An America without health insurance companies

Imagine an America with no health insurance companies.

What do health insurance companies do?

They take as much money as possible from people who want health insurance coverage. They pay out as little money as possible — so-called medical loss — to settle claims from creditors for health services and products that have been delivered.

They keep as much money as possible for the incomes of their executives and other employees, and to enhance share value for their owners.

They do try to attract enough premium money from customers — so-called covered lives — so that they can spread the risk of a few high-cost customers across the premiums of many low-cost customers.

They try as much as they legally can to cover as many low-cost customers as possible, and to keep as many high-cost customers out of their plans in order to maximize revenues and minimize expense.

They do employ a lot of people, all “following the money” — sort of a jobs program.

Why do we need them? There must be a better way.

It is true that health insurance companies use market clout to attempt to “keep costs low.”

And they are motivated to try to keep their own costs low by limiting use of expensive procedures.

But, by any fair, rational, national, international, and outcome measure, health insurance companies have failed to keep utilization low and failed to keep costs low.

But they have succeeded splendidly at growing their workforces, paying their execs highly, and rewarding their shareholders handsomely.

The for-profit American health insurance industry — and many of those not-for-profit lookalikes — is a poster child for the triumph of poorly-regulated and misplaced capitalism in a historically fundamental service profession.

Why does the United States need health insurance companies at all?

The answer is we don’t, at least not in their current forms. They cause more harm than they do good.

There must be better way to use our national and personal resources more effectively and efficiently to keep our people healthy and manage their illnesses when they get sick.

Let’s create it.

Having abolished health insurance companies in this fantasy, how would you start over?

I would grandfather in Medicare, but insist that it be greatly improved before implementation.

I would expect most ambulatory care to be paid out of pocket up to a means-based annual deductible.

And I would insist on means-based “catastrophic coverage” for ALL Americans.

I would expect the government to pay for preventive services for all that had been proven to be safe and effective, considering them to be public health.

I would take the profit motive out of the health insurance market.

What do you think about these ideas? What would you do?

George Lundberg is a MedPage Today Editor-at-Large and former editor of the Journal of the American Medical Association.

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  • http://twitter.com/DarrellWhite Darrell White

    What would you do about fees, costs, etc.? Price of a hospital room or OR? Fee for services provided by a physician or other medical worker? 

  • http://twitter.com/Leaderdmd Dr Dave Leader

    Don’t forget that the insurance companies fund a lot of our political system.  Without insurance companies our politicians would have trouble buying air time.

  • Kathleen Summers

    I think getting rid of the current system is an excellent idea. I second the call.

    What would I do next in this fantasy?

    I’d turn Medicare and Medicaid into one system that covers everyone. Let’s call it Medicaraid. Workers, investors, and entrepreneurs would continue to pay in to the system a certain percentage of their earnings. For every citizen, a “basket” of services that would support basic human dignity would be provided, covered by these fees. They would be provided by companies (yes, capitalism is alive and well in this fantasy) that would market and attract customers based on what they would offer in addition to the basic human rights basket.

    The basket would include evidence-based preventative care. It would include hospitalizations. It would include prenatal care and delivery. It would include generic medicines. What is covered would be basic, strict, and simple.

    If you want expensive brand name drugs, find an insurance company that offers them as a part of a package that you pay more for. If you want every arthritic joint replaced by the age of 60, find a company that offers it as part of a package you pay more for. Expect the best in new and innovative cancer therapy? Find a company that offers to provide whatever is new and expensive that will prolong life by a few more months. Want to go to the chiropractor, the acupuncturist, and the herbalist? Great, find a company that sells a package including those things. Force the companies to be innovative in what they will cover to attract new customers. Give consumers choices.

    But while everyone is busy wanting more and more and the best and the better, nobody has to do with nothing. And that’s because this country cares about every citizen and provides a basic level of health services consistent with human dignity. That’s my fantasy.

    • http://EasyOpinions.blogspot.com/ Andrew_M_Garland

       To Kathleen Summers,Insurance companies would offer this basic insurance in an instant, if allowed by the states.Health insurance is regulated, manipulated, and distorted in every state. Lobbyists at the state level arrange for their particular offerings to be covered by insurance, such as accupuncture, chiropracty, and health clubs.Insurance plans differ in total financial coverage, but don’t offer ways for the consumer to benefit from choosing older, cheaper drugs. So, everyone has the incentive to choose newer, more expensive drugs, and the state-standardized insurance plans evolve to universally cover those and to cost more. Or, everyone is restricted to the older, cheaper drug to save money, and you find yourself uninsured for the newer drugs which you would have preferred.That may seem as if I am arguing both sides at the same time. The point is, the individual has lost the ability to choose the detail of what his insurance will or will not cover, because it is a product sold to companies and is standardized by the state.

      • http://twitter.com/theYogadr Kathleen Summers

        Great. Then one of the most powerful political lobbies would be on the side of Medicaraid, making it more likely we would have real coverage for all.

        And as far as what doctors get paid (to jkyu99), I can only speak for myself. I worked for years as an ER doc making quite a nice bit of money. And I got out because the system is so broken. Now I make significantly less money, but I can feel good about what I do and I’m happy. That’s way more important than cash to me. If I could go back to the ER and take care of critical patients in their hour of need and do so in a wholesome environment, friendly to docs, and without all the crap in modern day medicine, I’d likely go back and work for a quarter of the income I received before. That’s a tough order though. Then again – it’s a fantasy.

    • Anonymous

      Sure – and what do you consider “basic” health care? There’s your first stumbling block, right out of the gate.

  • Anonymous

     Be careful what you ask for.  Under your plan, the government would pay for all doctors who provide catastrophic care.  If you think that For Profit Insurance plans are stingy, you should see what the government Insurance plan think a doctor should be paid. 

  • David Lawrance

    Insurance pools not only spread risk but improve purchasing power. Both of those goals are, in the main, good for those of us who find ourselves needing healthcare. A moral concern about the for-profit market is that its first duty is to maximize dividends to its shareholders. 

    In a healthcare insurance mutual, the shareholders are the policy holders. Though this is generally shrugged off as an old and insignificant form of insurance, it now deserves renewed consideration.

    Government ownership, Medicare, seems the ultimate co-op. However, government serves all interests.

    • Anonymous

      “However, government serves all interests.”

      Government should serve the interest of its citizens. If by “all interests” you include private enterprises, I disagree, since corporations are not citizens. I will believe corporations are citizens when Texas executes one.

  • Anonymous

    Working in medicine, and having worked for an insurance company in the past (college job), I somewhat disagree with your characterization.  

    Sure, insurance companies are businesses which are in business to make money.  They have costs, expenditures, employees, and two types of clients.  The first client is the patient, the second client is the corporation which decides to use the insurance company to cover their employees.  And yes, they have shareholders as well, not to mention providers and government regulations.  While it’s true the overall goal of the company is to make as much money as possible, they have to do this while keeping EVERYONE as happy as possible, and that’s why I disagree with the blanket characterization that they have free reign to provide the worst possible service at the lowest possible price.  

    Providers have the option of not contracting, employers have the option of choosing another insurance company, employees (patients) have the option of choosing another employer (or collectively complaining for change), shareholders have the option of divesting or removing management, and at the slightest misstep, the government has the option of levying massive fines.  

    Your article assumes the most powerful agency in all of this is the insurance company itself, but given how many relationships the insurer must juggle, that’s just not true.  It’s really the corporation- employee premiums are but a tiny fraction of the amount of money the coporation pays the insurance company for each employee, and it’s up to the corporation to determine how much of the overall cost the employee shares (via premiums).  The coporation is the entity that competitively negotiates insurance coverage, and the insurance company is contractually obligated to fulfill that contract to the letter.  If it starts cutting corners, a huge segment of its business is up for grabs.  Heck, even if it fulfills the contract but does it in a way that upsets the employees they could still be at risk.  By the way- many large corporations pay claims out-of-pocket, they only pay the insurance company to do the paperwork and contract with providers.  Many corporations even pay insurance companies to do the paperwork for unfunded benefits like FMLA- the sheer cost of doing this makes it worth paying another entity to do it for them.  That’s a market solution to increase efficiency, and it has nothing to do with healthcare.

    Theoretically could the system be made leaner by cutting out the profit the insurance companies make?  Probably, but at what cost?  To turn our healthcare system over to bureaucrats that have a long history of mismanaging everything they touch?   As I’ve pointed out, our system is very sensitive to the needs of each entity in that system and provides great incentive to respond when someone is unhappy.  Does that sound like something that has ever been true of our government?  Our system is imperfect and has holes through which people fall (particularly the unemployed), but personally I believe addressing these issues is far more constructive then imaging a utopia in medical insurance which simply doesn’t exist- not here, not in the UK, not in Canada, not in France, not anywhere.  Every system has problems with costs, every system is strained for lack of money, and every system has many individuals which are happy, and many which are not.  There’s no magic behind a great healthcare system, just lots of problems that need to be addressed.

    • Anonymous

      Sadly, you are naive about the real world. I sincerely hope you never have to learn the harsh realities.

      • Anonymous

        Please feel free to refute anything I’ve said with your own knowledgeable opinion from both inside and outside the insurance industry and we can have a productive conversation.  Or you can just throw stones, whatever works for you.

    • Anonymous

      While I can agree with you that just about every system has holes and problems that can be improved I disagree with your contention that a system that is exclusively or dominated by “for profit” players is best.  The crux of your argument rests on the assumption that the power of the free market in health care will regulate itself.  You assert that for profit health insurance companies must balance their primary purpose to maximize profit with the needs of their customers as you say “they have to do this while keeping EVERYONE as happy as possible”, but it is exactly why this delicate balance creates exactly the worst possible service at the highest possible price.  Think about it, every dollar squeezed out for investor return, which is their primary duty so they must address that first, is a dollar not used to maximize the level of service provided to its client.  No matter how well you try to balance these two opposing priorities, in order to maximize level of service it must come at the expense of shareholder wealth and that if a “for profit” ever tries to adapt that model it will find itself without any new investors or shareholders and must rely instead on customer “premiums” for new capital that can only be used to improve or maximize the overall level of service at the lowest price possible.  What a concept huh?  BTW, efficiency and accountable management is not a concept or process exclusive to the private for profit sector. 

      • Anonymous

        I wouldn’t say that a system dominated by for-profit entities is best, per se, only I wonder why this single industry is so demonized vs. all the other players.  I’m not convinced there is such a thing as “best,” as it strongly depends on the individual evaluating it.  For-profit domination isn’t unique to the health insurance sector though- everyone in our healthcare system profits handsomely; doctors, nurses, PA’s, NP’s, CRNA’s, health administrators, medical device companies, pharmaceutical companies, PT/OT/ST providers, social workers, and the list goes on and on.  Even “non-profit” hospitals are out to make as much money as they possibly can in order to pay bonuses and expand their operations from year to year.  According to the Medscape 2011 survey the highest paying medical specialty is ortho, averaging $350K/yr, yet salary satisfaction is around 50%, or 40% for private practice (which make more on average).  That’s true across all the medical specialties which make upwards of 1000% more than the average American family.  If it’s somehow evil to make money off sick people, well, there’s plenty of evil to go around.

        Now you might say there’s a difference between healthcare providers and insurers in the services they provide, and that’s true.  However, insurers do perform a valuable service in the marketplace employing thousands of people to do a staggering amount of paperwork (which would have to be done under any system).  As private businesses they have all the incentive in the world to do this as efficiently as possible, but I just take issue with the notion that it creates the “worst possible service at the highest possible price.”  That sounds like a government service to me.  When a private corporation needs to increase efficiency because they’re loosing money hand over fist, they do it.  Like Best Buy today closing 50 stores.  Problem, solution.  Now let’s look at the postal service; they’ve been loosing BILLIONS of dollars quarter after quarter; the Post Master General has come up with multiple plans to fix things and get the organization on a sustainable path, but congress refuses to act because of political pressure (in this case, from unions).  There’s a reason “act of congress” is a colloquial phrase in our lexicon.  FedEx, UPS, DHL?  Thriving businesses with competitive pricing vs. USPS.  We’ve gotten to the point that government cutbacks equate to decreases in the increases; that’s something that simply isn’t tolerated in the private sector.  If we consider reimbursement rates as a function of “better service” (higher rates equal decreased profits but higher provider satisfaction), what agency is the biggest offender for cut-rate pricing?  It’s not the private insurers, it’s Medicaid followed by Medicare!  The government-run systems we already have are the ones I hear providers complaining about the most- in several cases where reimbursement isn’t enough to simply cover costs.

        I’m not idealistically opposed to government performing certain tasks when there is evidence for it.  Nuclear power is one issue- it takes many years to build a single plant, the costs are enormous, and the return on investment doesn’t occur until decades after it gets up and running, let alone the liability of running the whole thing.  Or how about government subsidies to encourage innovation where it is needed but otherwise would not occur.  Or even restrained, conservative government regulation of an industry run wild (Enron, credit default swaps, etc.).  But to suggest the government would be a better solution to outright providing health insurance than what we have now….I just don’t see the evidence for that.  

  • http://EasyOpinions.blogspot.com/ Andrew_M_Garland

    Dr. Lundberg’s comments apply to all of a free society. Everyone wants to charge as much as possible and deliver as little as possible. This applies even to government employees, who are known to form unions to be paid higher salaries, pensions, and medical care guarantees, while delivering as little work-product as possible.

    I guess that Dr. Lundberg himself has changed jobs in order to earn higher salaries and exert more influence over how things should be organized. He now would find the power of the state useful in forcibly implementing the efficiencies and benefits which he has formulated. This will start with eliminating the catch-as-catch-can insurance companies, which arose first under the wild-west proposition that a free people should trade with each other on the terms they saw favorable.

    I think the laws about medical insurance are far from ideal, and also far from being worked out in freedom. All insurance is intensely regulated by the states and watched over by Congress. If insurance is faulty, it is despite the careful oversight of government. Insurance companies must indeed be evil to do their nasty business immediately under the eyes of the regulators.

    Insurance companies should immediately be eliminated in favor of intelligent, wise, self-sacrificing public servants. We know that they produce valuable efficiencies wherever they can be bothered to pay attention.

    So, let’s all save a lot of money and enjoy a much better world by eliminating our free market ode to greed. Wise men like Dr. Lundberg will form official boards to determine what things will cost and what everyone will be paid. This will eliminate duplicative and wasteful competition and innovation, replaced with a smooth functioning and low-error government organization for all of health care, and if possible, everything else of importance in life.

    All we have lacked in any area of life is a few, farsighted people with the political power to implement their vision. Thankfully, health care is next.

    I am dismayed that Dr. Lundberg has not included some links to his work. I wouldn’t expect a blog post to make a case in detail, but I hope that detail by Dr. Lundberg is available somewhere. Somewhere there is his detailed (and probably long) description of just how to reorganize all of healthcare and insurance, with historical examples of how great it turned out in the areas of implementation. I can’t be expected to think very clearly, as a layperson, but it would be nice to reference it from time to time, to understand the new arrangements and the expected savings.

    If we are going to have a new world, maybe the plan should come first. The devil is always in the details.
     

  • http://twitter.com/benrushsociety BenRushSociety

    Why do I never see an article by an car mechanic imaging a world without auto insurance? Why do I never see an article by a contractor, carpenter, electrician, or plumber imagining a world without homeowner’s insurance? Why do I never see an article by a tourist imagining a world without travel insurance?

    The answer is that there really is insurance in those markets. What we call “health insurance” is not insurance but pre-paid, third-party payment. If the government would allow true health insurance that covered catastrophic accidents or illness and left patients and physicians alone to figure out how to pay for the rest, we would not have the bureaucratic problems that we do today – and are going to get worse if PPACA is not overturned.

    • Anonymous

      How nice it must be to have enough money and not had crippling medical costs, that you can maintain your opinions. I sincerely hope that situation continues for you.

      Meanwhile, open your eyes to your fellow citizens – all of them – not just the other fortunate ones.

      By the way, if it was simply pre-paid, it would only pay the amount we paid in, less profit, right? And while you are at it, do you really equate human health with autos and plumbing? Not your own health, I bet.

  • Anonymous

    To paraphrase Churchill, health insurance is the worst method of providing healthcare coverage except for all those others that have been tried.

  • http://profile.yahoo.com/S77WGMJY3CFHKYDZC7FTGT5NNQ william

    WHY DOES ANYONE THINK THAT THE GOVERNMENT CAN DO BETTER THAN THE PRIVATE SECTOR. WHERE DOES THE MONEY COME FROM TO PAY THE DOCTORS AND STAFF????? AT WHAT COST????? WHERE DOES THE GOVERNMENT GET THE MONEY??????????

    • Anonymous

      WILLIAM PLEASE ENLARGE YOUR FONT SIZE, WE CAN’T HEAR YOU

      TIA

  • http://www.facebook.com/people/Terence-Ivfmd-Lee/1523282856 Terence Ivfmd Lee

    Businesses make money two ways. One is by providing value so that customers gladly, or at least, voluntarily, give them money in exchange for the goods or service they provide. The second way companies make money is to take advantage of some sort of blatant government-sanctioned power or some sort of subtle loophole so that people are forced to give that business money, either directly or through taxation. So to think about these few large insurance corporations, why then, do people (or their employers) give money to them? If one can answer that, we can start to understand what value or lack of value these so-called “insurance” companies have.

  • Anonymous

    This wheel has already been invented.  Other western countries have health outcomes that are as good or better than ours with less money.  Health insurance companies are parasites.  As a family doctor, I would welcome their demise, and I would expect my income to go up or at least stay stable without them.  Of course it is not all about me.  American society would benefit immensely. 

    • Anonymous

      Your income would go up? Why, because these families you serve would willingly pay even half what you charge and still come as often or get as many tests, procedures, etc? You can skip out of the insurance market anytime you like. I believe it’s called “concierge” medicine.

  • http://twitter.com/azahran007 Ahmed Zahran

    Regulate health insurance companies just like we do with utilities. Ensure they cover their cost but cap their profit margin per patient. However, that alone will not solve the problem with high healthcare cost. The healthcare industry in America is so inefficient, lacks enough standardization and lacks strong leadership and vision. Solve any or all of these and this is where healthcare costs can come under control.

    • Anonymous

      Regulated utilities have a market monopoly and a guarenteed rate of return, you realize that, right Ahmed?

      Plus, insurers were already regulated even before ACA. Since then, as of this year, they have to spend at least 80-85% of each premium dollar on claims and member wellness/quality services.

      Does you favorite charity do as well?

      • Anonymous

        The 80-85% spending of each premium seems to be left up to each State Insurance Commissioner’s Office, if I am not mistaken.  This means that it is completely willy nilly.  They are not going to self regulate. Otherwise, what is the regulatory/auditing body and how can it possibly be effective?  We just believe their annual report? 
        In my state the major insurer is being fined $200,000.00 or so a month for various infractions but that is because we have a very consumer friendly Insurance Commissioner–not provider friendly.  The utilities model is DEFINITELY NOT what I would suggest for health insurance companies if they were to continue to exist  in such large numbers.  They need to have their exemption from the Sherman Act revoked for a start.
        There are so many ways to make profit, I can’t imagine The Market, couldn’t live without health insurance companies.    

  • http://www.facebook.com/people/John-Kaegi/100000386043288 John Kaegi

    AN AMERICA WITHOUT PRIMARY CARE PHYSICIANS!

    Why do we need primary care physicians?  PC’s once played an important role in people’s health.  They healed illness and coached wellness, often in the home.  They were the most trusted, revered professional for most families in America.  Then the big money started coming in and pc’s either relinquished their roles by becoming referral agents for specialitists, or became specialists instead, where the big money was.  They no longer have any influence whatsoever in wellness coaching, and most appear to have abandoned that responsibility.  So, I ask you, do we really need primary care physicians anymore?  What would you do instead?

    This argument has about as much acumen as your blog.  Without insurance companies, most people would never have been able to afford health care at all.  You are forgetting where your bread is buttered Dr. Lundberg, and expect your readers to fall hook, line and sinker for your inane vision.  Certainly, non-physicians are not giving up their insurance and are embracing insurer’s tools and programs aimed to keep them healthy.  It is what we call a “win-win” proposition, one that you may not understand.  That could be why people ARE giving up their primary care relationships for empathetic nurse practitioners in clinics.  Think about it.

  • Anonymous

    How about putting the Hippocratic Oath  back into medicine?  The main reason healthcare costs are out of control are because doctors no longer work based on the oath they work based on their own profit, they’re in bed with all parties and pit the patients against everyone.  They prescribe high cost medicine to appease the pharmaceutical companies and get very nice perks from them.  They take plenty of money from the so called devil insurance companies but do not police their own offices to make sure they are doing there work correctly.  They’re in cahoots with the hospitals and request high cost procedures when they are not necessary.  So if you are going to control healthcare costs I’d start by regulating the doctor….

  • Anonymous

    Apparently Dr. Lundberg doesn’t realize that Medicare is administered THROUGH the same private health insurance sector he thinks can be abolished. If these people didn’t work for private companies, they’d be working for the government, in his model.

    Still it’d be a heckuva a jobs program – hundreds of thousands of CSRs handling the millions of customer calls every single day; cubicles full of computer technicians to keep running the software that pays billions of claims every single day. Platoons of accountants to “follow the money,” fleets of attorneys to ensure the zillions of regulations are followed. And lobbyists – oh, yes, Virginia, govt agencies DO have lobbyinsts, so don’t think you’ll be rid of them.

    And when, pray tell, they’ve squeezed the 0-4% of health insurer profit out of the system (it fluctuates by year), how to we save money on the REST of health care? The 30% that goes to doctor fees, the 30% that goes to hospitals, the 10% that goes to medication and the 15% that goes to medical equipment. What about THOSE profits, Dr. Lundberg?

  • Anonymous

    Pre governement involvment in health insurance cost to deliver babies in hospitals, less complications was around $500, which included a week’s stay in the hospital and a ride home in an ambulance, medical devices and equipment was only a small percentage profit above manufacturer cost and hospitals were run by Christian charities and regulated by conscience and fear of bad PR instead of the federal government. Onvr government is involved it it like the pentegon buying a hammer, all costs go up because “the government will pay for it”. Same with the assumption that all healthcare should be at no cost to the consumer all surrounding costs will go up, (medical devices, supplies, etc.) therefore making the smallest part of healthcare, the PCP’s visit more expensive than it should be with the PCP having to eat the cost of bandaids, sutures, needles, etc.

  • http://twitter.com/livewellthy Stewart Segal

    I love the idea of a world without insurance companies.  I agree with Dr. Lundberg’s assessment of what insurance companies do.  He left off the fact that insurers have actually driven the cost of medical care through the cieling in order to increases patients’ dependency on the insurer.

    What we need is a return to the days of peronal responsibility and “major medical” policies.  Until people are responsible for their own health and the cost of their healthcare, they will continue to abuse themselves and expect someone else to pay the piper.

    A Central Authority such as Medicare will, by its very nature, be a dictatorship.  The Central Authority will decide what is good for you and what is not based on their interpretation of “science.”  The problem is that the Central Authority will decide what “science” is and I fear the facts will be changed to fit the authority’s need to decrease spending.

  • Anonymous

    In truth
    the only way to control healthcare costs is to have a Single Payer system.  Of course this will never happen because we
    are a government of special interests; none more powerful than the insurance
    industry. One only needs to examine the industries contributions to the members
    of the Senate and House. Remember, people hate insurance companies,
    but they hate Godless Communist Socialism more.  Just by suggesting that a
    program is socialist insures a large number of Americans will oppose it —
    unless it is called Social Security or Medicare.

     The insurance companies are in business to
    insure young, healthy individuals and to deny coverage to those in most need of
    it.  Their term for what they spend on
    benefits is “Medical Loss”.  That is
    exactly how they look at it.  Any medical
    benefit paid out comes right off their bottom line.  We do not need insurance companies
    administering healthcare in this country. 
    They add nothing to healthcare except additional cost.  The profits they take out of the healthcare
    dollar are substantial.  They are the
    ones that are rationing healthcare in this country.

  • Anonymous

    In truth
    the only way to control healthcare costs is to have a Single Payer system.  Of course this will never happen because we
    are a government of special interests; none more powerful than the insurance
    industry. One only needs to examine the industries contributions to the members
    of the Senate and House. Remember, people hate insurance companies,
    but they hate Godless Communist Socialism more.  Just by suggesting that a
    program is socialist insures a large number of Americans will oppose it —
    unless it is called Social Security or Medicare.

     The insurance companies are in business to
    insure young, healthy individuals and to deny coverage to those in most need of
    it.  Their term for what they spend on
    benefits is “Medical Loss”.  That is
    exactly how they look at it.  Any medical
    benefit paid out comes right off their bottom line.  We do not need insurance companies
    administering healthcare in this country. 
    They add nothing to healthcare except additional cost.  The profits they take out of the healthcare
    dollar are substantial.  They are the
    ones that are rationing healthcare in this country.

  • Paul Smith

    In today’s world, health insurance providers take on some risk. That will be eliminated when the ACA is fully implemented. Health insurance companies will do nothing but take profit under the ACA. With medical loss ratios and risk adjustment, the insurance companies will take a guaranteed profit for providing no service at all (other than providing some political cover).

  • Anonymous

     I would like to start with an answer of sorts to George’s first question. George is right to ask first, “What do health insurers do?” My answer is that essentially all they do is pay for things. They are “payers.” Unfortunately, as George helps us to understand, we don’t need payers. What we need are “purchasers.”

    What we refer to as health insurance isn’t “insurance” as we use that term in any aspect of our society/economy. Insurance has to do with unpredictable risk. There is a bit of that in the present arrangement but not a lot. And it is everything else that is overwhelming us.

    Think about it. In nearly every other aspect of our lives we are able to act like purchasers. To save words I’ll assume we all have a similar notion of what they means. In health care on the other hand things are so complicated, in such a variety of ways, that there is really no possibility for us, as individuals or in small groups, to act as purchasers. Since the present payers have chosen not to disturb themselves at a level necessary to behave in such a fashion, the fact is that there is no purchaser.
    In addition to all the other regrettable features of the current realm which George lists, these so-called insurers have been able to occupy the space that would be far better reserved for an entity that could serve as a purchaser on our collective behalf. One almost has the sense that they have usurped this essential territory.

    A few weeks back I listened to a dialogue between Jerry ___, a Sr. Vice President of the AFL-CIO and Dr. Don Berwick. They were sharing thoughts about the importance of getting far better cost saving performance out of health care providers. During that conversation Jerry expressed exactly my view – present insurers are simply payers when what we really need is somebody to act as a purchaser. I gathered this was a recent epiphany for Jerry and at the time I sensed that the specific notion had not previously been in Don’s idea set, either. If my assessment here is correct, that others haven’t had this idea in their consciousness then maybe we haven’t been spending enough time on this approach.
    While I have some ideas about how we might go about starting what seems like a sea change at the moment, I am careful not to get the cart before the horse. As with most things in my life others will, over time, find better solutions than mine. What I’d like to see now is some body starting to work on finding ways for a purchasing process to be put in place that acts in the interests of those who are putting up the money (each of us, and all of us) and whose only aim is getting us the best we can get for the money we are going to willing and able to spend. Sure as hell that isn’t what we have now.

    I cannot resist one anecdote. A little while back during the health care reform debates the Congress held a hearing during which a handful of executives from U.S. health insurers got a hard time from one of the Committees. Afterward one of these execs was being interviewed and he said words to the effect – “It isn’t the insurance companies that are responsible for these costs, it is the doctors who order all those services.” From the viewpoint of a payer the statement is correct, of course, but in the context of a better why of thinking he was confessing the total and absolute incompetence of his industry.
    Finally I would note that some of the fairly recent initiatives by CMS – many of which were announced or publicized during Don’s watch but a number of which have been long in development – position CMS to claim that they are moving in the directions I espouse. My arguments that the ground here is totally fallow overstate to that extent. At the same time since CMS has to deal with the entire elephant one doesn’t expect a lot in the way of speed or agility. In the conversation previously mentioned Don acknowledged the urgency to be moving very fast to get costs under control. Locally focused activities better fit that aim and it is here where the George’s comments resonate most forcefully.

    Thank you

    E. David Buchanan
    dbuch37@aol.com

  • http://www.facebook.com/adam.pawinski Adam Pawinski

    Never single payer system!

    I work in Europe whith experience in medical practice in different rich and poor countries. We know well how much harm for our patients doctors nurses and everypeaple makes keeping one payer system. They administration become gods, thay do spare for real treatment possibilities spessialy inovatine. They kill any attampt for individuall treatment of your patients. Thay create disasterous risk for treatment patients when national economy collapses. Peaple who must be treated in such a systems are totally dependent of economical decisions from administration and not from the medical doctor.

    In that way you kill medical market and all prices for treatment are created by administration which leave as often without the chance to do independent medical practice because of that.

    DO not make such a stupied mistake. We, medical doctors in Europe do try now to recuperate normal health care insurense market which does not exist anymore.

    Do nort listen to comunists!

    Adam

  • http://euonymous.wordpress.com euonymous

    I agree so much it hurts. The political and economic realities in the USA are insurmountable, as far as I can tell.  A solution would seem to involve getting the camel’s nose under the tent.  Maybe make Medicare available from age 55+.  When the world doesn’t end, maybe we can work our way to a single payer healthcare system…. you know, like the rest of the civilized world.  

    Doctors did not become medical professionals to spend their time arguing with insurance companies.  Think of the research and good that could be done with that 20% to 30% of American healthcare spending wasted on insurance companies.  Do we want a mercenary military? Do we want a mercenary healthcare payer system? History suggests we don’t benefit from either.  For some things we’re all in this together, guys.  A healthy country is a safer, wealthier, more productive country.

  • Anonymous

    How foolish…substitute a market system of competition for a government paid system with no competition. Haven’t you seen the mess social security is in??!!  As far as impossible solutions go, the far better one would be eliminate ALL insurance – make everyone pay cash.  We’d see medical costs drop like hail stones.

    • http://twitter.com/Mtl4u2 Les Zouazo

       Social Security is a mess?

      How so?

      Please elaborate so we can learn something useful.

      Thank you

      • planningresult

        Les, the social security trustfund has become a conduit for the U.S. to take on more debt.  When the trust was established, the surplus of deposits over payouts was to be held in trust and invested to earn a return.  What has been done though, is the trust purchases U.S. Gov’t debt.  Now that payouts either do, or will soon, exceed deposits (running a deficit) there are no assets to offset that deficit.  In order to get cash to pay benefits the government must go deeper into debt to refund the existing debt or interest rates will rise significantly as the market is flooded with the debt in the trust which woulld be for sale on the open market. 

        This means benefits will be reduced, eligibility increased, taxes on SS increase, or some other reduction of costs.  If no reduction of costs is implemented, the entire economy will plug along happily for some time and then very quickly meltdown when everyone get’s what has happened.

  • Anonymous

    Medicare is an interesting model. First, the government hires insurance companies to administer the program, so you will need to keep some insurance companies around to do that still.  Second, the fact that Original Medicare is only administered as an old indemnity plan, it has terrible outcomes and no performance accountability.  Just think about the 30-day readmission rates running from 20% to 26% depending on diagnosis.  The non-profit coordinated care plans belonging to the Alliance of Community Health Plans average 15%, by comparison.  CMS is trying to promote innovations in Original Medicare to incorporate some of the features of these health plans, calling the new programs Accountable Care Organizations. 

    The fact is that care delivery is terribly fragmented today and patients fall through the cracks when transitioning from hospital to home or from rehab to home.  Once someone is in a nursing home, Medicare only requires once a month visits by the attending physician.  All too often these patients get unstable and are readmitted to acute care through the ER.

    Why is it that 25% of all Medicare beneficiaries are enrolled in Medicare health plans? First, these plans take away most of the unlimited financial exposure of the outdated Medicare plan design. Second, Medicare health plans put programs in place that knit together the loose ends, hire case managers, send nurse practitioners or physicians to the homes, etc. For those patients discharged from acute care, the goal is to get the patients in to see the primary doctor within the next two days.  He or she is often unaware that the patient was even in the hospital, and no one signals him or her to take over and ensure that the patient is stable.

    There is an industry target of getting between 15% and 30% of all Medicare health plan members assessed in the home to ensure that prescriptions and OTC meds are reconciled; often times the primary doctor has no idea what all the patient is actually taking or not taking. Health plans feed this information back to the primary doctors who find these reports very useful in care management.  These assessments also help true-up the risk-based payments health plans receive according to the burden of illness and acuity of their members. 

    As for excessive overhead expenses, such costs are non-competitive.  A health plan places competitive bids with the federal government and, if costs are too high, they lose out by starving benefits that Medicare beneficiaries want.  Now with the Medicare Stars Rating system, better health plans get paid more and lesser plans are either getting eliminated by CMS or by the sheer Darwinian competition because they are paid less by the government.  The transparency and accountability for outcomes, member satisfaction and effectiveness is really remarkable.  Check out the differences between 3 star plans and those at 4 to 5 stars. 

    So if you want to eliminate health plans, we could all wind up with Original Medicare-for-All, and we would all be much worse off.  And, by the way, you know that little gimmick called the Sustainable Growth Rate that hangs out there, promising to hack back 27% of physicians’ Medicare fees?  If we stick with Medicare-as-we-know-it, that SGR is only going to get steeper and uglier.

  • Ben Bradley

    These are no longer health INSURANCE companies, they are health care PAYMENT companies. Go back to insurance being only for catastrophic medical costs and having a high deductible, and let people pay for their own regular exams and minor treatments, just as they pay for oil changes and minor repairs for their car. This will lower premiums, but they will be covered for major illness.

    • http://twitter.com/Mtl4u2 Les Zouazo

       How about chronic illnesses? Any idea how much Diabetes Type I cost? Ask Mish Shedlock how much it can cost to care for a relative with Lou Gehrig’s disease.

      Last time we checked, humans are not cars.

  • Anonymous

    Health insurance is primarily expensive because health care is expensive. The comparison of costs with other OECD countries demonstrates that insurance administrative costs are not the driving difference of excess costs in the U.S. Outpatient care, physician salaries and hospitals are.

    Someone has to care about the value for the money.

    We tried an open check book fee-for-service system and providers proved they were imperfect agents for patient needs. The ability to prescribe additional provider income was irresistible.

    Providers have to demonstrate to whoever is writing the check that the care provided is medically necessary, appropriate, of sufficiently high quality and fairly priced. Accountability can’t be optional.

    If health care cost inflation is the problem (and it is), removing the brakes on cost is a mistake.

    Insurance company oversight of expenditures is not liked by providers but is one of the few brakes in a system afflicted with runaway inflation. Arguably Medicare spends too little on administration given that 10% of Medicare expenditures are estimated to be waste and fraud. Eliminate insurance companies and you’ve expanded the license to steal for the truly abusive. And the well-intended provider can also over prescribe or over utilize. See the wide variability in cost and quality. There is no evidence that spending more is favorably correlated with better outcomes or quality and much evidence that it is NEGATIVELY correlated. The assumption that spending less necessarily causes lower quality is just wrong. Some of the harm we do in the health care system is from doing too much.

    I don’t believe you can ultimately get costs under control without more directly involving patients/consumers in the cost/benefit balancing (value equation). As long as people behave as if societal resources are free the train is headed for an ultimate fiscal wreck. For now insurance companies represent the financial needs of those writing the checks, both employers and employees. There’s a necessary balance between cost and quality. Someone has to advocate for value. Providers have not demonstrated they can be trusted in that role due to the inherent conflict of interest that my cost as a patient is provider income.

    We instituted Medicare and Medicaid to protect vulnerable members of society. Failure to answer the fiscal problems will ultimately harm those we seek to protect. We can’t wait until creditors cut up our national credit card. Reform is not motivated by wanting to hurt the poor or elderly, but wanting to protect them from the disastrous consequences of a fiscal collapse. There is no evidence that foreign lenders will finance debt ad infinitum as required by current “budget” projections. In fact we’ve been explicitly warned by China and other foreign lenders that action is required. Imagine Medicare and Medicaid if the borrowing spigot is shut-off and we are reliant on current revenues. That would leave only sixty cents on the current federal dollar. Cut everything across the board by 40% or more and see how both providers and patients fare. (And that’s before the effects of an overnight contraction echo through the economy as a panic far worse than 2008.)

    • roobsiet

      MORON!!  The “blaming MD” rhetoric is old and based on mere class envy and false claims.  Physician reimbursement accounts for 7.5% of the healthcare pie.  Yes, genius, keep trying to solve the financial problem by continuing to suck out the life of the 7.5% that makes the remaining 92.5% viable.  I’m working in the hospital on a Saturday night while you are sipping your Martini at a bar watching the Final Four.  BTW.  Recent NEJM article, which you apparently don’t read, found that hospitals spending the most on patients with congestive heart failure, etc. had better outcomes and lower readmission rates.  

      • http://twitter.com/Mtl4u2 Les Zouazo

         Talk to us about defensive medicine.
        BTW, where do you get the 7.5% figure? Inquiring minds would love to know, ecause when I see Mass General and others command reimbursement rates climbing at 10%+ clip year in year out, I got a problem believing physicians do not see the color of some of the money.

  • http://profile.yahoo.com/FXOBIAELT7TDUEAES4HOZMGR5A Tom

    You only need medical insurance for MAJOR problems.

    You can get a catastrophic health insurance policy with a $10,000 deductible for about $90 a month.

    You then pay for everyday medical expenses out of your own pocket.

    I only go to the doctor if I NEED to go. By NEED I mean I’m in physical pain or feel like I’m dieing. As a result I rarely EVER go to a doctor. I don’t go for “checkups” just to have the doctor FIND something to charge me for.

    I also do not take any prescription medication. Doctors are on a MISSION to get you hooked on designer prescription medications that “May reduce the chance of….bla bla bla” 99% of prescription medication does NOTHING other than take money from your pocket.

    Americans need to stop going to the doctor for EVERY LITTLE THING. My grandfather lived to be 98 and he NEVER ONCE Went to a doctor in his life AND he smoked cigars and drank whiskey all his life.
     

  • qillower

     Ok professor in the real world the cost are high because patient demand their insurance take care of everything from my visit to a cough syrup at joes pharmacy.  Its hell trying to get anything back from Medicare that is why i no longer accept those patients.  Problem is people do not understand the basic cost of medical care and if we tried to run it like car insurance then an oil change would be 500 dollars and take the mechanic 3 months to get his payment back from autocare insurance.  The government is not the answer because they are the reason that insurance companies require everything under the sun be covered. 

  • http://profile.yahoo.com/PPZZHB7PX6QO3EQ66NEDUM7U3U someideas

    Do we even need health insurance
    companies? Health insurance companies are raising premiums, raising co-pays,
    lowering coverage, and lowering reimbursements for health care providers
    because health insurance executives are more worried about making money for
    themselves and their shareholders than using our money to pay for our health
    care needs. Obamacare requires everyone to purchase health care coverage from
    the same health insurance companies who have gotten us into this mess.
    One of the ways to fix health care would be to let us
    keep more of the money we pay, or our employer pays, for our health
    insurance. 
    For example, why does our employer or why do we give
    100% of our monthly premiums to health insurance companies who then decide
    which treatment they will pay for with our money? Could we create a system
    where employers send 50% of employees’ health care premiums to their employees’
    health care savings account (HSA) and 50% to either a quasi-governmental
    organization (QGO) or the health insurance companies instead of giving 100% of
    our premiums to health insurance companies?
    Using the 50/50 health care plan, health care costs
    would be reduced, risks could be managed, and everyone would be covered.
    There would be fewer disagreements with insurance companies over services or
    payments. Patients and doctors would decide the treatment that is necessary and
    the patient would pay for the services through either their HSAs or the
    QGO/health insurance company. This would encourage more responsible behavior
    and better patient-doctor relationships. No more millionaire (http://www.guardian.co.uk/business/2011/dec/14/healthcare-ceos-americas-best-paid)
    insurance executives denying claims and the patient would have control over
    his/her money and health care. And, people who lose their jobs would still have
    money for health care through their HSAs and/or QGO.
    Currently, if you lose your job and cannot afford COBRA,
    then you lose your health insurance or become part of Medicaid (if you are poor
    enough) or Medicare (if you are old enough) programs. It would be helpful
    to have a HSA to draw upon when unemployed in addition to Medicare and
    Medicaid. For example, if the health insurance premiums your employer pays for
    you cost $20,000 annually and you worked for 20 years, then you could
    potentially have $200,000 ($20,000/2 * 20) in a health savings account. You
    would deplete your HSA before you used the QGO, Medicaid, Medicare, etc.
    Health insurance companies have numerous excuses for
    not paying while at the same time charging a small ransom to be covered under
    their health plan. Obamacare should not be a windfall for the health insurance
    industry and the money the health insurance companies receive should be used to
    reimburse doctors for their services. After all, the money health insurance
    companies receive needs to be used for the health care of the
    customers/patients and not to enrich the shareholders and employees of the
    health insurance companies.

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