"Shifting the Health Cost Burden"

On 9/3/2010 The New York Times editorial page discussed shifting the health cost burden.  The editorial noted that 2010 health care premiums went up a "modest" 3% for family plans but that workers' shares soared by 14% and expressed what I interpret as "unhappiness"about the cost shift from employers to workers in the form of increased workers' contributions, reduced benefits, increasing deductibles and increasing copayments.

Employers don't take these actions in a vacuum. Insurers structure their plans and premiums to encourage employers to remain with them by manipulating benefits, deductibles and copayments to remain competitive.  Struggling employers, including those who "shop," have few real choices, as health insurance underwriting restricts insurance company willingness to accept high risk business, particularly business which involves demonstrably sick or older employees.  Paradoxically, the longer an employer stays with an insurer, the greater the risk that long-term employees and employees loyal to the employer because of personal or family illness insurability issues, drive up health insurance risk and the premiums. Perhaps health reform will change this picture, but perhaps not.

The Times said nothing about reducible costs of health care, such as (1) eliminating large duplicative professional, business and government bureaucracies which officiously pass paper (and digital data) back and forth and spend endless hours in defining policies and procedures intended to trace, identify, categorize and restrict reduce health services utilization while increasing administrative overhead (2) reducing technology barriers, such as requiring physicians to be data entry clerks for office visits rather than use their time and skills evaluating, diagnosing and treating their patients, (3) finding ways to increase and maintain the skills  and efficiency of all categories of health care professionals free of contributions from pharmaceutical companies and other vendors, (4) providing appropriate subsidies, expertise and legal authority to government and professional entities (including the FDA, Department of Agriculture among others) active in the public health arena, (4) eliminating subsidies which make our citizens fat, physically  inactive and ignorant of how to recognize and deal with their own health needs, and (5) admitting that health care reform focuses on access to and financing of  health care and not the extent and quality of appropriate and necessary health services.

It's easy to complain about the cost shift burden. But focusing on the reasons for excessive health care costs will step on many vested interest toes. Will true reform even drive down some of the high-flying health invested mutual funds?

Health Insurers, HMOs and Automotive History

After World War II, a Democratic presidential economic advisor observed that mergers and acquisitions in the auto industry left concentrated power in fewer companies (GM, Ford and Chrysler) which made them much easier for the government to control. Government controlled and regulated them, competitors have appeared, and the big three are struggling to survive.

We have seen merger and acquisition after merger and acquisition in the health insurance industry with relatively few major players still standing. Well-paid industry executives and advisors forgot to study industrial history, and their own vulnerability, when they reduced the number of viable insurers and HMOs. As they hungrily gobbled each other up, they did not recognize they were committing industrial suicide. If the election in November of 2008 results in a Democratic victory, the health insurance industry is ripe, as never before, for much tougher government control and regulation. And who is going to speak in behalf of the health insurance industry? Certainly not employers and unions who have seen unfilled promises of cost control and more appropriate provision of health care to their employees. Certainly not religious organizations and small governmental entities which are struggling to provide care to the uninsured and poor. Certainly not the public which readily expresses its anger and skepticism (go to a movie and hear the audience snicker when the "HMO" is used disparagingly). Not the physicians and other health care providers who have seen the quality of the service that they are paid to provide slide under the financial pressure of health insurers which cost-shift their way out paying for reasonably expected and necessary health services.

The industry insurance/ppo industry has set itself up for control by government on government's terms (regulators do not make fancy salaries and are not particularly sympathetic to those who do) and has, through its expression of greed, has made itself as vulnerable - as GM, Ford and Chrysler were in post-war America. Oh, if they had only paid attention to history!