I have heard some say that healthcare is a right while others respond that they disagree. No matter how passionately both sides state their points, the other side is not convinced. Perhaps, both sides are focusing on the wrong question.
Perhaps, we should ask: Does society have a moral obligation to provide healthcare for those who need it, and if so, what is the nature of the coverage?
Most would agree that it would be immoral to simply pass by someone who is dying without at least calling 911. Pretending not to notice does not relieve one of the moral obligation to assist. In terms of healthcare, there are many good people who get sick through no fault of their own. For example, if someone develops a curable cancer, can we agree that it is wrong to let this person simply die? We are our brother's keeper, and we have a moral obligation not to pretend otherwise.
In addition, if someone has a preventable condition, does society really need to wait for the person to get sick before offering support? Not only is preventive care usually more effective and likely less costly, but it also seems immoral to knowingly watch people fall into a preventable situation.
On the other hand, if someone wants a non-essential treatment such as nose job, I feel no moral obligation to pay. Whoever wants a nose job can pay for it themselves.
Most of healthcare exists between these two extremes. The question we need to debate is not if healthcare is a right, but instead, what is the extent of our moral obligation. Where should we draw the line between rightfully helping someone in need and inappropriately paying for something the individual should pay for himself? I do not have the answers, but I do believe society has a moral obligation to provide some sort of health insurance for all its citizens who can not afford it. That should be the starting point of the healthcare debate before arguing about how it should be done and what is and is not covered. Even if individuals do not have a right to healthcare, we as a society have a moral obligations that should not be ignored.
Wednesday, March 17, 2010
Friday, February 19, 2010
You're Not As Covered As you Think
If you have health insurance, are you covered for all catastrophic illnesses? If you are like most working Americans, you are covered for many conditions, but you likely have a gaping hole in your coverage that could find you sick and uninsured. Do you know what it is? Here is a hint, you will never find it documented as an excluded illness by your insurance company.
In "The Healing of America," T.R.Reid writes about Nikki White whose lack of insurance lead to her death, but at the time of her diagnosis, she had insurance. The problem with her insurance was that it did not cover her after she had to stop working. Once her employment ended, so did her health insurance, but her chronic life-threatening condition continued.
Would you be any better off if you became ill with a life-long chronic condition that required you to stop working? Disability insurance might replace much of your lost income, but your employer-based health insurance would eventually end.
If you can afford it, you will have a right to purchase health coverage through your employer for 18 months. After that, you will be on your own. Perhaps, you will be lucky enough to qualify for a limited safety net program, but as in Nikki White's case, you may at some point be told you are not needy enough. Once your insurance has been terminated, you will have a preexisting condition so it will be extremely unlikely that you will be able to buy insurance on the individual market.
How common is this problem? Good data on this issue is not easily available. However, according to a recent article in the American Journal of Medicine, most bankruptcies in the U.S. are related to healthcare costs, and 78% of people with these medically related bankruptcies had insurance at the time they first got sick. This would imply that Nikki While was not alone in her misfortune.
Proposed federal legislation will make this situation less of a problem by making it illegal for companies to discriminate against patients with pre-existing conditions. For those of you who live in Massachusetts, you may already be protected by laws that promote universal coverage. If you lose your current coverage, at least you will be able to find an alternative. If you live in the US outside of Massachusetts and you lose your insurance, you have a problem. Until legislation is signed and implemented for the rest of the country, most Americans will unknowingly be at risk.
In "The Healing of America," T.R.Reid writes about Nikki White whose lack of insurance lead to her death, but at the time of her diagnosis, she had insurance. The problem with her insurance was that it did not cover her after she had to stop working. Once her employment ended, so did her health insurance, but her chronic life-threatening condition continued.
Would you be any better off if you became ill with a life-long chronic condition that required you to stop working? Disability insurance might replace much of your lost income, but your employer-based health insurance would eventually end.
If you can afford it, you will have a right to purchase health coverage through your employer for 18 months. After that, you will be on your own. Perhaps, you will be lucky enough to qualify for a limited safety net program, but as in Nikki White's case, you may at some point be told you are not needy enough. Once your insurance has been terminated, you will have a preexisting condition so it will be extremely unlikely that you will be able to buy insurance on the individual market.
How common is this problem? Good data on this issue is not easily available. However, according to a recent article in the American Journal of Medicine, most bankruptcies in the U.S. are related to healthcare costs, and 78% of people with these medically related bankruptcies had insurance at the time they first got sick. This would imply that Nikki While was not alone in her misfortune.
Proposed federal legislation will make this situation less of a problem by making it illegal for companies to discriminate against patients with pre-existing conditions. For those of you who live in Massachusetts, you may already be protected by laws that promote universal coverage. If you lose your current coverage, at least you will be able to find an alternative. If you live in the US outside of Massachusetts and you lose your insurance, you have a problem. Until legislation is signed and implemented for the rest of the country, most Americans will unknowingly be at risk.
Health Insurance does not earn its profits
I believe in the free market; companies that provide value are rewarded by customers and earn profits.
With that premise, I began to wonder how, year after year, health insurance companies in the U.S. can be so incredibly profitable ?
Health insurance companies do not appear to improve the health of the patients they serve. Even if they did, there is no evidence that the more profitable health insurance companies do a better job of improving the health of their patients.
Unlike companies that provide other types of insurance, they are not at risk. Most health insurance is through employers, and the employer bears the financial risk. The insurance companies just administer the plans.
The insurance companies do not appear to pay claims efficiently. It is not unusual for more than 20% of every dollar spent on health claims dollars to go to the insurance company's administrative overhead, and this figure does not include the administrative costs doctors and hospitals incur in having to deal with insurance companies.
Why are these companies being rewarded so well when they do so little to help patient care? What am I missing?
I now believe that I have been mistaken in thinking of patients as the customer. Patients do not choose their insurance plans. If they do, they often only get to choose among the one or two plans offered by their employers. The employers are the ones making the real purchasing decision, and they are therefore the real customer. Their primary marketing efforts therefore need to be toward employers.
Patients are not even secondary customers. Most employers choose plans based on cost and range of doctors and hospitals that are available through the different health plan options. It is therefore a critical job of the insurance company to get doctors and hospitals to accept their insurance at the rate the insurance company pays. The insurance company's secondary customers are these providers and they therefore need to focus resources on their provider relationships.
I would say patients and their families are third in the list of priority. If patients are dissatisfied, perhaps their needs are prioritized to a lesser extent.
And yet, if employers are the customers, don't they still want high quality cost effective care? Why are employers rewarding insurance companies with such large profits? Couldn't they simply bypass the insurance companies and pay providers directly? Large employers are already assuming the financial risk. Cutting out the insurance company seems like the next logical step.
The reality is that in the current system, employers need the insurance companies since only insurance companies are large enough to negotiate the best prices with providers. The discounts that large insurance companies get more than justifies their profit. A patient with insurance who does not have a contract with a given hospital may be obligated to pay double or triple what they would otherwise have to pay. This more than justifies the insurance company profits. Without the insurance companies, employers would have to drastically overpay for each claim. Health insurance companies are really contracting machines. Everything else they do is secondary.
But how does this contracting effort help patients? It doesn't. The current health system allows insurance companies to compete in something that is of no value to patients or society. The system rewards local monopolies with the best contracts; healthcare quality and efficiency are a lesser concern. Those who generally expect the free market system to improve healthcare often do not appreciate this dysfunctional dynamic.
Just as those who implemented the antitrust laws 100 years ago discovered, I now realize that Adam Smith's invisible hand sometimes needs help.
With that premise, I began to wonder how, year after year, health insurance companies in the U.S. can be so incredibly profitable ?
Health insurance companies do not appear to improve the health of the patients they serve. Even if they did, there is no evidence that the more profitable health insurance companies do a better job of improving the health of their patients.
Unlike companies that provide other types of insurance, they are not at risk. Most health insurance is through employers, and the employer bears the financial risk. The insurance companies just administer the plans.
The insurance companies do not appear to pay claims efficiently. It is not unusual for more than 20% of every dollar spent on health claims dollars to go to the insurance company's administrative overhead, and this figure does not include the administrative costs doctors and hospitals incur in having to deal with insurance companies.
Why are these companies being rewarded so well when they do so little to help patient care? What am I missing?
I now believe that I have been mistaken in thinking of patients as the customer. Patients do not choose their insurance plans. If they do, they often only get to choose among the one or two plans offered by their employers. The employers are the ones making the real purchasing decision, and they are therefore the real customer. Their primary marketing efforts therefore need to be toward employers.
Patients are not even secondary customers. Most employers choose plans based on cost and range of doctors and hospitals that are available through the different health plan options. It is therefore a critical job of the insurance company to get doctors and hospitals to accept their insurance at the rate the insurance company pays. The insurance company's secondary customers are these providers and they therefore need to focus resources on their provider relationships.
I would say patients and their families are third in the list of priority. If patients are dissatisfied, perhaps their needs are prioritized to a lesser extent.
And yet, if employers are the customers, don't they still want high quality cost effective care? Why are employers rewarding insurance companies with such large profits? Couldn't they simply bypass the insurance companies and pay providers directly? Large employers are already assuming the financial risk. Cutting out the insurance company seems like the next logical step.
The reality is that in the current system, employers need the insurance companies since only insurance companies are large enough to negotiate the best prices with providers. The discounts that large insurance companies get more than justifies their profit. A patient with insurance who does not have a contract with a given hospital may be obligated to pay double or triple what they would otherwise have to pay. This more than justifies the insurance company profits. Without the insurance companies, employers would have to drastically overpay for each claim. Health insurance companies are really contracting machines. Everything else they do is secondary.
But how does this contracting effort help patients? It doesn't. The current health system allows insurance companies to compete in something that is of no value to patients or society. The system rewards local monopolies with the best contracts; healthcare quality and efficiency are a lesser concern. Those who generally expect the free market system to improve healthcare often do not appreciate this dysfunctional dynamic.
Just as those who implemented the antitrust laws 100 years ago discovered, I now realize that Adam Smith's invisible hand sometimes needs help.
Friday, November 20, 2009
Free Market Health Insurance is a Broken Model
Would you buy fire insurance for your house if you knew your house was made of solid steel? Would an insurance company sell you homeowner's insurance if they knew your house was made of straw? The concept of insurance requires ignorance. The statement is not meant to be derogatory. It is just that potential purchasers of insurance will only buy insurance if they think they might have an incident that will cause them to collect on the policy. Sellers, on the other hand, prefer to sell insurance to those who they think might never need to submit a claim. In the past, people were more likely to purchase health insurance to protect them if they had an unlikely illness that required an expensive hospitalization. Neither the buyer nor the seller knew if any individual would get sick. Today, health outcomes are much easier to predict, and nearly 75 percent of health expenditures are for chronic illness. This makes prior illness an excellent predictor of future health needs. To a large extent, simply knowing the prior year's expenses for a patient is a good predictor of next year's expenses. With advances in technology (in particular, genetic sequencing data), the ability of both buyers and sellers of health insurance to predict outcomes will only increase. As this ability increases, insurance companies will naturally try to avoid selling insurance to people whom they know will require care.
In addition, it used to be that expensive events covered by insurance were usually acute illnesses that created claims during a single year (the period for which insurance is generally purchased). Now, if someone is newly diagnosed with an expensive disease, the illness is more likely to be chronic, and the cost for the illness may occur after the period in which the patient has contractually committed health insurance coverage. For example, if someone is diagnosed with a new cancer, she may undergo repeated chemotherapy and surgeries for years after the coverage year in which she first got sick. If this patient loses coverage after she gets sick (for example, by losing her job or otherwise by not being able to work), she will likely not be able to get new coverage, and she will be marked as having a pre-existing condition. Unfortunately for the patient, if the insurance company is able to terminate coverage for this patient, it is in their financial best interest to do so.
As technology progresses, our ability to predict disease and live with more illness will increase. Given this trend, health insurance as it exists today is going to become less and less viable. Some aspects of reform being considered in Washington address these issues by forbidding insurance companies from dropping sick members or from considering pre-existing conditions in new members. In the absence of these reforms, the market approach that now exists is guaranteed to fail eventually. Many of the problems we are seeing in today's healthcare system are the beginning of this market failure. As a country, we have a choice between two options: 1) attempt regulatory reform that controls for this market failure, or 2) migrate to a single payer model that pools risk for all individuals. The status quo is no longer viable.
In addition, it used to be that expensive events covered by insurance were usually acute illnesses that created claims during a single year (the period for which insurance is generally purchased). Now, if someone is newly diagnosed with an expensive disease, the illness is more likely to be chronic, and the cost for the illness may occur after the period in which the patient has contractually committed health insurance coverage. For example, if someone is diagnosed with a new cancer, she may undergo repeated chemotherapy and surgeries for years after the coverage year in which she first got sick. If this patient loses coverage after she gets sick (for example, by losing her job or otherwise by not being able to work), she will likely not be able to get new coverage, and she will be marked as having a pre-existing condition. Unfortunately for the patient, if the insurance company is able to terminate coverage for this patient, it is in their financial best interest to do so.
As technology progresses, our ability to predict disease and live with more illness will increase. Given this trend, health insurance as it exists today is going to become less and less viable. Some aspects of reform being considered in Washington address these issues by forbidding insurance companies from dropping sick members or from considering pre-existing conditions in new members. In the absence of these reforms, the market approach that now exists is guaranteed to fail eventually. Many of the problems we are seeing in today's healthcare system are the beginning of this market failure. As a country, we have a choice between two options: 1) attempt regulatory reform that controls for this market failure, or 2) migrate to a single payer model that pools risk for all individuals. The status quo is no longer viable.
Monday, September 28, 2009
Houdini Coverage
Are you happy with you health care insurance plan? How do you know? Have you tested it? Will it really be there when you need it? Nikki White (referenced by Nicholas Kristof's Op-Ed Sunday Sept 13, 2009) thought she had good coverage when she was diagnosed with a disease called system lupus erythematosus at age 21. By 27, she could no longer work, and she therefore lost her employee sponsored coverage. From their, her health deteriorated, and she died at age 32 of what should not have been lethal condition.
Unfortunately, too many people find that their health insurance disappears when they need it most. A recent article in The American Journal of Medicine shows that 57 percent of bankruptcies in the US are related to medical bills, and even more surprisingly, 78 percent of the people who went bankrupt for medical reasons had insurance at the time they first got sick. Perhaps, you are happy with your current health insurance, but if it not there when you need it, what good is it?
The solution to this problem is clear, insurance companies should not be allowed to discontinue anyone once they have provided them insurance. Also, when signing up for insurance, insurance companies should not be allowed to consider pre-existing conditions. Both of these ideas are part of the new health reform being proposed, and if they were in place when Nikki White needed care, she would likely be alive today.
Unfortunately, too many people find that their health insurance disappears when they need it most. A recent article in The American Journal of Medicine shows that 57 percent of bankruptcies in the US are related to medical bills, and even more surprisingly, 78 percent of the people who went bankrupt for medical reasons had insurance at the time they first got sick. Perhaps, you are happy with your current health insurance, but if it not there when you need it, what good is it?
The solution to this problem is clear, insurance companies should not be allowed to discontinue anyone once they have provided them insurance. Also, when signing up for insurance, insurance companies should not be allowed to consider pre-existing conditions. Both of these ideas are part of the new health reform being proposed, and if they were in place when Nikki White needed care, she would likely be alive today.
Tuesday, September 22, 2009
For a while, I have been thinking of writing about the issue of
hospitals and clinicians having different rates for same exact
procedures depending on who they are paying. When I read about Senator
Conrad's efforts to start health insurance co-ops, I thought he might be
interested in the idea. I therefore submitted the below message to him.
I do not know if he or anyone in his office will pay much attention to
what I wrote, but I thought it would be worth a try.
Senator Conrad,
I commend you on your efforts in healthcare reform. Your work is vital
for the best interests of this country.
I am writing regarding your proposal for creating healthcare co-ops. I
believe the co-ops are going to fail if an additional change is not also
including in the healthcare legislation. Any new Co-op will be at a
significant competitive disadvantage when competing with established
insurance companies since 1) they will need to hire an army of contract
negotiators and 2) work in an environment where they pay significantly
more (perhaps 30% to 50%) than their competitors for the same exact
services (until the co-op has significant market share).
This does not have to be the case. Currently insurance companies
compete on the basis of their negotiating power. This provides no
benefit to the patient, and it just rewards monopolistic situations.
The system needs regulation analogous to antitrust legislation that
control monopolies. The regulation would state that providers should
not charge healthcare co-ops more than what they charge other commercial
insurance company. This regulation should eliminate the need of the
co-op negotiating rates with all providers in a region (a large portion
of the administrative waste) while getting the co-op a fair price for
the services they pay for.
Going further than needed for the Co-ops, the ability of each provider
to charge different rates to different insurance companies is a major
source of waste in healthcare, and it is a major reason competition in
health insurance is so regional. I also believe that providers should
not be allowed to charge different commercial health plans different
rates. This would promote competition by making it easier for plans to
enter areas of the country where that they currently do not serve.
Ideally, providers would post their rates for all consumers to see (as
one might find in an open, transparent market) so that consumers would
have the information they need to make informed choices about their
care.
I specifically propose that the rates providers set for commercial plans
should be set by providers and should not vary by the payer. The
government should not set the rates since government control of rates
would negate the beneficial aspects of the free market. Therefore, the
rates should not be tied to what providers pay to government plans since
these rates are set by the government. Tying the rate to these plans
would effectively be governmental price control. This would do more
harm than good.
I hope you find this suggestion helpful. If there is anything I can do
to help your reform efforts please let me know. If you do not like what
I have just presented, I am still a supporter of the healthcare report
reform efforts. I believe you and your committee are doing incredibly
significant work.
Tuesday, September 15, 2009
Who not to trust: government or business
I went to a John Kerry discussion forum on healthcare last week. At the forum, it was interesting to speak to people who were strongly in favor and strongly against the public option. The people with the strongest opinions on both sides of the question appeared to lack experience and knowledge in the field and were generally speaking from emotions. The strong opinions went as follows.
Against the public plan:
I do not trust government. Any additional power given to government is just power to be abused. History has ample evidence to prove this. Those people in favor of the public plan are naive to think government bureaucrats will act in our best interest. I want none of that.
In favor of the public plan:
We need a public plan to control the commercial insurance companies. These companies (even the non-profit) are just watching their bottom line and seeing what they can get away with. The business people in charge do not care about the patients, and we already have plenty of examples of abuse. The last thing I want is some executive watching his bottom line to be deciding if I need care.
For the people I spoke to, it was interesting to see how their strong emotions were driven by a strong distrust, but for different entities. Hopefully, both sized sides will learn to imagine ways of adding checks and balances so that the viability of whatever system we get is not dependent only on the integrity of specific powerful individuals.
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