Health Care & Unintended Consequences...or, How We Got Where We Are

Back in the 1970s, our elected officials enacted new legislation to permit an entity called a Health Maintenance Organization to be organized under federal regulations. That same law provided for grants to be used to create these new entities. People streamed to the federal trough and hundreds of health maintenance Organizations were created.

The intended results were the broadening of health care available to the members of these new organizations. The law required the use of a tool called community rating. This tool was intended to make premium rates fair across the total spectrum: young and old, male and female, and healthy and ill.

In addition, the entities could now either employ the health care providers directly, or those health care providers could organize for purposes of negotiating master agreements under which they'd provide required services for advanced payments. This was thought to be a good way to control the use of limited health care services while helping the new organizations remain financially stable.

It was believed that keeping people healthy was better and less expensive than the treatment of acute issues that had lain untreated for a period of time.

There seemed nothing wrong with the hypothesis, however time began to show the deficiencies.

Community rating caused the rates of the healthy and younger to rise since they had to offset the added costs of the ill and older members. The prepayments to the Health Maintenance Organizations were subject to shortfalls if over utilization occurred. We had just created an official way to ration health care. Services were delayed until the next month, and that solved the over utilization problem for the moment.

To this point, the free market had taken care of this issue; if you didn't have the money to pay for the service, you waited until you had the money.

This method of compensating providers came to be known as prepaid health care and began the process of removing the health care consumer from the equation. We consumers began to observe that our only out-of-pocket cost for this new kind of plan was our co-payment. Back then, co-payments were in the range of $5 to $10 per visit. We began to lose track of the real total cost of the health care we consumed. If we had a sniffle, why not see the doctor; after all, it only cost $5 or $10. We gave no real thought to where the rest of money was coming from, because it didn't appear to come from our pockets. That wasn't and isn't true, but it seems so on the surface.

It is important to understand that the Health Maintenance Organizations were not villains; they were simply following the federal edict. HMOs as we began to call them managed to eliminate much of the waste that had existed. They negotiated tough reimbursement agreements with hospitals. Hospitals that had had occupancy rates of 50% to 60% were now forced to close off wings, or to be creative and find other uses for the empty facilities. One of those uses was the birthing center with soft lighting, etc. Even though the mother was only given 48 hours in the hospital, they were going to be softly lit hours!

As HMOs took ever larger share of the market from traditional insurers, the insurance companies reacted and created their own provider networks and negotiated discounted prices from the usual fee for service pricing. As doctors were forced to take less money for each procedure, they could only exist by performing more procedures.

This story could go on for many more paragraphs. Suffice to say, there were many unintended consequences that continue to cause problems to this day:

• consumers have no concept of the real cost of the services they consume
• health care providers continue to provide more services since that is how they get paid
• health care costs spiral upward at multiples of the cost of other goods and services
• small employers have gotten to the point of ending health care plans to avoid going out of business
• health care now consumes nearly 16% of every dollar generated by our national economy and is headed up

We must restore the consumer to his and her rightful place in the equation. One of the ways to do that is to cause the consumer to want to know the real costs, and to think seriously about seeing the doctor before deciding to do so on a whim. We cause that by having the consumer again be responsible for a larger part of what he or she consumes.

In order for this to happen, we must have truly transparent cost information available. We must have truly transparent quality information available. And, we must have truly transparent outcomes information available. These are roles in which government can legitimately play a part.

We must reward health care providers for being good at what they do. Providers with better outcomes and better pricing should be rewarded with more business. Those not measuring up to their peers should pay the price of full disclosure causing them to clean up their acts. These are roles in which government can legitimately play a part.

Government does not belong in the health care business. There are numerous examples all across the world that vividly point this out. The governments with single payer plans are in trouble. They are running out of money, have alienated their customers [who are also the taxpayers that refuse to pay any more for inferior services], and look longingly to the United States and what they see as the best health care system in the world.

It seems that we're the only people who don't recognize what we have and how we can make it even better.

State Children's Health Insurance Programs: Follow Up

The earlier Blog covering this subject discussed the incremental approach to government run health care and cited the use of the Children's program to cover adults.

Sen. Olympia Snow of Maine (supposedly a Republican but actually a RINO) introduced legislation Thursday to double the funding of this program over the next five years. This flies in the face of the real Republicans who wanted the funding levels reduced to end the improper use of the program using the purse strings.

She was joined in sponsoring this legislation by Sens. Jay Rockefeller (D-W.Va.) and Teddy Kennedy (D-Mass.)

While they were at it, they seized on this opportunity to also increase the coverage afforded under the SCHIP program to include mental and dental health care. This is such a good example of incrementalism, I couldn't help but post an update.

If There Is Any Doubt About Government-run Healthcare...

We need simply look at the gyrations occurring in Congress as the “great debate” over SCHIP and Medicare Advantage takes place to see exactly where we’ll be if Healthy Wisconsin were to become the law in Badgerland.

SCHIP is being re-engineered to bring in more and more adults and to permit families of four earning over $80,000 per year to join. This is a very obvious expansion of government-run healthcare.

Medicare Advantage funding is being threatened because it represents an incursion of the private sector into the world of government-run healthcare (Medicare) that is a threat to all those whose goal is just that…government-run healthcare.

Doctors in Medicare would be favored by some of money freed up by the reductions in Medicare Advantage while SCHIP would get the rest because there simply isn’t enough money to go around even with huge increases in tobacco taxes. Medicare Advantage could disappear as the direct result of this move. In this instance, oldsters who had selected Medicare Advantage will be forced back into Medicare parts A & B with lesser benefits available to them at higher costs. This subtle form of rationing should give us all pause. Future forms of rationing promise to be far less subtle.

Politicians running healthcare is oxymoronic. They will be unable to resist the temptations of all that power…and you and I will suffer…just as those on Medicare Advantage programs are about to suffer. What will it be next? Will it be mandatory health prevention as suggested by one presidential aspirant? What will happen with all that data that is collected? And then where will it go? Will we ultimately see consciously controlled death rates since death is less expensive than living with and treating a disease? That happens in single payer countries around the world today. What makes us think that it wouldn’t happen here as well?

Health Care - The Uninsured: Part Two

The group of uninsured people in the U.S. is dynamic, as mentioned in my earlier blog; Wisconsin has an estimated 546,870 people, or about 9.9% of our population, who are uninsured at any one point in time. These numbers rely upon the use of Census information, analysis by the Blue Cross Blue Shield Association and estimates by the Congressional Budget Office.

We established the four major groups:
*people who are eligible for existing government programs but who have failed to enroll
*middle class people who earn $50,000 or more per year and who believe they cannot afford or choose not to buy insurance
*people who are classified as the short-term uninsured [up to two years uninsured, recent college graduates, seasonal workers and those who feel no need for insurance [or “the invincible” as I intimated in my last blog]
*the long-term uninsured who simply have fallen through the cracks and remain uninsured for a time span beyond two years

What is the number of Wisconsin citizens that fall into each category?

First, the group that already qualifies for government programs but has failed to enroll represents an estimated 204,529 people.

Second, the group classified as middle class who either cannot afford to or have chosen not to buy insurance is estimated at 174,998 people.

Third, the short-term uninsured is estimated to contain 68,359 people.

Based on these estimates, then, the long-term uninsured group is comprised of an estimated 98,984 people or about 1.8% of Wisconsin’s population.

Does this mean we still have a serious problem as far as the number of uninsured in Wisconsin and the country? Absolutely we do. Does it mean that we have to turn the present system on its head and move to “universal health care” (the euphemism for Single-Payer coverage)? Absolutely not.

It does mean that we need to bring all those who do not have insurance into the insurance system. It means that costs incurred by those providers who are not paid for services rendered are being shifted to the third party reimbursement system. That simply magnifies the increases in health care costs and, thus, insurance premiums year over year.

It also points up the truth that many do not want to accept: our problem is a health care cost problem and not a health insurance cost problem. Health insurance increases mirror the increased costs of health care, not the other way around.

Insurance by its nature was always intended to help each of us defray the unexpected catastrophic expenses that might befall us. We have come to expect that health insurance will cover everything. Prepaid health care has removed consumers from the equation...to the detriment of the whole system!

It’s as if our auto insurance covered the cost of gasoline and oil changes in addition to collision and comprehensive damage expense. It’s as if our homeowners’ coverage covered the cost of a new garage door opener when it quit working or a new coat of paint every few years.

Reform of our health care delivery system is too important to permit ourselves to be confused by “sleight of hand”. We have to get it right for we’ll most likely not have another opportunity to do so!

Health Care - The Uninsured

Part of virtually every discussion concerning the state of health care in the U.S. is a reference to the uninsured. Given that, we assume that the group of uninsured must be a very important part of the problem. We need to better understand just what is meant by the ubiquitous “uninsured”. We’ll likely all agree that it is a very serious part of the problem confronting us as a nation.

We hear of the ever-increasing number of uninsured. The former top number for the United States was 46 million…until it became 47 Million. That seemed to occur overnight. I don’t know who is responsible for keeping track of that number, but they sure seem on top of their game! If only our census were as accurate as the press and “special interest groups” [remember the earlier blog about special interest groups?] would have us believe is the estimate of uninsured.

Let’s take a look at what comprises the “uninsured”. First…this is not a static group of people; instead, the number of “uninsured” is an estimate…a snapshot…of the number of folks thought to be without health insurance on any given day of the year.

Please also note that I used the phrase, “without health insurance”. That is a much different phrase than had I said “without access to health care”. Every person in the United States has access to health care…by virtue of Federal law. It is true however that much of that health care is received in Emergency Rooms, and that is a significant part of our nation’s problem. The care is received too late in the wrong setting to be of lasting value to the individual. The care is also delivered in the most expensive possible setting and much of that cost is unreimbursed and therefore is “shifted” to the insurance premiums paid by individuals and employers.

The current number de jour for the uninsured in Wisconsin is 546,870. That number has increased each year but has remained fairly constant so far as it’s comparison to the total population of the state. Using the most recent census numbers for Wisconsin, coupled with an analysis by the Blue Cross Blue Shield Association and the Congressional Budget Office estimates of the make-up of the group called “uninsured”, we see an emerging picture made up of these parts:
*people who are eligible for existing government programs but who have failed to enroll
*middle class people who earn more than $50,000 per year and who believe they cannot afford or choose not to buy insurance
*people who are classified as the short-term uninsured [up to two years without insurance, recent college graduates, seasonal workers and those who are young and therefore invincible]
*the long-term uninsured who simply have fallen between the cracks and remain uninsured for a long time

In Part Two of this blog, we’ll look at the distribution of Wisconsin’s 546,870 uninsured based upon the segments identified above. I think you’ll be surprised; I know I was. And I’ve been more intimately involved in the insurance and health care industries than many.

Health Care & Special Interest Groups

We often hear about “special interest groups” trying to influence decisions especially during the debate on the health care “crisis”. Special interest groups have gotten the reputation of being somehow improper or part of something almost subversive in nature. Somehow many of us have been conditioned to shudder whenever we hear the term “special interest group”.

There are some special interest groups with which I take exception and there are other special interest groups with whose positions I concur. I am an intentional member of some of these groups. I am also a member of other special interest groups without even being aware of the fact.

Let’s take a look at some of these special interest groups. The list is almost endless, but here are a few examples. If you are a union member, you are part of one or more special interest groups. If you are a member of a local organization such as a Chamber of Commerce, you are a member of one or more special interest groups. Nurses, insurance agents, church members, AARP members, auto club members, teachers, and parents belonging to a parent/teacher organization are part of a special interest group.

My point is this: each of us, whether we know it or not, is likely part of at least one special interest group. Some of us are members of such groups because we chose to be and, as mentioned before, others of us are members of such groups unknowingly.

When you hear a news commentator or a radio talk show host talk about special interest groups, remember that you’re probably part of such a group whether or not that is a specific group or family of groups.

What does all this have to do with the health care debate? It means that just about every position that is advanced will favor one group over others. It means that the members of a particular group are trying to protect their interests. This often also means that the interests of other special interest groups will be subverted. It means that politicians who have accepted donations from one or another of these groups may have more at stake then you or I understand.

When more than 15% of our country’s gross national product is in play, there will be some very tough fighting going on behind the scenes. This is really brought to light by the recent combination of several special interest groups that have heretofore been the enemies of each of the others with which they’ve now chosen to align. These groups include an insurance company group, a labor union group, and a “family values” group. Each of these groups appeared to be on opposing sides of the “health care crisis” issue until a few days ago. What are we to make of this alliance?

For one thing, we can safely conclude that not only does politics make for strange bedfellows, money does as well!

State Children's Health Insurance Programs

State children's health insurance programs have been around under a federal mandate for some 10 years. The mandate needs to be re-visited and that has been going on in earnest in Washington, D.C. since the beginning of this year.

These programs were originally intended to help the states provide health insurance to needy children whose parents weren't poor enough to qualify for Medicaid. As is too often the case when federal money is available, some states have been very creative with these "children's" programs. One lament over these programs was the fact that so many children remained uncovered. These states have decided that they'd be able to attract more children if they could permit people with incomes of two to three times the poverty level to enroll their children.

There were, according to the powers that be, still too many uncovered children. So, it was decided that the parents needed to be brought into the "children's" program since they would enroll for the coverage...and would enroll their children for coverage, too. The SCHIP costs grew accordingly.

During the ongoing debate over future funding of these programs, several states have been complaining that they're out of money and need stopgap funding in order to avoid disrupting these programs.

Among these states are Arizona, Michigan, Minnesota and Wisconsin. These four states cover more adults than children! According to a Wall Street Journal editorial on April 24th, Minnesota spent 92% of its grant insuring adults. Arizona spent two-thirds of its grant the same way.

We are witnessing the incremental creation of government-run health care without the pain and suffering of voting on the issues. These deals were concocted in the halls of Congress and no one appears to have understood the concept of unintended consequences. Or...they did understand and knowingly circumvented the will of the people to achieve what they weren't able to otherwise accomplish with HillaryCare.