Who Is Making the Biggest Profits From U.S. Healthcare? You Might Be Surprised . . .

Healthcare –and healthcare reform—is complicated, in part because so much of what we think we know about American medicine turns out to be untrue. For instance, one would assume that more expensive care would be better. But the Dartmouth research has taught us that isn’t the case. Most people also assume that for-profit insurers are making a fat profit; after all, look at how high insurance premiums are! 

But as Rick Newman points out in the most recent issue of U.S. News & World Report , “blaming insurance firms for runaway healthcare costs is a weak argument, because the insurance industry isn't all that profitable to start with."

Over the past year, “the profit margin for health insurance companies was a modest 3.4 percent,” Newman points out, quoting data provided by Morningstar, a company that rates mutual funds. Morningstar would have no reason to low-ball the insurance industry’s profits; its readers are looking for highly profitable sectors of the economy where they can invest.  But the health plan industry is not one of those sectors: insurers ranks 87th out of 215 industries.

“The most profitable industry over the past year has been beverages, with a 25.9 percent profit margin,” Newman reports, “Right behind that were healthcare real-estate trusts (firms that are basically the landlords for hospitals and healthcare facilities) and application-software (think Windows).  The average for the oil and gas industry overall was 10.2 percent, three times the margin in the health insurance industry. And that's nothing compared with high-fliers like Google—which had a 20.6 percent margin—and Microsoft, at 24.9 percent.

“Profit margins basically reflect the percentage of revenue left over after paying salaries, expenses, taxes and lots of other things,” Newman explains. When it comes to insurers, “revenue” equals all of the premiums that they receive. Those premiums are so high—and have been climbing so rapidly, in large part because the amount of money that insurers have been paying out in reimbursements to doctors, hospitals, nursing homes and patients has been rising by roughly 8% a year, each and every year, for the past ten years. Insurers have been doing their best to pass those costs on to you and me, but they haven’t been able to make huge profits. While the cost of care spirals, the number of customers who can afford to buy health insurance has been shrinking—which has meant tough times for insurers.

“Among the large, for-profit health insurers” Newman adds, “profit margins line up with the industry as a whole. UnitedHealthGroup, the biggest health insurer, had a 4.1 percent profit margin over the past 12 months. WellPoint, the next biggest, had a 4 percent profit margin. Aetna, Cigna, and Humana came in below that.”

But this isn’t to suggest that no one in our for-profit health care industry is making money. “Pharmaceutical companies have a profit margin of 16.4 percent,” Newman reports, “seventh highest of the 215 industries that Morningstar tracks.”

This is why I’m skeptical when drug-makers say that they couldn’t possibly afford to lower prices on drugs—or that if they did, they wouldn’t be able to do research. The fact is that if drug-makers, and their shareholders, could be satisfied with margins of, say 8% or 9% they could, in fact, slice prices. And since roughly 16 percent of the $2.6 trillion that we spend on healthcare goes to the pharmaceutical industry, we are talking about significant savings. (Commentators frequently say that drugs account for “just” 10% to 11% of the nation’s total health care bill. But that’s because they are only looking at the dollars you and I spend, retail, buying prescription drugs in a pharmacy. When you add in the cost of drugs administered in a hospital, a nursing home, or in a doctor’s office --plus the cost of the many medical devices that drug-makers now sell—you find that their share of the $2.6 trillion pie rises to 16%. And if anything, those devices—ranging from stents to artificial knees—are even more over-priced than the drugs.)

Prescription-drug makers are not the only companies turning a nice profit on our health care, other industries with profit margins well above the 2.2 percent median  for all U.S. industries include:  healthcare information (9.4 percent), home healthcare firms (8.5 percent), medical labs (8.2 percent), and generic drug-makers (6.5 percent).

To give a clearer picture of which healthcare firms are earning the most, Newman has compiled some data from Capital IQ, a division of Standard & Poor’s,  showing net profit margins over the past 12 months for a number of well-known companies. “The following list includes the three largest firms in each of five different sectors: biotechnology, drug manufacturers, healthcare plans, healthcare services, and medical equipment. Some of these numbers are sure to be off-putting to Americans who are making sacrifices to pay for healthcare or can't afford it at all. Yet industries like pharma and biotech remain strong job creators that have held up well during the recession, and they represent parts of the global economy where America still enjoys a leading position.”

•    Amgen (biotechnology): Profit margin, 30.6 percent
•    Gilead Sciences (biotechnology): 37.6 percent
•    Celgene Corp. (biotechnology): 11.9 percent
•    Johnson & Johnson (drug manufacturer): 20.8 percent
•    Pfizer (drug manufacturer): 16.3 percent
•    GlaxoSmithKline (drug manufacturer): 17.4 percent
•    Unitedhealth Group (healthcare plans): 4.1 percent
•    WellPoint (healthcare plans): 4 percent
•    Aetna (healthcare plans): 3.9 percent
•    MedcoHealth Solutions (healthcare services): 2.1 percent
•    Express Scripts (healthcare services): 3.7 percent
•    Quest Diagnostics (healthcare services): 8.7 percent
•    Medtronic (medical equipment): 14.9 percent
•    Baxter International (medical equipment): 17.5 percent
•    Covidien (medical equipment): 12.3 percent

Sources: Morningstar; Capital IQ . Similar data on the most recently quarterly profit margins for a number of industries and firms are available on the Web at the Yahoo Finance Industry Center

“The big money,” Newman concludes “isn't in the insurance industry.”

Let me add: this doesn’t mean that the health insurance industry doesn’t need reform and regulation. It does. But the problem is not that it has been pocketing a large share of our premiums in the form of profits. No doubt, insurers spend more than they need to on lobbying and executive salaries, marketing and  advertising; the industry could be more efficient. But that is not where the big bucks are wasted.

Billions are squandered because, in recent years, insurers have tended to pay whatever hospitals, the best-paid specialists, drug-makers, device-makers and others choose to charge for their services and products, without asking: “is the patient benefiting?”  We know that one-third of our healthcare dollars are wasted on unnecessary tests, ineffective often unproven procedures and cutting edge drugs and devices that, too often, are no better than older safer products.

In the 1990s, for-profit insurers tried to “manage care,” but rather than comparing the effectiveness of various treatments, they tended to compare prices, and say “no” to the most costly procedures even when, in some cases these were the treatments patients needed. By contrast, both the VA (the government insurance plan for veterans), and non-profit insurers like Kaiser have made good use of internal outcomes data to sort through which treatments work best for which patients when making up their formularies (lists of the products and services that they cover. Note: these lists are not carved in stone; at the VA and Kaiser doctors can go outside the formulary if they believe a particular patient needs a different treatment.)

Because the VA, Kaiser and Mayo worry about which treatments are most effective for patients –as well as patient safety—all three stopped prescribing the pain-killer Vioxx for most patients more than a year before the government forced the drug-maker to take Vioxx offer the market.  These three insurers saw that Vioxx was no more effective than older, cheaper drugs for the vast majority of patients—and they were concerned about evidence that Vioxx was causing heart attacks and strokes.

For-profit insurers, on the other hand, continued to cover Vioxx because they were worried that, if they didn’t, customers would switch to a different insurance plan, and they would lose market share. The drive to maximize profits for their shareholders drove their decision.

Under health care reform, insurers will be expected to pay more attention to the quality of care that their patients are receiving. But this could be difficult to regulate.  This is why we need a public sector insurance option to set high standards.

The healthcare reform bill in the House creates a public-sector plan and calls for Medicare reform. It proposes that Medicare change the way it sets fees, paying more for higher quality care, while discouraging unnecessary, unproven and potentially hazardous treatments.  The public sector plan for patients under 65 would incorporate Medicare’s reforms. And since for-profit insurers would have to compete with that public-sector plan, they too would have to focus on providing enrollees with higher quality, safer care at a lower price.
   

Comments

[Massachusetts Nursing Degree]

Hi Lisa,

Thanks for this good idea. I am a volunteer for Partimus.org. We bring FOSS to schools. We build and maintain Linux computers in schools. We are currently serving two schools. We have been doing this work for 5 years.

I would love to hear if Lisa's idea of selling FOSS CDs rather than candy would work. I hope it will, but I don't think it will work. We have worked really hard to get FOSS into schools. There is a lot of talking that has to happen. "Normal" people don't like computers. They just want to turn on the computers and have the computers just work. "Normal" people run away from uncertainty when it comes to computers.

However, there are usually a small group of people in schools who are technologically oriented. Maybe those people would be willing to install CDs from strangers.

But for most people, trust is a huge issue. They need to know someone for a while before they will accept software from them.

If anyone has success with Lisa's issue, and would like to email me, I would love to hear it.

Christian Einfeldt

einfeldt at gmail com

[schedule software]

[...] Word press plugging to display all your recent stumbles in the sidebar as a widget. [...]

[Maggie Mahar]

Barry--

Healthcare in Mass. is so expensive, not because they have non-profit insurers, but because, according to more than two decades of Dartmouth reserach, there is more over-treatment in Mass.
than in any other spot on the globe.

I think you know this. I have written about this fact, at length, in the past. You have been reading this blog for a long time. and I have pointed out the facts and cited the evidence many times.

I'm delighted to repest info and evidence for new readers, but just don't have the time to repeat the same evidence, over and over, for someone who has been reading for a couple of years.

In writing to me, you have reocmmended conservative think tank conferences on health care. (Cato, Heritage, aetc.)

I understand that this is where you are coming from--and that's fine.

But this ideological fix on healthcare makes it very difficult for you to take in the evidence about better outocmes at Group Health (see Dartmouth reserach) and much greater patient satisfaction.

Finally, while I like to
try to respond to all readers, I really just can't respond over and over to a reader who makes the same point over and over.

I am sorry; it's just a matter of time.

[Barry Carol]

Maggie,

I’m not trying to “knock” Kaiser or defend for profit insurers. I think all participants in any business or market have a strong incentive to please customers if they want to grow or at least sustain their business model. With regard to Harvard Pilgrim, while I have a very high regard for them, I note that over 95% of the Massachusetts market is controlled by non-profit insurers yet healthcare costs there are higher than just about anyplace else.

When it comes to healthcare, I’m more skeptical of patient satisfaction surveys than I am of customer satisfaction scores for, say car or appliance manufacturers because there are several factors that can drive claimed patient satisfaction that have little to do with the quality of care provided. These criteria include the following: (1) the doctor has a very pleasant personality and good bedside manner. We get along very well. (2) I was able to get an appointment quickly and, when I arrived for my appointment, I didn’t have to wait very long in the waiting room. The waiting room was also bright, clean and had plenty of reading matter. (3) The doctor ordered lots of tests which must mean he or she is extremely thorough. More care is better care, isn’t it? (4) When I was in the hospital, the nurses were very pleasant and attentive and the food was good too. You get the picture.

If a given plan could demonstrate, for example, that its members lived longer or had lower infant mortality than members of other plans after adjusting for age, gender, socioeconomic status, regional differences in practice patterns, etc., I think it could advertise that fact effectively. Or, if the plan’s providers did such a good job of keeping their members healthy that there were meaningfully fewer inpatient bed days per thousand members, that could be effectively advertised as well, at least to employers if not to individuals. Non-profit does not mean no profit. Presumably, growth and increased market share, if they could manage them effectively, should be good things.

[Maggie Mahar]

Barry--

You write as if health care is a business and the goal of that business is to "expand market share"

The goal of health care is to improve the health of patients.

This month, Consumer Reports released a survey of customer satisfaction with HMOs and PPOs. Here are the results:

"Among HMOs, Group Health Cooperative and Health Alliance Plan topped the list and were also in the top 10 in Consumer Reports' 2007 survey. Members of these plans reported fewer problems getting the care they needed, and HAP members were more satisfied with their choice of doctors and the care they received."

PLEASE NOTE --the #2 plan, Health Alliance, is also Non-Profit.

Rounding out the top rated for HMOs were several Kaiser Permanente plans around the country; Preferred Care; Harvard Pilgrim Health Care; and Independent Health.

(PLEASE NOTE -- These top-rated HMOS are all Non-profits.)

At the bottom of the HMO list, Oxford Health Plan and Aetna Health HMO members gave the plans lower ratings for choice of providers. (PLEASE NOTE -- BOTH FOR-PROFITS) Oxford members also reported more problems getting the care they needed, while Aetna plan members reported more problems getting access to doctors."
See www.ConsumerReportsHealth.org.

Group Health is also on Dartmouth's honor roll based on quality of care and efficiency(excellent outcomes while avoiding over-treatment).

If you look at primary care, chronic disease management and outcomes, Group Health provides significantly higher quality care than the vast majority of health care center across the nation-- and it does it at a slightly lower cost than its regional competitors.

That's how one measures the success of a health care organization-- outcomes divided by costs = value.

(I would also note that in 2008, premiums for Group Health's standard option under the Federal Employee Health Plan fell by 18%.)

If it were a for-profit organization, shareholders would be intersted in "growth" of market share and more profits.

Group Health is a non-profit and so it takes its surpluses and, rather than distirbuting them to sharehodlers, plows them back into the system. That's why it has such excellent electronic medical records.

In the U.S. for-profit corporations have been hooked on the idea of "growth" since the 1980s--this has led to many problems ranging from over-extending themselves (lending--sub-prime mortgages) to cooking the books (exaggerating growth to meet Wall Street's expections--Enron).

For Group Health Cooperative, quality, not size, is the goal.

When it comes to cotrolling costs, Group Health's Patient-Centered Medical Home pilot has been extremely successful. When compared to controls,
In one year, Group Health

" Broke even on its primary care staffing investment through reduced downstream utilization costs. Emergency room/urgent care visits were 29 percent less and inpatient hospital stays for patients with conditions including diabetes, chronic obstructive pulmonary disease, congestive heart failure, and asthma were 11 percent less.

" Improved indicators of quality of care. Overall improvements were 1.6 times greater across 22 measures than in controls. In seven out of 22 measures, the proportion of people meeting their target went up by more than 5 percent over one year. One example is cholesterol management (LDL less than 100mg/dl) for people with heart disease.

" Enhanced patients’ experience, including better bonding between patients and their physicians and care teams as well as better care coordination.

" Improved care teams’ work satisfaction and reduced their emotional burnout."

Earlier this year, a A Commonwealth Fund case study spotlighted Group Health Cooperative reporting that it "is structured with incentives aligned to launch innovations and organize services in ways that make the most sense operationally and clinically."

Btw, the professor on the Lehrer report who criticized Group Health
distorted the facts.

He pointed out that health insurance in the state of Washington is more expensive than in Texas--
and neglected to mention that this is because in Texas so many sick and poor people are not in the insurance pool.

This is one way to keep premiums low.

See this table of uninsured by state and compare Texas to Washington.
http://www.statehealthfacts.org/comparebar.jsp?ind=125&cat=3

Barry, you have repeated tried to knock Kaiser and other non-profits in comments on this blog.

You provide no evidence, except to say "If it were that good, it would be bigger."

I hope all of this evidence about customer satisfaction and quality will convince you that when it comes to providing good healthcare, Kaiser,
Group Health Co-operative, etc. are at the top of the list.

[Barry Carol]

“Many non-profit private sector insurers do add value--they've created accountable care organizations that lift the quality of care while reigning in costs. I'm thinking of Kaiser Permanente in Northern Cal., Geisinger in PA, Community Co-operative in the state of Washington.”

Last Friday evening, “The News Hour With Jim Lehrer” did a segment on Group Health of Puget Sound reported by Betty Ann Bowser. The segment highlighted the fact that the doctors are on salary, the system uses electronic records which patients can access from home, and patient satisfaction is generally good. Group Health has been in business since 1947; it has 600,000 members and is the 3rd largest health plan in Washington State. Its premiums are essentially in line with its competitors or, at best, only marginally lower. In the most recent year, it raised premiums by 13%. In other words, it does not seem to be controlling costs any better than any of its private sector competitors, whether for profit or non-profit and it has not been increasing its market share.

One critic, a Washington area professor, made the point that if Group Health and those with similar business models (the health plan is both the insurer and the care provider) like Kaiser and Gesinger were really doing a much better job than their competitors, they would all be increasing their market shares and the basic model would spread like wildfire across the country. It hasn’t. Kaiser has roundly 8 million members, Group Health, as I noted, has 600,000 and Geisinger has something over 300,000. That’s 8.9 million members for the three of them combined or about 5% of the private health insurance market. None have increased overall market share or expanded into completely new geographies in recent years. If these three organizations are doing such a great job adding value while their competitors aren’t, why haven’t they been rewarded by individuals and employers with significant market share growth?

[Maggie Mahar]

Ed, Loren

Ed-- Evidence for your statement? We have reams of reserach showing better outcomes and higher quality care from non-profits.

loren-

"No matter what facts . .??""

If we're going to have rational discussions, we need facts and evidence.

Otherwise we're just spouting uninformed opinions--this is how misinformation begins to circulate.

[Loren Million]

No matter the facts you present I still feel most of the blame falls at the feet of the insurance companies and their drive for profit. All one has to do is look at what the hospitals were like before The 1980's de-regulation and how other countries make do with nationalized health. The sooner we do away with all of the insurance companies and nationalize the hospitals the better. Loren million

[Ed]

I dont know ... some of the non-profits are worse offenders than the for-profits. The non-profits can hide much better.

[Maggie Mahar]

Gregg Masters, Dave Koch, Fred, iyamwutiam, Kristi, Gregory,Carl, Benedict,

Gregg Masters--
You ask the crucial question: just how much value are for-profit insurers adding to our health care system? The answer, I'm afraid is "not much."
Many non-profit private sector insurers do add value--they've created accountable care organizations that lift the quality of care while reigning in costs. I'm thinking of Kaiser Permanente in Northern Cal., Geisinger in PA, Community Co-operative in the state of Washington.
But for-profit insurers haven't done these things. So, while their profits are not high--the fact that they are not adding value is the real problem.

Dave--The truth is that almost all large U.S. corporations pay executives exorbitant salaries.
This includes the 86 industries that are more profitable than health insurance companies.
Also, if you look at their total spending, exec salaries are a drop in the bucket compared to lobbying, marketing, advertising . . .

Fred--
You write that we need to restructure healthcare to pay for the most effective treatments-- and
so that if " providers are encouraged to distinguish what works from what doesn't, and have little incentive to offer the latter. In that case, the insurers wouldn't need to cover it, and the drugs for it wouldn't sell."

Yes . . . . but unless for-profit insuers have to compete with a strong public plan, they are likely to continue to make deals with drug-makers to cover over-priced, under-tested drugs--in exchange for discounts on other drugs.
And drug-makers are going to continue to pay doctors to "educate" other doctors about their newest, most
expensive drugs.

If we had a strong public plan it, like the VA, it would ignore the bribes (by law VA docs can't take money from anyone--perhaps this could be extended to docs in public plan networks) and the VA doesn't make deals with drug companies. It just negotiates for discounts.

iyamwutiam --
With your example of the lack of interest in TB programs, you illustrate the lack of interest in public health in this country.
This is a major reason why our overall population is less healthy than populations in other countires.
We put all of our emphasis on acute care for the relatively affluent--and don't put enough emphasis on public health programs that would help our sickest citizens--the poor.

Kristi- I agree that the patient should have the choice of a public plan. That's the right way to introduce a public plan--by letting the public vote with their feet.

Gregory- you are right,state medical boards should do a much better job of weeding out that small group of doctors who really are guilt of malpractice--usually repeatedly.

Moreover, we have to be very careful that tort reform doesn't become somethign that makes it very hard for the average person to sue--even if he truly is the victim of malpractice.
If the entity he is suing is a powerful hospital, and the case is complicated, it's likely the plaintiff will have a very hard time finding an attorney willing to spend the many hours it woud take to reserach it and take it to trial-not when there is a cap on the award (and so a cap on how much the lawyer can earn, which is usually a percentage of the award.)

Carl-- I completely agree with most of what you say--except for this part: "To me the first threshold of healthcare reform is that the roughly 48 million uninsured and 24 million underinsured obtain coverage that is roughly equivalent to Medicare and that they get it fairly quickly . . ."

We can't afford to insure the uninsured and udnerinsured unless we simultaneously begin to elminate the waste in the system.

We have more than two decades of reserach from Dartmouth showing that right now, 1/3 of our heatlhcare dollars are squandered on unncessary tests, ineffective, often unproven treatments, unnecessary hospitalizations and over-priced not fully-tested drugs and devices that are no better than the older, less expensive products that they are trying to replace."

This is a waste of money, and it's also hazardous waste that exposes patients to risk without benefit.

If we try to cover everyone without reining in the over-spending, taxpayers won't be able to afford the subsidies that patients will need to cover very high premiums.

Some people think that if we cover the uninsured that, in and of itself, will save money because they will get preventive care and so won't wind up in the hostpial.

But the truth is that uninsured people die earlier than the rest of us. As a restul we actually save money--they don't live long enough to
fall victim to diseases like Alzheimers, or the many cancers that are more common among older people.

If everyone in the U.S.had been insured over the past 10 years, our total health care bills--and our premiums--would be much higher than they are now.

That's why the current heatlh reform legislation doesn't try to roll out health care reform, with subsidies and a mandate that everyone have insurance until 2013.

That gives us some time to
begin reforming Medicare--changing the way we pay for care--to reward quality, not volume of treatments--and to change the way health care is devliered (in a more co-ordinated, efficient way.)

Just dumping the unisnured and underinsured into your current broken system would lead to disaster.

Benedict--
You over-estimate the importance of private insurers in our health care system.

They pay only a little over a third of our $2.6 trillion in health care bills. (The government (taxpayers) pay more than half. Patients pay 14% out of pocket.)

Becuase they are not the dominant payer, insurers' profits and administrative costs account for only about 6% of the $2.6 trillion that we are spending on health care this care.

IF they paid 100% of the bills, thier adinistrative costs nad profits woudl accoutn for 20% of the $2.6 trilion--but they don't.

Finally, the actual cost of care--the amount that insurers pay out in reimbursements to doctors, hosptials, and patients--has been spiralling by 8% a year--every year-- for the last 20 years.

That's the major reason why their profits are so low.

And, with the cost of care rising by 8% a year, even if we did away with the private insurance industry, what we saved by eliminating their profits and administrative expenses woudl be wiped out by less than one year of health care inflation.

[tschleder]

Insurance co. profits are one thing, but salaries and bonuses are another.

The hundreds of millions in health insurance CEO pay is criminal money - most of it it goes directly to patient care under government-backed systems like Medicare.

[Gregg Masters]

Maggie:

The piece struck a nerve!

Rather than ordinal ranking of net profit margins, my question for the health plan community is not whether they are disproportionately profitable (clearly, they are not), but do they add or subtract value?

Minimally it's an open question. We may see what could amount to a national referendum on that question when Kuccinich hosts the hearings I'm calling 'Tobacco 2.0', when he swears in health plan execs later this month.

From my POV, the burden of proof is on the health plans to demonstrate that they do in fact provide value in the health care food chain.

[iyamwutiam]

This (^) health-care provider needs to expand his vision. This is the problem with specialization -they forget the basic tenets/foundations of education.

"1) Why raise premiums across the board? Why are the healthy carrying the burden of the sick? Why are we not rewarding the healthy with lower premiums and the punishing the sick with higher premiums so that they would change their unhealthy behaviors? Of course the exception to this would be for genetic diseases and cancers, which have nothing to do with risky behaviors."

Duh- well-because the POINT of insurance is to distribute risk! What can I say -yet another uneducated provider 'sure' that he 'knows'!

"2) Don't lump all the uninsured into one category. Some are qualify for state aid that may not know it. There are small business owners or independent contractors who choose not pay for medical care. And of course, we lump ~12 million illegal immigrants into the pot, too. So the number may not be as large as it is made out to be."

Again-health-care provider 'forgets' that 90% of physicians DO NOT offer their employees health insurance. So I can SEE WHY this health-care provider is UPSET- with the call for universal health care-and OF COURSE- brings up a paltry (but hugely magnified (and so meaningless number of 12M illegals-it's called the red herring folks). Why paltry (12/320) will let you know -we haven't even crossed 5 percent!! Why are we ALWAYS focusing on the margin and not the meat- that's like buying a fillet Mignon for the edge of the meat (or bones) and not the fillet itself.

3."4) This is a happy "sue me" nation. Doctors are afraid of being sued for malpractice, so they would order unnecessary tests to cover themselves. We should have have reasonable cap on the award judgements."

Well-first of all- maybe no one would sue doctors if it didn't cost the average person 900 bux for an Axillary Nerve block (a weeks salary- for many) or some other outrageous price ! In short-Doctors are way over-paid for being in a 'noble' profession.

Pretty soon -we will have priest's/police/teachers/doctors/politicians -ALL-thinking they are 'entitled' to mercedes/5000 sq. foot houses etc- because they 'serve' the public.

This is assinine but wrse -it's like having a million whip worms in your ass. They suck everything out of you, irritate the shit out of you, and continually multiply till they kill the host. After all the cost of them are like whip worms(I should know -I taught medicine and nursing)-unchecked paraitism -ALWAYS -always -eads to death of the host (which is WE).

I can continue to destroy point by point a lot of conjecture/mis-education and worse jusrt poor moral foundation. But- I do think -I have written enough for people to doubt both the author and the probably the paid poisoners of our health -so that these parasites continue to live beyond their means, practice beyond their competence, et paid beyond their sincerity and definitely get waaaaaaaay more credit than their devotion.

What a job -no wonder -all the cowards flovk to medicine.

It is the 'safest' profession to get into where you can be facile intellect (poseur) and on that premise ask for salaries of over 200K !! Cause you went to school and then became basically a whining mechanic/stooge of drug/hospital/insurance companies etc.

Please- ALL the health-care providers -stop your whining. Trust me -most American's know you are waaaaaaaay too overpaid and under sincere to deserve any of that wealth.

Which is why - I strongly feel -we need to cut down the numbers of doctors and nurses. I don't understand -why when a doctor says "It's a business"- we do not take our business elsewhere.

Anyway -to all the parasitic infestations on our children and family members (formerly known as physicians/nurses/etc)- get a life- and remember if your in medicine for the money -puhleae-pweety please- KILL YO self :)

Trust me -America as a nation and a people will thank you in a century or so.

[Benedict@Large]

In a word, nonsense. The medical loss ratio has gone from .90 to .80 in ten years. (Aetna went from .92 to .77 !!!) If that 10% didn't turn into profit, where the hell did it go?

The bottom line is we, the public, don't give a damn what insurance company shareholders take home. We care about how much of our premiums actually end up paying for our medical services. What overhead does the insurance industry place on our system? And frankly, that is too much. And that's why they have to go.

[Carl Halpern]

For me the first threshold of healthcare reform is that the roughly 48 million uninsured and 24 million underinsured obtain coverage that is roughly equivalent to Medicare and that they get it fairly quickly. In order for the plan to be as cost effective as possible, providers should be reimbursed at current Medicare rates and the government should be able to negotiate drug prices. Once that threshold is passed, the question of improving outcomes and cost through effective coordination of care should be addressed.

[Dave Koch]

The problem with calculating the profits of companies like United is that the penalties and huge salsaries they pay impact the profits. If you turn that back the profits are significant.

[Maggie Mahar]

Susan, jd, Rebecca, Gregory, Fred, A.J. John Murphy

Susan-- Yes, I have read the bills. Insurers will not be able to charge more for pre-existing conditions--or deny care becaue of pre-existing conditions.
And the insurance companies themselvs have agreed to this provision. I believe it will kick in next year.

The only way this would change is if they change the legislation and do away with the mandate that requires everyone to have insurance.

If there is no mandate, but insurers were not allowed to change more for pre-existing conditions, then a great many people would wait until they became sick to sign up for insurance, safe in the knowledge that insurers would have to accept them, and couldn't charge them more.

This is why the president can't give up the mandate.

j.d.- Interesting insight into how it took insurers a while to realize that medical insurance is different from fire insurance.
And you are right, they do want to insure sick people--as long as those costs are covered.
The key, as I noted in my response to Susan above, is that we have an individual mandate.

Rebecca--

In other countries, there are guidelines --created by medical researchers-- that most doctors follow most of the time.

In this country the way U.S. doctors practice medicine varies widely-- even when you compare top academic medical centers.

American doctors like to do their own thing--many resist guidelines.

This then can lead to malpractice suits where lawyeres argue over what "best practice" would be.

The "comparative effectiveness reserach" that is part of health care reform should lead to guidelines that will make things much clearer here.

If the doctor follows the guidelines, he's safe. We'll need some legislation, but this can all be addressed--once we being using comparative effectiveness research.

Gregory--
I agree, of course, that
we need comparative effectiveness reserach on cancer treatments.

And we have way too many teatments out there --many minimally effective--though they might help a small group of people if we knew more about them.

Fred-- Yes, the CBO report is useful on malpractice--thanks.

A.J.

Actually, I have read quite a few plans. While
writing my two books I was self-employed for 7 years, and bought my own insurance.

I bought expensive plans that covered virtually everything. Sometimes the co-pay for a drug was higher, but these were comprehensive plans that covered acupunture, 50 physical therapy sessions a year, 100% of hospital costs, doctors visits with a $15 co-pay, any test any doctor ever offered. no life-time cap, no annual cap.

Did they cover "experimental treatments"? I don't know. I would have no interst in "experimental treatments" unless I were part of a carefully controlled clnical trial in which someone might learn something useful.

Now I have insurance through the Century Foudnation which also seems to cover virtually everything.

Again, this is a very expensive plan. As j.D. explains in his comment--insurers will cover anything---including sick people-- if the premiums are high enough to cover their costs.

You write: "Why is there so much flack out there about people dying after being denied treatments?'

First, there was a lot of flack out there in the 1990s--when insurers were trying to manage care--and did deny many treatments.

That pretty much ended in 1999 when insurers threw in the towel on managed care, and began covering virtually everything that the FDA approves and that Medicare covers.

You can see the sea-change if you look at the chart on p.2 of this report.
http://www.tcf.org/Publications/Healthcare/Maggie%20Agenda.pdf

As you'll note, from 1999 onward, the amount that insurers paid out in reimbursements spiraled by about over 8% a year, year after year, . .

That's because they began approving almost all treatments.

From 1992 to 1999, when they were "saying no" far more often, their reimbursements were growing at a much slower rate.

Of course since 1999 they have been passing the cost of saying "yes" along in teh form of higher treatments--which is why your premiums sky-rocketed.

These days, you still hear flack about patients dying after "treatment denied" but this is largely because a great many people simply can't accept death. It must be a mistake. Someone-- the doctor the hospital, the insurer must have done something wrong.
Today, when treatment is denied it is usually because it would do no good.
And since most large employers self-insuer (taking financial responsibility for losses incurred) the employer makes the decision. The insurance company simply
handles the administrative work.

And yes,, I am well-aware that most "block-buster" drugs are me-too drugs. Though the most expensive drugs on the market --which now gobble up an enormous amount of the money we spend on drugs--are cancer drugs.

Drug-makers decide which drugs we take by bribing doctors (a story about this in the Times this week) to "educate" other doctors about new drugs.
They also decide which drugs we take by running DTC ads, and by controlling what we do adn don't knwo about varoius drugs.

Finally, they control what we know by resisting head-to-head comparisons of alternative treatments.

With the newly funded comparative effectivenes research, that will change.

John Murphy-- where are these numbers coming from?
First, if you look at the financials of any insurance company, you will find that, while they're obscene, CEO salaries are a drop in the bucket in the context of overall spending.

The big ticket items are marketing, advertising, underwriting (denying people with pre-existing conditions or deciding how much more to charge them if they are sick) and lobbying.

Secondly, insurers keep 15% to 20% of premiums to cover their overhead and profits.

Finally, because private insurers only pay about 1/3 of our health care bills (taxpyers pay more than 50%, 15% is paid by patients out of pocket)
the private insurers profits and admnistrative expenses account for only 6% of the $2.6 trillion that we, as a nation, spend on health care.

[Gregory D. Pawelski]

Rebecca

Why is tort reform even on the national agenda yet, at a time when insurance industry profits are booming, tort filings are declining, only 2 percent of injured people sue for compensation, punitive damages are rarely awarded, liability insurance costs for businesses are minuscule, medical malpractice insurance and claims are both less than 1 percent of all health care costs in America, and premium-gouging underwriting practices of the insurance industry have been widely exposed?

As I've stated on this forum before, why tort reform will not work is that the doctors are the insurance companies. According to the Physician Insurers Association of America, a trade group of about 50 doctor-owned malpractice insurers, they cover about 60% of U.S. doctors in private practice and hospitals.

Limits on the rights of people hurt by medical malpractice will victimize them and their families further while helping neither patients nor doctors. The real beneficiaries will be insurance companies, including the doctor-owned malpractice insurers.

The real malpractice crisis is the fraction of doctors who commit most of the negligence and medical errors. Just 5.3% of doctors are responsible for 56% of medical malpractice payouts nationally, according to the NPDB. Doctors who get sued this often are the bad doctors. Of those bad doctors, only 7.6% have ever been disciplined by state medical boards.

The only people who benefit by medical malpractice reform are the doctors and hospitals who commit the malpractice in the first place. Why should innocent victim's rights to seek compensation be limited? That just rewards the wrongdoers. To help eliminate medical malpractice, state Medical boards have to do a better job of weeding out the bad doctors who cause most of the harm.

[Rebecca Kane, RPA-C]

Fred-
Thanks for that well out information. I will process it for some days now. Food for thought. Thanks for the time and effort. I'm always happy to see all of the sides of all of the issues.

Gregory-

I think you are looking at a "glass half empty "scenario of tort reform but we already have a "g;lass half empty scenario" with tort out of control.

If the rest of the world doesn't depend on spending half of their population spening half of their lives in the court system trying to win the lottery for some spurious case or another why does our culture encourage this?

I am not commenting on the legitimate cases out there. But imagine how wonderful it would be for them if the system wasn't clogged with the other cases.

OK. I am opening a Pandora's box here that you all are welcome to ignore if you so chose. It is off subject and won't help the health care initiative for now.

[Gregory D. Pawelski]

Tort reform isn't about fixing a broken justice system; it's about protecting the public image and bottom lines of the biggest and most powerful companies in the world. Tort reform isn't about protecting doctors from high insurance premiums; it's about protecting their insurers from having to pay large judgments. Tort reform isn't about keeping greedy lawyers from filing frivolous lawsuits; it's about keeping those who are severely injured out of the court system and away from the public eye.

[John Murphy]

Profit is not the only cost of health insurance. Once you add CEO salaries ($102,000 an hour) and other salaries, as well as massive paperwork, used to ration care for profit, you wind up with 35% of premiums currently going to insurance overhead, soon to become 41% of premiums going to insurance overhead.

[Kristi Davis]

Very interesting article concerning malpractice premiums. The tort reform that needs to be examined is the increased numbers of lawsuits without merit that drive up the costs of premiums

[Fred Moolten]

Rebecca - Here is a link to a CBO analysis of the costs associated with malpractice - both premiums and "defensive medicine" -
http://www.cbo.gov/doc.cfm?index=4968&type=0

The following is a quotation from that analysis:

"A 2003 study that examined state data from 1993 to 2002 found that two restrictions--a cap on noneconomic damages and a ban on punitive damages--would together reduce premiums by more than one-third (all other things being equal).(11) And based on its own research on the effects of tort restrictions, the Congressional Budget Office (CBO) estimated that the provisions of the Help Efficient, Accessible, Low-cost, Timely Healthcare (HEALTH) Act of 2003 (H.R. 5) would lower premiums nationwide by an average of 25 percent to 30 percent from the levels likely to occur under current law. (The savings in each state would depend in part on the restrictions already in effect there.)

Savings of that magnitude would not have a significant impact on total health care costs, however. Malpractice costs amounted to an estimated $24 billion in 2002, but that figure represents less than 2 percent of overall health care spending.(12) Thus, even a reduction of 25 percent to 30 percent in malpractice costs would lower health care costs by only about 0.4 percent to 0.5 percent, and the likely effect on health insurance premiums would be comparably small.(13)

Effects on Defensive Medicine
Proponents of limiting malpractice liability have argued that much greater savings in health care costs would be possible through reductions in the practice of defensive medicine. However, some so-called defensive medicine may be motivated less by liability concerns than by the income it generates for physicians or by the positive (albeit small) benefits to patients. On the basis of existing studies and its own research, CBO believes that savings from reducing defensive medicine would be very small."

[Rebecca Kane, RPA-C]

Fred-
Thanks so much for addressing the issue of malpractice liability. I have not seen that information before and can now practice defensively knowing I am not a part of the problem.

When you are in the trenches, though, and see people who can not afford to pay for their prescription that you know is absolutely necessary but expensive, it is hard not to think about all those dollars going to defensive tests that could be covering that prescription.

And it's also hard to justify when your hospital is operating in the red. If you are saying that, in the big picture, when universal coverage exists tort law won't matter, I hope you are right. (It certainly mattered to McDonalds and that fateful cup of hot coffee- even though the judge awarded the plaintiff essentially nothing .)

In actuality we are having difficulty with on call coverage of essential specialist services in the ER. Other specialties, especially OB-GYN's, are leaving NY State because of the high malpractice rates.

These are costs that may not be have been taken into account when calculating the true cost benefit of tort reform. Do you know if they were considered?

Thanks so much for your comments.

[Kristi Davis]

Managed care and insurance plans dictate the choices that the consumer makes; options are limited concerning place and provider. Would the consumer not be the ultimate voice in choosing the best plan if a public option was made available? The profits made ultimately reflect what is in the patient's wallet. Consumers should be able to choose how they want to spend their health care dollars; unfortunately the choice does not belong to them.

[Fred Moolten]

Just a few comments from the sidelines on the discussion between Maggie and A.J. Lester.

First, I think it's true that insurers aim to constrain costs at times by refusing to cover the rare and expensive "experimental procedure", and by tailoring their drug coverages to encourage less expensive choices among comparable alternatives. What they fail to do, however, is reward medical practices based on value rather than quantity. There is no need, for example, to prescribe antibiotics (even inexpensive ones) for ordinary viral infections. There is no need, in the case of a patient who has suffered a fainting spell, to uniformly include complicated tests including CT scans or Holter monitoring, when a physical exam, an EKG, and the measurement of supine and standing blood pressure might suffice. Deciding what is necessary, and what is unnecessary or even potentially harmful among estabished medical procedures is a task for comparative effectiveness research, but insurers don't push providers to go in that direction, because an insurer who refuses to cover "established" procedures loses out to a competitor who covers them.

A similar principle applies to drug costs. Insurers do try to limit what they pay, but not enough, and for the same reasons. If the choice is between drug A and the more expensive drug B, the insurer may limit coverage to the less expensive one. But if the best choice is no drug at all, the insurer can't take the risk of enforcing that choice for a condition in which either A or B is routinely administered. The result is a pharmaceutical industry that, despite a few limitations, makes enormous profits, and incurs hugh marketing, sales, and advertising expenses, often for developing "me too" drugs that add little to patient welfare. Somebody has to pay for those profits and expenses, and it is mainly the public, via insurers.

In my view, healthcare reform could benefit from a reform of insurance practices per se, and a reform of the drug development and marketing practices of the pharmaceutical industry, but even more, it requires a restructuring of healthcare itself, so that providers are encouraged to distinguish what works from what doesn't, and have little incentive to offer the latter. In that case, the insurers wouldn't need to cover it, and the drugs for it wouldn't sell.

Fred Moolten

[iyamwutiam]

I have been in the medical field for at least 10 years in the US and and another 10 years abroad.
I can safely say that amongst other entities -it is yet another example of government supported inefficiency. Can someone honestly say that with out the subsidization of research by NOH/Universities/hospitals and FMG training the US healthcare system could purport itself to be anything more than a disastrous exhorbitant failure -when measured by public health outcomes to $/GDP per capita be any worse!!

Take an example of TB. I have run this program in the US at the county and state level. I urge the author to do a study in the simplest, oldest and documented most curable disease in the PH sector today.

Study the state/local/federal (CDC/Block grants/grants) etc. You shall see that the goal of the system is not erudite, logical and sincere application of known treatment and investigative modalities-established since the 1980s. But rather an insidious and ubiquitous 'urge' to slow down, impede, impair the destruction/cure/abolishment of this disease in the US -because then -the many trained seals ad the too many parasitic infestations to the healthcare systems (predominantly a secure job in return for feigned competence-but in reality a silent conspiracy to continue the trickle of cases to justify over-paid/under-worked and most importantly non-committed workers hat survive by yet another disguised form of welfare for certain demographic and institutional interests). Hence the cure rates rarely ever exceed 90% in a year -although 80 percent of cases can be cured in 6 months!!

I have chieved close to 100 percent cure rates in certain jurisdictions. But it takes the gall to take on 'invested' interests -hospitals, overpaid louts (Doctors/nurses/CDC personnel. etc), and of course the ever whining majority based employee who feels that this is a waste of expenditure on 'other' people.

I strongly urge te author to investigate the TB branch of the CDC/PHS in the US to see the tremendous incompetency, hemorrhaging of public funds that must incur for many incompetents and worse knowingly incompetent employees subsidized by the US government in this nefarious web of ensuring that 'health care' can only be achieved by exorbitant prices/costs/etc needed -so that a few thousand people can make egregious profits on the ill/dis-eased/troubled/infected but easily cured/ diabetic but can be (yes cured) by insight. caring/ a proper history and the three golden Es of primary care 1.engage your patient
2.Enroll your patient in the modality needed by being sincere
3.Enlist your patient to help themselves and others by application of sincere and genuie actions.

This does not occur. What occurs is the empty chorus of -the "patients' have to "take" responsibility for themselves.

How does an individual patient take 'responsibility' for the corporate/government nexus of causation for Lead poisoning/asbestos/Tobacco/drug-resistant bacteria!!

Stop the madness- I ask all concerned americans fed up with their (give me your taxes and get nothing in return" system to withdraw all savings/money on election day.

With out our savings as collateral to increase their debt ratio -they are stuck. And FORCED to actually work for a living like most of us. No longer must we tolerate institutionalized vampirism -which is now epitomized as corporatism.

I also agree that one must be careful in attempting to objectively analysing any industry. Due to corporate 'tricks' like bad debt (which is hardly ever audited), out and out medicare/medicaid fraud (not a single insurance company has NOT been found guilty -but it is beeyootiful- steal 6 Billion and pay a 'penalty' of 600M - damn -I would steal EVERY DAY. Do we really believe these proven liars about how much profit- they really make? I mean the ovious evidence to the contrary -expansion/ multi-million dollar bonuses, plasma screen TVs(?)/security guards dressed in suits (in short -the conversion of a place of sickness into the new paradigm of hotel management).

Anyway - I have seen too uch as an insider -to have any sympathy for many colleagues -who lie thru their teeth about how much money they deserve -when they have not done the due diligence of continual education and devotion to their field of expertise.

We know this to be true for Lawyers/Politicians (who don't read the bills they encumber on public tax resources) and of course -doctors.

In a world of sycophancy and parasitic growth via the public trough -the cure can only be the death of the parasites -lest like cancer -the irrepressible appetite for 'growth' ultimately destroys the host that has been kind enough or stoopid enough to tolerate this. But at some point -like cancer -when the host and the parasite are many times indistinguishable - one must- if necessary -excise the cancer to save the the body (society).

[A.J. Lester]

Maggie:
I understand Morningstar and have even subscribed to it over the years. You missed my point. Anyone who's going to use their data (or anyone's for that matter) to minimize the insurance industry's central role in the problem IS playing into the hands of the big insurers.

Secondly, when was the last time you read a Summary Plan Description (SPD) of any major employer's health plan? There's nothing in any plan I've ever seen that, as you put it, "cover virtually everything that the FDA approves--without worrying about benefit to the patient or cost." Quite the contrary. Most plans are designed and written by the managed care companies to carefully exclude a whole host of services and benefits that are not in the best interests of the insurance companies (from a loss ratio point of view).

Corporate benefit plans are written, interpreted, and administered by the insurance carriers to allow them a terrific amount of influence over what what treatments are allowed, approved, and/or paid for. If that doesn't influence or "steer" treatment patients receive, why so much flack out there about people dying after being denied (by virtue of no insurer-approved payment for) necessary treatments?

Your point about pharma companies deciding what treatments via the drugs they create and market is only partially true. You're forgetting the fact that most of the newest, trendiest, and most heavily promoted drugs out there are NOT brand new treatments for previously untreated diseases. 99% of the time, they're replacements for other drugs docs have been using for years to treat those same diseases. Docs I know still prescribe the "tried & true" drugs, though it's true they do get asked for the "latest and greatest" drugs by patients.

If you're convinced that the drug companies control the doctors and treatments,I'd again suggest that you take a moment to review the SPDs and prescription drug programs offered by employers. In them, you'll find plenty of economic disincentives for patients to push their doctors for the newest scripts or name brands. If anything, most contemporary drug benefit plans try to steer patients and doctors away from the most expensive drugs.

In closing, it's your blog, Maggie, and I'm just trying to help engage in the dialog. But I do object to your suggestion that I misunderstand how Wall Street works and that my criticisms undermine my credibility. Like you, I put plenty of thought into what I post whenever I post, but I try not to impugn the intelligence or qualifications of the people with whom I share my opinions.

[Fred Moolten]

Rebecca - The CBO has looked at the malpractice issue, and has concluded that the combined costs of malpractice insurance plus "defensive medicine" (unnecessary tests performed to avoid lawsuits) accounts for only a very small percentage of total healthcare spending. Confirming this conclusion, the experience of several states that have passed tort reform legislation indicates that the legislation has had little effect on healthcare costs.

There are issues with the tort system, but malpractice liability is not a very important driver of increased healthcare costs.

Fred Moolten

[Gregory D. Pawelski]

Maggie

I agree that we should put more effort and money into comforting cancer patients so they can enjoy more "quality" of life. However, we shouldn't be "throwing the baby out with the bath water." A good benchmark assessment of the efficacy of drugs that come out of clinical trials could be comparative effectiveness of cancer drugs with cell function analysis.

At present, clinical trials are highly empirical, they test drugs on general populations and then look for a clincial response and a treatment effect that is not likely to be a chance result. However, the side effect of this is inflexibility, some patients may unnecessarily be exposed to inferior experimental therapies.

A problem with the empirical approach is it yields information about how large populations are likely to respond to a treatment. Doctors don't treat populations, they treat individual patients. Because of this, doctors give treatments knowing full well that only a certain percentage of patients will receive a benefit from any given medicine. The empirical approach doesn't tell doctors how to personalize their care to individual patients.

The number of possible treatment options supported by completed randomized clinical trials becomes increasingly vague for guiding physicians. Even the National Cancer Institute's official cancer information website states that no data support the superiority of more than 20 different regimens in the case of metastatic breast cancer, a disease in which probably more clinical trials have been done than any other type of cancer.

More clinical trials have not produced more clear-cut guidance, but more confusion in this situation. It is more difficult to carry out clinical trials in early stage breast cancer, because larger numbers of patients are needed, as well as longer follow-up periods. But it is likely that more trials would lead to the identification of more equivalent chemotherapy choices for the average patient in early stage breast cancer and in virtually all forms of cancer as well.

So, it would appear that published reports of clinical trials provide precious little in the way of "gold standard" guidance. Almost any combination therapy is acceptable in the treatment of cancer these days. Physicians are confronted on nearly a daily basis by decisions that have not been addressed by randomized clinical trial evaluation.

The needed change in the "war on cancer" will not be on the "types" of drugs being developed, but on the "understanding" of the drugs we have. The system is overloaded with drugs and underloaded with the wisdom and expertise for using them.

Identifying patients with resistant neoplasms may not only spare them toxicity but may prolong their lives, by sparing them from the life shortening effects of ineffective chemotherapy.

Patients would certainly have a better chance of success had their cancer been chemo-sensitive rather than chemo-resistant, where it is more apparent that chemotherapy improves the survival of patients, and where identifying the most effective chemotherapy would be more likely to improve survival above that achieved with empiric chemotherapy.

With the absence of effective laboratory tests to guide physicians, many patients do not even get a second chance at treatment when their disease progresses. Spending six to eight weeks to diagnose treatment failure often consumes a substantial portion of a patient's remaining survival, not to mention toxicities and mutagenic effects. In cases where there are several equivalent treatments available, patients can benefit from these assay-testing results as a supplement to other clinical data when deciding on a treatment option.

[Rebecca Kane, RPA-C]

Just saw "Money Driven Medicine." Thanks for touching on some important components involved in the health care issue and bringing them to the public.

While the program touched on many of them, it failed to consider one of the most important drivers of health care decisions by providers- malpractice liability attitudes and practices in the US.

I have spoken to practitioners and patients from other countries. The decision making processes in those countries is very different. I'm wondering why the pressures exerted by legal liability were not addressed by the program - especially as it pertains to "unnecessary" tests.

I'm also wondering why the issues are not being addressed by policy makers.

Until they are we can not hope to decrease the cost of health care in the US.

[jd]

lulu, you write: "I have some difficulty believing that insurance companies are not the villains due to their current refusal to cover my adult child because of their "pre-existing condition" clause."

You need to understand how this market is structured. Insurers would be glad to cover pre-existing conditions if their premiums (on average) reflected that cost.

Please just think about this for a second. Let's say including pre-existing conditions adds 5% to the cost of medical care for the average member. If insurers are able to recover that extra 5% through premiums, there is no reason to exclude them. Whatever the extra cost, if it is covered by the premium then there is no net financial loss to the insurer.

So why don't insurers cover pre-existing conditions? Well, actually, they do for over 90% of their business. They do for Group insurance, Medicare, Medicaid, and in the individual commercial market as the insurer of last resort (Blues plans).
Almost anyone who works for a company that provides health insurance will know from their own experience that they were accepted into the company plan simply by virtue of being a full-time employee (This is true for large companies anywhere in the US and small companies in every state where there is community rating...not sure how it works for small group in non-community rating states).

By the way, I think accepting pre-existing conditions is done as a matter of statute. It isn't out of the kindness of their hearts, it is done due to regulations, and it works. Skeptics of the regulation of insurance should take note!

The area where health insurers don't cover pre-existing conditions is in the individual market. The reason starts with the fact that people are free to get this insurance or not. If insurance is too expensive (either truly unaffordable, or just so expensive that other priorities take precedence) then they don't buy it. People are also price-sensitive when buying health insurance. Imagine there are two options: Option 1 includes all pre-existing conditions and costs (for the sake of argument) 5% more than option 2, which does not. Who is more likely to buy option 1? People who know or suspect they have a pre-existing condition. That means the healthy will gravitate toward option 2 and the sick will gravitate toward option 1.

The claims experience for these two options will, very rapidly, be very different. The cost to the insurer will not be a 5% difference, but a 10% or 20% or (more realistically, because the sick would jump at option 1) 100% or higher difference in the first year or two.

So now option 1 will have to be repriced based on its past claims so that now it is far higher than option 2. Now no one who thinks they are healthy will buy option 1 and they will be taken out of its pool, increasing the premium cost even higher in the future. This is called an actuarial death spiral. As you can see, it doesn't take long before policies that include pre-existing conditions will be so expensive even many people who have a disease will be unable to pay for the insurance. And of course, those in insurance know this, so they don't offer a plan like this in the first place unless regulations are in place that require it, as they do for the Blues in their role as insurer of last resort and certain states have "high risk" pools meant to address these problems, though at least in New York where I am it has been unsuccessful at stopping the actuarial death spiral (it has slowed it down instead).

In short, when it is optional to purchase a policy excluding pre-existing conditions the market will dictate that all policies exclude them. Not because insurers have some weird desire not to cover sick people, but because in order to recoup their expenses in premiums, they will have to price those policies higher and higher, while the healthy people (and the poor) drop out.

One thing almost no one gets is that, as long as costs are covered, health insurers WANT sick people as members. Why do you think they have been so eager to enter the Medicare market? If I get a 3% margin either way, why wouldn't I rather have my average member incur $700 in medical claims a month rather than $200? And both of these cases, of course, are better for the insurer than the one in which someone is unable or unwilling to purchase insurance and so doesn't pay anything.

As someone who works in health insurance, I can tell you from experience that they do want these sick members. However, it took a long time for some insurers themselves to get this. In 1993, most insurance executives, and the ones who sponsored the Harry and Louise ads, did not come from a managed care background but from the old-fashioned indemnity insurance that has no way to manage costs and still thought in terms very much like other forms of insurance (Fire, Property/Casualty, etc.) where you want to insure the best risk and don't "insure a burning building." Their mindset wasn't about managing risk at the time, it was about avoiding it or simply pricing it in, and if the business was lost as a result of pricing in a high risk, that was just like "fate" or something, not a problem with the system.

That is part of why they opposed the 1993 Clinton health plan (also, that plan called for reorganizations so extensive that it amounted to removing the old companies and creating totally new ones...people in high places didn't want to deal with the upheaval and threat of job loss). But they almost without exception get it now, and so they proposed back in 2007 to do away with medical underwriting, pre-excluded conditions and rescission, among other things. This industry wants to stop doing those things, and they have finally accepted the only solution (other than single payer) which achieves it: massive regulation coupled with universal inclusion in the system.

[Susan Patterson]

Are you sure the proposed bills prevent insurers from charging higher premiums for pre-existing conditions?

[Maggie Mahar]

Lulu, Gregory, Gustave, A Health Care Provider

Lulu-- The good news is that as of next year, insurers will no longer be able to refuse insurance (or charge more) because of pre-existing conditions.
Insurers have already agreed to this.

These are public numbers on insurers' profits. Facts are facts.

Gregory--

Yes cancer is terribly complicated and we are a long way from knowing which treatments might work best for which patients.
What you suggest sounds sensible, but I think that at this point we should be putting as much effort and money into "comfort" for cancer patients --so that they can live a full life as long as possible--rather than "cure."
At the very least, patients should have a choice--do they want to strive for a longer life, or better quality of life in the time they have left?

Gustave--I am afraid you missed Dr. Weinstein's point.

He was not so much upset that his daughter died as that she had suffered so horribly. Sometimes, there are worse things than death. (Too many American doctors, perhaps particuarly oncologists, are taught that Death is the Enemy and so wind up torturing patients rather than giving them (or in this case the patient and parents choices as to whether or not they want to continue treatment, laying out the potential benefits and potential side effects.)
In Dr. Weinstein's case, the doctors pressured the parents, even going so far as to threaten to sue if they didn't go ahead with the protocol the doctors wanted to pursue.
This is a case where "shared decison-making" (which has a specific protocol all its own) would have been the best protocol.

A Health Care Provider--

The notion that we should "punish" the sick for being sick is barbaric.

We know that most illness is either a) geneteci b) caused by lack of access to health care or c)enivronment (living in a polluted area ) or d)assocaited with poverty, the anxiety and the depression that accompannies poverty.
Poor people die six years earlier than more affluent Americans --and this includes many that have access to care.

Very few people are "responsible" for being ill.

Those who are healthy are lucky.

Responding to the rest of our post:
Illegal immigrants are Not Counted in the number of uinsured Americans--don't know where you got that information.

Insurers would not save money if they never denied claims.

They spend far, far more on reimbursements than they spend on resubmissions.

.

[Gregory D. Pawelski]

In regards to the comment about Dr. Bernstein and his daughter. Ninety percent of all drug cures occur in only 10 percent of cancer types that are intrinsically drug-sensitive, like childhood leukemia. Although modest inroads continue to be made in the treatment and understanding of chemotherapy refractory cancers (cancer that progresses during treatment or recur within six months of treatment), a therapeutic approach to drug "resistance" and "sensitivity" as a predictor of clinical response to chemotherapy is urgently needed.

A New England Journal of Medicine article (351:533-542, 2004) related microarray gene expression patterns to clinical drug resistance. The investigators used a 96 hour suspension culture drug resistance assay with a cell death endpoint to define cut-offs for "sensitivity" and "resistance." They used this data to define gene expression patterns associated with sensitivity and resistance to each of four drugs commonly used in the treatment of childhood leukemia. They were able to show that these gene expression definitions of sensitivity and resistance were significantly and independently associated with treatment outcome.

Is comparative effectiveness research the answer? Cell function analysis allows identification of clinically relevant gene expression patterns which correlate with clinical drug resistance and sensitivity for different drugs in specific diseases. There is no single gene whose expression accurately predicts therapy outcome, emphasizing that cancer is a complex disease and needs to be attacked on many fronts.

I believe that improving cancer patient treatment through comparative effectiveness research of cell function analysis will offer predictive insight into the nature of an individual's particular cancer and enable oncologists to prescribe treatment (even induction chemotherapy) more in keeping with the heterogeneity of the disease, instead of "trial-and-error."

[lulu]

Definition of protocols - insurers will be expected to pay more attention to the quality of care that their patients are receiving.

Translation - increase in trained clerical staff in spite of electronic records.

The only thing that will really work to the benefit of the patient is single payer. The current system is corrupted beyond repair.

p.s. I have some difficulty believing that insurance companies are not the villains due to their current refusal to cover my adult child because of their "pre-existing condition" clause.

[gustave eisemann M.D.]

After 50 years in practice as an internist and hematologist, I agree with much of your last nite's program. However, I strongly object about the section about Dr. Bernstein and his daughter.
Any intelligent person knows that the initial step after induction therapy for acute leukemia in children is remission. One always hopes for cure, but relapses occur. Hematologists who treat children with leukemia are not indifferent to the death of a child. Often, they have a sleepless night thinking about the loss of a child and the sadness of the parents and relatives. I know from experience. Prior to the arrival of pediatric hematologists in our area, I attended these children. It is painful to sit down with families and advise that their lovely child has died.

[A Health care provider]

This is a great documentary, unfortunately, we as a nation are too lazy and ignorant to learn the facts as presented here. I don't see how we can implement comprehensive health care without future or delayed taxes. The facts are often not presented truthfully and we cherry pick information to suite our side of the argument. Lets look at this issue more broadly and until we have answers to them, then we may come to better agreement to the solutions.
1) Why raise premiums across the board? Why are the healthy carrying the burden of the sick? Why are we not rewarding the healthy with lower premiums and the punishing the sick with higher premiums so that they would change their unhealthy behaviors? Of course the exception to this would be for genetic diseases and cancers, which have nothing to do with risky behaviors.
2) Don't lump all the uninsured into one category. Some are qualify for state aid that may not know it. There are small business owners or independent contractors who choose not pay for medical care. And of course, we lump ~12 million illegal immigrants into the pot, too. So the number may not be as large as it is made out to be.
3)Insurers would be able to cut cost if they deny less claims. They spend more time with re-submission of claims than claims that they do pay out.
4) This is a happy "sue me" nation. Doctors are afraid of being sued for malpractice, so they would order unnecessary tests to cover themselves. We should have have reasonable cap on the award judgements.
5) We should have a bill of rights for the public. We can sue our doctors for negligence of care, but not the insurance company for denial of care. Of course, we should also have a cap on the award judgements,too.
6) The pharmaceutical company should not be rewarded with such long patents. Their arguements for the high cost of drugs is research and development, which is true. Have any one seen a brand name company go out of business because there is a generic version? Granted that they may make less money, but it's about health care not profit care, right?
7) The final point is this, can the cost of health care go down if the pharmaceutical companies and insurance companies were not public for profit companies? As a for profit company, they would have to answer to their investors, which happens to be you and I through our 401's and IRA's. In another word, when they profit, so do we. It is a double edge sword.

[Maggie Mahar]

Jeff, Fred, Mo So, Camilo, J.d.

Jeff,
I'm not at all sure that underwriting costs as much as marketing, advertising and lobbying.
In any case, the good news is that insurers have already agreed to stop underwriting. AS of next year (I believe) they will no longer be looking at pre-existing conditions or charging more if you have a pre-existing condition.

This is part of all of the bills and I'm pretty sure it kicks in next year.
This will save some money, though I suspect they'll need to spend that money to meet new regulations. . .

Fred--Yes, thanks for understanding.
And you are right, since a public sector plan won't be under pressure from shareholders who always want earnings growth NOW,
they can take a long-term view and make rational decisions that will lower costs and improve health over the long-term.

Because private insurers only pay about 1/3 of our health care bills (taxapyers pay more than half and 15% is paid out of pocket by patienits)
their administrative costs and profits apply to only about 1/3 of the $2.6 trillion that we, as a nation will spend on healthcare this year.

That's why private insurers profits and overhead (total administrative costs) equal only about 6% of the $2.6 trillion.

Mo So--

It's not just insurers. A share of the money that you pay for most things (a car, food, etc.)
is used by the producer to lobby Congressmen to do things that will benefit the producer--and most often won't be good for cutomer (fewer safety inspections of food, laws that make it harder for consumers to sue over faulty products, etc.)

Corporations own many Congressmen. We desperately need campaign reform--beginning with limiting the length of all campaigns to no more than one month.

Camilo--
Pharma is NOT a Risky business. It hasn't been a risky business for decades.

Most of the research is done by NIH. It is only after it's quite certain that they have a viable prodouct that Pharma gets invovled.

This is one reason their profits are so high-- they take very little risk. The other reason their profits are so high, of course, is that they charge whatever they wish. They know that sick people have not choice but to buy their product--particularly if they are desperately sick with cancer of MS. That's why the prices of drugs to treat these conditions are so high.

Jd--

Good to hear from you.

YOu are right, of course,
when private insurers tried to "manage care" in the 1990s, they were roundly blamed for "denying."

This was partially their own fault. They tended to refuse to cover treatments based on cost rather than on whether or not the treatments would benefit the patient.

Becuae they focused on cost rather than quality they refused to cover some needed treatments as well as some unncessary treatments.

Meanwhile the public and the media took the attitudde that All treatments should be covered, whether they were effective or not.

Now, Medicare will be becoming more selective about what it covers, how much it pays and what it charges in co-pays, trying to steer patients and doctors toward more effective treatments. Privately, for-profit insurers have said they will follow Medicare's lead--they never again want to be in the front lines of "denying care."

[Jeff]

Assuming:

Profit margins are as low as the Morningstar report indicates.

Health insurance companies use 20% or more in premiums they receive less profits in administrative expenses.

Health insurance companies don't try to curtail the 80% they pay to hospitals and doctors

Then that explains why they must spend an exorbitant percentage of the administrative fees on underwriting (i.e. weeding out the sick before they are insured)and rescission (weeding out the sick after they are insured). Or in other words rationing care.

[Frederick Moolten]

Private insurer profits contribute less than 2 percent of total healthcare costs, and insurer overhead accounts for about 11-12 percent (more than Medicare, but still a relatively small contribution). As Maggie indicates, their responsibility for excessive costs lies more in their policy of passing excessive costs within healthcare on to consumers rather than acting to restrain those costs. A virtue of a public option would be its breadth (nationwide) and time horizon (long term), which would give it the latitude to offer insurance based on restructured healthcare sources - something that is more difficult for a private corporation answerable to investors interested in short term revenues that might experience a temporary decline during a shift from current inefficient providers to restructured ones that are trying to get a foot in the door.

Fred Moolten

[Mo So]

Remember that lobbying money is an expense as well, which comes out of income before the "profit" figure.

It annoys the heck out of me that United Health Care, the company who issues my catastrophic plan, charges me $15,000 a year in premiums (on a $7,500 deductible) and uses a portion of that money to lobby against reform. It's an insult, basically.

[Camilo Erazo]

I think you cannot compare the profitability of different industries only on the grounds of "earnings". Insurers have low profitability, but at the same time they have low capital requirement costs: they can manage their business with offices and computers, and a sales force, for something that people usually are required by law to have: health insurance. They have a steady flow of income from premiums and copayments in a pretty automatic way.

Pharma and health services providers, on the other hand, need large investments for fixed assets in the form of labs, hi-tech machinery, and R&D activities that have uncertain results: this means that industries command larger profitability ON AVERAGE, because investors demand larger profits on a riskier business.

Insurance companies are not making "less" money than other companies; they are profiting from an activity, the financing of health services and products, that should be provided by a more just and efficient system: a single payer, single government run health fund.

[NZN]

You should extend your voice on Twitter and Facebook.

@NZN

[Jd]

Maggie, wonderful post. You said so many things that desperately need saying. I'm also looking forward to your show tonight, after having been too scattered to watch it earlier.

Small disagreement on insurer motives for covering too much of questionable medical value. While no insurer wants to lose members (on a population level) and thus revenues and market share, there is more going on. When insurers did tighter utilization controls and formulary controls, they were savaged in the press. It is those controls in the 90s that largely created the dismal public image insurers have today.

The consequences were profound: there were new regulations at the state and federal level limiting what insurers could exclude from benefits, how claim had to be paid, etc. Some laws were good, some bad. More important, the bad public image allows insurers to be scapegoated for the problems of our system, creating a need to continually defend against efforts to enact punitive legislation of one kind or another. The public-payer-or-broke obsession on the left today is a case in point.

So the reluctance goes beyond losing share to a rival.

My favorite irony in all this is that in the years when insurers were acquiring their indellible stain of greedy, cruel profit mongers, they were at their least profitable. Look at industry margins from 94 to 96. Pretty much "0."

[Maggie Mahar]

Keith, NG, John, J.Rossi, Dr. Rick

Keith--
No one person is making the profit on a billion-dollar business or a 100 billion dollar business.
Profits are shared by shareholders.
A 100 billion business normally has many, many, many more shareholders.
What's most important to those who profit (the shareholders) is how much there shares are likely to increase in value.
Whether it is a $100 billion biz or a 1 billion biz, if the proft margin (whare of revenues the company is able to keep as profits) is only 3% your shares are not likely to go up much. IN fact, these stocks have been tanking for quite a while. Some upturn this summer as they hope that the public option will be defeated.
As I say in the post, exec salaries are very high and they spend a lot on lobbying. But that isn't the big problem--or why they need to be regulated.

The big problem is that health care costs too much-- we are paying too much for everyething from drugs to some specialty procedures, and we are being over-treated: over-medicated, too many unnecessary tests and surgeries, etc.

And insurers have done little to push back.

Read the whole post and I think you'll understand.

NG

First, regarding saying NO

I agree, there is a huge difference between saying NO to ineffective treatment, and saying No to treatment that would benfit the patient.

We must say no to treatment that won't help that particular patinet., We cannot say no simply beause the patient is poor or old (as long as he would benefit. If we're talking about a 85-year old who wouldn't survive the bypass operation that's one thing. But if he's a very healthy 85-year-old who would, most likely, survive and go home and play with his grandchildren, he should get it.

On the C-Span show you saw: Bruce Vladeck is very intelligent--and I like him personally--but after years running CMS he became discouraged and cynical--burnt out. This is understandable. The final years of the Clinton administration were pretty discouraging for many.

But the fact that things didn't change during the Clinton years doesnt't meant that they can't or won't during the Obama years.

Clinton didn't have Peter Orszag or Zeke Emanuel in his administration--both brilliant and both undertand what is wrong with the system.

Both understand that Medicare has to be radically reformed or it goes broke very soon.

Obama also has the House behind him-- and the HELP
bill that went through the Dodd/Kennedy committee in the Senate.

Read the House bill for health care reform and you will find a long, excellent section on Medicare reform, calling for Medicare to stop over-paying for volume, and start paying for quality.

Vladeck essentially understood what needed to be done but had no one to help him.

Scully is a Bushie and so is going to say reform is impossible.

But Medicare reform will happen as Medicare itself simply changes the rules.

It won't happen through "rational discussion of the issues" in society because a) most people don't understand the issues and b)most people think that more care is better care.

Because most people are not doctors, they are not in a position to evaluate comparative effectiveness reserach. This is something we have to leave to experts (doctors who are not paid fee-for-service and have little financial interest in the outcomes, medical ethicists, etc.)

You can see the move toward reform in the House bill which empowers Medicare to begin adjusting fees to reward doctors for what benefits patients--and to penalize hospitals that have a high rate of avoidable readmissions. We will see more financial carrots and sticks steer providers toward care that will provide the greatst value for patients.

You can see the change coming in the White House's insistence that Medicare fees must be set by an independent panel of physicians and health experts. (Right now, they're set by a panel made up mainly of specialists, that meets behind closed doors and almost always recommends increases, even when services have become easier or it has become clear that they do little or no good for most patients.)

They are now lowering fees for many invasive heart treatments.

They will also raise co-pays and lower fees for ineffective treatments and drugs.

Fees for diagnostic tests will be cut. This will mean hospitals and docs will do fewer of these tests, reducing the demand for diagnostic equipment.

Some people will kick and scream but private insurers have said that if Medicare leads the way, they will follow.

Private insuers just don't want to be the ones who lead in lowering fees or refusing to cover something because they don't want to lose market share.

Btw, a recent article in JAMA shows that diagnostic tests are exposing patients to dangerous levels of radiation, leading to cancer.

Finally, it's not a question of getting ineffective treatments if you're willing to pay for them.

They won't be available, just as Vioxx isn't available--the risks outweigh the benefits.

If Medicare and insurers do not cover "marginally effective" cancer treatments that give you an extra 3 months of poor quality life for $400,000 they won't be on the market. Even if a very wealthy person could pay for them out of pocket, it wouldn't be worth it to the manufacturer to produce and package the treatment for a tiny group of patients.

As a society we need to begin thinking collectively about how we want to spend our health care dollars so that we are getting value for our money.
Paying vast sums for marginally effective treatments just doesn't make sense.

A.J.

Why on earth would Morningstar favor insuers over drug companies??

I'm afraid that makes absolutely no sense.

I know Morningstar very well. It's goal is to sort out mutual funds and stocks that are most likely to go up. They is why people pay substantial fees to subscribe to its service.

It has no reason to conceal how much insurers are making.

I am often very critical of corporate America.

But if you don't understand how Wall STreet works,and don't (why Morningstar exists etc.) then your cricisms miss the mark entirely and undermine your credibility.

Finally, today insuers don't "decide what treatment we get." They cover virtually everything that the FDA approves--without worrying about benefit to the patient or cost.

They are not deciding what treatments we get--they are simply holding the door open and covering anything that comes down the pike,

Drug-makers decide what treatments we get by deciding what products to develop and market. They focus on the ones that will be easiet and cheapest to develop and are likely to be most profitable--either because many people will take them (allergey medications) or because the people who buy them will be desperate and pay whatever the companies choose to charge (cancer drugs.)

Unforturnately, many Americans are very gullible and actually believe the drug ads they see on TV

Docotors will tell you they don't have time to argue with many of these patients--so they prescribe what they ask for.

John--

First, Kaiser and models like Kaiser have grown.
The notion that they can't work in different parts of the country is a
piece of misinformation that Barry has repeated on this post more than once.

Even when confronted with evidence to the contrary, he persists

The truth is that KaiserKaiser has expanded successfully in Northern and Southern California, Oregon, Colorado, Hawaii Georgia and the Washington D.C. areas.

This is hardly an organization that cannot "expand significantly beyond its footprint."

I'm afraid Barry has an ideiological commitment to for-profit corporations that makes him unable or unwilling to see that Kaiser and others like it are succeeding.

Geisinger has just (or is in the process of) buying one or more additional hospitals.

In fact, the only insurers who have made real progress in reducing costs while lifting quality are the non-profits and government programs like the VA.

J.Rossi--

Yes insuers now keep 15-20% of premiums.

The good news: The House bill says they most pay out 85% of premiums in reimbursments and can keep only 15%. If they don't pay out 85% they have to give rebates to customers who paid the premiums.

As I said in the post, they are not as efficient as they could be-- they spend too much on lobbying and exec salaries.

But the big problme--and where the big bucks are wasted--is that they haven't really tried to rein in health care costs. They have accepted skyrocketing costs and passed them along in the form of higher premiums.

We need a public sector plan that will follow Medicare in using comparative effectivenss reserach to adjust fees and co-pays in a rational way --steering patients and physicans toward the most rational treatments.

Dr. Rick--
I agree that we would all be better off if health-care were non-profit.
But at the very least, we need to regulate for-profit heatlh care companies the way we regulated old-fashioned gas & electric companies.
Like heat and light, heatlhcare is a necessity.

[Maggie Mahar]

Keith, NG, John, J.Rossi, Dr. Rick

Keith--
No one person is making the profit on a billion-dollar business or a 100 billion dollar business.
Profits are shared by shareholders.
A 100 billion business normally has many, many, many more shareholders.
What's most important to those who profit (the shareholders) is how much there shares are likely to increase in value.
Whether it is a $100 billion biz or a 1 billion biz, if the proft margin (whare of revenues the company is able to keep as profits) is only 3% your shares are not likely to go up much. IN fact, these stocks have been tanking for quite a while. Some upturn this summer as they hope that the public option will be defeated.
As I say in the post, exec salaries are very high and they spend a lot on lobbying. But that isn't the big problem--or why they need to be regulated.

The big problem is that health care costs too much-- we are paying too much for everyething from drugs to some specialty procedures, and we are being over-treated: over-medicated, too many unnecessary tests and surgeries, etc.

And insurers have done little to push back.

Read the whole post and I think you'll understand.

NG

First, regarding saying NO

I agree, there is a huge difference between saying NO to ineffective treatment, and saying No to treatment that would benfit the patient.

We must say no to treatment that won't help that particular patinet., We cannot say no simply beause the patient is poor or old (as long as he would benefit. If we're talking about a 85-year old who wouldn't survive the bypass operation that's one thing. But if he's a very healthy 85-year-old who would, most likely, survive and go home and play with his grandchildren, he should get it.

On the C-Span show you saw: Bruce Vladeck is very intelligent--and I like him personally--but after years running CMS he became discouraged and cynical--burnt out. This is understandable. The final years of the Clinton administration were pretty discouraging for many.

But the fact that things didn't change during the Clinton years doesnt't meant that they can't or won't during the Obama years.

Clinton didn't have Peter Orszag or Zeke Emanuel in his administration--both brilliant and both undertand what is wrong with the system.

Both understand that Medicare has to be radically reformed or it goes broke very soon.

Obama also has the House behind him-- and the HELP
bill that went through the Dodd/Kennedy committee in the Senate.

Read the House bill for health care reform and you will find a long, excellent section on Medicare reform, calling for Medicare to stop over-paying for volume, and start paying for quality.

Vladeck essentially understood what needed to be done but had no one to help him.

Scully is a Bushie and so is going to say reform is impossible.

But Medicare reform will happen as Medicare itself simply changes the rules.

It won't happen through "rational discussion of the issues" in society because a) most people don't understand the issues and b)most people think that more care is better care.

Because most people are not doctors, they are not in a position to evaluate comparative effectiveness reserach. This is something we have to leave to experts (doctors who are not paid fee-for-service and have little financial interest in the outcomes, medical ethicists, etc.)

You can see the move toward reform in the House bill which empowers Medicare to begin adjusting fees to reward doctors for what benefits patients--and to penalize hospitals that have a high rate of avoidable readmissions. We will see more financial carrots and sticks steer providers toward care that will provide the greatst value for patients.

You can see the change coming in the White House's insistence that Medicare fees must be set by an independent panel of physicians and health experts. (Right now, they're set by a panel made up mainly of specialists, that meets behind closed doors and almost always recommends increases, even when services have become easier or it has become clear that they do little or no good for most patients.)

They are now lowering fees for many invasive heart treatments.

They will also raise co-pays and lower fees for ineffective treatments and drugs.

Fees for diagnostic tests will be cut. This will mean hospitals and docs will do fewer of these tests, reducing the demand for diagnostic equipment.

Some people will kick and scream but private insurers have said that if Medicare leads the way, they will follow.

Private insuers just don't want to be the ones who lead in lowering fees or refusing to cover something because they don't want to lose market share.

Btw, a recent article in JAMA shows that diagnostic tests are exposing patients to dangerous levels of radiation, leading to cancer.

Finally, it's not a question of getting ineffective treatments if you're willing to pay for them.

They won't be available, just as Vioxx isn't available--the risks outweigh the benefits.

If Medicare and insurers do not cover "marginally effective" cancer treatments that give you an extra 3 months of poor quality life for $400,000 they won't be on the market. Even if a very wealthy person could pay for them out of pocket, it wouldn't be worth it to the manufacturer to produce and package the treatment for a tiny group of patients.

As a society we need to begin thinking collectively about how we want to spend our health care dollars so that we are getting value for our money.
Paying vast sums for marginally effective treatments just doesn't make sense.

A.J.

Why on earth would Morningstar favor insuers over drug companies??

I'm afraid that makes absolutely no sense.

I know Morningstar very well. It's goal is to sort out mutual funds and stocks that are most likely to go up. They is why people pay substantial fees to subscribe to its service.

It has no reason to conceal how much insurers are making.

I am often very critical of corporate America.

But if you don't understand how Wall STreet works,and don't (why Morningstar exists etc.) then your cricisms miss the mark entirely and undermine your credibility.

Finally, today insuers don't "decide what treatment we get." They cover virtually everything that the FDA approves--without worrying about benefit to the patient or cost.

They are not deciding what treatments we get--they are simply holding the door open and covering anything that comes down the pike,

Drug-makers decide what treatments we get by deciding what products to develop and market. They focus on the ones that will be easiet and cheapest to develop and are likely to be most profitable--either because many people will take them (allergey medications) or because the people who buy them will be desperate and pay whatever the companies choose to charge (cancer drugs.)

Unforturnately, many Americans are very gullible and actually believe the drug ads they see on TV

Docotors will tell you they don't have time to argue with many of these patients--so they prescribe what they ask for.

John--

First, Kaiser and models like Kaiser have grown.
The notion that they can't work in different parts of the country is a
piece of misinformation that Barry has repeated on this post more than once.

Even when confronted with evidence to the contrary, he persists

The truth is that KaiserKaiser has expanded successfully in Northern and Southern California, Oregon, Colorado, Hawaii Georgia and the Washington D.C. areas.

This is hardly an organization that cannot "expand significantly beyond its footprint."

I'm afraid Barry has an ideiological commitment to for-profit corporations that makes him unable or unwilling to see that Kaiser and others like it are succeeding.

Geisinger has just (or is in the process of) buying one or more additional hospitals.

In fact, the only insurers who have made real progress in reducing costs while lifting quality are the non-profits and government programs like the VA.

J.Rossi--

Yes insuers now keep 15-20% of premiums.

The good news: The House bill says they most pay out 85% of premiums in reimbursments and can keep only 15%. If they don't pay out 85% they have to give rebates to customers who paid the premiums.

As I said in the post, they are not as efficient as they could be-- they spend too much on lobbying and exec salaries.

But the big problme--and where the big bucks are wasted--is that they haven't really tried to rein in health care costs. They have accepted skyrocketing costs and passed them along in the form of higher premiums.

We need a public sector plan that will follow Medicare in using comparative effectivenss reserach to adjust fees and co-pays in a rational way --steering patients and physicans toward the most rational treatments.

Dr. Rick--
I agree that we would all be better off if health-care were non-profit.
But at the very least, we need to regulate for-profit heatlh care companies the way we regulated old-fashioned gas & electric companies.
Like heat and light, heatlhcare is a necessity.

[NG]

This morning I watched on C-Span (Thank God for C-Span) Tom Scully and Bruce Vladek talking about Medicare and Medicare part C. Here is the link to the video of this fascinating and enlightening program. You really must watch this.

http://www.c-spanarchives.org/library/index.php?main_page=product_video_info&products_id=288580-3

The main admissions that I heard from this program is that they both implied that the current system is unnecessarily complex but can't be changed quickly for political reasons. Scully said that (which surprised me coming from a Bush type guy) the best system is likely the Wyden single system approach, but he said that it can't likely happen for ten or more years because the current politics prevents rational discussions of the issues.

What Barry and many on this Blog have been writing about requires rational discussion of the issues, but if that can't happen in America, how can we have meaningful reform? One the flip side, if we do nothing, how long will it be before the really obvious trouble finally sinks in so that Congress does act rationally (is that an oxymoron?).

We must deal with among other things:

--Too much unnecessary care
--Our care is way too costly
--Who gets access to care
--Who pays for care
--If we prove a system of comparative effectiveness, can anyone still get the marginal care if they pay for it
--Others

[Keith Sarpolis]

Maggie,

Percentages can be deceiving, it seems. Would I prefer making 5% profit on a 100 billion dollar buisiness or 20% of a billion dollar buisiness? Since insurance companies get to handle alot of money passing through the company, that 4-5% return may represent larger profit margins in terms of actual dollars. Also, how extravagantly the company is run makes a difference, as one of your posters pointed out. If the administration is taking home large salaries and bonus packages,building glitzy buildings, and having extravagant corporate retreats, then this can cut significantly into that profit. Better to look at administrative costs to sort some of this out in my opinion.

[A.J. Lester]

Morningstar and Mr. Newman have found yet one more way to let the insurance industry off the hot-seat. After all, who could begrudge those hard-working folks at WellPoint a measly 4% profit when Amgen's making 30% and Pfizer's pulling in over 16%?

This kind of analysis plays right into the hands of the insurance industry which counts on such stories to (yet again) shift the spotlight away from what they're doing and onto someone else.

But when you consider the role that Aetna, Unitedhealth, and WellPoint play in the actual day-to-day financing and delivery of healthcare, Mr. Newman's comparison is "apples-to-oranges" and here's why:

By virtue of their agreements with doctors and hospitals across the country, as well as thousands of employers representing millions of subscribers, managed care companies can literally control how medical care is provided. They pay or don't pay for services; authorize or don't authorize treatments; and can quickly interfere with the delivery of medical services by doctors, hospitals, and other medical providers at any time to fulfill the insurance companies' profit motives.

I don't know of one pharmaceutical company, biotech firm, or medical equipment manufacturer that can dictate how physicians practice medicine or control what services are covered or paid for. The freebies, trips, and other incentives that these companies offer medical providers may create a certain amount of influence over what medications doctors prescribe or equipment/techniques they use. But in the end, doctors are still free to practice medicine as they see fit, regardless of marketing efforts put upon them by such profit-rich companies on Morningstar's list.

Shifting blame away from the insurance companies will not serve the advancement of meaningful healthcare reform. The integral part that managed care companies play is simply too big to suggest that any other factor should be considered first or foremost. My suggestion: Keep the heat turned up the managed care companies and the insurance industry, and keep the fork ready.

[NG]

Barry wrote:

"If we are ever going to get serious about tackling the utilization issue, patients are going to have to learn and accept the fact that the word, NO, is a necessary part of the medical lexicon."
--------
I think you have to discuss this a bit more if you are really going to ever get to a good, in a mission-oriented sense, system reform point of view! There is a big difference between "NO" used to say "NO" you can't get that because your situation cannot afford it, AND between "NO" this process is non-necessary from a mission-oriented point of view.

The first "NO" system type is easy to set up, but socially very disruptive and unfair. The second "NO" system is very tough to set up, but then if done well, maybe be more socially accepted and workable if made transparent enough!

[John]

Barry-
I think that's the challenge we have. The Kaisers of the world are working models that have proven exceedingly difficult to export to community network-based settings. While the network models are much easier to market and grow for obvious reasons, most are nowhere near becoming integrated systems. I'm looking for evidence that third party payers are the solution for the clinical behavior modification we need to facilitate, and looking back over the past ten years I don't see a lot of evidence. I'm not trying to start a debate, just offering my opinion as to why the insurance industry makes such an easy target, and why some would be skeptical as to their ability to drive real change in health care. If third party payers were perceived as valuable agents of change in health care, their margins would strike most people as a bargain. And the fact that I am acknowledging public skepticism of the insurance industry should not be construed as an endorsement of Medicare and Medicaid. In the absence of wholesale departure from the FFS reimbursement model, we have no chance of reining in excess utilization.

[John]

On the one hand, I agree that the far bigger opportunity being largely ignored is delivery system reform, where the margins and waste making the insurers appear downright frugal. On the other hand, I think the issue with insurers is not necessarily their profits in percentage terms (which are nonetheless exceedingly large in whole dollars and could be redeployed to greater good elsewhere), but rather the question of whether there is a legitimate value proposition to begin with; much less one which deserves to be rewarded. A lot of people are struggling with a fundamental question of whether there is any credible alignment of insurance industry incentives and the imperatives of health care reform; particularly since they gave up on managing care (Kaiser and other real systems being obvious exceptions) a decade ago. I think that's why they are such an easy target.

[jrossi]

I just saw a Bill Moyers interview with a former Cigna exec named Wendell Potter who said the medical loss ratios for HI companies went from about 95% in the early '90s to about 80% now. Maybe it's not profit; maybe it's high salaries or too many underwriters, nice corporate headquarters and perks, etc. In any case, if 20% is correct, it is too much. If we can't put them out of business, we should force them to become non-profit and regulate the heck out of them (not that I think this is going to happen).They provide very little benefit to our society, if any at all.

[Dr. Rick Lippin]

Sincere thanks for the economics lesson. But our whole damn US health care system is terribly bloated and cravenly greedy.

I keep using the phrase we (the insured) have been both duped and swindled. The uninsured have been denied!

BUT MOST IMPORTANTLY BASIC HUMAN HEALTH SHOULD NOT BE FOR SALE? IT IS IMMORAL TO TRADE BASIC HUMAN HEALTH IN THE MARKETPLACE.

So my dream is that these companies disappear off the traditional Morningstar lists.Maybe Morningstar could start a separate list for them?

Are public schools on the Morningstar lists?

Dr. Rick Lippin
Southampton,Pa