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Health Care Reform 11 July 2009

Posted by The Inimitable M in Health Care, Research and the Industry.
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Anyone who thinks that this blog is going to provide a solution to the health care issue is mistaken.  This is also not a blog in which to discuss corruption – something of which, in one form or another, the majority of the public is guilty.  I’m not even going to get involved in the “blame game” to which so many have fallen prey. 

There is a need for change.  We all know this.  But pointing fingers at one entity or another is a knee-jerk emotional reaction.  There is no “fault” to be laid at the door of one group or another.  There is, going forward, only the need to understand the situation, how it got in the shape it’s in, and to find a reasonable, fair and equitable solution.

Let’s look at the cycle that has placed us in our current position.

Medical entities charge a certain amount for their services.  These charges are based on:

  1. The cost of equipment
  2. The cost of medicines
  3. The cost of the salaries of the personnel who run the equipment, dispense the medications, do the research and, of course, assess and diagnose the medical issues we have.
  4. The discount insurance companies are willing to accept.
  5. A profit margin that provides for future rising costs and the acceleration of improved health care for its patients.

Insurance companies negotiate with the medical entities to, as they tell their policyholders, keep the costs down.

The insurance companies base their policy charges/negotiations on:

  1. Covering the costs of the medical entities
  2. The salaries of their personnel who process the policies
  3. Materials overhead
  4. A profit margin that provides for future rising costs and the acceleration of improved health care for its policyholders.

The costs of the medical entities rise in accordance to:

  1. The rising costs of building medical equipment
  2. The rising costs of medicines
  3. The rising salaries of the personnel
  4. The rising rates of insurance companies

The costs of insurance rise in accordance to:

  1. The rising costs presented by the medical entities
  2. The rising salaries of their personnel
  3. The rising costs of materials overhead

The negotiations between medical entities and insurance companies set forth a cost that insurance companies are willing to cover, with medical entities eating some of their charges based on these negotiations.  This does not mean that they eat their basic costs.  They can’t.  This means they eat their charges, which are based, in part, on what insurance companies are willing to pay. 

Insurance companies have to show their policy holders that they are saving them money by having insurance.  In order to do that, medical entities have to have high enough published rates that they can cover their rising costs in paying good wages (which we all want in the positions we all have), improve their facilities and equipment in order to improve our health and keep patients and their families satisfied as much as they possibly can.

If insurance companies could lower their requirements, medical entities could lower their published rates.  If medical entities could lower their published rates, medical costs in general would be lower.

In the midst of this fray is the government with sponsored health care (i.e., Medicaid, Medicare) and health care legislation (e.g., what medications are legal, what treatments are acceptable, what research is allowed).  We elect our representation, but we run into the issue of “who is right”, based on our philosophies.  Whose “side” is chosen?  This is yet another complicated cycle that really cannot be generalised, but it plays a massive part in this entire picture.  If we are unhappy with our elected representation, we should understand that we, as a nation of free-thinking individuals, have, by majority vote, placed those people in office – to represent us.  If that majority is an uninformed majority, we have no one to “blame” but ourselves.  If we didn’t vote because we couldn’t decide, then that is absolutely each individual non-voter’s fault.

One hand washes the other.  Everyone has demands based on their needs.  The medical entities do, the insurance companies do…and we, as consumers of health care, do.

The cycle will continue as long as the demands on all sides are great, and they are, indeed, great.

Who is going to lower their expectations first?

You tell me.

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Comments»

1. Marge - 11 July 2009

I think one of the first fixes ought to be that uninsured people get to pay the same “negotiated” rates that insured folks get. My “routine” bloodwork for my physical would have cost $611 had I been uninsured. Negotiated price? $123.

This merely ensures that medical emergencies for uninsured individuals will be financially catastrophic.

I also think you can’t neglect public education about the gross overuse of testing, procedures, and new medications in this country – when people are receiving their only education about health issues from big pharma via commercials on television, then we get skewed expectations on the part of patients about what sorts of treatments are necessary.

theinimitablem1 - 12 July 2009

Exactly!

A perfect example for me was the pre-bill (“this is not a statement”) I received when I had my stroke in 2006. The “pre-bill” was almost $30,000. Negotiated cost, about $10,000.

Another example is a woman I know who is just sure this pill or that will “cure” her. She is in the clinic at least once a week with a perceived symptom that she saw on television, for which there was an “instant” cure via some medication they were promoting.

Progressive Mews - 12 July 2009

Oddly enough, it isn’t always the case that the uninsured get the worst prices because they don’t have insurers to negotiate. i’ve heard numerous people say they have gotten better prices on medications and doctor visits by bypassing the costly procedures of filing insurance claims. I know as an uninsured person, by asking those that ARE insured, that I have indeed gotten better deals by paying the doctor’s office or pharmacy out of pocket.

Not to mention that every time you file a claim it increases the chance of your premiums going up!

I agree with both of you on the absurdity of pharmaceutical companies advertising directly to patients, it is essentially causing imaginary epidemics. And talk about somebody getting between you and your doctor; encouraging patients to TELL their doctor what treatments they “need” is pure insanity! Don’t get me wrong, I think patients need to take a reasonable amount of responsibility in understanding their body and their overall health – but making people believe they know better than their doctor does when it comes to prescriptions clearly crosses over the line.

2. Origami Momi - 11 July 2009

Good question, wish I knew the answer.

3. Jane - 11 July 2009

Health Care reform certainly is an important issue and I do like how you presented this complex subject.

Medical groups and Insurance companies are both businesses who each need to make a profit along with prepaing for the future costs to continue to provide the best health care to patients and clients.

I enjoyed reading this today and looking forward to how this might be resolved.

Jane

4. Progressive Mews - 12 July 2009

All excellent points, but you left out one MAJOR factor, and perhaps even the most significant one: Wall Street.

From the congressional testimony of the former president of communications for CIGNA (fourth largest insurer in the US), Wendell Potter, in relation to the across the board testimony of the largest insurers’ execs (just the week prior) stating they will NOT stop their practice of denying claims; Potter explains why they will not stop this practice and its relation to rising prices:

“The average family doesn’t understand how Wall Street’s dictates determine whether they will be offered coverage, whether they can keep it, and how much they’ll be charged for it. But, in fact, Wall Street plays a powerful role. The top priority of for-profit companies is to drive up the value of their stock. Stocks fluctuate based on companies’ quarterly reports, which are discussed every three months in conference calls with investors and analysts. On these calls, Wall Street looks investors and analysts look for two key figures: earnings per share and the medical-loss ratio, or medical-benefit ratio, as the industry now terms it. That is the ratio between what the company actually pays out in claims and what it has left over to cover sales, marketing, underwriting and other administrative expenses and, of course, profits.

To win the favor of powerful analysts, for-profit insurers must prove that they made more money during the previous quarter than a year earlier and that the portion of the premium going to medical costs is falling. Even very profitable companies can see sharp declines in stock prices moments after admitting they’ve failed to trim medical costs.

To help meet Wall Street’s relentless profit expectations, insurers routinely dump policyholders who are less profitable or who get sick. Insurers have several ways to cull the sick from their rolls. One is policy rescission. They look carefully to see if a sick policyholder may have omitted a minor illness, a pre-existing condition, when applying for coverage, and then they use that as justification to cancel the policy, even if the enrollee has never missed a premium payment. Asked directly about this practice just last week in the House Energy and Commerce Committee, executives of three of the nation’s largest health insurers refused to end the practice of canceling policies for sick enrollees. Why? Because dumping a small number of enrollees can have a big effect on the bottom line. Ten percent of the population accounts for two-thirds of all health care spending.1 The Energy and Commerce Committee’s investigation into three insurers found that they canceled the coverage of roughly 20,000 people in a five-year period, allowing the companies to avoid paying $300 million in claims.

They also dump small businesses whose employees’ medical claims exceed what insurance underwriters expected. All it takes is one illness or accident among employees at a small business to prompt an insurance company to hike the next year’s premiums so high that the employer has to cut benefits, shop for another carrier, or stop offering coverage altogether–leaving workers uninsured. The practice is known in the industry as purging. …”

This portion of Potter’s testimony is found on the second page; all of which you can read here:

http://www.tnr.com/politics/story.html?id=a571410c-634b-4424-a6c1-d6760cd507eb

This major player in the role of pricing also makes me think this would affect ALL the for-profit healthcare/medical entities you have mentioned as well. When it comes to the politicians, the insurance companies have recently shown how they throw their weight around in DC by way of lobbying and of course campaign funding.

As was pointed out in the Bill Moyers’ Journal last night, members of Congress were told by insurers’ lobbyists that if they chose to endorse Michael Moore’s film “Sicko” in any way, shape or form, it would cost them dearly in their campaign coffers – whether it be a lack of it in their own, and/or it going to their competitors instead. And obviously the cost of these campaigns to keep our members of Congress aligned with the insurers’ interests over our own costs PLENTY (currently 350 former members of Congress & aides are being paid $1.4 Million DAILY to lobby) – another additional cost to insurers, that is then then passed on to consumers (the “insured”). Just imagine what kind of profits are being made by private insurers if it’s worth it to them to pay out that kind of money for lobbying!

theinimitablem1 - 12 July 2009

A very good point, and I agree with you. In the second sentence of the blog I said this was not the blog in which to discuss corruption, which in my point of view, takes the lobbying issue out of the picture. This sort of lobbying as it stands right now would not be happening if the rest of the cycle weren’t involved (including Wall Street, which I did forget), and the vast amount of monies – a distinct form of corruption – would not be paid out. This blog was intended to cover the essentials, not corruption. Thank you for including Wall Street.

theinimitablem1 - 12 July 2009

Also, now that you have added the Wall Street scenario, please tell me.

What is your solution?

I don’t mean an insurance solution. I mean a complete solution.

Progressive Mews - 12 July 2009

Well, I don’t really consider lobbying and Wall Street as “corruption” for starters. the fact if the matter is that this is just legal means of running business – whether we like it or not. I mean, for-profit companies, no matter what they are, are bound by LAW to serve the financial interests of their shareholders. Again, it isn’t pretty and especially in this case I don’t agree with it because applying for-profit business laws to healthcare truly has life or death consequences.

So I don’t know if I’m answering your question as to what I believe the “solution” is here, but I think it’s pretty clear that the “for-profit” element has no place in our healthcare system AT ALL. In policy, that translates to Single Payer; which is privately run medicine/healthcare, and government funded insurance.

If you’re talking about lowering the costs of the things you’ve mentioned here, then I still think Single Payer is the way to go. The majority of our research is done by (or funded by) the government anyway, and under this system it would actually be a REAL free market atmosphere that would bring innovation and results to the forefront instead of profit driven motives.

5. theinimitablem1 - 12 July 2009

I don’t know why it won’t let me reply to your reply, Heather, but I’ll leave this comment, anyway.

I work at an institution that is not-for-profit and yet I see millions go into research from private grants as well as grants from the government. I see us working daily as a facility that works for the people, rather than for the government. We are required to follow the guidelines and/or restrictions placed on our research by whatever administration is in place at the time. We are under siege constantly by special interest groups who spend their own millions to push their platforms through their own lobbyists on both state and federal levels. It adds to the cycle. It adds to the costs.

Some say it’s a necessary evil. I leave the word “necessary” out of the picture.

I am always amazed by the number of people whose claims are denied (and I’ve seen it happen often) – particularly through government insurance plans. With all of my own medical issues, I’ve never once had a claim denied. Not once. This includes having worked for both for-profit Wall Street companies and not-for-profit organisations.

We will see innovation and results come to the forefront when special interest groups (I won’t name them here) are disallowed the opportunity to sway our representatives with their emotion-driven, “my way is the only right way” platforms.

Progressive Mews - 12 July 2009

Yes, certainly special interests get in the way, but again, their “interests” are ultimately profits. And thus there really is no way of discussing this issue without including the corruption.

The only thing that I would make a small correction on is that government run insurance has been increasingly straying AWAY from being not-for-profit! A few factors going on there: First there are overwhelmingly those that have the most health problems, therefore raising the pay-out ratio dramatically (as opposed to having healthier people included in that “pool” of funds) – the opposite affect of “buying in bulk” and spreading out the “risk” factor of pay-out. Second, all the privately owned options and supplemental plans that have been included in and introduced into our intended not-for-profit healthcare system. Lastly, the gift to pharmas of disabling Medicare from making deals for prescriptions (part D); again, lacking the “buy in bulk” discounts. In more ways than one could possibly count, special interests have been chipping away at the not-for-profit portions of Medicare & Medicaid for decades!

theinimitablem1 - 12 July 2009

I’m glad I posted this. I’m still trying to sort out where to start, and where a comprehensive solution lies, but this discussion has been very informative.

Single Payer may be the place to start, but something tells me that, because of lobbying, Wall Street, special interest, even that will come down to whose pockets are lined the heaviest.

6. Progressive Mews - 12 July 2009

“… because of lobbying, Wall Street, special interest, even that will come down to whose pockets are lined the heaviest.”

This will ALWAYS be the case, as long as healthcare remains a for-profit venture too. =)

theinimitablem1 - 12 July 2009

🙂


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