Thursday, October 15, 2009

Bullish on the Baucus Bill: Why I won’t be bummed if we don't get a public option

Something happened the other day that made me reconsider the malaise I felt toward the Baucus Bill: I got a blood test.

Two days ago we heard the major news that the Senate Finance Committee had passed Max Baucus’s health care reform bill by a vote of 14-9, preparing the way for a vote on the House and Senate floors. There’s still work to be done, but make no mistake: this is a major achievement. At no time in our nation’s history have we ever been this close to such major health care reform.

Still, many progressives are disappointed in the bill, mainly over its lack of a public insurance option. Some see it as a worst-of-both-worlds compromise: a taxpayer giveaway to parasitic insurance companies that does nothing do control insurance costs. And until a few days ago I was one of them.

But then I got that blood test. And a flu shot. And a body mass index exam. And all of it was paid for by my insurance provider, United Health Care (UHC).

This was all part of a free flu shot clinic and wellness examination that UHC put on for everyone at my company, in our building’s cafeteria. I walked in at 4:00 for my flu shot, filled out my forms, and sat down to wait. I wasn’t officially scheduled for the wellness exam until 4:30, but when they noticed that line was shorter than the one for flu shots, they told me to go ahead to get it done faster. They pricked my finger, took my blood pressure, and sent me to have my body fat analyzed by a hand-held machine. And by the time that was done and I’d also had my flu shot, they’d completed blood glucose and cholesterol analyses on my blood sample – on site. My total cholesterol looked high, so they sat me down with a health coach, who explained that it was actually just my good cholesterol that was high, so I had nothing to worry about (thanks for the good genes Mom and Dad!). The health coach gave me some healthy eating tips and sent me on my way. I was back at my desk by 4:25 – five minutes before I was scheduled to have my checkup.

UHC has received much-deserved scorn for its practice of rescission, so what’s going on here? Why are they all of a sudden being so nice and giving me all this free health care?

Perhaps they knew that, as a powerful blogger, I could influence the 60 or so of you who will read this to like them more, and they hatched a nefarious plot to win me over. Somehow I doubt this.

Maybe they were just doing it out of the goodness of their hearts. But we already know that few corporations, especially health insurance companies, have hearts. The profit motive is their only motive.

And that's the reason UHC provided an in-office health care clinic at my company: it has a profit motive to keep its customers healthy. On the revenue side, companies will pay a premium for health benefits providers that keep their employees healthy and productive. At the very least, the clinics are a branding and PR exercise. On the cost side, simple preventive steps like cholesterol readings can identify risk factors early on, enabling people to change their behaviors or get treatments before more costly procedures become necessary. UHC doesn’t want me to develop diabetes and cost them thousands of dollars each year, so they have an interest in making sure I eat right.

Of course, as always, there’s a caveat: I have group insurance. UHC doesn’t ask me about preexisting conditions, and they can’t rescind my coverage if I get sick (as long as I stay in my current job). My company employs 2,000 people, so we have leverage; if one person starts costing UHC money, it’s not worth it to drop the entire company's benefit and lose the other 1,999, or to hike rates and risk losing my company’s business to another benefits provider. Thus, it’s in UHC’s interest to reduce the risk of costly benefits payouts by investing in preventive care. In my case, the profit motive works in my favor.

If on the other hand, you get your insurance on the individual market or through a small business, you’re not so lucky; in past posts where I've argued about the danger of leaving health care to the profit motive, this is what I was referring to. On the individual market, insurance companies simply refuse to cover anyone they deem as risky, or else charge unaffordable premiums – ensuring that the people most likely to need health care can’t afford it. In the small business market where the employee risk pool is small, one sick employee jeopardizes the profitability of the risk pool for the insurance company - and with it the insurance coverage of all the other employees. When this happens, insurance companies will often jack up premiums for the entire business to cover the one sick employee's cost, in many cases forcing the small business to drop its health benefit. The small business has no leverage.

If you don’t have group coverage, it’s simply more profitable for the insurance company to exclude or drop you if you become sick, so they have no interest in keeping you well. There’s just no money selling health insurance to sick people.

There's another problem with the market. You would expect that insurance companies, faced with escalating health care costs, would pressure hospitals to run more efficiently and medical device makers to invent cheaper devices, but they haven't done so. This is a mystery to me. I'm not an expert, but I imagine that the reason is a combination of two factors: consumer preferences and lack of competition. Consumers confuse health care with health outcomes, assuming that more treatment is always better. As a result, they demand that insurance companies pay for any and all treatments. Similarly, unions and benefits managers like providing their employees with generous health benefits - after all, complex benefits are what justify their jobs; witness their opposition to taxation of "Cadillac" health plans. At the same time, the relative lack of competition between insurance companies dilutes the incentive to find ways to provide the same benefit at lower cost - without rivals willing to undercut their prices, they can simply pass through the higher costs in the form of higher premiums. [Can anyone enlighten me on this paragraph? If you have some expertise, please explain in the comments section.]

Clearly, the health care market is broken. It’s up to the government to fix the market so it works in the People’s best interests. Give insurance companies a stake in their customers’ health, and they will find ways to keep them healthy at the lowest possible cost.

For this to happen, reform must do two things. First, it must make sure insurance companies actually have to pay for your health care when you get sick. Second, it must prevent insurance companies from simply passing these costs through to customers as higher premiums; this can be accomplished either by fostering competition or through legislative fiat.

The Baucus bill actually does a pretty good job on both fronts. It bans rescission. It requires insurers to sell you coverage regardless of preexisting conditions. It places limits on the premiums insurance companies can charge, and restricts the criteria for which companies can charge higher premiums (age, tobacco use, and family size - I would argue that obesity should be a criteria as well). And it creates competition: by creating insurance exchanges where people can shop around for policies, and by allowing the purchase of insurance across state lines starting in 2015. Creating a public option would probably the best and simplest means of fostering competition, but I'm certainly not wedded to it as the ONLY way.

When insurance companies can no longer just drop customers when they need expensive health care, and can't cover expenses simply by raising premiums ad infinitum, all of a sudden there's a powerful incentive to make sure their customers never need those expensive treatments - and that the treatments they do need don't cost the company a fortune. Essentially, what you're doing is telling insurance companies they must keep their patients healthy - and that they have limited dollars to do so.

This sounds like a tough, even unfair, spot to be in. How could insurance companies ever accomplish this? Conventional wisdom holds that all the money we throw at health care is what drives America's health care innovation machine.

But in fact, history suggests that reducing available funds can have a similar effect on innovation; when faced with a limited number of health care dollars to compete for, businesses can and will innovate low-cost treatments. Just as agriculture was invented in the desert, businesses are most inventive in the face of necessity.

Need proof? Check out what GE Healthcare is doing in India. Conventional wisdom holds that with a per capital GDP only 5% that of the United States', India would be a poor market for a company that makes million-dollar imaging machines, but that's exactly where GE Healthcare decided to invest. And the risk paid off. The need to serve people without much money to spend on health care has produced a $1,000 electrocardiogram device and a $15,000 PC-based ultrasound machine - roughly 15% the price of the top-end devices sold in the US. And costs keep falling. In fact, today GE is finding markets in the United States for these "50% solutions at 15% prices":

Consider GE’s health-care business in the United States. It used to make most of its money on premium computed tomography (CT) and magnetic resonance (MR) imaging machines. But to succeed in the era of broader access and reduced reimbursement that President Obama hopes to bring about, the business will probably need to increase by 50% the number of products it offers at lower price points. And that doesn’t mean just cheaper versions of high-tech products like imaging machines. The company also must create more offerings like the heated bassinet it developed for India, which has great potential in US inner cities, where infant deaths related to the cold remain high. And let’s not forget that technology often can be improved until it satisfies more demanding customers. The compact ultrasound, which can now handle imaging applications that previously required a conventional machine, is one example.

Anticipating the effects of health care reform, GE recently announced a plan to invest $3 billion to invent 100 more low-cost medical solutions in the US. Reading the article, I can scarcely contain my optimism over companies' abilities to innovate if given the right carrots (or sticks).

There may be other, less obvious benefits. According to some estimates, 30% of health care costs are due to obesity. Sticking insurance companies with the bill would give them a powerful reason to do everything they can to make sure Americans eat better. Indeed, as Prof. Michael Pollan of Berkeley argues, health care reform could pit insurance lobbyists against Big Food, fighting to end government subsidies for the foods that make us unhealthy:

As for the insurers, you would think preventing chronic diseases would be good business, but, at least under the current rules, it’s much better business simply to keep patients at risk for chronic disease out of your pool of customers, whether through lifetime caps on coverage or rules against pre-existing conditions or by figuring out ways to toss patients overboard when they become ill.

But these rules may well be about to change — and, when it comes to reforming the American diet and food system, that step alone could be a game changer. Even under the weaker versions of health care reform now on offer, health insurers would be required to take everyone at the same rates, provide a standard level of coverage and keep people on their rolls regardless of their health. Terms like “pre-existing conditions” and “underwriting” would vanish from the health insurance rulebook — and, when they do, the relationship between the health insurance industry and the food industry will undergo a sea change. Read the full article" style="color: rgb(85, 26, 139); ">-->Read the full article

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Through all of this, I think the public option is less important than its been made out to be. My guess is that all the hoopla is driven more by psychological attachment (or opposition) to it as a specific means rather than its efficacy in driving a desired outcome. For example, the GOP argument against the public option is that it would drive private insurers out of business and lead to a government takeover of health care. But this is illogical - if you believe in free markets, private companies would go out of business only if the public plan provided better health care at lower cost. It's a catch-22. Unless Republicans are against lower costs and better care, the only reason for opposing the public option is ideological opposition to anything done by government.

But by the same token, it's important for progressives to remember that the public option is a means to an end, not the end itself. I'm not saying we should not have a public option - far from it, I think it's the simplest way to foster competition, and we should continue calling our Senators to advocate for it. Nor am I questioning the earnestness of progressives' desire for it; I want a public option too. But I do know that it's human nature to attach ourselves to the thing that's most tangible; it's easier to rally in support of a specific policy than to think open-endedly about different ways to achieve a desired goal. That's especially true when the policy we've proposed gets attacked as viciously as the public option has – the attack makes it personal. Psychologically, we react by digging in, further cementing the policy as part of our identity and making it harder to consider other options. If you need some consolation over the probable loss of a public option, check out Nate Silver's post on insurance company share prices. I don't think the Baucus bill will be as big of an insurance company giveaway as everyone thinks it will.

I work in the world of sales and marketing consulting, and we've got a saying, "Oil companies don't need drills - they need holes." And Americans don't need better access to treatment - we need to be healthier. A public option is still desirable, but I'm optimistic that the Baucus bill actually does a lot better than many give it credit for.


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