Jason Shafrin at Healthcare Economist has an intriguing analysis of administrative expense in Medicare v private insurance. My net is that Medicare is less costly from an admin expense perspective than private insurance, but not as “less” as I thought.
This is where blogs really excel – making us rethink “common knowledge” and question our assumptions…

I’ve received an invite from the folks conducting the Consumer Driven Healthcare Summit to attend the September 13-15 conference as a representative of the blog world, sort of a “press invite”. I applaud their openness in two respects – first, I’ve not exactly kept my skeptical views of consumerism in health care to myself; and second, bloggers are a wierd, strange, new form of media that many don’t yet recognize as important or even worth noting.
So, I’m looking forward to it.
The agenda includes talks by Paul Ginsburg of the Center for the Study of Health System Change (one of the few truly excellent policy/analysis concerns); Jon Gabel on how much consumers are actually contributing to their HSA accounts; Karen Davis of the Commonwealth Fund, Ron Pollack of Families USA and John Iglehart of Health Affairs on the Downside of Consumer Driven Healthcare; and several sessions on results of studies and research into various aspects of CDHP and its cousins.
This should be fun. And I’ll be doing my best to report live from the scene, in the best tradition of Matthew Holt.

Sen. Bill Frist, the senate majority leader and ex-cardiac surgeon and heir to the Frist family fortune (they started hospital firm HCA), has launched a health care blog. A quick perusal indicates posts on med mal reform, Massachusetts’ health care reform initiative, and bioterrorism. There are also copies of articles by the Senator for those inclined to learn more about his opinions.
As a relatively new entrant to the field, we’d suggest a couple of things to the Senator. First, hotlinks are pretty useful, and help provide support for statements such as “Many states have passed laws that attempt to keep frivolous lawsuits from being filed and keep liability premiums down…”
It’s also helpful to be specific and clear when writing. Parsing out the quote above, it is notable that the dependent clause “that attempt to keep frivolous lawsuits from being filed and keep liability premiums down” relates to the “passed laws”, and does not imply that these laws actually do reduce frivolous lawsuits. Kind of nuanced, but readers appreciate the clarity.
At the risk of being accused of being snarky, I’d also point out that the focus on medical malpractice is somewhat bizarre, given the Doctor/Senator’s propensity for refuting other physicians’ diagnoses without first examining the patient.

Here’s another way health care costs weave their way into our lives – the town of Richland Hills, Texas is increasing property taxes to pay for a 20% rise in health insurance costs. While the increase in the mill rate (the cents per hundred dollars of property value) will only go up 0.6, it’s another example of the growing awareness of the impact of health care costs on a community.
The same is occuring in communities as different as MIssoula Montana, Boxborough Mass, and the state of New Jersey.
This is a national problem. Today’s NYTimes reports that property taxes have gone up two to three times faster than personal income in the tri-state area. As a resident of Connecticut and eight year veteran of my Town’s Board of Tax Assessment Appeals, I have first hand knowledge of taxpayers’ growing concern, and even anger, over rising property taxes. Now, new laws will require municipalities to report their future health care liabilities, a requirement that had a significant impact on public companies’ valuations and financial reporting.
And may well lead to even more taxpayer unrest; public entities typically provide health care benefits that are considerably more generous than those dispensed by the private sector. One of the stated reasons is these benefits are a form of compensation that makes the jobs more attractive given the wages, which tend to be somewhat below the private sector. While the latter may be true, the rationale instantly brings to mind the disaster unfurling at US auto manufacturers, who used the same logic decades ago to provide very generous health benefits in lieu of salary increases.
And look what’s happened to them.

As corporate profits have surged over the last six months, retiree health care benefits have been reduced at many companies. That’s the headline, but the reality is not so simple.
Large, old-line manufacturers with negotiated benefits and lots of retirees (think steel and autos) are facing bigger-than-huge retiree health care costs, driven in large part by benefit plans that don’t even have deductibles or copays. As these firms continue to get hammered by international competitors with much lower labor expenses, they are seeking ways to reduce their costs.
And retiree health care costs are a very big drag on many of these companies, hurting their ability to invest in new products, new employees, new plants and equipment. Sure, GM, Ford, Kaiser Aluminum, US Steel and other companies made lots of decisions, including trading benefits for labor peace, that don’t look so smart in hindsight. And GM and Ford completely missed the boat on fuel economy.
But all that is beside the point. If American manufacturers can’t reduce their cost of health care, they will be increasingly unable to compete.
Here’s one potential solution.

Self-insured employers are beginning to take the drastic step of sending patients overseas for expensive, complex medical procedures. While there are likely just a few employers doing this now, there are several companies formed expressly to provide these services to employers. And, at least three large employers have contracted with benefits consulting house Mercer to research medical services offshoring.
The rationale behind these decisions is obvious – greatly reduced expenses. Procedures done in India or Thailand commonly cost one-tenth to one-fifth what they do here. And this is in facilities that have been likened to five-star hotels, with very high staffing ratios and round-the-clock pampering of American patients.
Hospitals, at least American ones, are not happy about this. Private-pay patients (those covered by private insurance) overpay for care, and that overpayment helps cover the cost of indigent care. As hospitals are required by law to provide care to all, they have relied on this cost-shifting to help balance the books.
Some employers are no longer willing or able to pay this hidden tax
What does this mean for you?
Another thread is being pulled from the worn fabric that is the US health care system.

Most employers are not confident that they understand their companies’ High deductible health plans (HDHP). According to a study released by Buck Consultants, only 20% of respondents said they understood their HSHPplans “very well”.
Notably, 81% of respondents said the key challenge to successfully implementing these plans was employee education and understanding of the plans.
It is encouraging that employers recognize that the plans will not be successful without an educated and informed employee base; it is somewhat less encouraging that these same employers don’t think they know their own plans very well.

The premise of health insurance is simple – insureds pay insurance companies a premium with the expectation that when the insured needs medical care, it will be funded by the insurance company (subject to the policy conditions). And if the care required is really expensive, well, that’s why you have insurance.
The relationship is inherently based on trust; the insured trusts the insurance company to pay the bills and the insurance company trusts the insured to pay the premiums. Actually, there’s not a lot of trust on the part of the insurer, as they just cut off benefits when premium payments stop coming in. But the insureds trust the insurer to pay the bills, cover expenses, and treat them fairly.
What happens when that trust breaks down? Does it do lasting damage to the relationship between and among individuals and insurers? Absolutely.
“While deception may be tempting because it can be used to increase short-term profits for the deceiver, we find that the long-term costs of deception are very high,” the researchers conclude. In other words, in long-term relationships, it pays to cooperate.” This quote is from a very interesting experiment conducted by a couple Wharton Business School professors which examined the implications of deception on relationships between individuals.
Research indicates the health insurance industry ranks pretty low in terms of respecting customers, and customer respect, with 3 out of 5 respondents saying their general trust for insurance companies is “not much” or “not at all”.
Moreover, polls indicate that people would be willing to pay more to see certain doctors, under certain conditions. This being the case, it is puzzling as to why HSA plan sponsors (insurance companies) aren’t more forthcoming, and don’t explicitly inform insureds that services rendered by providers must be “covered” under the plan definitions if the negotiated rate is going to apply. If their members are OK with paying more, then insurers should just tell them, clearly and up front, that non-covered services are going to cost whatever the provider charges.
Many health insurance executives appear to have a large blind spot when it comes to their customers’ reactions to policy limits and restrictions. They don’t seem to “get” that customers are not expert in parsing policy language, don’t understand the intricacies of policy limits and restrictions, and get angry when they think they’re being mistreated.
The net is, insurance companies may save a few bucks by not telling HDHP buyers that their negotiated discounts don’t apply to non-covered services, but they will likely lose customers, and may well lose their battle against tighter regulation as a result.
What does this mean for you?
Perception is king, and customers/voters/health care consumers perceptions of insurers’ practices may well result in “unintended consequences” for the insurers.