Archive for the 'Insurance and Risk' Category

Stop Thief!

July 8, 2008

A Harris Interactive poll suggests that public awareness of health privacy concerns is on the rise, according to a report in Modern Healthcare.  The poll is described as an “online interactive” survey, however, which raises concerns about sampling validity.  That caveat aside, it’s interesting to note that there appears to be increasing public awareness of health data theft and data security issues – which, as we have written here before, are rampant.  (We’ve been following health privacy concerns for some time now.)

The poll also suggests that data thefts could be undermining public support for Electronic Health Records (EHR), which is another reason to get this problem under control before it escalates any further.

The Modern Healthcare article also reports that Booz Allen Hamilton was awarded a $450,000 grant in order to

…do an “environmental scan” to get its arms around the problem, then convene a meeting to gather ideas on how medical identity theft should be addressed, and then to write up an action plan recommending ways to deal with the problem.

I would’ve liked to have that contract, and I could’ve done it for a lot less.  We haven’t begun to explore the full implications of rampant health data theft – and we shouldn’t, at least in a public forum.

Still, I suspect the real solution to this problem is going to come from an imaginative entrepreneur, not a Federally-funded study.

(via CHCF’s iHealthBeat; image courtesy Medical Informatics Insider)


Congress Rips AIG, Other Carriers Over Comp Costs In a War Zone

May 20, 2008

Rep. Henry Waxman lacerated the Pentagon’s workers’ compensation program for civilian workers in Iraq and Afghanistan, saying it was a “flagrant abuse” of taxpayer dollars. He directed his wrath toward AIG and three other carriers not named in this CNN report.

From a business perspective only, and not speaking as an American citizen, if I had been an AIG underwriter I would have priced this program high in the first couple of years. From an underwriting perspective, they were going into a high-risk work zone with a lot of unknowns and no historical data. But according to the report, the carriers had been achieving 40% profits on these civilian employees for over five years. This, in an industry whose revenues declined last year and whose profit margins at home are shaky at best.

It’s fine to rip the carriers for not adjusting their rates to reflect experience. But there number of other questions should be asked, too, like: Who was minding the store? Were these costs a straight pass-through from Blackwater, Halliburton, et al.? That removes the incentive from these companies to push back on pricing. After all, the more irresponsible their purchasing practices, the more money they make.

And what about the government’s own civilian employees? Where were the Procurement Officers who are supposed to act as risk managers in this sort of situation? It seems to me a lot of people dropped the ball on this one, since it went on year after year.

Sounds like this was a classic seller’s market, and yet another story of government mismanagement. The carriers may not have been admirable corporate citizens, to say the least. But, at least in economic terms, they were ‘acting rationally.’ Too bad we can’t say the same thing about the people who were paying them. Our troops in harm’s way deserve better than to have the military budget managed so irresponsibly.

Med Mal: Sometimes The Best Defense Is … No Defense

May 19, 2008

A lot of attention is being given to yesterday’s New York Times piece about doctors and hospitals who apologize, ‘fess up, and correct their mistakes when they make medical errors. For medical professionals who have been trained to “deny and defend,” the whole idea seems counterintuitive. It’s a natural instinct for people to want to hide their mistakes. And as Michael O’Hare points out, it’s also something attorneys have been telling their medical malpractice clients to do for a long time.

I’ve written about the Sorry Works! Coalition before, and they’re mentioned in the Times article. That’s the group that’s dedicated to becoming “the nation’s leading advocacy organization for disclosure, apology (when appropriate), and upfront compensation (when necessary) after adverse medical events.” The Times suggests that there is now a data trail for the medical disclosure movement. Reporter Kevin Sack writes:

Despite some projections that disclosure would prompt a flood of lawsuits, hospitals are reporting decreases in their caseloads and savings in legal costs. Malpractice premiums have declined in some instances, though market forces may be partly responsible.

O’Hare tells an anecdote about working with a hospital whose in-house counsel promoted a similar policy 25 years, with very positive results. That sounds right: During my years inside the insurance industry I saw similar examples of the seemingly counterintuitive. Sometimes ‘fessing up is the best defense.

And there’s a political movement to institutionalize medical disclosure. Sack quotes the director of Sorry Works! as saying that “34 states have enacted laws making apologies for medical errors inadmissible in courteven require that patients be notified of serious unanticipated outcomes.” He observes that Democratic Presidential candidates Clinton and Obama cosponsored a similar resolution in the U.S. Senate, only to see it die in a GOP-controlled committee.

This should be an ideal topic for bipartisan support, given the Republican penchant for criticizing excessive med mal settlements. So why would Republicans kill a bill like this one? I don’t get it.

“Universal Coverage” – Only Words

April 21, 2008

It’s only words, but words are all I have to steal your heart away …1

My wife and I stood at the curb saying goodbye to our friend Maureen last week. The election came up, and Maureen said “I like the candidate that’s going to provide universal coverage.” Here’s the problem: there’s no such candidate this year. Maureen’s been had.

But first, a question: What’s wrong with this sentence, from my friend Joe Paduda’s informative write-up of the World Health Care Congress, referring to the difference between the Clinton and Obama health plans?

“… [Clinton] wants mandated universal coverage and [Obama] does not.”

The italics were a hint: Joe and I agree, as does our mutual friend Bob Laszewski, that the two plans are essentially similar. But their primary difference, which is that the Clinton plan includes mandates for adults, can not accurately be described as “universal coverage.” The Massachusetts experience has demonstrated that conclusively.

Even if a mandate plan were to be passed, millions of today’s uninsured would – by my estimation – remain uninsured. Millions more would benefit, as they would under a non-mandated plan, but we’d have nothing like genuine “universal coverage.” And many working Americans would face new financial pressures, without receiving better health coverage in return.  (My numbers and logic are laid out in a footnote.)

I expressed early and serious concerns about the Massachusetts plan, and there’s no pleasure in reporting that they have proved justified. The plan’s been very effective in providing coverage for those who qualify for full subsidies. But it has been far less effective for lower-income working people. Subsidies don’t reach them, and the difference between plan premiums and the mandated tax penalties they face is still a big-dollar amount for their budgets.

The result? These hard-pressed Americans still don’t have health coverage … and they’ve been hit with more taxes.

The Massachusetts plan is a lot like Clinton’s, in a state with a much less complex uninsured problem that other parts of the country – and it’s been forced to exempt 20% of the uninsured. That’s not “universal coverage,” it’s health mandates – and while it will provide coverage for some, many will fall through the cracks.

Why does this matter? Why am I harping on the choice of words? Because perception drives reality in politics. Maureen thinks her candidate will provide “universal coverage” if elected. Here’s what will really happen if Maureen’s favorite gets the nomination – she’ll be hammered by her opponent in the general election over the enormous added tax burden to lower-income working families. If she wins, her plan will face far greater political opposition because of the mandate provision – which will most likely be dropped as a result. If, against all odds, these obstacles are overcome and a mandate provision is passed,

Based on rough calculations, I agree that Obama’s plan would leave approximately 15 million uninsured. But I estimate that Clinton’s plan would leave 8 million uninsured – and is far less likely to pass in Congress.2 (Each plan has its own strengths in the cost-cutting and health oversight areas – and McCain’s isn’t really a “plan.” It’s more of a “wealth-transfer-device” for the already well-to-do … but that’s another topic.)

What about the argument that a mandate plan can’t pass?

Not so, says Paduda. He quotes Obama surrogate Rep. Jim Cooper as saying the mandate provision – which Joe again mischaracterizes as “universal coverage” – will get “zero Republican votes,” which he calls “a completely wrong statement.” Joe cites the mandate-driven Wyden Health Plan, with six Republican co-sponsors, as proof.

But the Wyden plan, which takes employers out of the health insurance game, has a couple of carrots to offset the “mandate” stick. One’s for working people: It requires employers who currently provide coverage to boost salaries to offset for the huge expense savings they’ll get. That puts money back in people’s pockets. The second is for employers: Salaries are rising at a much slower rate than health premiums, and they have more control over them, so this is a financial win – especially for larger corporations.3

I’ve talked to many employers over the years – large and small – who would love to get out of the health benefits business. And I’d argue that the Wyden bill can be pitched as more attractive to lower-income working people. I suspect these differences make the Wyden bill GOP-friendly enough to offset for its universal coverage mandate provisions. (That said, it’s excessive of Rep. Cooper to suggest that a mandate bill would get “zero” Republican votes. There might be handful, but probably not enough to pass …)

So we watched Maureen pull away from the curb, content in her belief that at least one Presidential candidate would bring the country “universal coverage.” Can’t blame her: a lot of smart people think so, too.

Too bad life ain’t so simple …


1What would a wonkish health policy post be without quoting at least one Bee Gees song? Others I could have cited here include “Stayin’ Alive” – and, of course, “Massachusetts.”

2Quick and dirty calculation: Massachusetts, which is demographically less challenging than other parts of the country (fewer illegal immigrants, etc.), was forced to exempt 20 percent of the uninsured from its plan. Planners in more variegated California expected that 30% would have to be exempted. So, even the generous assumption that mandates will do as well nationally as they have in Massachusetts gives us a 20% exemption rate. If we assume 40 million uninsured nationwide, then 20% = 8 million. That ain’t universal. Thus, the difference between an Obama plan that excludes 15 million and a Clinton plan that excludes 8 million is 7 million.

What’s left to consider? First, whether you think a mandate plan can pass Congress. If it can’t, everybody loses. Second, your personal opinion of whether mandates for hard-pressed working families are a) a way to force them to pay their fair share, or b) another regressive tax that places too much burden on those at the lower end of the spectrum.

3Re the Wyden plan, I like the concept. Unfortunately, though, I can see a number of ways that employers could game it. But that’s for another day.

As The Sentinel Effect Goes, So Goes the New York Times

April 15, 2008

nytimes logo

Yesterday we wrote this about the New York Times article on Tier 4 pharmaceuticals:

Defenders of the Tier 4 system will say that health premiums will become unaffordable if these costly treatments … are paid by insurance. There’s some truth to that. But here’s the problem with that argument:  The function of insurance is to protect individuals from expenses they can’t afford. Once you start withdrawing that protection, it’s a misuse of language to describe the product you sell as “health insurance” …if it isn’t really “insurance” anymore, what are they offering?

Yesterday’s post was called “When Is Health Insurance Not Insurance?” The New York Times ran an editorial about Tier 4 drugs today. Here’s an excerpt:

The insurers say that forcing patients to pay more for unusually high-priced drugs allows them to keep down the premiums charged to everyone else. That turns the ordinary notion of insurance on its head. Instead of spreading the risks and costs across a wide pool of people to protect a smaller number of very sick patients from financial ruin, insurers are gouging the sickest patients to keep premiums down for healthier people.

Coincidence? We report, you decide. But if the New York Times wants some more help with their editorial page then, believe me, I have some more suggestions …

Tier 4 Drugs: An Industry Response

April 14, 2008

Ezra Klein spoke with Robert Zirkelbach of America’s Health Insurance Plans regarding Tier 4 medications. Mr. Zirkelbach’s response hits a few points:

National Conversation

That we need a “national conversation” about “whether drugs that cost ten or a hundred times as much as current treatment options are producing better outcomes.” (Whatever your opinion of Hillary Clinton, I’m not particularly grateful for the insertion of the phrase “national conversation” into the political lexicon. A little less talk, a little more action, as Elvis would say.)

In this case, I would say we don’t need a “conversation” about better outcomes. We need data. It’s a research question, not a political one. If these therapies are better than the alternative, then we need a conversation – but it has to be about our level of willingness to provide insurance that pays for the best available treatment. That’s a debate worth having, and it’s also where we need some of that transparency Jonathan Cohn calls for.

Generic Alternatives

Mr. Zirkelbach says we should encourage “generic versions” of Tier 4 drugs. But, as Ezra points out, they’re not likely to be available.

Comparing New and Current Treatment Options

Lastly, Zirkelbach suggests “we need a national system in this country that compares new drugs with the treatment options currently available in the marketplace.” That’s a good point. Even under single-payer coverage, we would still need to do cost/benefit analyses on very expensive therapies – and not just for pharmaceuticals. The more information that’s made publicly available, and the more education and debate that ensues, the better.

I still say there is a point at which insurance” becomes a misnomer. What that point may be is somewhat subjective, but in theory it’s this: When the coverage being provided no longer protects individuals from severe financial harm as a result of loss.

And I’d add this thought to the “national conversation”: When plan designs are no longer made to change behavior, but simply to transfer high-cost items back to the insured party, that’s risk transfer and not benefit design. As a result, the insurance concept is being subtly modified – and arguably undermined.

Tier 4 Meds: When Is Health Insurance Not Insurance?

April 14, 2008


Is health insurance even insurance anymore? The high cost of intensive drug therapies is being shifted back onto patients – and not because the procedures are considered “experimental.”

The New York Times’ Gina Kolata wrote a piece today about a new kind of financial catastrophe striking Americans who have – or think they have – health insurance. The problem is with so-called “Tier 4” drugs, which are typically prescribed for severe medical conditions. These medications are extremely expensive, and insurance companies have been exempting them from the usual rules (like fixed copays and out-of-pocket limits) that protect their members from financial shock. As a result, people who think their they’re protected financially are being hit by huge drug bills.

Patients aren’t bearing more of the cost for these medications because they’re experimental – a reason that’s often used for denying certain treatments. They’re bearing more of the cost because they’re expensive, at least as far as some quick research today could determine. And, as Jonathan Cohn of The New Republic observes, the political debate isn’t even addressing this part of the problem.

How bad is it? Take one breast cancer patient in the Kolata piece, for example, who lives on Social Security disability and has Medicare coverage:

(Her insurer) declined to say what Tykerb might cost, but its list price according to a standard source, Red Book, is $3,480 for 150 tablets, which may last a patient 21 days. Wellcare requires patients to pay a third of the cost of its Tier 4 drugs.

That’s nearly $400 every three weeks. Or, how about the MS victim whose Kaiser coverage changed unexpectedly, so she didn’t find out until she picked up her usual prescription?

Now Kaiser was charging 25 percent of the cost of the drug up to a maximum of $325 per prescription. Her annual cost would be $3,900 and unless her insurance changed or the drug dropped in price, it would go on for the rest of her life. “I charged it, then got into my car and burst into tears,” Ms. Steinwand said.

Ezra Klein’s not sure how Tier 4 drugs are designated. (But he got curious about it, too. See his post and my reaction.) Ezra writes:

(Kolata’s) article vaguely implies that Tier Four is simply composed of costly drugs that insurers are dumping on patients. My understanding of the situation is that Tier Four is actually composed of largely experimental and unproven treatments that don’t seem to offer benefits in line with their cost. If it’s the former, then this really is, as the article seems to suggest, a cruel and crazed practice. If it’s the latter, then it’s exactly what we need to be doing.

I wish Ezra was right, but he’s not. Here are a couple of examples of the logic used to transfer these costs to customers. Blue Cross and Blue Shield of North Carolina says Tier 4 drugs are “medications classified by BCBSNC as those which require special dosing or administering, are typically prescribed by a specialist and are more expensive than most medications.” That’s it: nothing about “experimental.” And the UPMC health plan, affiliated with the University of Pittsburgh health system, says this:

The fourth tier is for specialty drugs, which are high-cost medications and biologicals, regardless of how they are administered (injectable, oral, transdermal, or inhalant). These drugs also have the highest level of copayment. These medications are often used to treat complex clinical conditions and usually require close management by a physician because of their potential side effects and the need for frequent dosage adjustments.

These two descriptions are typical of the way insurers describe Tier 4 drugs. Defenders of the Tier 4 system will say that health premiums will become unaffordable if these costly treatments, which can exceed $100,000/year, are paid by insurance. There’s some truth to that. But here’s the problem with that argument: The function of insurance is to protect individuals from expenses they can’t afford. Once you start withdrawing that protection, it’s a misuse of language to describe the product you sell as “health insurance.” It needs to be called “health cost offset,” or “selective health cost mitigation,” or something else that doesn’t promise more than it can deliver.

If costs have become so high that the private health insurance system can’t provide affordable coverage that protects people from financial harm, then the entire system needs to be re-envisioned. Remember: In all the debate about “universal healthcare,” most politicians are really talking about “universal health insurance.” But if it isn’t really “insurance” anymore, what are they offering voters?

(Kevin Drum has also written about this issue)

Separate And Unequal: Healthcare in the United States

April 8, 2008

The nation commemorated the 40th anniversary of Martin Luther King’s death last week. Here’s a quote from him that didn’t get much play in the testimonials: “Of all the forms of inequality, injustice in health care is the most shocking and inhumane.” Two recent studies highlights the lack of progress we’ve made in four decades, and proposals from John McCain and the Florida State Senate show how little resonance Dr. King’s words have in some corners of public life.

Studies by the Robert Wood Johnson Foundation and the Harvard School of Public Health provide more documentation for something many Americans know from personal experience: The United States is a nation living under medical apartheid. The South Florida Times summarized the studies’ findings as follows:

“… elderly black and Hispanic patients often received substandard care for common but serious conditions like heart attacks, congestive heart failure and pneumonia. Researchers say their data suggests that the nation’s healthcare system is racially and ethnically segregated, not just for the elderly, but across the board.”

Lead researcher, Dr. Ashish K. Jha, said:

“When we see ongoing segregation in housing and education [in America,] it may not be surprising that we’re seeing very different administration of care in hospitals that serve blacks and Hispanics versus hospitals that mostly serve whites. But we’re not talking about [failures of] high tech medicine. This is basic stuff, like failing to administer aspirin or beta blockers to patients suffering a heart attack; treatments that we’ve known about for 20 years.’’

These studies are consistent with earlier findings that, at all levels of incomes, black Americans die years earlier than whites. The infant mortality rate for African American babies is 2.5 times greater than it is for non-Hispanic whites, according to data from the National Center for Health Statistics, giving us the worst infant mortality rate of any industrialized nation on Earth, except Latvia. It should be noted that these recent studies demonstrate that Hispanics in this country also experience extreme disparities in medical care.

Are you OK with that? Then how about this? Lack of health insurance results in the deaths of 18,000 Americans each year, according to studies compiled by the National Academies’ Institute of Medicine. That equates to 49 or 50 deaths every day.

How are politicians responded to this ongoing health crisis among “the least of us”? The Florida State Senate is proposing to cut $803 million in health care financing for the low-income residents, the poor, and senior citizens – a figure the Orlando Sentinel calls “staggering.” Disabled Floridians and recent transplant recipients would be among those losing medical coverage. “This is a death sentence for a lot of people,” said a bone-marrow transplant patient. He’s right.

For his part, according to the Boston Globe, John McCain is still “working out the details” of his health plan. He’s already done enough. Although some friendly reporters are emphasizing his willingness to offer tax credits, rather than just tax deductions (as his GOP predecessors have done), his plan is the same prescription for disaster that Bush’s and Giuliani’s have been. Like them, he proposes to end tax benefits for employers providing health insurance, which would effectively scrap the current employer-funded system.

McCain would replace the employer system with a tax benefit that would fall far short of covering the added costs of health insurance, especially since the bargaining clout of employers would be scrapped for a free-for-all system of individual buyers without expertise or buying power. The result would be a plan that creates substantially higher out-of-pocket costs for working Americans without extending insurance to those currently uncovered.

McCain attempts to make his plan more politically palatable than his predecessors’ by speaking in vague terms about “high risk pools” and subsidies. But, except for the inclusion of tax credits as well as deductions, he has yet to differentiate his proposal from theirs in any concrete way. His refusal to place any requirements on insurance companies, together with his abandonment of the employer-based insurance system, would create enormous financial hardship for working people who suffer from cancer and other pre-existing conditions.

What about the poor and unemployed? It’s true that some might benefit from a tax credit – but the $5,000-per-family figure McCain mentioned wouldn’t cover premiums for very many lower-income people. And they’re unlikely to be able to afford the difference between $5,000 and the actual cost of insurance, which would likely be thousands of dollars per year. The net result? Continued lack of coverage for those currently doing without medical care.

Obama and Clinton supporters are free to continue their blood feud over which has the better health plan. I’ve argued that Obama’s is more politically feasible and, in the end, more progressive. Some colleagues in the health policy world disagree. But we all agree that Sen. Clinton’s plan would also be a vast improvement over McCain’s. And the actions of the Florida State Senate are unconscionable.

To be clear, we’re talking about two distinct policy issues here – the problem of the uninsured, and the ethnic and racial divide in American healthcare. But these two issues are closely related, and both cut to the heart of what it means to be a just society in the 21st century.

Debating the Science of Dead Pop Stars

September 19, 2007
 If there’s a rock and roll heaven, sang the Righteous Brothers, you know they’ve got a hell of a band. Maybe — but the real question is, do they have a health plan? According to one study, “famous” pop stars are far more likely to die prematurely than the general population — often from either drug use or depression. That finding is objectionable to some rock fans, but their protests raise a different set of problems. Numbers can be misused or twisted, but they hold wisdom. In this case, they may have more to teach us than even the study’s authors realize.

The article, published in the Journal of Epidemiology and Community Health, is entitled “Elvis to Eminem: Quantifying the price of fame through early mortality of European and North American rock and pop stars.” It’s analytically sound. They define “fame” as having been “a solo performer or group member with a listed album” in Virgin’s list of “All Time Top 1000 Albums.” Maybe that’s not a perfect definition — but, in the words of economist and systems theorist Herbert Simon, it “satisfices.”

The authors give this reason for conducting the study: “While qualitative reviews support rock and pop stars suffering high levels of stress depression, and substance use, quantitative studies of mortality amongst such individuals are almost completely absent.” The piece goes on to describe their methodology in detail, and it looks reasonable.

Their findings are interesting, although they may seem obvious (or, as analysts prefer to say, “intuitive.”). American and European pop stars (including rock, rap, and R&B) are more likely to die young than their peers, when compared to populations with similar backgrounds. The authors use valid sample sizes, and their results are statistically significant.

Statistical validity is important, whether we’re discussing dead pop stars, cancer victims, or the frequency and size of hurricanes. Any one event — a death, a storm, an accident — can be caused by many things. But when the numbers reveal a pattern, there is an underlying story to be told.

Ideologues and industry spokespeople often challenge the idea of statistical significance, using the general public’s innumeracy to cast doubt on everything from global warming to carcinogens in the environment. But the “Elvis to Eminem” study brought objections from a different quarter. Music blogger Brad Laidman wrote a critical post called “I Want My Rock Stars Dead.” It was then distributed to the email list for Rock and Rap Confidential, Dave Marsh’s music magazine.

What were their objections to the study? First, Laidman goes after the methodology with a classic anti-science line of attack: “Their study sample is too small and 75 percent of it hasn’t managed to die yet.” That’s wrong, and here’s a simple response: Even if all of a sample group hasn’t died yet, some percentage of it has. If that percentage is greater than it is for the general population, in a statistically meaningful way, then something significant is taking place.

Read the rest of this entry »

Lifestyle-Based Insurance Premiums: Somebody’s Watching You

July 11, 2007


Here’s something that’s been brewing in the insurance industry for a long time: Health coverage that costs more if your lifestyle suggests that you will be more expensive to insure. As USA Today explains:

Workers who want to lower their annual deductible can volunteer to have blood tests and other evaluations once a year to see if they smoke and if they meet target goals for blood pressure, cholesterol and height/weight ratio.

For each of the four goals they meet, workers would qualify for a $500 credit as individuals or $1,000 as families toward the deductible. If they qualify for all four — and UnitedHealthcare estimates that few will initially meet all four — their annual deductible would fall to $500 for individuals or $1,000 for families.

I predict a libertarian implosion as two competing impulses – the desire to live as you please and a belief in the ability of the free market to solve all ills – collide. Unless you’re a single-payer advocate, however, this development raises questions across the political spectrum. Questions such as:

  1. Is it appropriate to penalize people for their health-related behavior? (Or, to reframe the question from the opposite perspective: Why should everybody pay the costs that result from a person’s lifestyle decisions?)
  2. Is it fair to charge people more because they can’t achieve the desired results (lower blood pressure, reduced weight, etc.) if they sincerely try?
  3. Will this type of program lead to police-state insurance underwriting, as one critic suggests? Will we one day find ourselves pay more in insurance if we accumulate speeding tickets (ahem – guilty), drink a little too much, or work in stressful jobs?

The debate should begin immediately, and in earnest. Mandated coverage programs like that in Massachusetts will only intensify feelings on both sides of this issue. One group will say we shouldn’t be forced to pay for the behavior of others, while another will argue that insurance underwriters shouldn’t become the all-seeing eye that monitors our private lives.