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Health Care A Defining Issue
David Broder is widely considered the “dean of political journalism,” so it’s no small deal when he writes a column like he did in the Washington Post saying, “It is virtually certain that health care will be as big an issue in the 2004 presidential election as it was in 1992.” His primary evidence is the announcement that CalPERS premiums are rising 25 percent this year.
Broder concludes, “When the single most important player in the showcase of managed care sees its bills going up at that rate, it says unmistakably that time has run out for the dysfunctional, disjointed thing we call health care.”
Broder finds an echo in the person of Dr. Henry Simmons, president of the National Coalition on Health Care, a coalition of some 80 labor, business, provider, and consumer groups. Simmons says in the article, “The incremental strategy is bankrupt. We need a big debate on how to get a grip on this system.”
CalPERS May Self-insure in the Future
Broder isn’t the only person to be alarmed by the CalPERS hikes. Writing in the San Francisco Chronicle, Victoria Culliver says CalPERS is dropping two major plans, PacificCare and HealthNet, which will force 150,000 families to change insurers.
This leaves only five plans contracting with CalPERS, down from 14 in 1997, 10 last year, and seven this year. Active workers face an average $52 per month increase in premiums, though some union contracts require the state government to pay most of that.
Medicare HMO members, however, will be paying another $66 a month—a 40 percent increase.
Culliver reports the two dropped plans aren’t disappointed, since they were losing money on the CalPERS business anyway. Next, CalPERS will be considering putting everyone in the same self-funded program, eliminating the individual choice element the program has long touted.
Policymakers Should Wake Up to National Problem
The New York Times covers much of the same ground in an article by Reed Abelson. Abelson quotes Hewitt’s Ken Sperling as saying 25 percent premium increases are common today, and some large employers are getting 100 percent increases. The article says managed care organizations are willing to lose business rather than take a loss by under-pricing their coverage.
CalPERS President William Crist is quoted as saying, “this is a national problem,” and Peter Lee, the president of the Pacific Group on Health, says, “I don’t think policy makers have woken up to how bad things are.” The article does not say what these gentlemen would have “policymakers” do to fix this “national problem.”
Consumerism May Be Answer
“Consumerism” may be the answer to these problems, according to Jill Elswick in Employee Benefit News.
According to Elswick, Watson Wyatt has discovered that among the large employers they surveyed, “those that adopted various forms of ‘consumerism’ saw [premium] trend increases of 12.9 percent in 2002, significantly below the median increase of 14.3 percent.”
Elswick reports that different businesses are taking different paths to consumerism. Federal Express looked at defined contribution and decided it is “too embryonic in its current state for our culture,” but the Pacific Business Group on Health embraced it, “without demanding proof.” Peter Lee is quoted as saying, “Our members are willing to accept a good argument.”
Meanwhile, back in Washington, the academics remain skeptical. The article says Paul Ginsberg of the Center for Studying Health Systems Change is all for “cost-sharing,” but thinks it should take place within an HMO/PPO context.
Managed Care Magazine: “Wow, This Could Work!”
The managing editor of Managed Care Magazine, Michael Dalzell, acknowledges that a year ago the magazine “wrote off defined contribution as unworkable. Since then, the landscape has changed.”
Dalzell quotes Robert Dawson, president of Empowered Benefits, as saying, “eighteen months ago, there was a lot of confusion about a host of issues—tax consequences, underwriting, risk selection.
“Then, as companies and products addressed those perceived obstacles, employers’ reaction was, ‘Wow, this can work!’ It’s a totally different dynamic today.”
The article takes a pretty honest look at where the market is heading, balancing some enthusiasm with some skepticism.
It points out, for instance, that “pure” defined contribution, in which employees buy individual coverage, “has very little resonance among purchasers.” And it questions whether personal health account approaches are really “defined” contribution when the self-funded employer is still on the hook for unlimited spending.
Perhaps the most interesting discussion centers on whether old-line insurers or new start-ups are best positioned to take advantage of the trend. The article points out that the established carriers have advantages such as distribution networks and claims systems, but they also “carry the baggage of their old products,” which try to “control consumers, not serve them.”
2002 Make-or-Break Year for Self-Directed Care
Meanwhile, Jeannie Mandelker takes a hard financial look at “self-directed” companies in Investor’s Dealers Digest. She says 2002 will be a “make-or-break year” for these companies, and there is a question whether they can generate enough business before burning through their venture capital.
Mandelker’s article is an interesting examination of the financial health of each of the start-up companies, and the specifics of their business plans. It also considers the standing of the old-line insurers who are launching products and the market potential for all these rivals.
Overall it is a pretty optimistic assessment, even though one firm, HealthSync, has already closed. The article says 29 percent of employers “intend to offer some type of self-directed plan this fall for plan year 2003,” and quotes one consultant as saying, “I don’t have a client out there who isn’t looking at this.”
Source: The article was in the April 15 edition. Go to: http://www.iddmagazine.com/
MSAs Make Inroads in San Antonio
Medical Savings Accounts are still an innovative idea to many employers, according to an article by Aissatou Sidime in the San Antonio Express-News.
The article cites a psychologist who recently switched to an MSA because he liked the simplicity and control the plan offered. Another consumer, who has breast cancer, also preferred the MSA even though she hasn’t been able to save any money with it. She says, “I had been paying on a PPO before and felt like I was throwing money away.”
The article quotes insurance agent Steve Johnson as regretting there are so few carriers offering the programs locally. “We need more competition,” he says. The article also notes President Bush has proposed expanding the MSA program so larger employers can take advantage of it.
SimpleCare Growing in Washington State
SimpleCare keeps growing to meet the demands of patients and physicians, according to an article in ManagedHealthcare.info. The article profiles a 42-member physicians’ group that is joining the SimpleCare network to “help offset managed care and Medicare underpayments.”
Dr. John Weaver says he loses three dollars for every routine office visit when seeing insured patients, due to cumbersome paperwork and overhead expenses. Under SimpleCare, he can charge patients less and still make more money because of the reduced overhead. One uninsured patient is quoted as saying, “It’s less than the cost of a plumber. It’s more than fair and I couldn’t be happier about it.”
The article adds that the challenge is “to get lawmakers to allow families and businesses the chance to build Medical Savings Accounts to allow them to pool money for these kinds of service.”
Source: The article appeared on April 22, 2002. Go to: http://www.managedhealthcare.info/, but you have to be a registered subscriber to access it.
For more information …
For more information on SimpleCare, see “Fee-for-Service Health Care Makes a Comeback, Health Care News, March 2001; “The SimpleCare Story,” Health Care News, February 2002; and “Oregon Community Adopts SimpleCare Approach,” Health Care News, April 2002.
Greg Scandlen is senior fellow in health policy at the National Center for Policy Analysis in Dallas, Texas and assistant editor of Health Care News. To sign up for his free weekly e-newsletter, Scandlen’s Health policy Comments, log on to www.ncpa.org/sub. Email Scandlen at [email protected].