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Risk

Posted Apr 02 2014 9:11pm

Stanley Feld M.D.,FACP,MACE

The state insurance regulators are supposed to protect consumers again abuses by the healthcare insurance companies. Many State Boards of Insurance have not administered their responsibility effectively.   

The federal government put out for bid the administration of the federal programs such as Medicare, Medicaid and the VA systems. It has not done this job very effectively. There has been much fraud and abuse in this system.

Somehow the healthcare insurance industry has talked these regulators into permitting the insurance industry to take 40% of the healthcare premiums off the top.

Obamacare mandated a Medical Loss ratio of 80/20. Eighty percent of the premium dollars are to be spent on direct patient care and 20% can be held back for expenses and profit.

However, the regulatory agencies have permitted an additional 20% of expenses to be written off as direct patient care.

The details of these expenses are so complex that few can understand the direct patient care expenses.

Recently, we have heard that if the insurance demographic mix is inappropriate, provisions are written into Obamacare that permit the healthcare insurance industry to achieve a profit.

If it does not reach its profit goal, Obamacare will bail out the healthcare industry. The traditional media has not paid much attention to this provision.

High deductible healthcare plans are very attractive to people who are at low risk for disease. If an unforeseen illness occurs they could buy an inexpensive first dollar coverage plan.

Obamacare is slowly eliminating those plans.

President Obama is trying to drive everyone into a health insurance exchange plan in the name of creating competition among insurance companies. His administration is also picking preferred insurance companies to sell these plans state by state.

President Obama is also choosing hospitals to participate in the state insurance plans’ networks. In some states the insurance company choices are thin to nonexistent. An example is New Hampshire with one healthcare insurance vendor. The same state has eliminated two thirds of hospitals and physicians eligible to participate in the health insurance exchanges.

Some of the best hospitals and clinics are not participating in the exchanges. In some cases reimbursement is too low.

Obamacare’s excuse is this will eliminate the facilities that overcharge and eliminate the risk of cost overruns.

All this keeps the healthcare insurance industry in charge of the risk. In order to reduce costs patients have to be motivated to avoid illness and be responsible for their own health and healthcare dollars.

This concept is not embodied in Obamacare. The government and the healthcare insurance industry will make the healthcare decisions for consumers. 

Another big idea included in Obamacare is the concept of shifting risk from the government and the healthcare insurance industry to physicians and consumers.

Accountable Care Organizations (ACOs) are supposed to be set up to integrate care. If an organization does better than average or better than the year before it gets to share the cost savings with the government. If it does worse it receives less money.

If it improves one year there is little room for improvement the next year. Its share will be less. It is self-defeating motivation.

A major problem is physicians can only control certain risks. Many risks depend on patients’ ability or willingness to adhere to the care recommended. Eighty percent of the healthcare dollars for any chronic disease is spent on treating the complications of the chronic diseases.

There are no provisions for risk weighting payments to physicians for disease complications resulting from patients’ lack of adherence to treatment. The more complications of a chronic disease patients have the greater the risk of higher costs that cannot be controlled.

Severe complications and decreased adherence increases the risk of higher medical costs.

ACO’s bundle payments for disease entities. One size does not fix all.

ICM-10 increases the number of diagnostic and treatment codes from 18,00 to 68,000 codes. This increases the complexity of coding. It is an opening for fraudulent coding. It also can result in the possibility of over or under coding as well as miscoding.  It will take years to learn and years to get right.

If physicians miscode those physicians will not get paid by the government or the insurance industry.

This brings us to the next barrier to the success of Obamacare. There is a constant threat of penalty to consumers and physicians. There should be a constant incentive to receive a monetary reward.

Consumers have higher deductible and higher premiums with Obamacare. Many middle class people cannot afford the higher premiums and higher deductibles. The government subsidizes the healthcare insurance for the poor.

The funding for these subsidies is unclear. It will probably result in yet another tax increase for the middle class. The poor are exempt from income tax payments.

I s this redistribution of wealth?

There are no incentives for anyone to stay healthy and avoid unnecessary and expensive physician visits and diagnostic testing.

There is no tort reform in Obamacare. The lack of tort reform increases the need for excess testing in order to avoid lawsuits for physicians not doing a complete workup.

Physicians and hospital systems have never figured out how to calculate Health Maintenance Organizations’ reimbursement. Physicians and hospitals lost a great deal of money trying to price HMOs bundled payments.

Physicians and hospital systems know less about pricing bundled payments for ACOs. They have no control over consumer usage even though they are being asked to cover the risk. They are hesitant to assume risk.

This is part of the reason ACO participation has been so poor as I pointed out in my last blog.

 It is Insurance coverage (public or private) that should cover and assume the risk. This is the definition of insurance. It is not in the physicians power to control risk nor should it be his responsibility.

It is the responsibility of the State Insurance Boards to price that risk for the healthcare insurance industry wisely. These boards should provide a wide range of products to fit consumers needs. The consumer should have the freedom to choose.

Federal and State officials should not accept the insurance industry’s word.

It is unacceptable.    

The opinions expressed in the blog “Repairing The Healthcare System” are, mine and mine alone

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