In Utah: Talk About Health System Reform

Over the last weekend, the Salt Lake Tribune carried one lead story and two opinion pieces about health system reform. Here are excerpts:

Utah’s young, healthy to bear health reform’s costs
Health insurance » Your premiums could jump by 135 percent.
By Kirsten Stewart | The Salt Lake Tribune
http://www.sltrib.com/sltrib/news/54888699-78/health-insurance-insurers-...

On a single day in January 2014, Utah’s individual health insurance market — now about 143,000 people strong — could more than double in size as scores of uninsured heed federal health reform’s mandate to purchase coverage.

One estimate, by an actuary consulted by the state’s Legislative Health Reform Task Force, pegs growth at 50 to 150 percent.

But if predicting enrollment is hard, estimating how much these newcomers will cost — and how much to charge them — is even harder.

"[It’s] very likely the most challenging actuarial problem ever faced by companies doing business in Utah," Pritchett told task force members last week.

What’s clear, he said, is there will be winners and losers. And without taking steps to balance the score, the losers — the young and healthy — could see prices increase by as much as 135 percent.

"There’s a lot of uncertainty, and uncertainty usually leads to higher prices," Pritchett said.

The "individual market" is where you buy insurance if your job doesn’t come with health benefits. It’s the path to coverage for just over 5 percent of insured Utahns, primarily the self-employed and part-time and low-wage workers.

And it’s a market with fewer price protections than small and large employer groups enjoy. New regulations in the Affordable Care Act seek to remedy that. But the law leaves states leeway in implementing and enforcing the rules. How Utah chooses to act could determine how far prices swing, and whether insurers thrive or fail.

Among the uncertainties is the precise mix of new enrollees.

Some will be a boon to insurers: the young and healthy. Others, the sick and uninsurable, will increase costs with their pent-up demand for medical care.

Pritchett sees newcomers breaking down like this: 35,000 to 130,000 will drop their current policy in favor of government-subsidized plans on Utah’s health exchange; 30,000 to 80,000 will have been previously uninsured; and 6,000 to 9,000 will have pre-existing conditions that have made them uninsurable.

It’s this last group that worries insurers most. Utah’s federal high-risk pool, the insurer of last resort for many of these high-cost patients, pays out $8 in claims for every $1 in premiums collected.

Right now the government plugs the gap. But when this group enters the individual market, their costs will be borne by fellow policyholders.

Their presence, alone, could cause rates in the individual market to rise 35 to 45 percent, said Pritchett.

New industry regulations will cause yet another rate spike for the young and healthy. Come 2014, insurers will have to take everyone, even if you’re sick.

They won’t be able to exclude coverage of pre-existing conditions or charge you more for them. They can no longer charge women more than men and there are limits on how much more they can charge you based on your age.

For individually insured young adults, these rules, coupled with medical inflation, could add an extra 68 to 90 percent to premiums.

Most young adults will qualify for federal subsidies, making coverage more affordable and attractive. "But for the poor soul who doesn’t, there’s going to be some sticker shock," Dunnigan said.

True reform won’t happen until the country stops focusing on insurance prices and starts addressing the underlying medical costs, he said. "It’s easy to go after insurers. They’re an easy target."

Health insurance exchanges work
By rich mckeown
http://www.sltrib.com/sltrib/opinion/54890593-82/health-exchange-insuran...

Like many small businesses, the triggering event for our involvement in the Utah Health Exchange was the appearance of our insurance broker who laid out a spreadsheet presenting a 22 percent increase in next year’s premium costs. Disappointed, we asked our broker to review other options.

he conventional market yielded quotes ranging from a 22 percent to a 134 percent increase. Ask any small business and you will learn that these increases come right out of employee compensation and, in many cases, new hires. Containing these costs, particularly in small businesses with small risk pools, has eluded the best minds in health care policy for decades.

We asked our broker to explore the Utah Health Exchange with vigor. We considered it last year, but the deadlines proved to be an obstacle for us. Our experience this year was remarkable and is instructive for states that object to state-created health insurance exchanges on the flimsy basis of their association with federal health reform.

Our premium increase ended up at 6.6 percent, which is 3 to 4 percentage points below the general health care market trend and significantly lower than our prior bids. Each employee had an opportunity to choose from 191 different health plans available on the exchange. The selection process included options from full coverage to high deductible health savings accounts.

The administrative savings were significant since our employees now control their contributions and their health plan. Leavitt Partners defines their contribution; employees pick the health plan that best suits their needs. And if our employees leave us and work for another company in the exchange, their policy travels with them.

Rich McKeown is the president and CEO of Leavitt Partners, a health care consulting company that consults with six states about health insurance exchanges and receives approximately 13 percent of its revenue from its exchange practice. He is also the former chief of staff in the U.S. Department of Health and Human Services.

Delivering a new breed of doctor
By paul grundy
http://www.sltrib.com/sltrib/opinion/54896627-82/care-health-utah-primar...

We all know our nation’s health care system is in a time of turmoil and transition. The Affordable Care Act is only one part of the puzzle. Enormous changes are underway among commercial health insurance companies, care delivery systems, even in how care is delivered at the federal level via the Department of Veteran’s Affairs and Office of Personnel Management.

There is change all around us and a new recognition that an effective health care system is one that improves care at lower costs. Primary care just happens to be the foundation of this new model of care and that’s where this new crop of caregivers comes in.

What’s underway in Utah is groundbreaking and a model for the rest of the nation. It started with the great strides we’ve seen in Utah as the state has effectively held down the cost of care. Salt Lake City is ranked with the eighth lowest cost of care in the nation and health care spending is at $2,979 per person.

But what’s next? Better coordinated, connected and integrated primary care is becoming the new standard of care in many states like Utah. But until now, what has been lacking is a blueprint for delivering the next generation of physician who can really make this model work.

That’s what the Institute for Healthcare Transformation the U. is developing is all about. It’s about building a new breed of doc and nurse who put the patient at the center of the process. It is about teaching these caregivers new ways of doing business, and how to use data and technology to shed light on what they are doing and how they are doing it.

The challenge is a big one and the Institute for Healthcare Transformation is taking it on. The next generation of doctors will have to have new skills in managing population health. That means keeping diabetics stable and keeping asthmatics out of the ER. They’ll have to understand how to use data in new ways and use analytics to predict which patients will get sicker and how to prevent that.

They’ll need new understanding of health technology as they consult their iPad and log into mobile apps and monitor patients remotely. More important, the next generation will need to understand how to take unnecessary costs out of health care. Today 30 percent of the $2.5 trillion in U.S. health care spending is considered unnecessary.

My comment:

Kirsten Stewart has identified a major problem lurking behind ObamaCare. While everyone is required to buy insurance, and there is a lot of hand-wringing type legislation/regulation concerning keeping cost down, no one really knows how much these mandated insurance policies will cost, though we do know that these policies will not cover very much (see many previous posts here). Rep. Dunnigan, who is quoted as lamenting how easy it is to criticize insurance companies, is himself an insurance agent/broker. (Today's post includes a number of self-serving statements.) It is true that the cost of health care is high in the US. But the health insurance industry is being paid to manage these costs. After all, what is it that they are offering us in exchange for the handsome fees they collect? The truth is, private health insurance is a major failure in health financing. The overhead for the private, for-profit health insurance business model is incredibly wasteful, costing up to an order of magnitude more than efficient health system financing. One highly regarded, well-documented estimate places the excess cost of private health insurance overhead in the US at $400 billion per year. And then, in addition, private health insurers are not as good as public payers at moderating the rising costs in our health care system due to poor quality care (patient injury, inappropriate care, and failure to deliver clinically proven care consistently). The fact that, as Kirsten Stewart documents, ObamaCare is relying on the private health insurance business model to finance mandated health care benefits seriously weakens any chance that the nation will be at all better off after implementation. Rather, it should seem obvious even before the fact, we will be suffering sticker shock while still suffering from poor quality care.

And Rich McKeown's self-serving statement about health exchanges does nothing to boost our confidence (most of the 10 comments made to his op ed piece picked up on the fact that Mr. McKeown's business makes money by assisting states to set up health exchanges. . .no wonder he likes them so much). By any honest measure, the Utah Health Exchange is a failure. It's hard to use and does not reduce cost. Most people are not even allowed access to the business done on the exchange. Very few people have actually succeeded in buying a health insurance policy there. The rates of uninsurance in Utah have increased during the time of implementation of the Exchange. The cost of care has continued to rise. The Exchange succeeds only as a place where a business like Mr. McKeown's can 'define' its benefit for employees (meaning limit its financial obligation for health care), which was all it was ever intended to do. The Utah Health Exchange is not health system reform. It is not even health insurance reform. It is just silly to talk about it in any useful way.

Dr. Grundy, who works for IBM and is trying to ply the products of Big Blue in the health care sector, is at least talking about transformation in the way health care is delivered. Primary care is a vital (and underemphasized) part of health care delivery in the US. He's correct about that, but the article never clearly articulates what needs to happen. Nor does it mention that the health insurance business model itself has played a role in keeping primary care from realizing its potential in the US. We can not transform health care delivery merely by mechanizing it or paying for it differently. The health care delivered must be different. It must be higher quality.

Let's keep talking about health system reform. But let's not be distracted by the big talkers who have little to offer.

Dr. Joe Jarvis