This is basically it in a nutshell, some of those mathematical formulas are no more. When you listen to the President speak, this is the entire issue of the entire 
health insurance business and what has made the American public unhappy over the last number of years. Everyone understands business but when you look at the massive profits made where dividends took precedence over better care, nobody is happy. The methodologies used for years are now coming to the surface with transparency and the White House is taking numbers.
Sure it’s an ugly picture as to what has been allowed to continue as a business model for health insurance for years and nobody was minding the shop. I have said this many times but the prior administration has not come to terms with how transactional charges that carve out profits for services rendered are eating up money that should be available for actual care.
“Department of Algorithms – Do We Need One of These to Regulate Upcoming Laws?
You can talk about it in many different fashions, but the bottom line is that algorithms were used for profit that crossed the line when it came to providing good care for many. I wonder how the health insurance business will fully adjust with the new laws in place and no doubt, they will be looking for new “algorithms” and ways to slice the pie. I think one thing that absolutely keeps this issue in the forefront is the “first hand” experience the President had with his own mother and he saw the nightmare first hand and knows it exists, so no matter how many fancy wrappers the packages contains, the same thing is inside. As I always say, there’s a lot to be said for hands on experience, as it helps one stay in touch with the real world.
Recently in California the news was big about increases with premiums and Blue Cross made a trip to Washington.
HHS to California Blue Cross – Bring Your Algorithms to Washington And Explain
Back in December of 2008 health insurers recommended more business intelligence and algorithms and look where we are today, perhaps the type of algorithms used were for profit only as we have all seen their numbers. We certainly need business intelligence to help us work smarter and more intelligently but again with transparency today, the reality of what business models were used is out in the open and frankly people don’t like it as it was not a “human” way of doing business.
Health Care Insurers Suggest Algorithms and Business Intelligence solutions to provide health insurance solution
The algorithms of healthcare as they continue to develop, fragmented and with the overall focus on risk management business models are not the answer to our current dilemma and as we continue to fuel the fire, as we have seen in the last few years it continues to elevate. Perhaps if we could come together on algorithms with the same goal someday, we might just see some progress.
Little Progress on Fighting Healthcare Fraud – Look At Who’s Getting the Anti-Fraud Contracts
In summary it’s a risky game here as some of the very same people that used algorithms for profit are now vying for contracts to help fight fraud, and the big question now is can they be trusted any more today with new business models or are we going to see the same old mathematical manipulations to find holes to cut for additional high profit yields? The President’s message today basically is a warning to cut to the chaise and become partners and operate with ethics. BD
WASHINGTON -- President Barack Obama and Health and Human Services (HHS) Secretary Kathleen Sebelius warned insurance companies not to impose outsize premium increases while healthcare reform is being implemented.
In a call with reporters, Sebelius said she is urging state insurance commissioners to investigate suspicious premium increases and said the federal government is also monitoring such increases.
President Barack Obama Gets Tough on Insurers, Releases New Regs - ABC News
Health insurance and health care are two different things, which I state often in my blog.
ReplyDeleteHealth insurance companies profit at a rate of about 4%+/-.
Pharma profits at a rate of about 21%.
Hospitals profit at a rate between 3% to 8%.
Medical Labs profit at about 7%.
Biotechnology profits at about 12.5%.
Determining doctors' profits is not readily available, but I recommend Maggie Mahar's Money Driven Medicine as a good reference for the boom in doctor's fees: http://bit.ly/aCagt2 Maggie, btw, is a single-payer advocate. She is spot-on regarding the escalating costs of care.
It is well known that insurance pays claims. Claims are merely the fees charged by doctors, hospitals, pharma and other providers. As these costs go up, so do insurance rates.
To squeeze insurance companies, is merely to put them out of business (save for the government-awarded contracts to be awarded Aetna, CIGNA, UHC and WellPoint).
Squeezing the insurance companies does not impede the increasing cost of care and does nothing to solve the issue.
How much will insurance premiums go up when the government requires loss ratios to be 80% to 85% minimum? Easier math than an algorithm. 50% is the answer.
Who will be at fault then?
I don't know where your figures are but I will correct one issue here and that is about hospitals, 55% are in the red so the numbers there are voided. Now perhaps those that are not in the read may see those stats.
ReplyDeleteOn the documentary, Money Driven Medicine, yes I had several posts recommending all to watch.
http://ducknetweb.blogspot.com/2009/08/money-driven-medicine-movie-official.html
Profits may be down on percentages with insurance companies but I'll not ignore the big dividends and profits they have made over the years and the same can be said for the pharma business too, non sustainable in today's economy.
Medical Quack,
ReplyDeleteMaggie Mahar's book and PBS' documentary, both titled, "Money Driven Medicine", are two different things - just like Health Care and Health Insurance are two different things.
I was refering to Maggie Mahar's book and not the documentary.
Regarding the numbers for hospitals, where can you site 55% are in the red. Not that I don't believe you, but your information is suspect as the information is not readily publicly available. An industry survey is a suspect source for such information as there is no accountability for the accuracy of the answers to any survey. Who is tracking all of the 990s that not-for-profits have to file with the IRS? That could be a source, but all it shows is the data. The real question is why are the hospitals running in the red?
Hospitals are not running out of cash. Not-for-profit hospitals may indeed wish to run in the red - as long as they have cash flow increasing every year, what incentive do they have to make a profit? That's it! Not-for-profits don't have an incentive to profit!
Does not making a profit mean that hospitals are virtuous? Absolutely not! It means that they can be, but if out of control spending on new facilities, expensive equipment and exorbitant salaries means that they run in the red, so be it. As long as hospitals have the cash, who cares about a profit. And, boy will people think we have it bad!
My point is that insurance profits are not the source of your ire. Rather, you need to look at the root cause of rising insurance rates, which are claims paid to doctors, hospitals, pharma and other providers - and coupled with state and federal regulations that drive up the cost of insurance.
You, along with many, have a predisposition that finds insurance companies to be undesirable, to put it nicely.
Insurance serves to transfer an individuals risk of financial burden. It does not exist to pay doctors, hospitals and pharma.
Just did a post this week about a hospital that either had to close or be taken over by another hospital. Not all are equal by any means and this has been the largest year for layoffs too. The 55% numbers are quoted in the press all the time.
ReplyDeleteI am aware of risk management methodologies and how claims and all the red tape works, did a lot of data work for both MDs and hospitals too. I could split hairs all day but you can't ignore the big white elephant and stories in the news about how claims are handled/denied, all mathematical, but they are tied to human lives and the methodologies have been less than human with many as they have made the news over the last number of years.
All hospitals do not have big stocks of cash either and why the government created stimulus money to move forward with technology. I do some billing and am well aware first hand of the processes and how complicated and difficult it is. First hand experience trumps all.
Personally, insurance should go back to where it was in the beginning to spread loss over a large group and should not be traded on the market, then we would see a different picture. Hospitals have made bad investments as well and one in San Diego is suing their financial advisers as they too are almost out of money.
I am also aware of the huge reserves that insurance companies have and if you lumped them all together we might be sitting on a few trillion as well when it comes to cash. I could debate this all day long but bottom line is care at an affordable price and there's room for improvement everywhere.
Medical Quack,
ReplyDeleteYou seem reasonable enough. I appreciate the dialogue.
Tying insurance to medical care is not how insurance works. It is what Medicare created in 1966. It is also what doctors, hospitals and pharma have exploited for profit by withholding care until patients assign their insurance benefits by contract directly to the provider.
You are correct about the reserves. Reserves typically account for 25% of premium. These reserves are used to pay Incurred But Not Reported Claims, are actuarially sound and required by state insurance laws.
Reserves are not excess, but are actual dollars set aside to pay legitimate doctor/hospital/pharma costs that a patient may incur today, but which may not be billed by the provider to the insurer for months or that may be contested under the provider contract.
You are way off on the amount of reserves. The aggregate annual premium in the U.S. medical insurance market is about $2.5 trillion. Reserves at 25% account for about $625 billion - virtually all used to pay future claims - to the delight of the insureds and the providers these reserves pay.
The largest insurers and the other few politically connected are happy to go along with reform as they will directly benefit. By providing administrative services only, they will hold billion dollar ASO contracts without having to take on any actuarial risk.
Competition shall go by the wayside while costs continue to skyrocket out of control only to be paid by increasing taxes.
The reserves amounts were an educated guess based on former year stats that are available and yes I am aware of the reserves required by law and we do in fact want credible reserves that are in fact available and not in a sea of reinsurers and not cash available, i.e. AIG. It's back once again to corporate responsibility.
ReplyDeleteHigher taxes as much as everyone disliked the idea maybe the only way to resolve, not sure exactly but one thing is a known, taxes produce money:)
This is a good article.
ReplyDelete