Posts tagged ‘HMO’

What Does Pelosi Define as "Immoral" Profits? Greater than Zero?

Nancy Pelosi said this the other day (emphasis added)

I'm very pleased that our Chair of our Democratic Congressional Campaign Committee and member of the leadership will be talking too about the immoral profits being made by the insurance industry and how those profits have increased in the Bush years. We all believe in the profit motive; we all want to reward success.  But having that success come at the expense of America's working families "” have that success come by withholding care, when a person becomes ill, is just not right and we're going to take this issue in a new direction.

In the past, other leftish pundits have been even more direct:

It means the health insurance industry is scared that we might actually do something in 2009 and they want to be seen as something other than completely obstructionist. That means only one thing: they've shown fear, and now it's time to bore in for the kill and gut them like trouts. Let's get to it.

I don't have time to redo the analysis, but for the third quarter 2008 (the last quarter of the dreaded Bush years that increased insurance profits so much) I looked up on Google Finance the profit margins of major health care insurers, providers, and HMO's.  I am not sure who the Democrats would consider the real Satan of health insurance (ala ExxonMobil or Wal-Mart) but if I left a key company off you are welcome to suggest it in the comments.  Anyway, 3Q08 profit margins were:

Cigna: 3.50%

United Health Group: 4.56%

Aetna: 3.64%

WellCare:  4.08%

Amerigroup: 3.51%

Humana 2.56%

WellPoint: 5.49%

So, if you are a business owner (and that includes those of you who own equities, which are ownership shares), be very afraid.  Look at your company or your favorite stockholding.  If they have margins of 2.5% or more of revenues (and that includes just about every profitable company in America -- I think the industrial average is in the eights) then Nancy Pelosi and the Democrats consider your profits immorally high and they intend to gut you like a trout.

Update: OK, I had a bit of time to update numbers, so I took Cigna, which is the first on the list, and looked at their net profit margin over 4 years:

2005:  7.6%

2006:  7.0%

2007:  6.4%

2008:   1.5%

Hmm, not sure I see the profits increasing in the Bush years -- looks like they are going down to me.  I would also observe that they never in the last four years even rise to average for a large American public company.

Perhaps the Most Egregious Statement of the Healthcare Debate

No, not the one that said everyone who likes their current health plan can keep it, though that clearly is a whopper.  This is the one that fascinates me:

[Obama said] if doctors have incentives to provide the best care, instead of more care, we can help Americans avoid unnecessary hospital stays, treatments and tests that drive up costs.

What he is referring to is the fact that if doctors prescribe more procedures, they make more money.

I spent years as a consultant  working with incentive programs in corporations.  They are very tricky things.  It is much harder to create incentives for the wrong behavior than the right behavior.  But I don't think you need similar experience to dissect this plan.  Because there is absolutely nothing of real substance in this plan, or any HMO has discovered, that will truly create incentives for "the best care."  It just doesn't work with doctors.  I know doctors, and when Obama says "best care" he means saying no to a lot of things.  That is not how doctors would understand the phrase.  I worked with Kaiser-Permanente for about a year as a consultant, and this was a constant source of friction between the Kaiser business people and the Permanente medical staff.

Really, all Congress and Obama are doing is twiddling one knob called "payment model" and the knob only has two settings - either create incentives for the doctor to do a lot for the patient by paying for individual services, or create incentives for the doctor to do as little as possible for the patient and resist every plea for a test or specialist referral.  Basically, Obama's intention is to flip the switch from the former to the latter position, similar to what is being done currently in the Massachusetts health plan with switching to capitated payments from fee for service for doctors, and similar to the strong HMO model that pissed so many people off years ago that many states banned practices Obama is implementing nationally.

Yeah, I know the response, that somehow "preventative medicine" will reach the golden mean.  Forget it.  Preventative medicine is great as a spur to individual well-being, but does little to reduce total system costs**.  Waving around the flag of "preventative medicine" is about as believable as when politicians say they will make up budget gaps with savings and efficiency.  Basically, the next time we see either will be the first time.

** This kind of thing always sounds heartless, but for example it is actually cheaper not to find a cancer until its almost too late.  An expensive operation may be called for, but a quick death is actually cheap for the system.  Finding a cancer early means expensive treatments now, and probably expensive treatements later in a longer life.  I much prefer the latter, but it is more expensive.  You can't get around that.  The big wins in reducing health costs rom preventative medicine are in public health and nutrition, and most of those battles are won.  There may still be some savings in pre-natal care, but even that is iffy.

Anti-Universal Coverage

Michael Canon has proposed for principles of an anti-universal health care coverage club:

  1. Health policy should focus on making health care of ever-increasing quality available to an ever-increasing number of people.
  2. To
    achieve "universal coverage" would require either having the government
    provide health insurance to everyone or forcing everyone to buy it.
      Government provision is undesirable, because government does a poor job of improving quality or efficiency.  Forcing
    people to get insurance would lead to a worse health-care system for
    everyone, because it would necessitate so much more government
    intervention.
  3. In a free country, people should have the right to refuse health insurance.
  4. If governments must subsidize those who cannot afford medical care,
    they should be free to experiment with different types of subsidies
    (cash, vouchers, insurance, public clinics & hospitals,
    uncompensated care payments, etc.) and tax exemptions, rather than be
    forced by a policy of "universal coverage" to subsidize people via
    "insurance."

You know I'm in;  after all, I am the one that has said that "universal coverage is as if, in the Great Society public housing programs, everyone in the country, not just the poor, had been required to tear down their current houses and enter monolithic public housing structures."

However, I would have added a fifth principle:  Health care decision-making and tradeoffs amongst cost, quality, and
content of care should belong to the individual, except when an
individual delegates this decision in some way by his own choice (say
by joining a very structured HMO program).

I wrote about the joys of actually shopping for health care under a high-deductible policy here and here.  Michael Canon also has a new post on shopping and HSA's here.

Anti-Universal Coverage

Michael Canon has proposed for principles of an anti-universal health care coverage club:

  1. Health policy should focus on making health care of ever-increasing quality available to an ever-increasing number of people.
  2. To
    achieve "universal coverage" would require either having the government
    provide health insurance to everyone or forcing everyone to buy it.
      Government provision is undesirable, because government does a poor job of improving quality or efficiency.  Forcing
    people to get insurance would lead to a worse health-care system for
    everyone, because it would necessitate so much more government
    intervention.
  3. In a free country, people should have the right to refuse health insurance.
  4. If governments must subsidize those who cannot afford medical care,
    they should be free to experiment with different types of subsidies
    (cash, vouchers, insurance, public clinics & hospitals,
    uncompensated care payments, etc.) and tax exemptions, rather than be
    forced by a policy of "universal coverage" to subsidize people via
    "insurance."

You know I'm in;  after all, I am the one that has said that "universal coverage is as if, in the Great Society public housing programs, everyone in the country, not just the poor, had been required to tear down their current houses and enter monolithic public housing structures."

However, I would have added a fifth principle:  Health care decision-making and tradeoffs amongst cost, quality, and
content of care should belong to the individual, except when an
individual delegates this decision in some way by his own choice (say
by joining a very structured HMO program).

I wrote about the joys of actually shopping for health care under a high-deductible policy here and here.  Michael Canon also has a new post on shopping and HSA's here.

HMO's at 15% Approval

Apparently, HMO's only have a 15% approval rate with Americans.  People don't like the waits, and the institutional service, but, more than anything, they don't like someone in the HMO back office rationing their care based on pre-set formulas about what care or test is appropriate in each given situation.

All well and good.  However, if this is so, then why does the idea of universal government health care appeal to so many people?  Because if universal health care turns out as well as it possibly could, then the best we could expect is that it will resemble... current HMO's.  And unfortunately, it will probably be worse.  Because today, the guy in the HMO back office who is setting up the allowed care formulas knows that if he cuts things back too far, you will go to another competitor.  No such threat or incentive will exist for the government bureaucrat, who will be setting the formulas based on stupid mindless rules and interst-group pressures and absolutely no concern about your satisfaction.