| CONSUMER
CHOICE MATTERS, #6
DATE: March
5, 2003
TO: Consumer
Choice Matters Readers
FROM: Greg
Scandlen
IN THIS
ISSUE:
BOOZ
ALLEN HAMILTON LOOKS TO 2003
I still have
some catching up to do after my January
hiatus. One of the most interesting
things to come out since the first of
the year is a letter from Gary Ahlquist,
Senior Vice President at Booz Allen
Hamilton. This is Gary's wrap-up of 2002
and look ahead at the coming year. His
perspective is worth paying attention
to. He points out that 2002 was a year
of neglect on the political front, but
"real action" for
intermediaries, including employers,
health plans and the IRS. "By the
end of 2002," he writes, "the
United States had answered a question it
was probably unaware it had asked: What
structure would the health benefits
system have in the next decade (or
two)?" He describes 2003 as a year
of "paradigm drift." He points
out that after the Clinton health care
initiatives, managed care was elevated
from being a product to being "the
answer." "Consumer-directed
health plans address the incomplete
agenda left behind by 20 years of
managed care experimentation." He
says that the incomplete agenda includes
employer paternalism, distorted tax
policy, the new era of two-income
families, and others.
"Defined-contribution
consumer-directed health plans will not
be the final form of American health
care, but they will be the next dominant
form." He then predicts some
developments that will influence the
business environment in the near future,
including: "the commoditization of
catastrophic risk coverage;" the
need for new capabilities for providers
and suppliers; "the emerging role
for financial services firms;"
continued consolidation and
diversification of health plans; and
growth potential for heavily managed
care plans. He concludes by saying,
"We believe 2003 will be viewed as
the year that a new wave of major
structural change in health care began
in earnest."
SOURCE: www.bah.com/bahng/SilverDemo?PID=
Home.html&style=item&contType=TABLE&dispType=
HTML&language=English&sCacheID=&sNumHits=
0&sNumJobHits=0&sNumVideoHits=0&Area=2727&Region=
&Geography=&Taxonomy1=&Taxonomy2=34&Taxonomy3=
179019,123&SortBy=dateline+DESC&GroupBy=
-1&FORM_ACTION=BROWSE&ITID=209447
HEALTHLEADERS
FEATURES HUMANA
Also in
January, HealthLeaders magazine's
cover story was on "The New Face of
Health Plans." The article leads
with Humana's CEO Michael McCallister
who says he is "very pleased with
the results" of the first year with
a consumer driven health plan. Claims
costs increased 4.9%, down from a
projected 19.2% increase for the year,
saving $2.1 million. His bottom line,
"When people are spending their own
money, given good and actionable
information, they're going to be much
better than the current model in
controlling costs." Skeptics
abound, of course, and the article
points out that there isn't much data,
and some of it, such as Humana's
results, may be considered anecdotal and
self-serving. Still, the alternatives
are limited. Writer Chris Rauber lists
tiered copayments for hospitals and
prescription drugs, case management
programs for the seriously ill, and more
cost-sharing with employees as the other
strategies employers are using. The
article counters the "healthy and
wealthy" argument by pointing to
Definity's results at Medtronics where
the demographics of people choosing the
consumer-driven plan were
"virtually identical to those of
employees who choose the company's other
benefit options." The article also
quotes Destiny's Ken Linde as saying,
"People's behavior changes when
they spend their money instead of
somebody else's, once they see the money
as their own."
SOURCE: www.healthleaders.com/magazine/feature1.php?contentid=41074
NEW
YORK TIMES - HRA WORKS FOR THE HEALTHY
The New
York Times weighed in with an
article this weekend unfortunately
headlined, "A New Health Plan
Works, at Least for the Healthy."
Writer Beth Koblinger gets most of her
quotes from Ron Pollack of Families USA,
Gary Claxton of the Kaiser Family
Foundation, and Jon Gabel of the Health
Research and Educational Trust
(associated with the AHA). These
opinions range from skeptical to
hostile. Beyond that, she uses anecdotes
such as the out-of-pocket costs at
Pharmacia for childbirth - "$160 in
the company's HMO, $835 in the PPO, and
$1,300 in the consumer-driven plan"
(which could be a real problem if you
have a baby every year. Of course, if
you're getting an annual contribution of
$1,000 - $1,500, the OOP cost would be
far less if you have a baby every two
years). She also mentions that 115 of
906 employees who chose a consumer
driven plan at Charter Communications
switched back to a PPO after one year.
She wraps up by quoting Ron Pollack as
saying, "the plans could skim off
the healthiest employees, leaving the
sicker ones in HMOs and PPOs, resulting
in higher premiums."
SOURCE: www.nytimes.com/2003/03/02/business/yourmoney/02MEDS.html
RWJ'S
"COVER THE UNINSURED WEEK"
NEXT WEEK
Next week is
"Cover the Uninsured" week as
declared by the Robert Wood Johnson
Foundation and most of the health care
establishment. Some 100 national
organizations have all agreed that there
are too many uninsured in America, but
they haven't agreed on a solution. It's
a little hard to decipher the purpose of
the effort, other than that RWJ has a
lot of money to spend. The
"proclamation" uniting the
groups states, "We recognize the
urgency of seeking solutions to one of
America's greatest problems and hereby
declare our support for Cover the
Uninsured Week March 10 - 16,
2003." There will be town hall
meetings, campus teach-ins, health fairs
and a lot of other hoopla. And each
group gets to publicize its own approach
to solutions. No doubt it will be an
organizing triumph, and I guess RWJ will
get a good database of people who are
interested in the issue, but watch the
blood flow if they try to convert this
into a solution.
SOURCE: www.covertheuninsuredweek.org
BLUES
- MOST UNINSURED CAN GET COVERAGE
ALREADY
Just in
time, a couple of reports have come out
discussing some of the nitty-gritty
numbers behind the uninsured. The Blue
Cross Blue Shield Association has
released a study of "The Uninsured
in America" that finds the
population more diverse than is often
thought. Of the 41 million uninsured,
more than 14 million already are
eligible for Medicaid or SCHIP, but
haven't enrolled; more than 15 million
have incomes of $50,000 or more and
could purchase coverage if they thought
it was valuable; and 5.7 million are
short-term uninsured, often people
between jobs or recent college
graduates. The report notes that 5.2
million of the eligible but unenrolled
live in just three states -- California,
Texas and New York. It also points out
that the greatest growth in the
uninsured is in people earning $75,000+,
rising 70% from 1999-2001. Only 8.2
million are long-term uninsured, too
poor to afford coverage and ineligible
for public programs. The paper proposes
giving tax credits to employers to
enroll their low-income workers, but
that idea misses the real lessons in
these numbers - many people do not like
to be in government programs, many
others do not find value in existing
private coverage, and many others are
not associated with an employer. The
solution to all three groups could be
tax credits to individuals (not
employers), so they can purchase the
coverage they prefer and value.
SOURCE: bcbshealthissues.com/proactive/newsroom/release.vtml?id=38740
and BCBSHealthIssues.com/relatives/20464.pdf
U.S.
ALREADY SPENDS $35 BILLION ON UNINSURED
And Health
Affairs has published an article by
Jack Hadley and John Holahan (both of
the Urban Institute) that shows the
government already spends a lot of money
on the uninsured, some $35 billion. The
uninsured average $1,235 per person in
health care consumption, of which they
pay directly 35%. Eighty-five percent of
the balance, about $800 per person, is
picked up by a variety of subsidies to
providers, including federal
"disproportionate share"
programs, state and local appropriations
to public hospitals, and other direct
payment for indigent care. There are a
number of interesting items in this
paper:
- It finds
that while the "full-year"
uninsured consume $1,253 in
services, the privately insured
consume $2,484, but about half the
difference is accounted for by
demographic differences between the
populations (the uninsured are
younger and healthier than the
insured). So the insured get only
about $600 more care than the
uninsured -- not much of a
difference considering how much
money goes into providing them with
insurance coverage.
- It also
finds that uncompensated care
amounts to only 2.8% of total
personal health spending, which
suggests that the
"free-rider" problem cited
by advocates of mandatory coverage
is a pretty small problem.
- One must
conclude that a tax credit such as
the president has proposed (of
$3,000 per family of four) would be
virtually free to the taxpayers. If
government is already spending $800
per uninsured person, that amounts
to $3,200 per family of four. A
$3,000 tax credit that succeeded in
getting these individuals off the
uninsured roles would actually save
the taxpayers $200.
- Further,
the uninsured are already paying
about $400 per person for their
care, or $1,600 per family of four.
If this money were to be combined
with the tax credit, each family
would have $4,600 of current money
to spend on coverage.
- Finally,
the paper points out that the way we
currently provide services to the
uninsured is inefficient. They wait
too long to seek treatment and are
more expensive to serve as a result.
We could get better health out of
the dollars spent if we could get
these folks covered.
SOURCE: www.healthaffairs.org/WebExclusives/Hadley_Web_Excl_021203.htm
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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