James G. Knight MD, president of the San Diego Medical Society, has an observation or two in the San Diego Union Tribune about all the health care reform frenzy.
Knight says one of the jobs of a doctor is to tell you what you don’t want to hear: “So here it is: No one can afford to give you everything you want for free, forever. That is especially true for quality health care.” While most Americans now consider health care a “right,” Knight adds, “85 percent of Americans want nothing to do with paying for their own care.”
“How can something be that important, yet not be worth paying for?” he asks. He goes on to say the reason there are so many uninsured is because insurance has become so expensive, and the reason insurance is so expensive is because most people get their care for free, or for a $5 copay.
Knight is unimpressed with the current raft of universal health care proposals. “Can California, currently facing a $35 billion deficit, be relied upon to responsibly run a massive new system that will be the sole provider for 30 million Californians?”
“It’s time to put the consumer back in the game,” according to Knight. “American consumers must be empowered to take control of health care.” He says “the growing national trend toward ‘consumer directed health care’ is a practical and immediate necessity,” and urges legislators to confine themselves to making sure there is a truly competitive marketplace.
The article ran April 13, 2003. You may search the archives for a free abstract or purchase the complete text at http://pqasb.pqarchiver.com/sandiego/.
The Case for Consumer-Driven Health Care
Writing in the May/June issue of Contingencies, Definity’s head actuary David Tuomala makes “The Case for Consumer-Driven Health Care.” He says reform efforts in that direction are “an attempt to build a more rational model in health care.” He disagrees with those who “suggest that health care is fundamentally different from other parts of the economy, and that the usual supply and demand considerations don’t apply.”
Instead, the key transaction occurs between a provider of care and a patient. This is where supply and demand plays out, he notes, and this is where attempts at third-party control break down. He contends consumer-driven models such as “personal care accounts” that require a financial transaction at the point of care will be more effective than defined contribution approaches that require consumer judgment only at the time of enrollment.
Tuomala uses the vision care system as an illustration of a point-of-care payment system. He says the system tends to be highly competitive, price transparent, and convenient for consumers. “Even when expensive new technology (such as lasik surgery) becomes available, a different pattern emerges than elsewhere in health care,” with prices dropping over time.
Tuomala adds, “Many of the problems we face in health care today can be traced to the prevalence of the third-party payment system itself.”
Bringing it Home in Arkansas
The Arkansas Democrat-Gazette explains how consumerism is beginning to affect The Natural State. Arkansas is currently “studying a plan for the state’s 31,000 employees and retirees and its 45,000 school employees and retirees,” according to Sharon Dickerson of the Department of Finance and Administration.
Michael Taylor, a Towers Perrin consultant, says employees “have to realize that this is their money they’re spending and not a third party’s.” The article quotes Cato’s Tom Miller as predicting consumer-driven plans will provide premiums of “between 5 percent to 10 percent lower than rates offered by traditional managed care.”
Tom Liskey, who reported the story, says the concept may be “relatively new to the health care industry,” but it is “as simple as seeing the price tag before making a purchase.” The “starting point is the consumer,” he writes, and only when consumers get interested in price will providers start to reveal what their prices are.
John Goodman of the National Center for Policy Analysis is also quoted, saying “If patients are footing the bill, providers are going to have to be more forthcoming in their prices.” That, in turn, will develop a competitive impulse to lower prices.
Source: http://www.ardemgaz.com/. The article ran in the business section on Sunday, April 20, 2003. The paper charges for archives.
Market Expansion in Florida …
The Orlando Business Journal reports Humana is re-entering Florida’s individual market, and Aetna is considering doing so as well. Reporter Christine Sexton says Blue Cross and Blue Shield of Florida and United have been the only carriers providing individual coverage until now.
The article quotes a Humana spokeswoman as saying, “We’re full service. Now we have a complete product line for Florida.” An Aetna spokeswoman says they consider Florida an attractive market and “are currently exploring possible product offerings that would provide additional choices for Florida’s uninsured residents.” There are currently 3 million uninsured in Florida and 600,000 enrollees in individual insurance products.
… and in DC
The insurance commissioner of Washington DC, Lawrence Mirel, is developing a proposal that would build on the individual insurance model, according to the Washington Business Journal. His “Equal Access to Health Insurance Act” would use an FEHBP-type structure to enable Washington residents and employees to purchase their own coverage. The program also would include a Risk Transfer Plan to reinsure participating carriers for excess losses. It isn’t clear whether the program would include any coverage subsidies, though the reinsurance program could make an elegant pipeline for any subsidy.
Tufts Health Plan Committed to Consumer-Driven Plan
Meanwhile, the Boston Globe reports Tufts Health Plan is solidly committed to a consumer-driven model. Reporter Charles Stein quotes Tufts Senior Vice President Jon Kingsdale as saying, “I think potentially what we are talking about is as radical an innovation as HMOs were 30 years ago.”
Tufts will cover hospital care and drugs for chronic conditions, but use an MSA-type arrangement for more discretionary spending. The article notes the product design is taken from South Africa’s Discovery (and its American affiliate Destiny) and says company president Adrian Gore “has reams of charts that show his plan slows the growth of health spending but doesn’t discourage people from seeking preventive care. Compared to people covered by traditional insurance, Gore’s customers spend less on dermatology, drugs and physical therapy but get more Pap smears, mammograms, and cholesterol screenings.”
Source: The article was published on May 25, 2003. There is a fee for accessing it through the archives at http://www.globe.com but I’ll wager that Mr. Stein would send it to you if you e-mail him at [email protected].
Also in Boston
Mary Pratt writes employers are responding to rising health costs in a number of ways. “Some employers are passing on more of the rising costs to employees, while others are dropping the level of benefits being offered in order to keep costs in check. And a relatively small number are adopting a plan model designed to expose employees to the true cost of care.”
She cites a local broker who had “three clients purchase new consumer-driven plans, which tout savings of about 15 percent for employers.” She adds, “Many of the major health insurance companies have either introduced or are now rolling out versions of these plans to help employers cope with the escalating premiums.”
Greg Scandlen is director of the Galen Institute’s Center for Consumer Driven Health Care and assistant editor of Health Care News. His email address is [email protected].