Business Community Embraces HSAs

IN THIS ISSUE:


? Business Community Embraces HSAs

? Cogan, Hubbard, and Kessler on Real Health Reform

? Blumenthal on Physician Supply

? Robinson on the Health Insurance Transformation

Business Community Embraces HSAs


I’m in the middle of a whirlwind tour of America this spring, giving talks to literally thousands of business owners, insurance brokers, and medical professionals. Last Thursday (April 29) it was the Nebraska Health Underwriters in Omaha, on Friday the meeting of state think tanks organized by The Heritage Foundation in Chicago, on Monday it was the National Association for Alternative Staffing in New Orleans, this coming Friday it is the Federated Ambulatory Surgery Association in Phoenix, the Virginia Association of Health Plans in Hot Springs, VA next Tuesday, an International Business Federation meeting in Arlington, VA on the 13th and the Indiana underwriters on Friday the 14th. I hate the travel, but I love the chance to talk with people about how consumer directed health care fits in with what they are doing.


Typically, I will give an overview of the need for a consumer-centered system and explain how policy makers and the private sector have responded to that need. Someone else usually talks about how HRAs and HSAs are now available in their area, how they work, and how to implement them. I have never seen anything like the positive reception HSAs are getting everywhere. One fellow at the NAAS meeting got up and reported that he gave a talk to a meeting of 80 brokers and asked how many of them have gotten calls from clients about HSAs. Every single one had. These are customers calling the producers demanding HSA information – and the product has existed for only four months!

SOURCE: The slides I use can be downloaded from the Galen web site at: /assets/New_Tools.pdf

Cogan, Hubbard, and Kessler on Real Health Reform


The only good thing about travel is it gives me a chance to get caught up on some reading. There have been a number of interesting and provocative articles published in recent weeks. For instance, “The Wall Street Journal” ran a big thoughtful piece by John Cogan, Glenn Hubbard and Daniel Kessler about real health care reform. The article demands to be read in its entirety, but in a nutshell, it argues that costs are the essential problem in America’s health care system, but “efforts by employers to stem the cost escalation have not only failed to succeed, they have also sharply diminished patient satisfaction and raised patient frustration.” The authors call for a series of improvements, beginning with “reform the tax treatment of health-care expenses.” They argue that providing a tax advantage exclusively to employer-sponsored health insurance was the “most far-reaching and misguided government policy” of the last 60 years. It has led to a system of third-party payment that is “so pervasive that we accept it as a natural part of the health-care system. Yet there’s nothing natural about it.” They say, “Leveling the playing field between employer-provided insurance and out-of-pocket payments is an essential step to fixing health care.” They suggest “a simple change” in which “all individually purchased insurance and out-of-pocket expenses would become tax deductible for persons who have at least catastrophic insurance coverage.”


Their next step would be to “promote portable, nationwide insurance.” “Therefore, insurance companies should be allowed to offer insurance plans on a nationwide basis, free from costly state benefit mandates and excessive regulations,” say the authors. They would also “reduce barriers to entry.” They say that “control by physicians and hospitals on the supply of new physicians? amounts to market participants acting in concert to restrict competition, a clear violation of antitrust law.” Then they would “address head-on the costs of helping the chronically ill,” with targeted subsidies. Finally, the authors say, “Allow market forces to work … Either we are going to continue the slow march toward a government-driven system, or we are going to choose a free-market solution that puts consumers in charge.”

SOURCE (subscription required): http://online.wsj.com/article/0,,SB108362681322500884,00.html

Blumenthal on Physician Supply


It is interesting that Cogan et al. raise removing barriers to entry as an important issue in health reform, because the current “New England Journal of Medicine” includes an in-depth article by David Blumenthal on “New Steam from an Old Cauldron – The Physician Supply Debate.” A reading of this article should be a humbling experience for central planners. For decades, public policy has been trying to anticipate and control the supply of physicians in the U.S. Not only have they failed to do it, but they have been unable to even determine whether we are facing a physician surplus or a physician shortage. Even lofty-sounding and well-funded organizations like the Council on Graduate Medical Education (COGME) keeps changing its mind about its projections of physician supply. In the early 1990s it was predicting the U.S. would have a “surplus” of 80,000 physicians by the year 2000. Dr. Blumenthal says COGME projected the number of specialists would rise from 123 per 100,000 in 1992 to 152 per 100,000 in 2010, so it recommended adoption of policies that would ensure that half of all new physicians would be generalists. As a result of this and other alarms, Congress “capped the number of residency slots eligible for federal support at 1997 levels.” Blumenthal says, “Ironically almost as soon as Congress acted to moderate the predicted glut of physicians, the expert consensus behind the oversupply of physicians began to unravel.” In particular, Richard Cooper, former dean of the Medical College of Wisconsin, used a different methodology to “predict that the demand for physicians will exceed the supply by about 50,000 physicians in 2010 and by about 200,000 in 2020.” Now COGME and other similar organizations are changing their minds and predicting not surpluses, but shortages, in physician supply.


What a farce. Of all the issues in health care, could there be anything simpler than predicting how many doctors we will have ten years from now? But the central planners can’t even get this one right! And these are some of the same people who think academics and economists should be dictating practice protocols from afar on independent physicians who are actually examining patients. Look folks, labor supply is one of the easiest things for markets to deal with – provided, as the WSJ article says, there are no artificial barriers to entry.

SOURCE (subscription or purchase required): http://content.nejm.org/cgi/content/extract/350/17/1780

Robinson on the Health Insurance Transformation


James Robinson of UC Berkeley is one of the most perceptive health economists in the business today. He has an article in the Journal of the American Medical Association (JAMA) entitled “Reinvention of Health Insurance in the Consumer Era.” It points out how things are changing in the financing world. He says, “During the managed care era, the health insurance industry moved toward uniform and comprehensive benefit designs under the principle that financial incentives for cost control should be directed at physicians rather than patients.” Today, the industry is moving to a variety of benefit designs and premiums, “to appeal to the many diverse customer segments.” He cites statistics that employer benefit plans are raising cost-sharing requirements, though still by trivial amounts. Contrary to the views of some, he says, “Thinner benefits are designed to hold down premiums for the most price-sensitive purchasers and to forestall adverse selection.” In other words, high premiums chase the young and healthy from the market, while keeping premiums low keeps them participating in the pool. He says HSAs are moving from a “use it or lose it” approach to benefit design that encourages over consumption, to a “use it or save it” logic. He also points out that provider networks “played a central role in managed care” but only a secondary role in current health plan strategy. For instance, he says health plans are finding that tiered copayment programs are confusing to patients, and plans are moving toward percentage coinsurance, which are less reliant on a predetermination of good and bad providers. Still, he expects volume discounts and “centers of excellence” referrals to continue. Another trend he identifies is a move away from broad-based medical management in favor of programs that target “patients with serious chronic conditions as the category most likely to benefit clinically and generate financial savings based on medical management programs.” Finally, he says, “Underwriting and risk-based premium pricing have reemerged as the industry has come to recognize the paucity of scale economies in health insurance (and) the limited efficacy of medical management?.”

SOURCE (subscription or purchase required): http://jama.ama-assn.org/cgi/content/abstract/291/15/1880

Please send all comments/questions directly to me at gmscan@aol.com.


“Consumer Choice Matters” is a free weekly newsletter published by the Galen Institute, a not-for-profit public policy organization specializing in research and education on health policy. Visit our website at http://www.galen.org for more information.


If you wish to subscribe/unsubscribe or update your address, please send an e-mail to galen@galen.org.





SHARE THIS ARTICLE

About the author

IN THIS ISSUE:


? Business Community Embraces HSAs

? Cogan, Hubbard, and Kessler on Real Health Reform

? Blumenthal on Physician Supply

? Robinson on the Health Insurance Transformation

Business Community Embraces HSAs


I’m in the middle of a whirlwind tour of America this spring, giving talks to literally thousands of business owners, insurance brokers, and medical professionals. Last Thursday (April 29) it was the Nebraska Health Underwriters in Omaha, on Friday the meeting of state think tanks organized by The Heritage Foundation in Chicago, on Monday it was the National Association for Alternative Staffing in New Orleans, this coming Friday it is the Federated Ambulatory Surgery Association in Phoenix, the Virginia Association of Health Plans in Hot Springs, VA next Tuesday, an International Business Federation meeting in Arlington, VA on the 13th and the Indiana underwriters on Friday the 14th. I hate the travel, but I love the chance to talk with people about how consumer directed health care fits in with what they are doing.


Typically, I will give an overview of the need for a consumer-centered system and explain how policy makers and the private sector have responded to that need. Someone else usually talks about how HRAs and HSAs are now available in their area, how they work, and how to implement them. I have never seen anything like the positive reception HSAs are getting everywhere. One fellow at the NAAS meeting got up and reported that he gave a talk to a meeting of 80 brokers and asked how many of them have gotten calls from clients about HSAs. Every single one had. These are customers calling the producers demanding HSA information – and the product has existed for only four months!

SOURCE: The slides I use can be downloaded from the Galen web site at: /assets/New_Tools.pdf

Cogan, Hubbard, and Kessler on Real Health Reform


The only good thing about travel is it gives me a chance to get caught up on some reading. There have been a number of interesting and provocative articles published in recent weeks. For instance, “The Wall Street Journal” ran a big thoughtful piece by John Cogan, Glenn Hubbard and Daniel Kessler about real health care reform. The article demands to be read in its entirety, but in a nutshell, it argues that costs are the essential problem in America’s health care system, but “efforts by employers to stem the cost escalation have not only failed to succeed, they have also sharply diminished patient satisfaction and raised patient frustration.” The authors call for a series of improvements, beginning with “reform the tax treatment of health-care expenses.” They argue that providing a tax advantage exclusively to employer-sponsored health insurance was the “most far-reaching and misguided government policy” of the last 60 years. It has led to a system of third-party payment that is “so pervasive that we accept it as a natural part of the health-care system. Yet there’s nothing natural about it.” They say, “Leveling the playing field between employer-provided insurance and out-of-pocket payments is an essential step to fixing health care.” They suggest “a simple change” in which “all individually purchased insurance and out-of-pocket expenses would become tax deductible for persons who have at least catastrophic insurance coverage.”


Their next step would be to “promote portable, nationwide insurance.” “Therefore, insurance companies should be allowed to offer insurance plans on a nationwide basis, free from costly state benefit mandates and excessive regulations,” say the authors. They would also “reduce barriers to entry.” They say that “control by physicians and hospitals on the supply of new physicians? amounts to market participants acting in concert to restrict competition, a clear violation of antitrust law.” Then they would “address head-on the costs of helping the chronically ill,” with targeted subsidies. Finally, the authors say, “Allow market forces to work … Either we are going to continue the slow march toward a government-driven system, or we are going to choose a free-market solution that puts consumers in charge.”

SOURCE (subscription required): http://online.wsj.com/article/0,,SB108362681322500884,00.html

Blumenthal on Physician Supply


It is interesting that Cogan et al. raise removing barriers to entry as an important issue in health reform, because the current “New England Journal of Medicine” includes an in-depth article by David Blumenthal on “New Steam from an Old Cauldron – The Physician Supply Debate.” A reading of this article should be a humbling experience for central planners. For decades, public policy has been trying to anticipate and control the supply of physicians in the U.S. Not only have they failed to do it, but they have been unable to even determine whether we are facing a physician surplus or a physician shortage. Even lofty-sounding and well-funded organizations like the Council on Graduate Medical Education (COGME) keeps changing its mind about its projections of physician supply. In the early 1990s it was predicting the U.S. would have a “surplus” of 80,000 physicians by the year 2000. Dr. Blumenthal says COGME projected the number of specialists would rise from 123 per 100,000 in 1992 to 152 per 100,000 in 2010, so it recommended adoption of policies that would ensure that half of all new physicians would be generalists. As a result of this and other alarms, Congress “capped the number of residency slots eligible for federal support at 1997 levels.” Blumenthal says, “Ironically almost as soon as Congress acted to moderate the predicted glut of physicians, the expert consensus behind the oversupply of physicians began to unravel.” In particular, Richard Cooper, former dean of the Medical College of Wisconsin, used a different methodology to “predict that the demand for physicians will exceed the supply by about 50,000 physicians in 2010 and by about 200,000 in 2020.” Now COGME and other similar organizations are changing their minds and predicting not surpluses, but shortages, in physician supply.


What a farce. Of all the issues in health care, could there be anything simpler than predicting how many doctors we will have ten years from now? But the central planners can’t even get this one right! And these are some of the same people who think academics and economists should be dictating practice protocols from afar on independent physicians who are actually examining patients. Look folks, labor supply is one of the easiest things for markets to deal with – provided, as the WSJ article says, there are no artificial barriers to entry.

SOURCE (subscription or purchase required): http://content.nejm.org/cgi/content/extract/350/17/1780

Robinson on the Health Insurance Transformation


James Robinson of UC Berkeley is one of the most perceptive health economists in the business today. He has an article in the Journal of the American Medical Association (JAMA) entitled “Reinvention of Health Insurance in the Consumer Era.” It points out how things are changing in the financing world. He says, “During the managed care era, the health insurance industry moved toward uniform and comprehensive benefit designs under the principle that financial incentives for cost control should be directed at physicians rather than patients.” Today, the industry is moving to a variety of benefit designs and premiums, “to appeal to the many diverse customer segments.” He cites statistics that employer benefit plans are raising cost-sharing requirements, though still by trivial amounts. Contrary to the views of some, he says, “Thinner benefits are designed to hold down premiums for the most price-sensitive purchasers and to forestall adverse selection.” In other words, high premiums chase the young and healthy from the market, while keeping premiums low keeps them participating in the pool. He says HSAs are moving from a “use it or lose it” approach to benefit design that encourages over consumption, to a “use it or save it” logic. He also points out that provider networks “played a central role in managed care” but only a secondary role in current health plan strategy. For instance, he says health plans are finding that tiered copayment programs are confusing to patients, and plans are moving toward percentage coinsurance, which are less reliant on a predetermination of good and bad providers. Still, he expects volume discounts and “centers of excellence” referrals to continue. Another trend he identifies is a move away from broad-based medical management in favor of programs that target “patients with serious chronic conditions as the category most likely to benefit clinically and generate financial savings based on medical management programs.” Finally, he says, “Underwriting and risk-based premium pricing have reemerged as the industry has come to recognize the paucity of scale economies in health insurance (and) the limited efficacy of medical management?.”

SOURCE (subscription or purchase required): http://jama.ama-assn.org/cgi/content/abstract/291/15/1880

Please send all comments/questions directly to me at gmscan@aol.com.


“Consumer Choice Matters” is a free weekly newsletter published by the Galen Institute, a not-for-profit public policy organization specializing in research and education on health policy. Visit our website at http://www.galen.org for more information.


If you wish to subscribe/unsubscribe or update your address, please send an e-mail to galen@galen.org.





SHARE THIS ARTICLE

About the author