| CONSUMER
CHOICE MATTERS, #5
DATE:
February 25, 2003
TO:
Consumer Choice Matters Readers
FROM:
Greg Scandlen
IN
THIS ISSUE:
Maryland
May Allow Small Group HRAs
On
February 12, I testified on Health
Reimbursement Arrangements before the
Maryland Senate Finance Committee.
Maryland is unique in having a
"Health Care Access
Commission" that defines what
benefits will be allowed to be offered
in the small group market. The
powers-that-be in Maryland (including
the couple of major insurers that
control most of the market) are quite
happy with this arrangement. Publicly
they argue that having standardized
benefit plans is good for consumers
because it makes it easier to comparison
shop between plans. In fact, it impedes
competition and innovation, so the major
players can continue dominating the
market without having to work very hard.
A few years ago the Commission decided
to allow MSAs to be sold in Maryland,
but added so many bells and whistles to
the already complicated federal rules,
that few if any have ever been sold in
the state. The legislation I was
testifying on would have required the
Commission to allow small employers to
set up Health Reimbursement
Arrangements. There were quite a few
misconceptions among the Senators. They
seemed to assume that an HRA must
involve a high-deductible insurance
plan. I tried to clarify the issue in my
testimony.
SOURCE: www.galen.org/news/021303a.html
AMA
Calls on FTC to Investigate Insurance
Industry Concentration
American
Medical News ran an editorial
calling for the Federal Trade Commission
to investigate this sort of market
domination. It cites a recent AMA report
on "Competition in Health
Insurance" that found as few as two
plans hold 90% of the market in places
like Dayton, OH and Pensacola, FL, and
61 out of 70 metropolitan areas are
"highly concentrated." It says
that in 20 of the markets, a single plan
held at least half of the HMO/PPO
enrollment and that barriers to entry
for new competitors are daunting. The
editorial concludes, "The FTC needs
to investigate, and act forcefully as
needed, when a managed-care machine
starts pushing people around."
SOURCE: www.ama-assn.org/sci-pubs/amnews/amn_03/edsa0303.htm
NY
Times - Bush Reinventing Medicare,
Medicaid
This
kind of market domination makes it easy
for the single payer crowd to argue for
governmental programs. If there is no
meaningful competition, what is lost
when a government agency replaces a
private monopoly? That is precisely the
nut the Bush administration is trying to
crack in developing Medicare and
Medicaid reform proposals, as well as
Social Security, according to Robin
Toner and Robert Pear in the New York
Times. They write, "The
administration's vision for Medicare and
Social Security moves away from the
notion that everyone should be in the
same government-managed system with the
same benefits. It promises individuals
more choices…" The ability of
individuals to make choices is a
fundamental dividing line, according to
the article. It quotes Former SSA
Commissioner Robert Ball as saying,
"(The Bush) proposals are a major
departure from the principles that have
governed the social insurance system
from the beginning." These
principles include "that all
working Americans pay into the same
Medicare system; that the healthy and
the sick, the rich and the poor, end up
in the same program; and that all have
the same core benefits when they
retire."
SOURCE: www.nytimes.com/2003/02/24/politics/24AGEN.html
Fortune
-- Upcoming Labor Negotiations to Focus
on Health Benefits
Writing
in Fortune Magazine, David Stires
says, "You don't need a crystal
ball to see that that is a fight waiting
to happen." He is referring to the
coming round of labor negotiations where
health care will be at the very tippy-top
of the agenda. The tone has been set by
the two-day walk-out by General Electric
workers and the earlier 44-day strike at
Hershey Foods. The GE workers were
resisting adding from $200 - $400 per
year in out-of-pocket costs, and the
Hershey workers ended up taking lower
pay increases to offset added health
care costs. The article says that
corporations, especially in
manufacturing, are reaching a breaking
point. While prices went up in the
services industry by 3.2% in December
(over the year before), in manufacturing
prices actually dropped by 1.5%.
Meanwhile health care costs are soaring,
rising by 44% since 1999 at GE. SBC
Communications is even worse off with
health costs jumping by almost 50% since
1999, for a total outlay of $2.5 billion
for 343,000 active and retired employees
-- $7,829 per person. The Big Three
automakers have total health care
liabilities of $92 billion - 50% greater
than their combined market
capitalization of $66 billion. Though
strikes are likely, they could also kill
off the economic recovery. The article
says the West Coast dock strike last
year "was the single biggest
influence on the fourth quarter's sharp
drop in national output" and cost
the economy $2 billion a day. There
isn't much optimism in the article.
While GE's senior vice president of
human resources is quoted as saying the
company was passing on just 10% of its
health care increases, the president of
the union, Edward Fire says, "We'll
fight to the bitter end," if the
company tries to get workers to pay more
of their health care spending.
SOURCE: www.fortune.com/fortune/articles/0,15114,423756,00.html
Overutilization
Overstated - Marmor & Sullivan
With
dynamics like that, consumer-driven
health care seems an awfully thin reed
to pin our hopes on. Theodore Marmor and
Kip Sullivan argue in the St. Paul
Pioneer Press that the whole premise
is wrong. They see a giant conspiracy by
corporate America to mislead the public
into thinking health care inflation is
the fault of over-insured patients.
"There is no credible evidence that
Americans received a lot more medical
care in the past few years," they
write. The real culprit is, "The
market power of insurers, drug
manufacturers, hospitals and other
suppliers of medical services."
They argue that underuse is every bit as
prevalent as overuse. "Advocates of
medical savings accounts… know they
have no solution for underuse and that
their practices will almost surely
aggravate it."
SOURCE: www.twincities.com/mld/pioneerpress/news/opinion/5216693.htm
Third
Party Payment Induces Rationing
The
Orange County Register points out
that one of the reasons health care
costs rise faster than other sectors of
the economy is because health care is
more heavily regulated than other
sectors. "The best way to arrest
the cost increases in health care, or
even reverse them, would be to reduce
the role of government and increase the
role of the private, voluntary
sector." It adds, "When third
parties pay and recipients perceive
services as 'free,' the tendency is to
demand more than is really needed, which
drives up prices or induces
rationing." (Hence, the "underuse"
that Marmor and Sullivan worry about,
except people are rationed out of
appropriate use by third parties, rather
than making their own decisions.)
SOURCE: www2.ocregister.com/ocrweb/ocr/article.do?id=25944§ion=COMMENTARY&subsection=COMMENTARY&year=2003&month=2&day=18
Consumerism
Means More Than Cost-Shifting
Michael
Prince writes in Business Insurance
that, "Cost-shifting is only a
temporary solution." What is really
needed is, "a fundamental change in
employees health care mindset." The
article quotes Jack Mollen of EMC Corp.
as saying, "We can never solve the
15% compounded growth problem without
focusing on the long term." The
article goes on to say that a successful
long term approach "involves
instilling a consumer mentality,"
including cost awareness and better
information. Keith Peden of Raytheon
said 3,000 of their employees have
signed up for Definity's consumer-driven
plan. He reports there has been no
adverse selection. At Coors Brewing, 14%
of employees signed up for the plan when
it was first offered. But Mr. Mollen
added that consumerism does not have to
mean adding a consumer-driven plan.
"Consumerism is getting the
employee to be an effective
decision-maker. It's about making the
right choices."
SOURCE: www.businessinsurance.com/cgi-bin/article.pl?articleId=12351&a=a&bt=cost-shifting
Milwaukee
Employers Consider the Return of Fee
Schedules
Employers
in Milwaukee are looking at reinstating
fee-schedule payments, according to Joe
Manning in the Journal Sentinel.
"The idea is high on the agenda of
the Business Health Care Group of
Southeast Wisconsin" which includes
most of the area's larger employers. The
group has employed Mercer Consulting to
study whether the idea could be part of
the solution. Humana's Larry Rambo says
his company has also been looking at the
feasibility of a fee-schedule product.
And Richard Blomquist has been looking
at price variations in the area and
setting up a fee-schedule program under
Blomquist Benefits. He has found
hospitals charging from $2,736 to $6,268
for vaginal childbirth. His fee schedule
would pay slightly more than $3,800.
Fees for a colonoscopy range from $743
to $2,552 and for a coronary artery
bypass from $21,250 to $43,567. The
article raises the concern about higher
payments for more complicated
situations, and the need for patients to
know about quality and safety along with
prices.
SOURCE: www.jsonline.com/bym/News/feb03/118760.asp
VENDOR'S
CORNER
Evolution
Benefits says its debit card can double
Flexible Spending Account participation.
It says with higher cost-sharing,
employees will need "a convenient,
reliable source to fund those
benefits." The card reduces
paperwork and administrative expense,
and by encouraging greater FSA
enrollment, employers can save on FICA
costs. One client "saw total
contributions jump from $6 million to $9
million," and saved $225,000 in
FICA payments as a result. The company
says its debit card can also be used
with HRA programs, with or without an
FSA. The company performs electronic
adjudications to ensure only qualified
expenses are paid from the HRA. For more
information go to www.EvolutionBenefits.com
Optate,
Inc. has announced a new online decision
support tool called HEALTHCAREoptimizer.
The company release says, "It helps
the employee construct an estimate of
health care utilization for the coming
year, and optimizes how that utilization
would affect out-of-pocket costs across
all plan options." For more
information contact Rebecca McDermott at
734-794-4022 or rmcdermott@optate.com
Mercy
Health Plans, Inc. has contracted with
HealthTrio to serve 200,000 enrollees in
Illinois, Missouri and Texas. The
company says members will be able to
enter personalized health information
and access their own personal health
records and educational material. Mercy
CEO Tom Kelly says, "We will be
able to move past the cost shift issues
inherent in consumer-driven health plans
and concentrate on improving the health
status of our members." For more
information, contact William Bennett at
314-214-8123 or wbennett@mhp.mercy.net
Greg
Scandlen
Director
Center for Consumer Driven Health Care
The Galen
Institute
P.O. Box 19080
Alexandria, VA 22320
703-299-9206 (office)
301-606-7364 (cell)
Please send all
comments/questions directly to me at gmscan@aol.com.
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