Consumer Power Report #179

Published May 22, 2009

We had a terrific call with Professor Regina Herzlinger on the monthly Health Policy Call we sponsor with the Council for Affordable Health Insurance and State Policy Network. Regi is the author of three important books on health reform, Market Driven Health Care, Consumer Driven Health Care, and Who Killed Health Care? She is also a wonderful, animated speaker. It was my hope that she would provide us with some visionary remarks that would inspire the listeners, and she did not disappoint. I received several e-mails from people who said they came away from the call feeling much more optimistic.

I am posting below a recent article she wrote for McKinsey and an interview she did with the Pittsburgh Post-Tribune so you can get the flavor of her comments.

These calls are available for free to paid members of Consumers for Health Care Choices. In the recent past we have heard from Senator Jim DeMint, Congressman John Shadegg, some staffers from Senator Kennedy’s office, and Rick Scott of Conservatives for Patient Rights. If you would like to participate, all it takes is a $100 membership in CHCC. Please go to our Web site to find out how to join.

SOURCE: Interview with Regina Herzlinger; McKinsey Digital article

In This Issue:


I guess it isn’t surprising. Whenever something is working well in this country, it immediately comes under attack by the Left. Wal-Mart is profitable, so it must be brought down. The pharmaceuticals are one of the few industries that export American products to the rest of the world, so let’s destroy them. Microsoft is a success so let’s bring anti-trust actions against it. Meanwhile, we prop-up and bail-out companies that are failing.

And so it is in health care. Managed care has been soundly rejected in the market and is despised by most Americans, so the Left wants to enshrine it. But consumer-driven health is the one thing in health care that is succeeding beyond anyone’s expectation, so let’s punish it.

The Senate Finance Committee has now proposed:

  • Limiting HSA contributions to the amount of the deductible;
  • Doubling the penalty on non-medical withdrawals to 20 percent;
  • Limiting the definition of “qualified medical expense”;
  • Requiring “substantiation” of all medical payments from an HSA; and
  • Including employer HSA contributions in any limit on the exclusion.

These provisions would not kill HSAs, but they would certainly raise administrative costs and make the programs less user-friendly. All for no purpose other than general hostility to the concept of consumer empowerment.

SOURCE: There are several industry sources, but click here for the Senate Financing Options paper. Financing Comprehensive Health Care Reform

Another AHIP Study

Last week we reported on the release of AHIP’s latest annual census of HSA enrollment. Less publicized was a companion report on the income characteristics of account holders.

The second study used information on one million account holders from the five largest HSA banks. Since it didn’t have direct income information on these accounts, it used the average income in the census tracts where the account holders live, which is a pretty accurate gauge.

The study breaks income groupings into five categories and found:

  • 3 percent of account holders were in the lowest income group;
  • 45 percent were in the next lower-middle income group;
  • 34 percent were in the middle-income group;
  • 12 percent were in the upper-middle income group; and
  • 5 percent were in the upper-income group.

The report does not say what portions of the overall population fall into each group, so it is impossible to say if account holders are over- or under-represented in any of the categories. But the account activity of each group in 2008 is very interesting because the deposits and withdrawals are very much the same, even though the income levels are vastly different:

  • LI — $784 input, $489 outgo;
  • LMI — $958 input, $608 outgo;
  • MI — $1,202 input, $742 outgo;
  • UMI — $1,464 input, $892 outgo; and
  • UI — $1,766 input, $1,051 outgo.

So, the oft-repeated charge that HSAs are a “tax shelter for the rich” is flatly contradicted.


Optum Bank

Related to this is a study done by Optum Bank on account holder satisfaction. A press release by the company says, “Health savings account (HSA) owners are overwhelmingly satisfied with their accounts, and 91 percent believe such accounts should remain an option for Americans.”

Account holders believe strongly in personal responsibility–“the survey found that 83 percent of respondents agreed people should research health care options and try to get the best price–just like they do for other major consumer purchases; 72 percent of respondents said that individuals should be responsible for helping to manage their own health care costs.”

The survey was conducted in February and March of this year and included 500 respondents.

SOURCE: Reuters

Charlotte Observer

Meanwhile, an article by Andrew Dunn in the Charlotte Observer makes it clear that HSAs are now firmly entrenched in the mainstream of the health care system. The article begins, “The future of health insurance likely lies in personal spending accounts rather than traditional copayment plans, business leaders said Wednesday at a health care summit hosted by the Charlotte Chamber.” He describes HSAs and HRAs and reports, “Blue Cross and Blue Shield of North Carolina saw the number of Mecklenburg County residents enrolled in either savings or reimbursement accounts grow 49 percent in the past year–to 95,388.”

The article goes on to quote a local broker who helped an employer adopt an HRA plan. “It wasn’t purely about how can the employer save money, it was about how to get the employee more engaged in the process.” He found the company’s workers used fewer sick days, probably because they are more engaged in prevention now.

SOURCE: Charlotte Observer (be sure to read the comments, too)


Drew Altman, president of the Kaiser Family Foundation, has been writing a series of “pulling it together” essays during these days of heated debate. In his latest he notes the wide divide between what “the experts” think about “some of the key issues in health reform,” and what “the public” thinks. For example, while the experts believe “30 percent of the care delivered is unnecessary,” 67 percent of Americans say, “they don’t get the tests and treatments they need.” And, while the experts believe expert ratings of providers are important, fewer than half of the public would pick a surgeon based on expert ratings.

Mr. Altman writes, “These differences between experts and the public matter because key elements of health reform which elected officials expect to resonate with the public could get a decidedly less enthusiastic reception than expected.” He hopes that someone like Ross Perot will come along to explain to the public the basic facts underlying the problems in health care.

Maybe so, but who is going to explain to “the experts” that their statistics and population-wide averages fail to capture the reality of the health care experience for most Americans?

SOURCE: Drew Altman’s Essay

I should mention that of all of the big health-oriented foundations, KFF is far and away the least biased. It is willing to take a critical look at all of the promises and proposals being made. I attribute that largely to Drew Altman’s intellectual honesty. KFF has recently unveiled a new Web site to provide easy access to resources in the current debates. I encourage you to visit the site and bookmark it for future use.

SOURCE: KFF’s Health Reform Site


One of the best critiques I have seen about the current “reform” proposals is from Nina Owcherenko at Heritage. She writes:

“There is little disagreement that the current health care system needs an overhaul. There is also general agreement on the outcomes Americans are looking for in any health care reform proposal: affordability, accessibility, portability, and quality. But there is less agreement on a policy path for reform.

“On one side, there are those who believe that centralizing power in Washington is the best approach to achieve serious and long-lasting health care reform. On the other side, there are those who believe that individuals and families should be the key decision-makers in health care and that they should control the flow of health care dollars in a reformed system.”

She fleshes out each of these positions, and says there are three “key elements for a workable solution”: tax equity, state flexibility, and sound financing. She concludes, “Members of Congress have a choice: Either they can support efforts that expand Washington’s control of the health care system, or they can allow the states to develop solutions that will transfer direct control of health care dollars and personal health care decisions back to individuals and families. The choice should not be that hard.”

SOURCE: The Heritage Foundation

J.P. Wieske

The trade publication AMBest featured an article about the future of agents and brokers after reform. It says, “Some U.S. health insurers may leave agents and brokers hanging out to dry as President Barack Obama seeks to slash their administrative expenses – including commissions – as one way to control high health care costs as part of his comprehensive proposal to overhaul the health care system.” It quotes CAHI’s J.P. Wieske as saying, “Agents and brokers are going to get whacked very hard on this,” and that the whole intent of the insurance exchange is to replace agents, especially in the small group market.

The article adds, “Commissions are an easy target, said Sam Fleet, president and chief executive officer of AmWins Group Benefits, a wholesale brokerage. The average cost of distribution for commercial health plans, including broker fees, sales and marketing, accounts for 30 percent to 50 percent of total administration, totaling $23 billion annually, he said.”

But the article cites NAHU’s Janet Trautwein as saying she doesn’t think carriers “are about to throw us under the bus.” She says NAHU is about to launch a “major grassroots effort” to discuss the value agents and brokers bring to the system. And an AHIP spokesman says agents and brokers “will continue to play an important role in this process.”

Somehow I am not comforted.

SOURCE: AMBest (this is available only by purchase)

BCBS North Carolina

One insurer that seems to “get it” is BCBS of North Carolina. The ABC affiliate in Raleigh reports that it is “putting together a media campaign criticizing a White House proposal that calls for a government-sponsored health insurance option for Americans.” The story says, “many in the insurance industry oppose any government-sponsored health insurance plan. Agents fear that the government would be competing with them directly, and could seriously eat into their ability to make money.”

The article describes an advertising campaign the company is working on and quotes company spokesman Lew Borman as saying, “We believe the government does need to play a role – to assist Americans who cannot afford insurance on the private market. However, we think that private-sector health insurance can bring innovation and quality improvements to health care more quickly than government. Dealing with rising health care costs is central to health reform. We see three key strategies to lowering costs: improving the quality and effectiveness of care, promoting health through preventive care and lifestyle changes, and continuing to lead in paying for better care, not just more care.”

SOURCE: ABC WTVD, Raleigh; Washington Post

Betsy McCaughey

It is nice to have Betsy McCaughey back in the game. She writes in National Review, “Covering the uninsured is a worthy goal, but it will not save money: Once they are covered, they will use 70 percent more health services overall than before, according to the Congressional Budget Office.” How will they pay for it? By seeing to it that everybody gets less care.

She cites Obama’s new technology czar David Blumenthal as saying in the New England Journal of Medicine that “his job is not about ‘just putting machinery in offices.’ In fact, it’s about control. Blumenthal explained that if electronic technology is to save money, doctors will have to take advantage of ‘clinical decision support,’ a term of art for computers telling doctors what to do. He predicted that ‘many physicians and hospitals may rebel, petitioning Congress to change the law or just resigning themselves to penalties.'”

Ms. McCaughey comments, “This approach is deadly for those with serious illness. In the U.S., the CBO notes, about 5 percent of the populace uses 50 percent of treatment dollars.”

SOURCE: National Review


Donald M. Berwick, M.D. ([email protected]) is president and chief executive officer of the Institute for Healthcare Improvement in Cambridge, Massachusetts and a very influential ethicist. He has been moving in the right direction for a while and now has published an article in Health Affairs on the need for “patient-centered care.”

While I don’t care for the term, the phenomenon he is after is just right. He begins by noting the growth of the “medical home” idea and says it doesn’t quite get there: “The question remains open, however, about the degree to which medical homes will shift power and control into the hands of patients, families, and communities.” That is exactly right. Placing patients in a medical home misses the point, which is that patients need to be in control over what is done to them.

He describes a story of accompanying a friend to a cath lab and lack of sympathy of the professionals there. He goes on to chronicle his efforts to get “patient control” included as a value in the book Crossing the Quality Chasm. He addresses the objections to patient control he expects from medical professionals and offers ways to build patient control into health systems.

But ultimately, he sees himself as the patient, which is how empathy is found. He says, “That’s what scares me: to be made helpless before my time, to be made ignorant when I want to know, to be made to sit when I wish to stand, to be alone when I need to hold my wife’s hand, to eat what I do not wish to eat, to be named what I do not wish to be named, to be told when I wish to be asked, to be awoken when I wish to sleep.” In other words, to be controlled by people who don’t know you and don’t really care all that much about you.

SOURCE: Health Affairs