I realize I have written about a national health plan that could actually work. I am, perhaps out of sequence, writing why the Affordable Health Care Act (aka. ObamaCare) was designed and passed by Congress to fail.
As a reminder, Managed Care was modeled after Kaiser Permanente in California. It was formed by the Kaiser family for their employees and was/is not for profit. Some corporate suit saw an opportunity to make large profits by using that model and creating large profits. Hence, HMO’s were formed.
The Kaiser plan used about 10% of its income for corporate needs and 90% for patient care, facilities, staff, equipment, etc. The HMO’s needed an entire department for investor relations and profit management.
In case you are wondering if size matters, in the insurance business it absolutely does. The number of people who sign up for coverage is the Risk Pool. The larger that Risk Pool, the stronger the likelihood the company could make a profit. For the most part, people don’t use their insurance in a given year. Young children and the elderly use it a lot, but the idea of the large Risk Pool is to have many more people who don’t use the services than those who do.
When the for profit companies found that they just didn’t have enough income to keep investors happy, they became creative in ways to save money. Doctors were given financial incentives to not use extra testing like MRI and specialists. The groups were given a “budget” to work with for an entire year. If they were below budget, a portion of the money remaining was divided among the doctors. If they were above the budget, they were dropped from the plan. Another way was to reduce the reimbursements to doctors. At one time, MANY years ago, Pima Care paid surgeons $45.00 for appendectomy, tonsillectomy and cholecystectomy (gall bladder removal).
The primary problem with those plans was that the risk pool was too small. It is absolutely the same today with the Affordable Health Care Act. The current population in Arizona is about 6,927,347. There were eleven providers listed in the Arizona Health Insurance Exchange. IF everyone were included, that would leave an average enrollment of 629,759 per provider. In reality, all citizens are not covered. According to Arizona statistics, 203,066 people are covered by private health plans. That would be an average of 18,460 for each of the eleven providers. The number of those covered by group plans was not available. Remember, all the providers are FOR PROFIT corporations.
The population of California is estimated to be 38,000,000. One provider, Kaiser Permanente has 10,600,00 clients (more than the total population of Arizona). Clearly, there is a greater chance for health insurance providers to have a large enough risk pool to be profitable. Even there, the Affordable Health Care Act has made it difficult to be profitable. That is NOT a bad thing. Here is why.
Previously, for profit HMO’s would spend 50% or less on patient care, using the other half for corporate operations and profit. If the risk pool decreased, the amount spent on patient care also decreased. Nothing was allowed to interfere with profits.
Along came the Affordable Health Care Act. The providers were required to spend 80% of their income on patient care with the other 20% going to all other costs, including profit. If there were large groups, involving 50 or more employees, the percentages were 85 and 15. NOW YOU KNOW why companies are leaving the plan. That is not necessarily a bad thing. The fewer the number of companies in the Health Insurance Exchange, the more people in their risk pool. Sadly, as good as this could be, there is really no way a for profit health insurance company can make enough money to keep their investors happy.
To make things worse (better for the insured) health insurance companies are required to regularly submit data on the portion of premium revenues spent on clinical services and quality improvement. It is called Medical Loss Ratio (MLR). Those companies are required to issue rebates to policy holders if their MLR does not meet minimum standards.
All the requirements listed above are designed to improve the quality of care patients receive and improve availability for all citizens of America. It works and always had for Kaiser Permanente in California. The key to success is that health care providers cannot and must not be for profit.
I repeat, the basic design was intended to fail because it used for profit corporations. A much better idea would have been to include ALL American citizens in Medicare and demand all providers live within the Medical Loss Ratio. Of course, that would require that providers be not for profit corporations. Another option, for those who are afraid of government run programs (the best insurance coverage my wife and I have ever had is Medicare), is the one I sent to Washington more than 20 years ago. I wrote about it in my blog about a national health care plan.
The Affordable Health Care Act needs to be fixed. Even President Obama suggested that. Unfortunately, Congress refused to act in order to try to make it better. That is because when they passed the legislation, it was with the intention that it would fail. They were sure the Supreme Court would find it illegal. Amazingly, a conservative Court said it was legal. Having done so, Congress opted to do nothing, hoping for total collapse of that program. Yet, with all its faults, the Affordable Health Care Act made us the last of all industrialized nations of the world to have a national health plan.
We have the most expensive health care costs in the world. We have the most expensive drug costs in the world, yet we were ranked below Australia, Canada, Denmark, France, Germany, Japan, Netherlands, New Zealand, Norway, Sweden, Switzerland and the United Kingdom. (Organization for Economic Cooperation and Development, comparing health care spending, , supply, utilization, prices and health outcomes. 2013).
We need and deserve a high quality, affordable health care system like the countries listed above. It is possible. The Affordable Health Care Act was the first step in making that happen. It needs to be fixed or replaced. It should, under no circumstances, simply be eliminated.