Insight, analysis & opinion from Joe Paduda
The shine appears to be wearing off the CDHP movement. And fast. Comments from several knowledgeable folks indicate that the movement may have been oversold on its merits. I’m expecting to learn a lot more later this week as I’ll be attending the Consumer Driven Healthcare Summit in Washington as a member of the press.
HMOs are cheaper than other forms of health insurance due to lower provider costs. At least that’s what an analysis of a 2004 study comparing HMOs to other forms of insurance discussed by Jason Shafrin in a post on Healthcare Economist says.
The difference amounted to 9.3%, with no measurable difference in utilization rates or risk selection between HMOs and other plans.
So, as an industry, HMOs are not more efficient because they are better at managing care or selecting risk, they are cheaper because they pay providers less. I would note that the analysis is based on data from the nineties, so perhaps a more accurate statement is that in the past HMOs were more efficient.
I don’t know if that’s the case today.
Mark McClellan is leaving his post as head of the Center for Medicare and Medicaid Services. He served long and loyally, sticking to the Administration’s line even when facts indicated otherwise, remaining a calming force when Part D enrollment was going nowhere. McClellan is also known for listening hard to suggestions and criticism from all sides, and working diligently to address problems.
Here’s what’s happened during his tenure.
Part D was passed, implemented, and operational. This was a monumental task, and one McClellan was instrumental in accomplishing. It’s not his fault it is a fatally flawed program; well, maybe it is, in some small part, as he was probably involved in writing/editing/opining on the legislation. Nevertheless, under McClellan the program became reality, with the initial enrollment problems addressed (in large part).
The bad news is the number of those without health insurance in the US has grown to over 46 million. The good news is that a few states have seen a reduction in the number of uninsured; the really bad news is a few have gotten even worse.
Several states are doing well. One is Iowa, where the uninsured population actually decreased last year, as the percentage of those without health insurance dropped from 10.4% in 2004 to 9.1% in 2005. Part of this success is due to increased enrollment of kids in the state’s Hawk-I program, which more than doubled over five years to 34,600 in 2005. This parallels an increase of 200,000 enrolled in various government-funded programs over the same period.
Maine’s one of the better off states, with a population of uninsured that is significantly lower (10.5%) than the national average of 15.7%. The state’s Dirigo health plan, an effort to increase coverage among Mainers by targeting small employers and kids, has failed to meet enrollment goals but generated significant savings. It is tough to tell if the program has had an impact on the uninsured rate, as it is very new.
One that is not experiencing the same level of success is Arizona, with 20% of the population uninsured after an increase of 225,000 in the number of uninsured in 2005. To address the problem, the state is seeking to implement a revamped Medicaid program under a Federal waiver that focuses on the lower-income workers employed at businesses with fewer than 25 employees. There are over 200,000 businesses in the state that meet the size criterion.
As bad as the situation is in Arizona, it is worse in Texas, where almost a quarter of the population lacks health insurance.
What does this mean for you?
A closer examination of individual states may help us understand drivers of and solutions to the problem of uninsurance.
It’s happening. Actually, it has been happening for years, albeit not very often. Frustrated with increasing premiums and no real solutions from the health insurance industry, large employers are investing in direct contracts with health care providers to deliver health care services to their employees and their dependents.
The practice got its start before WWI, when lumber mills in Tacoma Washington contracted with the Western Clinic to provide health care services for their employees. Leland Kaiser built health care facilities and hired staff to provide services to workers on the Grand Coulee Dam in the nineteen-thirties, a project that was the beginning of today’s Kaiser Permanente.
While there are no statistics on the number of lives covered under direct-contract arrangements, the total number is probably tiny. Unless there is a “magic” combination of a large employer and a dominant health care provider group with extensive facilities in a relatively small geographical area, direct contracting will just be too complicated and difficult to pull off.
But when those conditions do exist, expect more employers to seriously consider the move. Employers that are likely to consider direct contracts include large municipalities, school boards, manufacturing concerns, transportation hubs and entertainment companies.
What does this mean for you?
A business opportunity for providers, another challenge for health plans, and another way to tackle the problem of access and cost.
Okay, here’s a kind of out-of-left-field diversion from our usual diet of policy, insurance, managed care and industry news. Lets talk about motorcycle helmets.
When jurisdictions have mandatory helmet laws, the number of fatalities goes down. By most measures, that is a good thing. However, it does mean there are fewer organs to be transplanted, which is a bad thing.
One of the “bad” things is the increase in medical costs. When Florida dropped its mandatory helmet law, hospital costs for motorcycle injuries jumped from $21 million in the thirty months prior to the change to $44 million for the same period post-enactment.
Readers with good memories will recall that Florida also has a lot of folks without health insurance; 81% of these folks are of working age.
EMTALA laws require hospitals to treat patients, including injured motorcyclists without insurance, who show up at the emergency room.
So society is paying for motorcyclists who want to exercise their free right (choice of words intentional) to suffer brain injuries by riding without a helmet. But I don’t want to pay for their health care.
Do you?
For an intriguing answer to the question, does risk selection work to maximize profits in health insurance?, see Jason Shafrin’s article.
For those too lazy to click-thru, the answer is yes, for the health plan.
Jason also has a related post on the dark side of risk selection, which is what happens to those risk selected against. In a word, the uninsured.
What’s good for the company is bad for the economy.
Aetna continues its effort to provide information on physician pricing and quality with the announcement that it is now publishing data for the Washington DC metro area. Given the problems encountered by members of other health plans trying to be good “consumers”, this initiative, while very limited, is certainly going to help Aetna’s DC-area members.
What’s missing are the pricing and outcomes for procedures that are less common, but potentially more costly and more critical to individual patients – minor surgery, major surgery, endoscopy, etc.
What does this mean for you?
A step in the right direction, but only a small step. Consumers will need a lot more information in a lot more areas if the whole consumer-directed thing is going to have any chance.
and thanks to Fierce Healthcare for the heads up.
Two recent articles highlight the massive inefficiencies in the US health care system. In Philadelphia, five hospitals now have heart transplant programs, even though there are only enough patients for two. The result? Hospitals will not perform enough to gain the experience needed to improve safety and efficiency while lowering variable costs.
A few hundred miles away, a (reg req)group of cardiologists in Elyria Ohio have evidently decided that their Medicare patients need angioplasties four times more frequently than the national average. I wonder if it’s the fried dough at the Elyria fair?
A recent survey indicates middle income Americans are deeply worried about health insurance, the cost of care, and the impact of both on their well-being. The survey authored by the Commonwealth Fund and reported in California Healthline, highlights concerns across incomes, with individuals at higher income levels somewhat less affected by health care costs (although one in five still had trouble paying medical bills).
And this is not just a general fear; according to California Healthline; “half of U.S. adults living in middle-income families say they had a “somewhat serious” or “very serious” problem paying their medical bills over the past two years.
Most intriguing – three-quarters said the “U.S. health care system needs to be fundamentally changed or completely rebuilt (Agovino, AP/Long Island Newsday, 8/17)” (California Healthline).
Politicians – are you listening??