Insurers in trouble for the wrong reason: Wall St. wants them to rip you off for even MORE!

There is good news and bad news regarding health/medical insurance. Let’s start with the good:

In his Substack, “Health Care Uncovered” from August 8, 2024, Wendell Potter reports that “Wall St. is disenchanted with Medicare Advantage Plans”. This is good news in the sense that it is good when anyone is disenchanted with these plans, or any aspect of the for-profit health insurance industry. Potter notes that both CVS/Aetna and CIGNA disappointed Wall St. investors with inadequate (from their point of view) profits, compared to a year ago. I also am disenchanted, but for different reasons than Wall St. I am upset that these for-profit insurers continue to rake off such a huge amount of money that was intended, by the workers and employers who paid it, to be spend on actually delivering health care. Investors are upset that these health insurers are not raking in even more.

Potter notes that Aetna president Brian Kane resigned as a result, but appropriately writes:

I am much more concerned about the health and well-being of the 4.3 million people enrolled in CVS’s MA plans and the 6.2 million in Humana’s plans. Sadly, most will find they’re trapped in a circle of hell created by the insurance industry, unable to stay in their current Medicare Advantage plan but also unable to return to traditional Medicare because of what for them will be unaffordable Medicare supplemental policies (most of which are sold by the same big insurers that sell MA plans). Seniors have six months from the date they’re eligible for Medicare to buy a supplemental (Medigap) policy to cover out-of-pocket expenses. If they’ve been enrolled in an MA plan longer than six months, they’ll have to go through medical underwriting. That means that if they’re being treated for much of anything or, God forbid, have a “preexisting condition,” they’ll have to pay an arm and a leg for Medigap policy.

A similar piece of good news is not particularly about Medicare Advantage plans, but the overall health insurance industry/scam, in a story about data-analytics firm MultiPlan (‘Revenues Down and Stock Battered as Data Firm Faces Scrutiny’, NY Times, August 16, 2024). This one is a little harder to understand than the CVS/Aetna and CIGNA stories. They are about the fact that while they are making beaucoup bucks, it is not as much as investors would like. In the MultiPlan case, we have a company that worked for insurers to get reimbursements down (that is, to pay doctors and other healthcare providers less) and made money from it. For example, if a doctor billed $100 and MultiPlan told the insurer to only pay $50, that’s more money for the insurer (and MultiPlan), and the patient can be on the hook for the other $50. (Of course, it’s never only $100, or $50.) Since they do this mainly for “out of network” care the amount that you (the patient) can get stuck with having to pay can be – a great deal. (This can happen even when you choose an “in-network” doctor and hospital, since other doctors – like in the ER, or radiology, or even the “assistant surgeon” – can be out of network. And the ambulance almost always is).

This article was a follow-up to an earlier exposé in the NY Times ‘Insurers Reap Hidden Fees by Slashing Payments. You May Get the Bill.,’ April 24, 2024, in which the amount the patient could get stuck having to pay was as much as $100,000 – or more. The good result of this first article was a lot of opprobrium aimed at MultiPlan, resulting in some insurers being more reluctant to use them (because of the bad publicity, not because they save them money; apparently they can use other less-notorious data analytics firms to save them money), so MultiPlan is in trouble as the more recent NY Times article documents. Good. I love to see them in trouble.

The bad news is that it is likely to be you and other regular people who are screwed. There is already evidence that the pressure from investors to go back to making not just great but obscene profit margins is affecting CIGNA, CVS/Aetna, and other insurers, who are denying more claims, making it even harder to get the care that you need. Potter notes that

Humana said last week it planned to jettison “a few hundred thousand” of its Medicare Advantage enrollees that have become unprofitable. CVS says it will get rid of about 10% of its MA enrollment, which would be around 430,000 of America’s seniors and disabled people.

That’s a lot of seniors who will lose their medical coverage. I have often been critical of Medicare Advantage plans (sometimes called, more accurately, Medicare Dis-Advantage), which are NOT Medicare but are private insurance plans, usually HMOs or PPOs, paid for by Medicare funds. One of the major reasons for my criticism is that because they are private insurance, they can (and often do) deny coverage for care even when the care is approved by Medicare. Recent legislation has required these MA plans to cover Medicare-approved care, but in fact they still often deny claims. Indeed, it is often the modus operandi for these companies. They may approve the claim if you appeal, but the vast majority of clients do not appeal, and probably don’t even know that they can. If fined by the Center for Medicare and Medicaid Services (CMS) it becomes a “cost of doing business.”

But the “jettisoning” of hundreds of thousands that Potter refers to illustrates another big problem with MA. As with all insurance – not just medical – companies make money by collecting premiums and paying as few claims as possible (although medical insurance companies seem to have taken this to the extreme). One effective way to do this for healthcare is to insure healthy people. They, or their (usually former, if they’re on Medicare) employer pay the premiums but they don’t cost much money in claims. And they love getting free eyeglasses and hearing aids and gym memberships, which cost the insurance companies very little. The problem is that sometimes previously healthy people get sick, and this becomes more and more common as they age. Remember that in any given year approximately 5% of the people account for about 50% of healthcare costs, but they are not necessarily the same people the next year. Some folks get better, some folks get worse, and some really sick people die. MA plans have long “encouraged” their sickest (= most costly) patients to consider switching to traditional Medicare. Now they will be more than encouraging; they’ll drop those high-cost “losers”. Maybe you.

The MultiPlan case got good (that is, bad) coverage from the original April NY Times investigation, which resulted in it losing business as reported by that newspaper in August. But the insurers will get another data analytics firm to try to screw doctors and other providers, and the patient, you, will still be caught on the hook for many of those dollars. The system is not set up to help or protect you, and it has relatively few sanctions against companies whose business model is to find any way to screw you that will make them more money, and to use that money to hire lawyers and others to find the loopholes and to pay the politicians to ensure that they are not closed too tightly.

It’s kind of like a sport where one team able and willing to bring in ringers, violate the rules, commit all sorts of fouls and infractions, and at worst get a slap on the wrist for it. Not a fair game, but heck, that team’s owners are paying off the referees and the league.

There’s another way to do it. Absolutely strict regulation to ensure the interests of patients are the ones that are protected, and protecting the profits of the insurers is given zero weight. Penalties that are strictly enforced, and draconian and include going out of business. Even better: prohibiting profit making in any healthcare endeavor. In some countries, like Switzerland, there are private insurers, but they all have to offer the same comprehensive product, charge the same rates, and be non-profit. So how do they compete? Customer service, can you imagine!?

I like that approach!

"It's the prices, stupid!". And they won't tell us what they are...

You wouldn’t buy most things if the price were not labelled, and certainly not if price were not available on asking. Sometimes shopping on the Internet is frustrating because that the prices are not always apparent. When I had to get my sewer routed out, the plumber told me what it would cos (a lot), and my only choice was to have a blocked sewer or try to find another plumber who might be cheaper. But I had that choice, and he told me the price. Even in the American bastion of car buying, where “negotiating” is a tradition, and while YOUR first question is “what is the price”, theirs is “what are you trading in [so we can quote a higher price]”, this is changing, with set prices at many dealers and alternative vendors like CarMax and Carvana.

Where it is almost never true is in purchasing health care, and it is worst when you are most vulnerable and in urgent need of a service -- sometimes even more urgent than routing your sewer line! We think we would almost never buy something first in order to find out what it cost – that would be crazy --  but in fact that is the title of a video by Martin Schoeller recently featured in the New York Times: ‘How Much Does Your M.R.I. Cost? Buy It First to Find Out.’ And that is what it shows. The prices aren’t available in advance, there is no published price list, there is no bar code for the clerk to scan, and no one, pretty much, can tell you how much it will cost. It is not just MRIs, of course; that is just the headline; it is all tests, procedures, surgeries, and consultations from specialists.

One of the people interviewed by Mr. Schoeller, who had severe injuries as a result of being two feet from where to bomb blew up at the Boston Marathon in 2013, says “I had these procedures done, and now I’m getting the prices. It should have been the other way; I should have had the prices first.” Of course. But this is the story all of the people he interviews – regular people, just like us, he notes -- whose lives have been upended twice, first by their health problem and then by the cost that they were never told about, “whether it is through surprise bills or straight-up price gouging.”

In an old expression, you might say “there oughta be a law”. The amazing thing is that there is a law, or at least a federal rule. The Hospital Price Transparency Rule went into effect on January 1, 2021. Per the website of the Centers for Medicare and Medicaid Services (CMS)

Hospital price transparency helps Americans know the cost of a hospital item or service before receiving it. Starting January 1, 2021, each hospital operating in the United States will be required to provide clear, accessible pricing information online about the items and services they provide in two ways:

1.      As a comprehensive machine-readable file with all items and services.

2.      In a display of shoppable services in a consumer-friendly format.

This information will make it easier for consumers to shop and compare prices across hospitals and estimate the cost of care before going to the hospital.

CMS plans to audit a sample of hospitals for compliance starting in January, in addition to investigating complaints that are submitted to CMS and reviewing analyses of non-compliance, and hospitals may face civil monetary penalties for noncompliance. Access a list of hospitals that have been issued CMPs.

That sounds good, right? There is only one problem. They’re not doing it. The article notes that “A recent study by PatientRightsadvocate.org, a nonprofit group that works for price transparency, revealed that only about 14 percent of the 1,000 hospitals it surveyed were complying with the new rule.” That’s right. Eighty-six percent of the hospitals in the US are NOT posting their prices, in violation of the law. While the language on the CMS website, “This information will make it easier for consumers to shop and compare prices across hospitals and estimate the cost of care before going to the hospital”, could have (actually, as far as I know, may have) come directly out of the mouths of a conservative think tank that advocates “consumer choice” as the solution to the costs of health care, they’re not even doing that. These folks want you to shop for health care like you would shop for anything else, choosing the one that provides you the most value for the best price. This was always a completely bad (I was going to say stupid, but it could be simply malicious) idea, but when you can’t even get the prices to compare, it is completely ridiculous.

Back on March 15, 2009 (“Bargaining down the medical bills”) I wrote about an Oprah Winfrey show on which her guests were the late health economist Uwe Reinhardt and Karen Ignani, the then-head of the trade group America’s Health Insurance Plans (ACIP). At one point

Oprah asked Ms. Ignani (and I paraphrase, I don’t have the transcript): “So if I need a $200,000 procedure, why don’t you just pay it?” Flustered, Ignani said, “Well, you presume that the $200,000 is in fact what the procedure is worth; other hospitals may chart less …” – Oprah interrupted her: “I’m sick!”, she said, “I don’t have time to go shopping around to six different places to see where I can get the best deal!”

I added “Unsurprisingly, the audience, made up of regular people, not pundits, applauded wildly.” But, in fact, in 2022, 13 years later, you still could not find the price for that procedure in 86% of American hospitals! Inadvertently, perhaps, Ms. Ignani points to another concern: your insurance company may refuse to pay for your procedure because you could have had it done across town (presuming you live in an area where there is more than one hospital) for less money. But, as Ms. Winfrey so succinctly put it, you weren’t in a position to comparison shop – you were sick!

The woman who was severely injured in the Boston Marathon bombing tells Mr. Schoeller that she had no idea that these surprise bills were coming, because everyone in the hospital was so nice. The fact is that none of those nice people, nurses, doctors, technicians, clerks, was being devious – they didn’t know the costs either. Mr. Schoeller says that it is not just patients, but employers, unions, even the government that cannot get the prices. And neither can staff. While most people would not buy groceries if the prices were not listed, some more well-off folks might. But only a very few would buy a car, or a house, or something else that might cost $200,000 without knowing the cost – unless it was medical care. Obviously, this hits the poor and uninsured worst, as does everything of the sort, but being insured – and even being well-insured – is not a guarantee that you will not be hit with surprise charges. And that you won’t end up like those who speak to Mr. Schoeller. One says “I just ignore the bills now,” and he asks if this might keep her from getting a loan or a credit card. “Of course,” she says. Life ruined?

So medical system IS systematically not only engaged in price gouging, but in fact hiding those prices in clear and direct violation of a federal rule that was put in place to address this problem. It is a system clearly and unequivocally built not to provide health care but to make money for the investors (in “for-profits”) and large organizations (“non-profits”) that provide the care, as well as insurance companies and drug companies and lots of large corporations, at the expense – in dollars and health – of all of us.

The same Uwe Reinhardt mentioned above, when asked why US health care was so expensive, was fond of saying (and co-wrote an article entitled) “It’s the prices, stupid!”. ‘“We depend on hospitals in our communities to take care of us,” Mr. Schoeller says, “But our hospitals are putting profits before patients.”’ He calls for there to be diligent enforcement and stronger penalties for violation of the price transparency rule.

It’s a good idea, but I call for more than forcing hospitals to post their prices. I call for those prices to be reasonable, and to require insurance companies to pay them, and for everyone to have health insurance that does. A universal national health insurance system, such as improved and expanded Medicare for All.

And the elimination of profit from the health care industry.