The DMCB Enters the Health Care Affordability Model Debate (and ponders the role of health insurance in controlling costs)

There's been considerable bloggery over Robert Laszewski’s post on how to control health care costs with a ‘Health Care Affordability Model’ (HCAM). While the Disease Management Care Blog likes to imagine the inhabitants of Greater Blogistan's postings really do actually influence national policy, the DMCB thinks the bigger lesson here is what the reactions of the commentariat (here and here and here and here and here) teach us about how health insurers are generally viewed.

Briefly, Mr Laszewski would make health insurers responsible for controlling healthcare cost inflation under the threat of losing their federal tax qualification. Health plans would be obliged to meet actuarially predetermined cost targets that are based on the growth of the gross domestic product (GDP). Targets would be established by a ‘Health Care Actuarial Certification Board’ within the Department of Commerce. What’s more, there would be State ‘sub-Boards.’ He believes this can be part of any health reform legislation currently before Congress. Mr. Laszewski would like to phase this in over three years.

The DMCB agrees with the politically astute prognosis from Dr. Millenson: the likelihood that this will be included in the legislative sausage-making process is about the same as a U.S. Senator ever having to remit a co-pay for a medical service. What's important however, is that Mr. Laszewski et al's proposal is based on the idea that health plans are not only responsible for spiraling health care costs but they also somehow have control over them.

They mostly aren't and they really don’t.

Commercial health plans’ benefits, premiums, capital requirements, enrollee communications, provider networks and ultimately surpluses are all already tightly regulated by State Departments of Insurance. Most well run employer sponsored plans are run as if they are tightly regulated. While they can command large discounts from hospitals and doctors, the yeild from that strategy was used up long ago. Instead, insurers are ultimately just a means to pool risk. The price of that risk is increasing, not because of the insurers, but because of external cost drivers that include (but are not limited to) pricier technology, dysfunctional fee for service incentives and an increasing burden of chronic illness. In other words, they collect actuarially defined premiums, pay the bills and pass all the costs plus a small margin (that varies from year to year in the underwriting cycle) to the consumer.

When the DMCB says they mostly aren't responsible, that doesn't mean insurers don't have a role to play in defining a benefit that promotes quality and fulfilling a fiduciary duty to their enrollees. All that, however, is at the margins. The truth is that the managed care backlash defanged the insurers over a decade ago.

If they were given their fangs back, they’d probably turn to leveraging a selective network of high efficiency providers (tiered networks including the option of excluding hospitals and physicians that cost too much), denying payments on the basis of suspect medical necessity (for example, low risk prostate cancer, coronary stents for angina or treatments for colorectal cancer and that’s just for starters) and ‘steering’ patients toward the cheapest alternative when all else is equal (for example, medications for diabetes mellitus). Health plans can't do this today because elected representatives, regulators and the public don't trust them to do this right. We still have the Sicko hangover and insurers behaving badly. It's less a matter of comparative effectiveness research (CER) and more a matter of policy.

By the way, the DMCB thinks there are many health plans that could, in aggregate, do this right. They're generally smaller, not-for-profit with effective Boards and meaningful consumer input. They're generally not centrally-controlled public and behemoth plans. Some entity somewhere is going to have to start using the terms 'no,' 'not covered' and 'denied' in earnest. Whether it's based on CER (we 'know' drugs and exercise beat invasive heart procedures) or common sense (whoa, how much for a cancer treatment designed to extend life by 4 months?) it's going to need to happen sooner or later.

The DMCB likes to imagine Congress will get health reform right. It daydreams about the income potential of its blog. HCAM without the means to back it up shares in the same level of unreality.