Mandated Benefits - A Time to Reassess?

As Illinois seeks to rebuild its business economy and dig out of a $13 billion dollar budget deficit, mandated health benefits are a place to look. Visit http://www.insurance.illinois.gov/healthinsurance/mandated_benefits.pdf to learn about our State’s thirty-seven mandatory benefits, some of which became effective as the economy was tanking. These benefit mandates put financial pressure on State businesses and drive up the social burden for the overall cost of healthcare. Illinois Medicaid is a comprehensive health plan and, as such, has an even broader array of benefits, offerings, and coverages. Benefit redesign is worth a hard look as attempts are made to determine what society at large should be covering for each other, versus what should be the financial burden of the individual or family unit.


To pick on just a couple examples, infertility coverage rises near the top for me. My wife and I were beneficiaries of infertility benefits for two of our children. Wanting children and not being able to have them has many painful and emotional ramifications for couples and can wreck a marriage for some. That said, the average cost of one person entering treatment for IVF, GIFT, and ZIFT, runs about $35,000 per year. Because older Moms are more likely to receive the benefit and are more likely to give birth prematurely, there is the additional cost of neonatal care associated with growing and feeding a premature infant, further increasing the social burden. When should the cost of these wonderful benefits be supported as a pooled resource of either tax dollars or employer contributions, vs. a direct cost to the individual? That’s the question not being asked, even with benefits that are not even close to a life or death issue for the beneficiary.

Our State has both a mandated “serious mental illness” benefit and a separate benefit requiring HMO’s to cover inpatient and outpatient mental health services as minor as short-term counseling with a psychologist. While not necessarily a big cost item in the overall cost structure of health care, the same question of who should pay what, emerges. Autism spectrum disorders, a long list of disorders resulting in a wide range of disabilities from very mild to severe, has a benefit category of its own for individuals under age 21, with a benefit up to $36,000 per year. Benefit design and unit cost are the primary drivers of over 85% of health care costs. The matter of what society pays for and what the individual pays for is a serious matter of consideration.

Recently I read about the practice of embryo adoption due partly to the large number of frozen embryos which otherwise are likely to be wasted. What a great potential solution for a childless couple who want the experience pregnancy provides. And, since adoption costs are not yet a mandated benefit to be covered by insurance carriers, no drain on the social insurance fund as well. Then the question surfaced, “Will the insurance carrier pay for pre-implantation genetic testing so I can be assured no major malady awaits”? The best answer for today may be, “The non-implanted embryo is not yet a member”.

Health care costs are very high and are arguably the biggest challenge we have is bringing cost under control. Many of today’s costs are created by discretionary decisions which are not critical to prolonging life nor critical to reducing functional disabilities that make a workforce more productive. Through mandated benefit designs funded by large social pools of money, our society has been moving toward a socialized system for decades. The time has come to reverse the trend, rebalancing by redefining what costs are supported by the individual, vs. what costs are supported by the social pool. Rationing is not a choice. Rationing is a reality handled most equitably through balancing what should be the cost to the individual vs. what should be a cost against a social fund. Many socialized systems around the world are confronting The Tragedy of the Commons. Whenever there is unrestricted demand for a shared finite resource, ultimately the resource is doomed through rational over-exploitation. The community and the social pool of resources ultimately suffer, resulting in a loss of the resource to all. Today, Congress seems to be moving toward a solution where payment denials occur for poor outcomes allowing for more benefits to become available for others. As we’ve seen through analysis by the CBO, some projections can be made to look favorable for bending the overall cost trends, at least in the short term. But without a focus on the basic question of who pays for what, particularly around discretionary services which often find their way into mandated benefit regulations, less service, not more, will be the ultimate outcome. Thoughts?

Congress Can Help - But How?

At this point, thousands of pages of legislation have been devoted to reforming America's health care system. Though, as stated previously, only very recently has there been a primary shift away from access in favor of a focus on cost. Tomorrow, March 1st, Medicare is scheduled to reduce physician payments by 21%. Claims are going to be held for a couple of weeks to allow Congress an opportunity to enact another solution. Meanwhile, Doctors are being asked to refrain from dropping out of the Medicare program, on the hope of a fix. While all of this is going on, the American people have little clue to the real issue, the issue of price.


Free-market economics is predicated on the idea that people make informed choices about what they consume through prices, which signal the value of goods and services. Unlike the markets for books, cars, groceries and other goods, pricing for health care procedures is done behind the scenes by insurance companies, medical providers and the government.

Doctors, hospitals, medical device manufacturers, and pharmaceutical houses determine "list" prices, but hardly anyone pays those fees. Rather, they pay their portion of a rate negotiated by their provider and insurer. If the insurer is Medicare or Medicaid, government sets the rate.

Patients typically have little idea how much medical stuff actually cost and how much their insurance is willing to pay until they receive the bill in the mail. Doctors and hospitals don't have to compete to provide good care cheaply. While government is able to simply set price, private insurers and provider systems alike are in a race toward domination to market power in order to negotiate a “best price”.

Actuaries suggest the physician 21% payment cut in Medicare will cause physicians to want at least a 4% increase in payments for non-Medicare services in order to stay at break-even. But what the American people are missing in all of this is the fact that their precious health care access and cost is being controlled at a level way beyond their own ability to have an impact. There is a lack of transparency regarding real prices, a lack of accountability of providers to patients, and a lack of accountability of patients to seek out good values from bad.

This lack of transparency increases costs for those with and without insurance, particularly if you have insurance with large deductibles, co-payments, and co-insurance responsibilities. Expensive diagnostics, like MRI’s, CT scans, and cardiac caths, are lucrative for doctors and comforting for insured patients, who can ignore much of the high costs that ultimately get redistributed through higher premiums. Getting hit with a co-payment, a deductible, or a co-insurance payment does little to cause most patients to really ask the tough questions needed for market forces to have the desired impact.

Can Congress fix any of this? To an extent. Consumer surveys could be conducted and results posted by region or by provider number, looking for the best examples of value. Best practice guidelines could drive government benefit design, rather than only unit price, allowing providers to gain consent and balance bill the member for additional or substitute services at variance to the standard benefit design. Provider information could be made available to the consumer as to the frequency and under what benefit areas providers are most likely to request payment for services that don’t align with published guidelines. For example, older adults with expanding abdominal aneurysms are recommended to be followed every 6 months with either CT scans or ultrasound studies once the aneurysm is 4.0 cm in size. Some doctors routinely want to follow patients every 3 months, and some of these same physicians insist on more expensive MRI studies, when often less expensive ultrasound studies would suffice. Medicare can certainly make the consumers aware by refusing to pay for studies every 3 months and refusing to pay for MRI scans. However, if doctors and patients agree more frequent studies are warranted, let the member pay the difference and engage in the needed conversations with their providers, a necessary element of market force. This type of information will eventually empower the consumer and will push providers toward more standardized practices and prices.

There is no real hope of having market forces play a role in controlling health care costs until the market is empowered to act. In the early days of Medicine, before large third party government and private payers, market forces were in play despite the shortage of physicians and hospitals. While third-party payment schemes have played a huge role in the overall growth and development of the health care economy, it has gone too far in removing the consumer from what is an essential element of their own ability to function independently. Health care reform is about the prices and costs we pay, first and foremost. Empowerment of the individual consumer with information and personal responsibility is the path toward creating a solution that benefits the greatest number of Americans, at the highest value. Congress can help.

Maybe a New Beginning for Health Reform?

The Wall Street Journal Weekend Interview (Feb. 6-7) with Angela Braly, by Joseph Rago, was well done. Titled “A Wasted Opportunity”, Rago interviews WellPoint’s CEO on ObamaCare’s mistakes and how to pick up the political pieces. Mrs. Braly did a nice job outlining the challenge as well as the path to reform in rather simple pragmatic terms. The salient points to my reading were as follows:

1. For an insurance pool to work effectively, it requires everyone to be in the pool, not opting in only when they get sick.

2. Government intervention and regulation of health care has added cost and lowered service. A better alternative to central insurance planning is public-private partnerships to create insurance pools for those at high risk.

3. The market clout of doctors and hospitals is making it increasingly difficult to contain health costs and the health care market is structured in such a way the providers don’t have a reason to control cost. The solution is to “reintroduce the consumer to the health care equation” and “insurers…to create value.”

The insurance industry has lots of data with which the “aligned” consumer can make prudent purchasing choices. Opening the insurance industry data to more transparency around price and outcome seems an important consideration. And when coupled with more reasonable first dollar deductibles, co-insurance, and co-payment opportunities to help drive consumer choice, one would expect the provider community to respond with more information regarding quality outcomes and actual experience with key goods and services. It is a mistake to entitle the consumer as envisioned under the Obama plan and standardize benefits while controlling premium price. Rather, the consumer needs to be empowered with information and economically aligned to help drive better value.

As commented on in earlier blogs, Mrs. Braly again reminds the reader of the mistake Obama made in making his case about health insurance reform exclusively. “Confiscating the 2009 profits of the entire insurance industry would pay for only two days of U.S. health care.” When most of the cost of health care is being paid to doctors, hospitals, suppliers, drug and device manufacturers, the question is how to create value and eliminate potentially avoidable costs.

Maybe going forward will represent a new beginning for Health Reform? If employers continue to push first dollar coverage to employees and insurance companies partner with information regarding price transparency, this could be a good start. Now we need the inefficient and poorly run government programs comprising almost fifty percent of the health care spending in the U.S. to follow along, making most pay something, to be engaged. That, along with a public-private partnership to negotiate rather than set provider fees, could help reform the system in ways a long-term problem could be better solved and supported. Reform is needed, just not the way Obama envisioned!

How Do We Bring Better Value to Seniors?

In the 2000 census the Medicare-eligible U.S. population totaled 35.1 million. By 2030 that same population is projected to grow to 69.7 million, and by 2050 to 81.9 million. The issues of improved health and longevity are further changing the equation. In the final decade of life, Medicare costs rise dramatically. The high costs associated with acute care and morbidity will simply be postponed to later in life as people live longer. Thus, there will be more elderly using nonacute Medicare services for longer periods. Most experts believe there is currently excess hospital bed capacity in the US adversely influencing current practice trends and holding back progress toward more efficient models of care. That said, bed shortages are projected by 2020 unless there are significant achievements made to provide medical care in outpatient settings, or build more beds at a projected cost now exceeding $100,000 per bed.

As one ages, the number of different disease states mount quickly. Today, Medicare members admitted to the hospital have a 71% chance of readmission within 12 months. There is a 19.6% chance of readmission within 30 days, and a 34% chance within 90. When patients are readmitted, follow-up care is found to be lacking in the previous 30 day period exactly half the time. And the average Medicare patient today has 5 chronic diseases, see 12 physicians, and have prescriptions for 50 different drugs each year. Most Medicare members will have one hospitalization during any 12 month benefit period. And the per capita cost in 2008 was $7,804 per Medicare member.

These numbers speak clearly for a need to have someone working alongside each senior to help coordinate the care associated with such mounting medical complexity. The incidence of depression is approximately 25% at any point in time with elderly members. And when present, members normally capable of managing their complex array of medications simply fall apart until the depression is treated or subsides. Furthermore,
the interaction between and among treatments is profound in elderly patients. For example, only 12% of diabetics only have diabetes. The remaining patients have varying degrees of renal insufficiency, heart disease, high blood pressure, cholesterol problems, and more. Medications used to treat the heart often worsen the renal problems, and vice versa. Specialists focused on single disease management often overload the patients with a total number of medications, causing difficult if not impossible management challenges. The complexity of it all results in poor compliance, interactions among medications, and more complications. It is a vicious cycle.

Today’s best practice calls for a careful discharge plan that encompasses medication review and simplification, patient education, and follow-up within one day of a patient going home. We botch this regularly in most hospitals, according to patient surveys post discharge. There needs to be another follow-up within one week of discharge, and a second follow-up within two weeks. The care transition coaches (if they even exist) are trained to identify red flags and work closely with each discharged patient depending on the particulars of each patient. Medical care follow-up with the primary physician coordinating the overall care is appropriate within the first week of discharge, assuming the primary care physicians can handle the case load. Complex patient situations often require a team approach consisting of help from mid-level providers, social work, Doctors of pharmacy, and high risk nurse educators. Today these resources are simply not sufficiently available to patients nor physician offices. The primary physician offices don't have the infrastructure to handle the case load. And either regular following of the patient within their home, or in an office setting is missed.

Every system is designed to perfectly deliver the results we see. To shift the way we currently care for our elderly members of society will require a careful look and coordinated team effort. The value equation is quality plus service divided by cost. The care paradigm required to better serve our elderly is also costly, but perhaps less so than the current paradigm. Given the consistent patient survey results of how much people hate to be hospitalized, certainly the quality and service should be greatly enhanced, even if cost remains high. As hospitals loose reimbursement for readmitted patients, more interest in models aimed at keeping patients home will be employed.  As with most complex problems, the solution usually depends on a champion.  Who will champion the effort required?  Who will coordinate?  Is the solution the primary medical home?  What should it look like?  Thanks for your thoughts.

Surely the Numbers Never Lie, Except When They Do?

This morning’s WSJ ‘Letters to the Editor’ used this heading for several letters submitted regarding the January 14th op-ed by Michael Boskin, “Don’t Like the Numbers? Change ‘Em.” Art Davis of Richmond wrote, “Resolving inequities through a redistribution of income was, and is, the centerpiece of the Obama administration’s agenda. A magnanimous mission of fairness explains why the Obama team is willing to play fast and loose with numbers….”

It certainly does seem impossible anymore to trust data. When the collecting and reporting is in the hands of those likely to gain from the results, most of us are suspect. Like when a pharmacy company sponsors research on its own drug and compares against placebo rather than a competitors product that might be much less expensive. But even some of the long-standing research foundations without a clearly known conflict of interest have known biases. And some of us know there is a history of large media blitzes for some results while either not funding or allowing other funded works to slip quietly into oblivion when in conflict with their underlying mission. We’re spending more time and energy today than ever before collecting and reporting information, often under the mandate of expensive regulatory requirements. And the data often reflects complex research methodologies very difficult to explain but easily used to mislead the end user. Our elected officials and the private sector alike are guilty. The numbers lie because the people behind the numbers lie.

Health Care is in love with “Best Practices”. The concept is that doing the right thing at the right time in the right way will improve quality and lower cost. In a recent interview with a well trained new employee of one of our local delivery systems, I asked if his employer exemplified “Best Practices”. He looked, smiled, and said, “I’ve learned to always just say ‘yes’.” “I say ‘yes’ to any request of a referring physician. I say ‘yes’ to anyone asking for consultation. I say ‘yes’ to anyone asking me to admit a patient. Our system has so many people collecting data and defining policy for what is ‘best’, I would create misery for myself, certainly lower my income, and possibly loose my job if I dared to say ‘no’.” He went on with his elaboration and we both concluded that the concept of ‘best practice’ is easy but the creation of best practices is fraught with all human shortcomings, not the least of which is organizational self interest. And yes, the people behind the numbers lie and forget their primary purpose of providing patient-centered value.

Before our society became so enamored with being smart, before we moved into the ‘age of a knowledge-based economy’, common-sense was the rule of the day. Common-sense was the mode of assessment, the framework of analysis. Formal knowledge was scarce. We explored the world using all our senses, and we made decisions accordingly and either suffered or enjoyed the consequences. The few professionally trained folks in our community were widely accepted but were expected to be there for us, during the good times and bad, fighting for our best interests. We didn’t have the same systems of quality control in place as today, but each and every person had their sense of quality and communicated throughout the community the good and bad. People lied then to but we didn’t debate numbers, we debated one another. Common-sense prevailed.

Sometimes it takes a paradoxical event like Mr. Brown’s victory in Massachusetts to bring us all back to our senses. The electorate finally saw the lies behind the numbers. The people said ‘no’ with a clear sense of conviction as to what was wrong in Washington. Hopefully this was the beginning of a major shift back to the center and recognition the common sense of the people is far more discerning than the lies behind numbers could ever fool. Maybe we’re seeing a new day for the anti-Federalists with recognition domestic policy should be decentralized to best align with the interests of our Citizens and to keep each other more accountable. A healthy society questions, examines, and uses all of its senses to judge. A healthy society recognizes knowledge is just a tool to sharpen the senses. A healthy society knows ‘Best Practices’ must always be ‘in the moment’ in order to be ‘best’, the numbers come later. And a healthy society knows that doctors who just say ‘yes’ are not the caregivers we need nor the systems of care that will bring the highest levels of patient value. Our common sense, collective or individual, must always stand in the front of every potential solution or we can always bet the numbers will lie.

What Do I Have to Compare, Not Even Cost?

Today was a bit special as I reviewed our family 2010 health benefit plan. We live in Chicago and our three children attend schools in three states other than Illinois. In short, we’re all out-of-network except that I work several days a week in East Central Illinois where our in-network benefits apply. As my employer has creatively sought solutions to the high cost of health care, my out-of-network benefit is, well, out of my pocket! As I explained the importance of getting our care in-network to my wife and one of the children, there was silence. Finally the first question, “So what is so special about those in-network doctors?” My answer, “They cost less, I think.”

I’m really quite proud of the quality of care our in-network physicians provide, but I can’t say why. Unfortunately I have nothing public to review that has meaning to me, or my family. There are no quality or patient satisfaction metrics to review unless I bring out proprietary information. There are no procedure counts by doctor should someone ask, “Doctor, how many of those have you done?” We don’t see the readmission rates, the infection rates, nor the overall cost of a likely work-up or procedure. We don’t really even know if the 20 percent in-network copayment for a colonoscopy will be less than the 50 percent out-of-network copayment somewhere else, though the odds are good that in-network services are cheaper, particularly given that big out-of-network deductible.

It is my choice to live out-of-network. And it is a matter of choice where I and the other four members in our family choose to get their medical care. As a consumer I’d like to know something about the services I’m about to choose, in-network or out. And I’d much prefer my employer contributing to my insurance costs and letting me shop around for what is best for me and my family.

To us, we regard our health care decisions as very important. We don’t really like the idea of government or employers telling us what to do. We would like more transparency from the providers so we don’t have to bug them or their business offices with questions they probably can’t easily answer. If Health Reform wants to do something for us, make the providers post their results in the open market, and post usual and customary prices. Give me the right to shop for the best insurance plan for my family, using the network of providers we believe are most convenient and of highest quality. By decentralizing (giving me the power to choose) rather than centralizing (Washington or my employer chooses) the choices, I’m empowered and accountable. And we might be able to make some deals!

Do Policy Wonks Just Need Religion?

The Latin re-ligio means to relink; to reconnect. Hence, the purpose of religion is to restore people to relationship with one another and to the Devine. As we then read the scriptures, there are several “macro-stories” centered around themes of bondage followed by liberation, exile and the journey of return, and sin and guilt followed by forgiveness. These become the stories we hear from childhood that encourage us to reflect and contemplate the message of our hearts. As Jesus upset the established order of the day with his message of unconditional love, those in positions of power could not stand the implied threats, and killed Him. The contract of the human head won over the contract of the human heart and the message of Jesus.


Social reform, as contemplated by humans, is a battle between those that have vs. those that don’t. The outcome of reform is a change in who wins and looses. Everyone does not win. The resources of supply are reallocated and consumed differently, until the supply is expanded, replaced, or depleted. In health care, we are referring to the supply of caregivers and the facilities in which those caregivers function.

The goal of expanding health benefits to all is fundamentally a supply and demand question. Cost is secondary though very important in determining marginal demand. The household demand for health care will continue to rise by most projections, regardless of the outcome of current social reform efforts. Without personal responsibility for buying the service, however, demand will become "tragic" as defined by the inability of any system to find a solution. While every system has opportunity for improving efficiency and expanding benefits by reducing waste, the path is completely independent of the agenda for typical social reform with its focus on defining a new model of rationing.

The central issue of religion is unconditional acceptance for the human condition. If our policy wonks had religion, the primary focus would be on structures to better meet "real" demand. This would lead to a focus on educating more people as caregivers. We would be looking at ways of redistributing caregivers to medically underserved areas through incentive structures. And we would be focusing delivery system performance on best practices with education to the average citizen as well as incentives to the delivery system. The concept of social reform Jesus preached was not a new model of winners’ and losers’. Everyone was a winner! Meeting the unmet needs of all will require a very different contract with the American people, starting with a focus on our legal system structures that impede delivery of best practice services, and ending with assuring an adequately qualified workforce. Then and only then, can America stand together and stand strong. Thoughts?