and then swiftly dropping coverage, a practice that insurance executives say is driving up costs for other people and small businesses.
In 2009 alone, 936 people signed up for coverage with Blue Cross and Blue Shield of Massachusetts for three months or less and ran up claims of more than $1,000 per month while in the plan. Their medical spending while insured was more than four times the average for consumers who buy coverage on their own and retain it in a normal fashion, according to data the state’s largest private insurer provided the Globe.
The typical monthly premium for these short-term members was $400, but their average claims exceeded $2,200 per month.
The problem is, it is less expensive for consumers — especially young and healthy people — to pay the monthly penalty of as much as $93 imposed under the state law for not having insurance, than to buy the coverage year-round. This is also the case under the federal health care overhaul legislation signed by the president, insurers say.
http://www.boston.com/news/health/articles/2010/04/04/short_term_customers_boosting_health_costs/?page=full

Health policy science told us ahead of time that a mandate for individuals to buy private health insurance would not work if the penalties for not doing so were quite modest. Yet Massachusetts enacted such a plan, and now very similar policies have been enacted into federal law.
The Massachusetts experience has demonstrated that health care consumers will act in their own financial interest. Individuals who perceive themselves to be in good health will elect to pay the much lower penalty for being uninsured. If they then develop expensive medical problems, they will sign up for a health plan, but then will drop their coverage after their medical needs are met. It means little to them that this drives up premiums for those who remain in the insurance pools.
There are legitimate reasons that state and federal legislators have been reluctant to assign greater penalties for not being insured. The most important is that insurance premiums are simply not affordable for moderate income individuals who do not receive adequate public or employer assistance. Even the modest penalties create a financial hardship for some. Pushing the penalties higher would compound the financial stresses that too many middle income families are already experiencing.
There are policy interventions available, but those under consideration are based on leaving the private insurance industry in charge. One suggestion is to close enrollment except for a short period of open enrollment once or twice a year. This would leave already financially strapped individuals without a safety valve should problems arise during closed enrollment periods. Another suggestion would be to reinstitute (Massachusetts) or expand (federal) the waiting period before preexisting disorders are covered, even if of very recent onset, again preventing coverage for more urgent, serious problems.
Though some might suggest that these individuals would be getting what they deserve for not being insured, the real fault is with policies inherent in the design of a financing system based on private insurance plans. Individuals are forced to choose between private insurance coverage that they may not be able to afford, or exposing themselves to the potential of greater financial insecurity by remaining uninsured. If solving problems in a system creates new problems, then we should question the system itself.
We can do this far better. We can separate the financing from the delivery of health care. With a single payer, improved Medicare for all, everyone would be automatically covered, for life. The financing of the system would not be through premiums tagged to private plans, but rather would be through progressive tax policies in which each person would pay an equitable share, and no one would face a financial hardship.
Gaming the individual mandate is not a very fun game. Let’s shut it down, and change to a system that works for everyone.

By Avery Johnson and Suzanne Sataline
The Wall Street Journal
April 2, 2010

A unit of WellPoint Inc. dropped Stellaris Health Network, a four-hospital chain in Westchester, N.Y., from its network after Stellaris asked for a 15% increase in reimbursement payments from the health insurer.

Stellaris says it merely wanted the insurer to pay rates consistent with what it receives from other health plans in the market. “Our non-profit community hospitals can no longer subsidize the record profits of a health-insurance conglomerate,” said Arthur A. Nizza, Stellaris’s president and chief executive, in a statement. Empire asserts charges of overall profitability aren’t relevant to this particular situation.

The decision will affect thousands of members of Empire BlueCross BlueShield, a WellPoint unit in New York, who use the hospital system. Empire has six million members in New York, and Stellaris has been one of its top 10 hospital systems in the state based on size and member utilization.

The failure to reach an agreement, which resulted in the contract being terminated late Wednesday, is the latest in a string of negotiations between hospitals and insurers that have gone hostile.

http://online.wsj.com/article/SB10001424052702303960604575158042406727102.html

Comment: 

By Don McCanne, MD

It is common to hear hospital administrators complain about low reimbursement rates from Medicare, yet how many terminate their participation in the Medicare program? And of course Medicare never unilaterally terminates a provider except when appropriate in cases of criminal fraud or incompetency that constitutes a hazard to patients.

Yet what happens when a private insurer is the payer? The decision to terminate a contract is strictly a business decision made based on market conditions, having much less to do with the value, quality or necessity of the services being provided, but much more to do with the oligopolistic leverage that the insurer has in the market. The private insurer, based purely on a business decision, is quite willing to disrupt the continuity of health care services for its own customers. And WellPoint/Empire says that their profitability isn’t relevant when it makes these decisions!?

And what will the new reform legislation do to correct these blatant injustices? It will pour more taxpayer funds into the coffers of these intrusive middleman, providing them with even greater leverage in their negotiations with the health care delivery system.

Do we want a health care financing system that is designed to benefit the money managers, or do we want a financing system designed to be sure that health care is there when patients need it? If we favor the latter, then we need to dump the private insurers and adopt an improved Medicare program that takes care of everyone.

WellPoint Unit Drops Stellaris From Network

By Avery Johnson and Suzanne Sataline
The Wall Street Journal
April 2, 2010
A unit of WellPoint Inc. dropped Stellaris Health Network, a four-hospital chain in Westchester, N.Y., from its network after Stellaris asked for a 15% increase in reimbursement payments from the health insurer.
Stellaris says it merely wanted the insurer to pay rates consistent with what it receives from other health plans in the market. “Our non-profit community hospitals can no longer subsidize the record profits of a health-insurance conglomerate,” said Arthur A. Nizza, Stellaris’s president and chief executive, in a statement. Empire asserts charges of overall profitability aren’t relevant to this particular situation.
The decision will affect thousands of members of Empire BlueCross BlueShield, a WellPoint unit in New York, who use the hospital system. Empire has six million members in New York, and Stellaris has been one of its top 10 hospital systems in the state based on size and member utilization.
The failure to reach an agreement, which resulted in the contract being terminated late Wednesday, is the latest in a string of negotiations between hospitals and insurers that have gone hostile.
http://online.wsj.com/article/SB10001424052702303960604575158042406727102.html

It is common to hear hospital administrators complain about low reimbursement rates from Medicare, yet how many terminate their participation in the Medicare program? And of course Medicare never unilaterally terminates a provider except when appropriate in cases of criminal fraud or incompetency that constitutes a hazard to patients.
Yet what happens when a private insurer is the payer? The decision to terminate a contract is strictly a business decision made based on market conditions, having much less to do with the value, quality or necessity of the services being provided, but much more to do with the oligopolistic leverage that the insurer has in the market. The private insurer, based purely on a business decision, is quite willing to disrupt the continuity of health care services for its own customers. And WellPoint/Empire says that their profitability isn’t relevant when it makes these decisions!?
And what will the new reform legislation do to correct these blatant injustices? It will pour more taxpayer funds into the coffers of these intrusive middleman, providing them with even greater leverage in their negotiations with the health care delivery system.
Do we want a health care financing system that is designed to benefit the money managers, or do we want a financing system designed to be sure that health care is there when patients need it? If we favor the latter, then we need to dump the private insurers and adopt an improved Medicare program that takes care of everyone.

By Sofia Wu
Focus Taiwan News Channel
March 30, 2010

The health insurance premium rate will be raised from the current 4.55 percent to 5.17 percent April 1, but Department of Health (DOH) Minister Yaung Chih-liang said Monday the public could end up paying less in premiums when a second-generation health care system is adopted in two years.

Earlier Monday, Yaung briefed Premier Wu Den-yih on draft amendments to the National Health Insurance Act that will pave the way for the introduction of a new generation of health care insurance.

After listening to Yaung’s briefing, Wu said the executive branch will lobby lawmakers to pass the draft package during its current session to allow for an early implementation of the second-generation system.

Under the new system, premiums will be paid by the insured, employers and the central government. At present, the government’s contribution is financed by both central and local governments.

The new system will calculate premiums based on total household income (including wages, stock dividends, rental income and other unearned income) instead of the current model that considers only the insureds’ salaries or earned income.

Yaung said the new system will be more equitable, as wealthy households whose income does not mainly rely on earned income will have to pay higher premiums.

http://focustaiwan.tw/ShowNews/WebNews_Detail.aspx?Type=aALL&ID=201003300010

Comment: 

By Don McCanne, MD

Taiwan’s single payer system has been phenomenally successful, though they, like all other nations, have had to confront increases in health care costs. Under the current financing system it has become necessary to increase the percent of income paid as insurance premiums, to the displeasure of the citizens of Taiwan. That has prompted recommendations to improve the financing system.

The most important change is to shift from a premium based on a percentage of earned income to a percentage of all household income, including wages, stock dividends, rental income and other unearned income. The obvious impact of this is to make the contribution more equitable by increasing the progressive nature of the health care tax. This acknowledges the necessity of instituting a transfer not only from the healthy to the sick, but also from the wealthy to those with more modest incomes. Costs are too high to do otherwise.

Another change is to eliminate the contribution of local governments, which frequently struggle with their budgets, and to shift the full responsibility for the government contribution to the central government.

When you think about, we’ve already adopted these principles for our Medicare program. The program was established as a federally funded program, unlike Medicaid which depends on state funding as well. Also, the reconciliation bill just signed by President Obama includes a Medicare tax on the unearned income of wealthier individuals.

But there is one glaring difference between the approaches of Taiwan and the United States. Taiwan uses an exceptionally efficient single payer system that covers everyone, whereas we lose almost all of the advantages of the single payer model by limiting our Medicare program to less than 15 percent of our population.

It’s great that we’ve accepted the principle of equitable financing of health care, but wouldn’t you think that our government stewards would be smart enough to know that we also need a stable, efficient financing infrastructure, if for no other reason than to ensure that everyone benefits from equitable financing? The Taiwanese stewards have already figured that one out.

Talk of the day — Health insurance overhaul nearly ready

By Sofia Wu
Focus Taiwan News Channel
March 30, 2010
The health insurance premium rate will be raised from the current 4.55 percent to 5.17 percent April 1, but Department of Health (DOH) Minister Yaung Chih-liang said Monday the public could end up paying less in premiums when a second-generation health care system is adopted in two years.
Earlier Monday, Yaung briefed Premier Wu Den-yih on draft amendments to the National Health Insurance Act that will pave the way for the introduction of a new generation of health care insurance.
After listening to Yaung’s briefing, Wu said the executive branch will lobby lawmakers to pass the draft package during its current session to allow for an early implementation of the second-generation system.
Under the new system, premiums will be paid by the insured, employers and the central government. At present, the government’s contribution is financed by both central and local governments.
The new system will calculate premiums based on total household income (including wages, stock dividends, rental income and other unearned income) instead of the current model that considers only the insureds’ salaries or earned income.
Yaung said the new system will be more equitable, as wealthy households whose income does not mainly rely on earned income will have to pay higher premiums.
http://focustaiwan.tw/ShowNews/WebNews_Detail.aspx?Type=aALL&ID=201003300010

Taiwan’s single payer system has been phenomenally successful, though they, like all other nations, have had to confront increases in health care costs. Under the current financing system it has become necessary to increase the percent of income paid as insurance premiums, to the displeasure of the citizens of Taiwan. That has prompted recommendations to improve the financing system.
The most important change is to shift from a premium based on a percentage of earned income to a percentage of all household income, including wages, stock dividends, rental income and other unearned income. The obvious impact of this is to make the contribution more equitable by increasing the progressive nature of the health care tax. This acknowledges the necessity of instituting a transfer not only from the healthy to the sick, but also from the wealthy to those with more modest incomes. Costs are too high to do otherwise.
Another change is to eliminate the contribution of local governments, which frequently struggle with their budgets, and to shift the full responsibility for the government contribution to the central government.
When you think about, we’ve already adopted these principles for our Medicare program. The program was established as a federally funded program, unlike Medicaid which depends on state funding as well. Also, the reconciliation bill just signed by President Obama includes a Medicare tax on the unearned income of wealthier individuals.
But there is one glaring difference between the approaches of Taiwan and the United States. Taiwan uses an exceptionally efficient single payer system that covers everyone, whereas we lose almost all of the advantages of the single payer model by limiting our Medicare program to less than 15 percent of our population.
It’s great that we’ve accepted the principle of equitable financing of health care, but wouldn’t you think that our government stewards would be smart enough to know that we also need a stable, efficient financing infrastructure, if for no other reason than to ensure that everyone benefits from equitable financing? The Taiwanese stewards have already figured that one out.

By Steven Syre and Robert Gavin
The Boston Globe
March 30, 2010

The New York private equity firm that last week struck a deal to buy Caritas Christi Health Care could build the chain of six Catholic community hospitals into a competitive lower-cost provider of medical services in Massachusetts, touting it as a profitable national business model in the age of health care reform, analysts say.

Caritas, which also includes a physicians network, could become a new cost-conscious option for more patients under such a system.

Cerberus Capital Management plans to invest $830 million to acquire Caritas Christi and turn the charity into a for-profit venture. The investment, which includes money to reduce debt and invest in renovations and upgrades, would appear to be a steep price for the Caritas business as it exists today.

But the hospitals could emerge as an attractive lower-cost alternative to Boston’s big teaching hospitals as health care reform moves forward soon in Massachusetts and later across the country. And, as reforms aimed at controlling costs take effect, an increasing number of health insurance policies may well offer patients a choice: Go to a famous teaching hospital and pay more or go elsewhere and spend less.

If the ambitious plan works, it could eventually mean a sizable payoff for Cerberus and its investors, said Howard Anderson, senior lecturer at MIT’s Sloan School of Management. With a successful health care business, Cerberus could cash out by taking the company public and selling stock to investors, or by selling the chain to another for-profit health care firm.

http://www.boston.com/business/healthcare/articles/2010/03/30/caritas_christi_could_carve_out_a_lower_cost_niche_under_new_owner/

Comment: 

By Don McCanne, MD

Massachusetts has been held up as a model on which our new federal health financing program is based. The purchase of Caritas Christi Health Care by Cerberus Capital Management may give us a hint as to what efforts under such a reform model might be made to slow the growth in health care costs.

Cerberus Capital Management plans to convert Caritas Christi into “an attractive lower-cost alternative” to Boston’s expensive teaching hospitals.

Their concept of lowering costs is right out of the book on the promised rewards of free markets. They are going to take a chain of low-cost charity hospitals and convert it into a for-profit venture. Then they are going to reap a “sizable payoff” by cashing out, either by taking the company public and selling stock to investors, or by selling the chain to another for-profit health care firm.

The model of reform that has just been enacted expands the lucrative health care marketplace for opportunists such as these venture capitalists. These entities will be crawling out of the woodwork to try to glom on to a share of the massive infusion of tax dollars to be redistributed by the private insurance companies. Should we really have expected anything else?

It’s not too late to regroup and do it right.

Seeking lower-cost care

By Steven Syre and Robert Gavin
The Boston Globe
March 30, 2010
The New York private equity firm that last week struck a deal to buy Caritas Christi Health Care could build the chain of six Catholic community hospitals into a competitive lower-cost provider of medical services in Massachusetts, touting it as a profitable national business model in the age of health care reform, analysts say.
Caritas, which also includes a physicians network, could become a new cost-conscious option for more patients under such a system.
Cerberus Capital Management plans to invest $830 million to acquire Caritas Christi and turn the charity into a for-profit venture. The investment, which includes money to reduce debt and invest in renovations and upgrades, would appear to be a steep price for the Caritas business as it exists today.
But the hospitals could emerge as an attractive lower-cost alternative to Boston’s big teaching hospitals as health care reform moves forward soon in Massachusetts and later across the country. And, as reforms aimed at controlling costs take effect, an increasing number of health insurance policies may well offer patients a choice: Go to a famous teaching hospital and pay more or go elsewhere and spend less.
If the ambitious plan works, it could eventually mean a sizable payoff for Cerberus and its investors, said Howard Anderson, senior lecturer at MIT’s Sloan School of Management. With a successful health care business, Cerberus could cash out by taking the company public and selling stock to investors, or by selling the chain to another for-profit health care firm.
http://www.boston.com/business/healthcare/articles/2010/03/30/caritas_christi_could_carve_out_a_lower_cost_niche_under_new_owner/

Massachusetts has been held up as a model on which our new federal health financing program is based. The purchase of Caritas Christi Health Care by Cerberus Capital Management may give us a hint as to what efforts under such a reform model might be made to slow the growth in health care costs.
Cerberus Capital Management plans to convert Caritas Christi into “an attractive lower-cost alternative” to Boston’s expensive teaching hospitals.
Their concept of lowering costs is right out of the book on the promised rewards of free markets. They are going to take a chain of low-cost charity hospitals and convert it into a for-profit venture. Then they are going to reap a “sizable payoff” by cashing out, either by taking the company public and selling stock to investors, or by selling the chain to another for-profit health care firm.
The model of reform that has just been enacted expands the lucrative health care marketplace for opportunists such as these venture capitalists. These entities will be crawling out of the woodwork to try to glom on to a share of the massive infusion of tax dollars to be redistributed by the private insurance companies. Should we really have expected anything else?
It’s not too late to regroup and do it right.