Lost in the fight over health reform is a single, huge truth – if the private insurance market worked, there would be no need for reform.
We wouldn’t be in this mess if private insurers were able to control cost inflation. And at the end of the day, that’s what they are supposed to do. Sure they have lots of experience in underwriting and risk selection, and some have made some progress in some areas of disease management/mitigation, but UHC and Coventry and Wellpoint and HealthNet et al’s ‘experience’ have not been able to consistently deliver lower health care costs.
I know there are lots of reasons/problems/complicating factors, but the stark reality is when it comes to controlling inflation, none of them have been able to.
Why not?
Several reasons, some good, some not so good, but all worth considering as we contemplate a new world built on one of the bills before Congress.
Health plans’ best interest
As Maggie Mahar so eloquently and persistently reminds us, we live in a culture of ‘Money-driven Medicine’. Health plans, providers, brokers, and suppliers are in this business to make money. For health plans, controlling costs means lower revenues, and this is one of those wonderful industries where top lines grow every year by ten percent plus – regardless of any increase in the number of customers (members). Wall Street loves top line growth and rewards companies that consistently grow their revenues.
Quite simply, it is not in a health plan’s best interest to control cost, as most of their policyholders are going to stick with them regardless of the increase in premiums, and the business they lose they’ll make up by stealing customers from other health plans.
Churn
Employers change plans every three or four years, so any ‘investment’ in reducing long term costs is an expense incurred by the current healthplan for the benefit of a competitor. This is particularly true for smaller groups, and is further exacerbated by the increased mobility of the workforce, which tends to change jobs more now than a couple decades ago.
Mindset
After the great explosion triggered by providers’ negative reactions to capitation and employees’ negative reaction to small provider networks, healthplans, led by UHC, adopted an ‘open access’ model, wherein members could go ‘out of network’ to receive care, albeit at a higher copay rate. Employers are certainly to blame for a failure to explain the logic behind and lack of will to stick with the tighter managed care models, but they’ve certainly paid a high price for their lack of foresight and will. The result of the ‘dimming down’ of managed care is the current employer-based health cost inflation.
Regardless, since the adoption of the open access model in the mid-nineties, consumers have gotten used to, and highly attached to, that model. Undoing that mindset is going to be painful, and health plans don’t succeed by causing pain amongst their members.
Cost control by price control
Listen to health plan execs on their quarterly earnings calls, read their transcripts, review their press releases, look at their product offerings – see much in the way of real cost control? Strong disease management, medical homes, useful data on provider outcomes and costs presented in a way that Joe Sixpack or Maria Martinez can readily use?
Didn’t think so. Sure, a few health plans (Aetna probably being the best among the for-profits) are making an honest effort, but most are not. Instead, health plans rely on price control – squeezing providers down as hard as they can on reimbursement rates for specific procedures – a practice that solves one part of the cost equation but does nothing to control utilization, and may well exacerbate it.
For-profit health plans operate in the best interests of their stockholders – not those of their members, providers, or society. That’s how capitalism works. And not-for-profit health plans have to compete with the for-profits, a reality that has forced the Kaiser Permanentes and Group Healths to adopt many of the business practices of their competitors.
The net
The reason we need reform is the current ‘free market’ is not fixing society’s problem. The reform we need is real, meaningful reform, with true cost control, not a few pilots here and a bit of disease management there and a couple of billion of comparative effectiveness research sprinkled on top of a layer of slightly-modified fee-for-service reimbursement.
Dec
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