Rowdy Townhalls Focus on Healthcare

Saturday, I went to a townhall meeting by my congressman, Brad Sherman.  Nearly all of the 1300 people who showed up (his largest townhall ever) were obvious supporters of Sherman.  Of course in a district of 771,000 people, there were bound to be some non-supporters as well.  This vocal minority made for some very contentious moments (as to be expected).

The more passionate elements of the crowd were not focused on Trump, his cabinet, or even Russia. They were focused on healthcare.  The majority of signs being waived had slogans like: "HEALTHCARE FOR ALL", "FIGHT REPEAL AND REPLACE", "YES TO SINGLE PAYER" and "SUPPORT SB-562" (a single-payer bill in the California Senate).

As stated in Modern Healthcare

"In crowded town halls around the country, congressional Republicans had many eye-opening encounters this past week with Americans who voiced fear and anger over the prospect that they will lose their health insurance if the Affordable Care Act is repealed." 

The feeling of uncertainty is not limited to just Republicans, of course, and Brad Sherman's townhall is a testament to the general concern that people have about their healthcare.  With threats of global war, human rights violations, and terrorism (domestic and abroad), health insurance is probably on the top of everyone's list of worries.

All these other threats are incredibly important and vital problems to solve.  But when you are sick and can't afford treatment, somehow you don't worry about illegal immigration as much.

There is a vast divide between the two sides on the best approach to health insurance.  Let's not forget that we have but a single goal regardless of who you voted for.  We all want to know that when we or a loved one gets sick, we have access to proper care without the fear of going bankrupt.

Higher Deductibles - The Black Hole of Coverage

In a recent post on Health Leaders Media, there was an interesting argument presented that these higher deductibles will backfire on insurers.  The idea is that as deductibles continue to climb, people will feel that they are not really benefiting from having insurance policies.  They will make decisions on health care based more and more on financial impact as opposed to health.  This in turn will force many people to not spend money on less critical health conditions. 

"The problem with high deductible health plans is you are shifting the decision making to the least informed, which is the consumer," says [Mike Ducote, chief operating officer of CirraGroup, a company that assists consumers with healthcare debt resolution]. "We're having to make these calls purely based on the dollars. I don't think that's a good recipe for success."

What does this mean?  Avoiding treatment for less severe medical issues can often lead to serious complications requiring even more extensive treatment.  So instead of reducing the costs of medical spending in our country by catching and treating illnesses at an early stage, higher deductibles are actually contributing to higher medical costs.

This is a nasty Catch-22.  To bring insurance costs down, deductibles continue to rise.  But these could create higher medical spending by discouraging early treatment.  Such higher spending will make the insurance companies look to contain their costs.

How do they do that? Increase deductibles and raise premiums.

Mandated coverage under the ACA was supposed to fix this due to the penalties for not having coverage.  The calculation can be complicated.  But in some cases, as detailed here, it can be cheaper to pay the penalty than it is to have coverage with a high deductible.  The number of such cases is likely to increase as the deductibles continue to rise.  If so, then this would create the very black hole of health insurance that everyone is trying to avoid.  

So, when deductibles are so high that it feels like a person doesn't have any coverage at all, then the consumer demand for such policies will decrease.  Higher deductibles may seem like a viable cost containment strategy when, in fact, it could backfire on insurers in a big way.

I'm sure most people would consider it a victory if deductibles and premiums just stayed where they are without any increases.  It would be more of a victory to consumers if deductibles fell even if premiums rose.  Hopefully there will be some smart people at the insurance companies to realize the diminishing returns of higher and higher deductibles.

Pre-Existing Conditions...Pre-Obamacare. Remember Them?

I am so f***ing tired of politicians claiming that Obamacare is an obvious disaster and failure without explaining why they think so.  It's true that it's not perfect.  Insurance rates and deductibles are rising.  Networks of available doctors are shrinking.  But how would you feel if you had type 2 diabetes and couldn't get coverage at all!

Doesn't anyone remember what it was like to have insurance companies tell you that your pre-existing conditions were being excluded from your policy for 1-2 years or that they were charging you double or, worse yet, they were denying issuing a policy entirely?

I have pre-existing medical conditions.  My family has them.  In fact, most everyone I know has one or more health issues.  Here are some sobering stats:

• ~50% of all Americans have one chronic condition
• 1 in 4 Americans have two or more chronic conditions
• 7 out of 10 deaths in the U.S. in 2010 were due to a chronic condition

Source: CDC

Change the word "chronic" to "pre-existing" and you'll see just how big an issue this is.

I suspect that most of the ACA critics are covered under group policies that did not permit  pre-existing conditions to prejudice rates or coverage.  Certainly politicians who decry ACA are all covered under such policies.  I wonder how they would feel if they were forced to carry individual policies (not group) and were at risk for such exclusions.

So if the ACA is repealed, some politicians believe that increased competition between insurance companies will prevent pre-existing exclusions from returning.  Without mandated coverage, I highly doubt that.  There was plenty of competition before the ACA  and that did nothing to prevent these exclusions.

So try to remember what it was like before the ACA only 6 years ago!  Then see if your finances could survive an emergency treatment for pre-existing condition (after you have been denied coverage) or not.

I can already hear my critics saying that the rising deductibles are like being denied coverage.  But even the higher deductibles that ACA plans now have will be a pittance if you have to have any type of surgery for a chronic condition that was denied coverage.  

So, please remember.

U.S. Census Report on Health Insurance

In case you have a lot of free time, the U.S. Census just issued a 44 page report on the state of health insurance in the U.S. for 2015.   This report does not attempt to suggest a cause/effect of the decline in uninsured.  It's "just the facts".  But the facts are fascinating.  You can download a link here:

U.S. Census Report

Key takeaways (in my opinion):

• Percent of Uninsured Americans fell 1.3% to an all-time low

• 29.1 million Americans are uninsured (9.1%) (another all-time low)
• Private insurance continues to be the primary source of health insurance over public insurance (e.g., Medicaid, Medicare, etc.)  67.2% vs. 37.1%
• The breakdown of the types of insurance for 2015 was:

• 28.9 % of noncitizen adults were uninsured.  This is ~2.5x greater than uninsured American citizens (10.8 %) 

Walmart Decides to Increase Their Pricing and Reduce Their Sales Force

Would Walmart actually thrive if they made their customers pay more and made it less convenient to do so?  Certainly not!  Walmart's success (as do most retailers and businesses) derives from keeping their customers happy.  Walmart does this by offering a wide variety of products at the lowest prices possible and making it easy for customers to buy them.  Their stock price rises and falls based on per customer loyalty and satisfaction which ultimately drive all other financial factors.  Walmart wouldn't survive if they made the radical changes suggested by this headline.

Health insurance companies are perhaps the only industry where consumer satisfaction is not the driving force for success.  Not surprising, the American Consumer Satisfaction Index published a study last year (ACSI Study 2015) showing that consumer satisfaction for health insurance companies is at a 10-year low.

It is no mystery why this is so.  Pretty much everyone is facing higher insurance costs next year with lower benefits.  Deductibles continue to rise, co-pay's increase (my ER copay went from $100 to $250), annual out of pocket maximums are getting higher...all the while, premiums just keep getting more expensive regardless of any rebates that ACA may offer.

Pay more...get less.  That's usually a formula for failure in the business world.  Not so with health insurance.  In fact that is pretty much their modus operandi.  This is why their CEO's are being rewarded with incredibly lucrative compensation packages and why insurer's profits continue to rise.

The main flaw in this equation is that we, as the insured, naively assume that our satisfaction is important to health insurance companies.  It is not.  CEO's are not striving to create happier consumers.  They are not beholden to the people paying the premiums.  Their main concern is to keep the shareholder's happy.   

And apparently, they are doing quite a good job at that.  Unfortunately, it's at our expense.

The Costs of Not Going to the Gym ($500 Billion)

Most of us know that we should be eating healthier and exercising more.  It's not a complicated formula.  And yet, the statistics on preventable illnesses are staggering.  Here's just a small sampling:

• Nearly 10% of the US population has diabetes (~30million)
• Approximately 1.4 million new cases of diabetes reported annually
• 30% of all Americans are obese
• Obesity related illnesses account for ~$200b per year in health costs
• 17% of all Americans over 18 are tobacco smokers
• Another 16 million Americans live with a smoker.
• Smoking causes $300b a year in health costs and lost productivity
• Cigarette smoking is responsible for 480,000 deaths per year and is the leading source of preventable deaths

(sources:  American Diabetes Association and CDC) 

The statistics on exercising are not very good either:

• 191 million Americans (60%) don't get the recommended amount of weekly exercise
• 25% don't exercise at all (79 million people)
• # of gyms in the U.S.:  30,500
• # of Americans with gym memberships:  58million
• % that don't use their memberships:  67%

(sources:  CDC and StatisticBrain) 

The average cost of a gym membership is about $60 per month.  That's $720 per year.  Many diabetes medicines cost far more than this.

So let's generously assume that there are ~85million people in the U.S. (27%) with a preventable illness.  If the government spent $720 per person on a gym membership for each of them, the cost would be $61billion per year.  

So the big question is:  could this $61b reduce health care spending by more than that amount?  If ~$500b is being spent on preventable illnesses, that means that it would have to result in 12.2% savings.

I haven't found any conclusive studies one way or the other.  But, personally speaking, I prefer the idea of spending $61b on gym memberships as opposed to the same amount on diabetes medicine.  

Of course, the big problem is how to encourage (or require) that people use their gym memberships?  Any solution would certainly be very controversial (just ask any ACA opponent about the mandate).

The Golden Triangle of Health Care

I am a big fan of inspirational quotes.  I even have a few of my own; some of them are even original.  One of them (and I don't think I invented it) is:  

"If money can solve it, it's not a problem."  

 [My Mom has a great variation that she swears that I did create:  "If there is a solution, then it's not a problem."  I think she just misquoted me.  But I like her version better than mine.  So, I'll claim ownership.]  

In the health care system, a lot of people and a lot of companies are spending a lot of money to solve its problems. It's not working.

Why?  It's the "Golden Triangle".  It looks like this:

Simply put, the Golden Triangle consists of three options:  Good, Fast, and Cheap.  You get to pick any two.  It often refers to the world of design.  But it can be applied to practically any service being rendered ranging from car repair to restaurants.  Of course, it's not unusual to want all three corners of this triangle. Sometimes you can actually get it.  Usually, not.  More often you get what you paid for.

The major difference between applying the Golden Triangle to health care as opposed to graphic design is that  picking only two corners can end up with undesirable, and sometimes, deadly results.  Fast and inexpensive care would certainly not substitute for getting proper treatment. Nor would excellent care that you could afford but had to wait weeks to receive it.    And yet, when we are sick, we want to receive quality care in a reasonable amount of time and not worry about losing one's savings (or worse) in the process.  These are not unreasonable expectations in my opinion.

Most of the time, patients are more concerned with good and fast.  That is, work on the health issue as quickly and as effectively as possible. Inevitably, that leads to sticker shock when the bill arrives.

Unfortunately, too often, we are only getting one corner of this triangle.  And sometimes, patients get none of the corners.  The latter is often true for challenged populations such as uninsured and low-income patients.  

If you were only allowed two corners of the Golden Triangle for your health care, which ones would you choose?  This certainly will vary from person to person.  And that's why it has been so difficult to make systemic improvements in the health care system.  

Can we solve all three issues at once?  Perhaps not.  So, which corner(s) would you address?  And how would you justify ignoring the other corner(s)?  This is a very difficult decision which providers are wrestling with every day.  

Please let me know your preferred corner.

Don't Cry For Me Aetna (and UnitedCare and Anthem)!

(Update:  Aetna may have pulled out of these states because they didn't get Federal approval for their merger with Humana.  See Aetna's DOJ Letter)


Waaah!  Health insurers are crying.  They are losing money and can't carry on insuring all of the new ACA enrollees.  Aetna just announced that it was pulling out of 11 states where it offers ACA plans to individuals due to fabulous losses it incurred: $430million last year.  (CNN)  Other insurers have claimed similar or greater losses.  It kind of makes you feel sad for their financial burden. (Note: Aetna pulled out of California, my home state, after 2014 leaving me high and dry.)

I guess that's why Aetna's CEO saw a paltry pay raise of only $2.2m last year ($15.1m in 2014 to $17.3m in 2015 -  WJS).  UnitedHealth's CEO really suffered when he earned $66m in 2014, a belt-tightening increase of $42m from 2013 - FierceHealthCare).

It's true that a lot of insurers got slammed with a lot of new enrollees incurring more health services than expected.  Perhaps the most controversial part of the ACA was the mandate provision forcing people to buy health insurance.  The reasoning was simple.  How could insurers afford to get rid of all of those fancy restrictions on benefits (e.g., life time caps, pre-existing conditions, etc.) if they only had sick clients.  They needed healthy clients to pay premiums to make up the difference.  

As it turns out, many of the new ACA enrollees are not as healthy as anticipated.  They wound up (heaven forbid) actually using their health insurance policies for (wait for it)...health care. And now insurers want to stop offering individual policies because they claim that they are bleeding money.

A cursory examination of their woe-is-me claims shows that a loss in the individual health policy business is not actually making much of a dent in the overall profitability of major insurers:

• UnitedHealth's 2015 net profit: $5.8B (up from $5.62B)  
• Aetna's 2015 net profit:  $2.4B (up from $2B)
• Cigna's 2015 net profit: $2.09B (down from $2.1B 2014)
• Humana's 2015 net profit:  $2.4B (up from $2.2B)

(Note:  all figures taken from the company's own annual financial statements)

Remember, these figures have already accounted for the losses from ACA policies.  So not one of these companies showed a loss due to their ACA business.  They simply made less profit.  Aetna's profit actually increased despite their ACA losses.  

So if the individual policy business is tanking, then where is this profit coming from.  Turns out that most of these profits are coming from you, the taxpayer. Half, or even more, of these profits derive from Medicare, Medicaid and other government related policies. In other words, these companies are profiting from your tax dollars while making it harder for individuals to become insured by them under the ACA exchanges.

That's like paying the mechanic to fix your car and then someone else get's to drive it.  It's not right.

(Stay tuned...Are the insurers really spending more on patients?)