Third-Party Payment Destroys Good Ideas

Published February 1, 2008

I was pretty excited when I heard Blue Cross Blue Shield of South Carolina was getting on the medical-tourism bandwagon, but then I heard a presentation at the Consumer Health World conference by David Boucher, an executive from that company.

He said the employers they are working with want to reap the savings of sending workers 10,000 miles away for major surgery and reward these workers with–hold onto your hat–waiving the deductible.

I told him this is another example of third-party payment taking a good idea and ruining it. The employer is saving some $60,000 or more on a major surgical procedure, and the most they will do for employees is waive the deductible? Why would any employee agree to that?

If you don’t get consumer buy-in for an idea like this, not only will it fail, but the whole concept will be discredited.

Paying for Performance

That was followed by a debate over pay-for-performance, between Consumers for Health Care Choices Board Chairman Stormy Johnson, M.D. and Vince Kerr, M.D. of UnitedHealth Group.

Paying for performance is a fine idea. Consumers should be free to pay more to see the best physician in town, and less for the kid just out of medical school–which is prohibited under current insurance rules.

But third-party payers are destroying a good concept by injecting their own judgment about what physicians are worth, without providing any real information to patients. Why would a patient trust a health plan to make these judgments? The health plans may be rating the cheapest doctors high and the better doctors low, just to save a few bucks.

Massachusetts Mandate Burdens

Now that Massachusetts has mandated everyone purchase health insurance, the next steps are already becoming evident:

  • Since everyone must buy, we can’t make them pay too much. So the state will allow premium increases of no more than 5 percent, according to The Boston Globe. This is an arbitrary number bearing no relationship to underlying costs.
  • And of course we can’t have health plans limiting premiums by “shifting costs” to the insured, so the state will instruct health plans to “steer” patients to low-cost providers only.
  • Universal coverage was supposed to end “cherry picking” and “selection,” but another Boston Globe article reports the HealthNet Plan sponsored by the Boston Medical Center is trying to “poach” enrollees from other plans. At least one of the competing plans does not contract with Boston Medical, so patients that have used the facility in the past will no longer be able to do so if they enroll in that plan. HealthNet sent a letter to these patients advising them of this limitation.
  • Having a variety of choices was supposed to increase competition, but the Connector (the state-run entity through which individuals buy health insurance) prohibits insurers “from directly soliciting beneficiaries of other plans.” That is known as “marketing” in the rest of the economy.

HealthNet may be penalized by having the Connector reduce its enrollees. Whatever happened to “choice”?

Sources: “Panel to press insurers on premiums,” by Alice Dembner, The Boston Globe, December 5, 2007:

“Hospital errs with coverage notice,” by Alice Dembner, The Boston Globe, December 4, 2007:

More Mass Problems

The New York Times, meanwhile, points out that while 200,000 people have gained coverage in Massachusetts, at least that many–and maybe twice that number–have not.

The article reports the leading Democratic candidates have all pledged to impose “universal health coverage” and Clinton and Edwards would use a Massachusetts-type mandate to do so. They appear to suffer from the delusion that covering everybody will somehow lower health spending.

But Massachusetts’ free-care program has been so popular the state is looking at $150 million in unplanned new spending next year. The unsubsidized program is not so popular.

Meanwhile, John McDonough, director of the Massachusetts group Health Care for All, finds it “breathtaking that [national] political leaders were calling for an individual mandate well before there was any way to measure the success of the Massachusetts experiment.”

Even the executive director of the Massachusetts Connector, Jon Kingsdale, concedes mandates do not lead to “universal” coverage. “There’s good evidence,” he says, “whether it is buying auto insurance or wearing seat belts or motorcycle helmets, that mandates don’t work 100 percent.”

Source: “Massachusetts Faces a Test on Health Care,” by Kevin Sack, The New York Times, November 25, 2007:

Political Posturing

The Web site offers a skeptical view of the health reform proposals offered by the presidential candidates in “Politics, Business as Usual in Health Proposals?” It cites the University of Minnesota’s Roger Feldman saying none of the plans “revolutionize the system.” He notes the proposals to mandate coverage simply add 47 million more customers to insurance company rolls without doing anything to address costs.

Mohit Ghose of America’s Health Insurance Plans notes a mandate in Washington State was quickly repealed because all it did was raise costs and lower choices.

The article goes on to say most of the ideas offered so far amount to outlines, not specific policy proposals, but suggests the discussion has had the desired effect–to shake down the health care industry for more campaign contributions.

“Health care has poured in $41.4 million to all 2008 campaigns by the end of this year’s third quarter,” with 54 percent going to Democrats, the report says. With a track record like that, you can bet health reform will continue to be high on the list of topics.

Source: “Capitol Report: Politics, Business As Usual In Health Proposals?”, December 04, 2007.

Greg Scandlen ([email protected]) is president of Consumers for Health Care Choices, an advocacy group based in Hagerstown, Maryland.