Consumer Power Report #225

Published June 8, 2010

The impact of ObamaCare is already showing up in some pretty disturbing ways. A new insurance company founded by our friend Paul Kitchen in Virginia has announced it will close its doors. This is a pity because we need more competition, not less in the insurance market. The company, nHealth, was off to a great start. The original idea was to replicate the original Blue Cross model and provide coverage only for hospital inpatient care. It was able to offer substantially lower premiums than other carriers in Virginia.

But innovation is now officially dead in health insurance. And not just innovation, but new competition of any sort. It is impossible for a start-up company to comply with the loss ratio standards in ObamaCare. There are substantial costs in building and promoting a new company and it takes a while before claims start coming in. A start-up company will collect premiums today, but not have any claims to pay for a year or so. It will not be paying out 80% of its premiums for some time.

Indeed, the federal government will not hold itself to the same standard. Part of ObamaCare is creation of “The Class (Community Living Assistance Services and Supports) Act” which establishes a new federal insurance company to pay for long term care. This company will begin collecting premiums of about $150/month per worker, probably in 2012, but it won’t start paying claims for five years after that. So, for five years its “medical loss ratio” will be zero.

One standard for the federal government, another standard for everyone else.

Another start-up company I have long admired is, now known simply as eHealth. I have referred hundreds of people to this site and found my own health insurance on it. It is easy to use and provides very comprehensive information on insurance options.

But Bill Boyles of the Consumer Driven Market Report writes that eHealth is the front-runner to get the federal contract to manage the “national health plan web portal starting July 1, 2010.” So suddenly this company will have only one client, the federal government. It will no longer have to please me as a consumer as long as it pleases the federal government. If I don’t care for the service, there is nowhere else I will be able to go.

Welcome to the ObamaCare plantation where there is only one master.

– – Greg Scandlen



Speaking of one standard for the Feds and another for everybody else, Ron Bachman writes up the results of his trip to Germany where he dug deep into the German system. He writes, “We listened to federal and state officials, doctors, hospital executives, members of the Bundestag, a health journalist, and German policy experts. They told us that the German system is the fourth most expensive system in the world. Their costs are rising rapidly and are unsustainable.” He says he pressed these people on what were the three best characteristics of the German system, and they could come up with only two – Solidarity and Progressive Financing. “Quality, access, cost effectiveness, choice, and convenience were never mentioned.”

He goes on to say that, 90% of the population is in “compulsory statutory social health insurance through 170 plans (where) there are waiting times for office visits, delays for elective hospital care, and postponed care if quarterly medical budgets are exceeded. Choice of physicians/surgeons is limited and private hospital rooms are not available.”

Ten percent of the population is “covered by 50 private insurance plans. Those with private coverage get to the head of the line for appointments, have access to private hospital rooms, and use of ‘master’ surgeons and leading specialists for care.” Ron writes, “I asked, who are those individuals and how many Germans get the private coverage as complimentary? The response was that federal government employees, state employees, professors, and others are defined as civil servants.” They make up 80% of those enrolled in these private plans.

Not all pigs are equal on this plantation(farm).

SOURCE: Daily Caller


Now that ObamaCare is the law of the land, the New York Times is getting around to questioning some of its underlying assumptions. One article that got a lot of attention now that it is too late, was a criticism of the Dartmouth Health Atlas study of Medicare spending. You will recall that Dartmouth looked at Medicare spending in the last six months of life and found that some localities spent a lot less than other locations. They concluded that IF every location spent the same as the cheapest ones, and IF the spending patterns of the dying elderly could be applied to everyone, THEN we could save 30% of total health care costs.

Never mind that the entire premise was absurd, Obama’s OMB Director Peter Orszag took that factoid and ran with it. To the point of predicting that health care reform would not only preserve Medicare forever but also improve quality and balance the federal budget.

Now Reed Abelson and Gardiner Harris write in the Times, “In selling the health care overhaul to Congress, the Obama administration cited a once obscure research group at Dartmouth College to claim that it could not only cut billions in wasteful health care spending but make people healthier by doing so.” But, oooops — “the Dartmouth researchers themselves acknowledged in interviews that in fact it mainly shows the varying costs of care in the government’s Medicare program. Measures of the quality of care are not part of the formula.”

It adds, “Even Dartmouth’s claims about which hospitals and regions are cheapest may be suspect. The real difference in costs between, say, Houston and Bismarck, N.D., may result less from how doctors work than from how patients live. Houstonians may simply be sicker and poorer than their Bismarck counterparts.”

The article goes on to quote Elliot Fisher, MD, one of the Dartmouth researchers, as saying, “We never asserted and never claimed that we judged the quality of care at a hospital — only the cost.” Uh, huh.

It’s a good article, but it still misses the most devastating critiques of this pseudo-research, such as the withering reviews by Dr. Buz Cooper and others. Is there any chance the N.Y. Times will begin to look beyond the propaganda coming from the White House?

SOURCE: New York Times


Even Health Affairs is beginning to catch on. It published an article by Kristin Carmen and others that calls into question one of the other panaceas underlying ObamaCare, the whole effort to dictate medical practice based on bureaucratic standards.

The authors are alarmed, but they still don’t quite get it. They begin by saying, “Many studies have shown that some health care provided in the United States is inappropriate, inefficient, and unsafe. Passage of the Patient Protection and Affordable Care Act of 2010 has now laid the groundwork for major reforms, including greater use of evidence-based medicine, shared decision making, comparative effectiveness research, evidence-based benefit design, and transparency of cost and quality information. We refer to these diverse efforts as evidence-based health care.”

They accept this all as gospel truth without ever questioning their underlying assumption. In fact, the evidence they use for the initial statement – that health care in the U.S. sucks – is mostly the junk science published by the Institute of Medicine in “To Err is Human,” and “Crossing the Quality Chasm.” We have debunked this on many occasions, to little avail.

No wonder, then, that they are surprised that the American people understand what is going on better than the academics do. Yet they understand how consumer buy-in is essential to any new initiative – “Their attitudes and beliefs about evidence-based health care, and their understanding and acceptance of it, will help determine its success or failure. If consumers don’t understand it or reject it, or if they see it as an invalid basis for making decisions about providers and treatments, the most ambitious goals of this movement may fail.”

They go on –

Increasingly, consumers are being asked to use evidence to manage chronic conditions, choose between treatment regimens, and select providers and health plans. In some respects, consumers are rising to the challenge. Research shows that decision aids, which provide information about options and outcomes, can help increase consumers’ confidence with decision making and improve their understanding and knowledge of treatment options. If consumers are more involved in decision making generally and self-management of health conditions, the results can be improved adherence to treatment, increased use of screening, increased patient satisfaction, better health outcomes, and lower health care costs. At the same time, many consumers’ values, beliefs, and behaviors remain rooted in traditional expectations about the doctor-patient relationship and the medical care system. The dominant role of physicians in determining patient care has been a fact of medical care delivery for many decades.

Most of the article is frustration that people are not as enlightened as academia about having bureaucrats control everything. They know that consumers are essential, but they don’t know how to get them to do what academia dictates.

Perhaps they should consider ways to empower, not control, people.

SOURCE: Health Affairs


It is already old news, but AHIP has issued its latest survey of HSA enrollment. The survey found that 10 million people were enrolled in HSA-qualified coverage as of January 1, 2010, an increase of 25% from a year ago. The states with the greatest numbers enrolled were California (1,018,000), Ohio (651,000), Florida (639,000), Texas (637,000), Illinois (575,000), and Minnesota (361,000). The states with the greatest market penetration were Vermont (13.8%), Colorado (9.2%), Minnesota (9.2%), Arkansas (8.2%), Indiana (8.1%), and Ohio (8.0%).The report includes details on average premium, average deductible, and market segments.


EBRI also released a report on Consumer Driven Health Care this month. This one is focused on the accounts themselves, including balances and amounts rolled over. It found in August of 2009 there were 5 million HRA and HSA accounts with $7.1 billion in assets. This is up from 1.2 million accounts and $835 in assets in 2006. Average account balances were $1,419 in 2009, up from $606 in 2006. But the average balance grew modestly in the past two years (3% in 2008 and 5% in 2009.)

The report gives a lot of detail on the characteristics of those enrolled, but of greatest interest to me are the income and educational levels of enrollees. EBRI finds that 45% of CDHP enrollees had incomes of $50,000 to $99,999, while only 38% of traditional plan enrollees did. This might suggest some selection based on income, but the difference in education was even greater, with 46% of CDHP enrollees having a college degree and another 21% with a graduate degree. This compares to 23% and 11% respectively for traditional plan enrollees. These results suggest that education is a far more important factor in selecting a CDHP plan than income is. The report also says, “There are no statistically significant differences in self-reported health status between CDHP and traditional plan enrollees.”


CFO magazine reports on another study, this one from Towers Watson and the national Business Group on Health. It finds that 50% of employers now offer some form of CDHP and that is expected to rise to 60% in the coming year. It adds that CDHPs now cover 15.4% of all employees. The article says concerns linger about whether employees can handle the out-of-pocket cost involved with a CDHP, but “a recent analysis of the data by Towers Watson and the NBGH suggests that at least some employee concerns may be unwarranted.” It quotes Ted Nussbaum as saying, “The perception is that because CDHPs are based on a high deductible, employees pay considerably more, but we’re just not finding that to be the case.”

The article also says that savings depend on the take-up rate among employees. It says, “Compared with the $7,826 average cost per employee in a non-CDHP plan, those with more than 50% of the workforce enrolled in CDHP plans saw an average $978 savings per employee, while those with under 20% enrollment saw only an $83 savings per employee.” The article also reports that renewal rates have not been as favorable as companies stay with the program longer.

SOURCE: CFO Magazine

The magazine Campus Progress reports on a panel at the New America Foundation that was convened, “to answer whether artists could in fact finally quit their day jobs now that health care reform has passed. The panel’s answer: We still have to find out what’s in the bill.” But most of the panelists were gung ho on Health Savings Accounts. One panelist represented an organization called Fractured Atlas that operates in 32 states. The article says, “Fractured Atlas works to enroll artists in health insurance plans, primarily low-cost, high-deductible health insurance packages often paired with health savings accounts.” And two of the panelists, “recommend artists consider health-savings accounts—essentially, an escrow account that individuals may pay into tax free and then use to cover costs associated with dental care, alternative or holistic treatments, and other health care not covered by their insurance benefits.”

SOURCE: Campus Progress