Managed Care 101 in 2010 (Part I): Reforming Healthcare

Paul Krugman, healthcare economist and newly a Nobel Laureate is one of my favorite NY Times columnists. In “Health Care Destruction,” (Oct. 5, 2008), he criticizes the McCain health plan, while showing some preference for Barack Obama’s proposals for healthcare insurance reform.

He says that most of those in the US who are under 65 get their insurance through their insurer because “the tax code favors such insurance” in that the employer’s contribution to insurance coverage is not considered to be taxable income, so long as the employer obeys certain rules. In particular, the same plan has to be available to all employees, regardless of the size of their paycheck or the state of their health.” He continues:

This system does a fairly effective job of protecting those it reaches, but it leaves many Americans out in the cold. Workers whose employers don’t offer coverage are forced to seek individual health insurance, often in vain. For one thing, insurance companies offering “nongroup” coverage generally refuse to cover anyone with a pre-existing medical condition. And individual insurance is very expensive, because insurers spend large sums weeding out “high-risk” applicants — that is, anyone who seems likely to actually need the insurance.

And in the process of comforting the comfortable while afflicting the afflicted, the McCain plan would also lead to a huge, expensive increase in bureaucracy: insurers selling individual health plans spend 29 percent of the premiums they receive on administration, largely because they employ so many people to screen applicants. This compares with costs of 12 percent for group plans and just 3 percent for Medicare.

- Paul Krugman, NY TImes, Oct. 5, 2008

However, Arnold Relman, professor emeritus of medicine and social medicine at Harvard Medical School, and the erstwhile editor in chief of The New England Journal of Medicine, is appropriately critical of him as well, saying: “he does not mention that neither candidate offers practical suggestions for effective control of the rising costs that make universal coverage unachievable.” Dr. Relman’s next statement neatly summarizes the failure and opportunity of managed care which I hope to expand on here, weekly, over the next month and a half.

“This problem [the lack of “ practical suggestions” results from the inappropriate organization and perverse economic incentives of a health care delivery system that motivates physicians and medical institutions to maximize their income rather than focus on optimal patient care.”

“The solution will require more than regulation of medical insurance. It will need major reform in the way we structure and finance the delivery of medical care — a difficult, incremental task that we will nevertheless soon be forced to undertake. “

- Arnold S. Relman*, “Reforming Health Care.” NY Times, Letter to the Editor; Published: October 10, 2008

Managed care or not, “Performance on measures of health system efficiency remains especially low, with the US scoring 53 out of 100 on measures gauging inappropriate, wasteful, or fragmented care; avoidable hospitalizations; variation in quality and costs; administrative costs; and use of information technology.” So, what are we to do?

, 2008, Authors: The Commonwealth Fund Commission on High Performance Health System, [Contact:

] , July 17, 2008; Vol. 97 as posted by: anne on Economist’s View, October 06, 2008 at 03:36 PM.

Why Not the Best? Results from the National Scorecard on U.S. Health System Performancecs@cmwf.org

The following is an attempt to list what ails the American healthcare system; the “Big 10 Hit List":

1. First dollar coverage - forget that. Rebates (paying to get your product on the formulary)? Cost-shifting (def. the allocation of unpaid costs of care that have been delivered to one patient population through surpluses collected from other patient populations as when capitation revenues supplement those without insurance or entitlement programs that are unprofitable, given the level of illness)? Cost-sharing (eg, out of pocket costs and the infamous ‘doughnut hole’)? -- forget them as well.
2. Tax cuts to pay for healthcare? Merely politics
3. Employer-based health care insurance - Too many of us don’t fit that mold; besides want to be married to your job?
4. Insurance companies who profit when you don’t use the health services they cover and you are getting a denial for non-discretionary care? That's an oxymoron at best, an affront in any case. Is it a surprise that they market to the young and healthy? Do you think they are happy to be community rated (as opposed to experience rated)? Where do they come off denying insurance to those with preexisting conditions, anyway?
5. Healthcare’s not a privilege; it’s a right. The price of U.S. health care insurance -- more than $12K for a commodity that when you need it most, someone or something gets in your way and you have little energy to fight the system. Besides, since when is/was/shall be health care, a commodity?
6. The separation of disability from health insurance - does that make sense?
7. Health Savings Accounts are inappropriate vehicles for anyone whose health status, family needs or liquid assets make the cost prohibitive.
8. Should we not penalize those who consciously make adverse lifestyle choices -- the obese couch potatoes? The relentless smokers? Those with too many kids and little means to support them? DWIs that kill or maim? And, those who spread STDs?
9. How about the technological imperative (when the technology adds little but glimmer)?
10. The law of unintended consequences or "a stitch in time, saves nine"--what’s the down stream cost of an illness or of not being able to afford a test or a proper medicine? And, who bears that cost, that is, is it accounted for? [And, is that the proximate reason why HMOs don’t invest in their patients’ health maintenance?] What about he cost of caring for sick family members? Prohibitive out of pocket costs? The underinvestment in mental health care or preventive medicine? -- all sore points that are poorly or not at all addressed in any healthcare proposal to come down the pike.