Tag Archives: News

Wednesday, August 19, 2009

Earlier today, in a piece entitled “A Bits and Pieces Approach to Healthcare Legislation”, I suggested that the President and Congress abandon their attempt to devise all-encompassing healthcare legislation in favor of writing new law to address individual issues. The example I gave was about resolving the problem of pre-existing conditions. Here’s a second item Congress could also dispatch with speed and efficiency even while they continue to argue more esoteric, more complicated strategies for healthcare reform.

Doctors and hospitals charge their insured patients prices which reflect what has been negotiated with the underwriters – Blue Cross/Blue Shield, Aetna, Prudential and others. Uninsured patients are often charged significantly higher prices for those same services. Why?

The only reasonable explanation would be certainty of payment. The doctor or hospital knows it’s going to get paid by the insurance company, while it may have serious collections issues with some of the uninsured – particularly given than many families who do not have coverage make lower and less stable incomes. The question is, do these price differentials reasonably compensate the service provider for the additional administrative costs and real potential for lost collections?

It’s not an easy question, but rather one which requires research by finance and industry experts which may have already been done and, if not, can certainly be done quickly.

If, as I am going to assume, the uninsured are being over-charged, there are solutions short of providing everyone with coverage. That’s our goal of course, but doing so may take time and/or may be an incomplete process, still leaving millions without any or adequate insurance.

One option is to simply legislate that the price of a medical service charged to a patient must be the same whether or not that patient is insured – and let the healthcare industry and insurance underwriters work out the details. If necessary, the legislation could include a government subsidized default insurance program – the healthcare version of mortgage insurance – to guaranty payment. Premiums would be paid by the uninsured.

Sure, I tend to over-simplify everything, which I actually consider to be positive trait. My personal intellectual deficiencies aside, the bits and pieces approach to healthcare reform is clearly superior to the overly-complicated, often incomprehensible, impossible to explain legislative process our President and Congress are struggling to accomplish. Even if it turns out that individual laws we pass, one issue at a time, need to be revised in light of future revelations, the effect of the approach for its clarity, timing and impact will be well worth these relatively minor adjustments.

-wf

#1: Pre-Existing Conditions
Wednesday, August 19, 2009

President Obama and Congress are trying to accomplish comprehensive healthcare reform in a single piece of sweeping, historic legislation. Good for them, but it’s making my head hurt and doing nothing to instill confidence in the outcome.

Why not address the myriad of component issues in separate pieces of legislation? For example, the issue of pre-existing conditions.

Medical insurance underwriters give extra value to large businesses who subscribe to their programs. It’s a form of volume discounting which is supposed to reflect the administrative savings the underwriters enjoy by virtue of the centralized management of so many individual accounts.

In and of itself, there’s nothing inherently wrong with at the least the concept of volume discounting. The problem here is the extent to which the price of coverage is being discounted, and in the non-pecuniary, high value benefits that the underwriters are allowing.

What’s really happening is that the underwriters are competing for large clients in a way they don’t feel the need to compete for small company and individual family business. It is discriminatory pricing which has too little to do with the actual costs of medical care. As a rule, small business employees and unaffiliated Americans who would buy individual and family coverage are no more likely to become ill, and no more costly to treat than the employees of large companies. The underwriters are discriminating, not because it makes good economic sense, but because they can get away it. Existing law and new healthcare legislation can stop that.

There are two issues here. One is whether or not the underwriters are over-discounting to large clients at the expense of smaller companies and individual families? More to the point, is there anything truly non-competitive about their behavior – not just undesirable, but non-competitive – that existing law, aggressively applied, may be able to regulate? If there’s a problem, and if we need new legislation, okay, let’s do it.

The other issue is that underwriters waive pre-existing condition rules to attract large account business. That practice has no real economic basis and can be discontinued in a single piece of highly specific legislation not much longer than this posting – and upon which almost everyone in Congress, on both sides of the isles, can agree. Americans will love the initiative for its clarity and the sense of progress this single piece of legislation represents. The President’s polls on the issue of his management of healthcare reform will improve – as will Congress’ which have nowhere to go but up. And we can all focus our attention on the next very specific healthcare issue on our agenda, whatever that might be — one problem at a time.

There. That was easy. (Thunderous applause, followed by feigned modesty and, “Thank you. Thank you very much.”)

-wf