Gail Shearer Consumers Union Rebuttal (2)
- Written by Bernie Saks MD
please refer to The Intelligent HSA position paper for more complete discussion
Gail Shearer, Director Health Policy Analysis
April 1, 2009
Re: The Intelligent HSA
Gail: thank you so much for taking the time to speak with me yesterday about health care reform.
I am including several attachments including the position paper to Tom Campbell when dean at UC Berkeley Haas Graduate School of Business and his reply. Tom is now running for Governor of California.
The Intelligent HSA will be effective in controlling cost when used in a setting of Universal Care. Utilization, when controlled externally is called rationing and when controlled internally is called conservationism. The Indemnity health insurance model will never control utilization because money is taking from employees prior to services being rendered and the patients therefore wish to get the most services for their health care dollars while doctors are glad to provide services so long as being reimbursed for them. Patients will never see a dividend from the insurance carriers should they be savvy consumers.
In "The Intelligent HSA" in an Universal setting the patient is rewarded immediately and directly for being a cost conscious consumer.
The argument of adverse selection (and cherry-picking) in HSA's is moot in a Universal Care setting and can only be made in a voluntary health insurance marketplace. Once we enter the realm of Universal Coverage we need to rethink what is the best business model. Indemnity insurance and its inability to control utilization without rationing is not the best model.
If HSA's and their associated HDHP's are funded completely for the individual by employer mandate and/or government taxation the argument of COST TO THE INDIVIDUAL becomes moot if the plans are fully funded. Then the focus of health care can shift to SAVINGS AND REWARD TO THE INDIVIDUAL for healthy lifestyle and appropriate utilization. The argument of upward premium spirals for low deductible plans becomes moot if HSA's/HDHP's are applied in a Universal Care setting.
The Intelligent HSA plan includes an independent medical advisor to remove the conflict of interest in cost conscious decision making within the doctor patient relationship in the current indemnity models.
If the regional HDHP provider is also included in the model then there is the added benefit of reducing costs by reducing redundancy in administrative services, as well as the benefit of providing portability and total doctor accessibility to the patient.
There is no one variable that, by itself, if changed will solve the Health Care crisis. However, if Universal Care is adopted while shifting to fully funded HSA/HDHP's, a medical advisor independent of the doctor-patient relationship and a regionally out to bid HDHP provider, issues of cost containment, appropriate utilization (without rationing), administrative redundancy, portability and accessibility will all be adequately addressed.
I have been discussing this model with Tom Campbell and would appreciate your consideration and feedback regarding this proposal. The attachments should take you no more than ten to fifteen minutes to read. I look forward to speaking with you again. If you are no longer the agent at the Consumer Union who deals with this arm of Health Reform, I would appreciate you forwarding this packet on to the appropriate person(s) or if providing me their names, I shall personally contact them.
please click on the About The Intelligent HSA tab above, or
copy and paste the link below to read the entire position paper
The Intelligent HSA position paper
- Written by Bernie Saks MD
THE INTELLIGENT HSA
Health Care Reform need not be so difficult
There is no single variable, which when adjusted, will resolve our health care dilemma and control our unsustainable health care costs. However, minor adjustments to most all of the variables which are currently in place allow us to arrive at that point.
- Align medical dollars with the patient Universally (HSA)
- Provide a catastrophic medical safety net Universally (HDHP)
- Provide a medical coach to every patient
- Remove redundancy in medical administration (single payor-nongovernmental system)
- Remove price fixing by insurers and physicians (free market pricing)
- Institute tort reform
Instituting these changes will encourage appropriate utilization with patient involvement, reward the patient for controlling costs, reduce administrative profiteering, provide transparency in the payment process and provide portability and choice for the patient.
I first articulated these point to the major Democratic candidates in the last presidential cycle and finally found a receptive ear with the Dean of the UC Berkeley Haas Graduate School of Business and previous California Gubernatorial candidate and current US Senate candidate, Dr. Tom Campbell.
I have included the position paper written to Dean Campbell regarding "The Intelligent HSA". Dean Campbell and his team have incorporated many of these points into his California Gubernatorial Health Platform. My final mark-up of that platform is also included.
Bank of America Dean and Professor
WalterA.HaasSchool of Business
University of California, Berkeley
545 Student Services Building, #1900
Re: “THE INTELLIGENT HSA”
To summarize our discussion, the current health care system dissociates the person receiving the service (“the patient”), the person providing the service (“the physician”) and the payor (“the traditional health insurance company”). Money is taken from the patient prior to service being rendered. The money is part of an employment entitlement package and that money could otherwise be substituted to the employee as additional income. There is little if any chance of the money being returned to the employee, as a dividend, if the employee is a cost conscious consumer. There is no curb on utilization. Quite the contrary; as the employees’ money has already been taken to pay for health services, there is every motivation for the patient to want to receive the most services to “get their monies worth”.
The physician providing services has every motivation to provide services as he/she will be compensated for them.
The insurance companies provide token resistance to both patient and physician to limit utilization (to the chagrin of both of those parties) in the effort to marginally limit the growth of health care costs. However, so long as the insurance companies receive their margin (between policy premiums and service costs), they are more than happy to allow policy premiums and utilization to inexorably creep upward.
Managed care, as proposed by the Clinton Administration, was a dismal failure because it pitted the patient against the physician. It placed physicians in the position of limiting utilization while the insurance company reaped the windfall. Physicians were not rewarded for performing fewer services. Patients were not immediately rewarded for more appropriate utilization. It was viewed by patients as an intrusion, prohibiting their health care with no immediate financial reward. Potential delayed gratification for the consumer, reduced premiums years down the line was not palatable while insurance companies reaped the immediate financial rewards. In an industry where satisfying the patient is paramount, that model guaranteed to produce a disgruntled, dissatisfied customer. The only system that allows a patient who utilizes less to also be satisfied is a system that rewards the patient DIRECTLY and IMMEDIATELY for controlling utilization.
The current business model of taking the money out of the hands of the patient before the service is rendered (and giving it to the insurance industry) promotes the current “buffet mentality”. That is a guarantee to increase utilization inappropriately. “If my money has already been taken for health care, then I want to spend it, dammit!” If you applied the same business model for food (which is just as basic a need) as we do for health care, the model would seem preposterous. If you had the employer take money out of the employee’s paycheck to pay for “food insurance”, had the employees make a co-pay at the restaurant or supermarket and then let the waiter or supermarket employee give advice to the consumer (why buy ground beef when you could get filet mignon!), the supermarket shelves would be empty and the restaurant inventory would be barren. If you thought obesity was a problem now, it would be more than epidemic in such a business model. We have that same “obesity” in our current health care model.
The only business model that address all of these issues is “The Intelligent HSA”. “The Intelligent HSA” is a model with THREE components: a health savings account (“the HSA”), a high deductible health insurance policy (“the HDHP”) and most importantly a “medical coach” or advisor that is independent of the current doctor-patient relationship.
The HSA is the vehicle which places the money back into the hands of the consumer. If the consumer spends their money wisely then the saving is theirs. The reward is direct and immediate. It is human nature to take better care of things that you own.
The HDHP is the safety net for catastrophic events and costs exceeding your HSA account. That is straight forward.
The medical coach or advisor is the novel and important component. In the current business model there is inherent bias in the doctor patient relationship. The doctor is both the person advising you of services and the person who stands to gain from performing those services. Though most physicians are altruistic, there is certainly the tendency to perform procedures or exams or to say “why not just do it so that we know for sure”. The medical coach acts as a sounding board, educator and advisor. The medical coach can present the pros and cons, costs and returns, risks and benefits of action AND inaction without monetarily benefiting from the decision. The patient can then make a very educated decision based on a less biased relationship.
Don’t HSA’s exclude the poor and the sick?
Current medical insurance plans leave behind the poor and sick! Universal coverage is the solution to this issue. If there is universal coverage, adverse selection becomes moot. The costs for universal coverage can be based on taxes or employer contribution or whatever combination of resources that is deemed most appropriate. However, once you enter into the realm of universal coverage, then you must select the best business model. Universal coverage with the current medical business model is flawed for all of the reasons mentioned above and costs will continue to escalate. Universal coverage in the “Intelligent HSA” model is the most effective.
Who would oversee the HSA?
It would make sense for there to be an administrator for the HSA to ensure that money placed in the individual’s account by the government or employer is spent only on medical related expenses.
Who would oversee the HDHP?
It may make sense for there to be a single insurance entity. Such an entity could be regional, statewide or multi-state depending on the number of people needed to support the actuarial risk pool sufficiently. A contract for such services could be placed out to bid. A single entity also supports the concept of avoiding the duplication of costs in underwriting, administration, advertising and sales forces. That would lower the cost overall.
If there were a single HDHP entity regionally, it would also support the concept of portability. Should a person transfer jobs or move regionally the single HDHP entity would still cover them. If there were reciprocity between single regional HDHP entities portability could be extended nationwide.
If there were a single HDHP entity regionally, it would also support the concept of accessibility as physicians would not be forced to choose or jockey between insurance company panels.
A single HDHP entity does not equate with “socialized medicine”. The insurance company fulfills the role of actuarial only. They would bid to provide services, be awarded a contract and be private not governmental. However, they would be treated like utilities. Currently, I have electricity provided by a single carrier in my area and I do not have several carriers from which to choose. However, that carrier is a publicly held and traded company.
How does the medical coach work?
This third prong of the “Intelligent HSA” plan is most important and could consist of a printed or internet version of frequently asked questions (FAQ’s), a telephone or internet bank of nurse practitioners, physician assistants and/or physicians. Every medical specialty could have contributors to this process. They could review the literature regarding specific issues and questions. Currently, we have the WebMD ™ and Healthology ™ type formats that individuals use to get medical information. Such formats could be used as a starting point and expanded. Please read Iowa Medical Society Q and A regarding response to physician questions.
Are people smart enough to make such medical decision?
Some patients are and some patients may not be educated enough (or may not have the desire to take the effort) to make such decisions. This is not different than the situation we have now. Those willing to get involved and make educated decisions benefit financially. Those patients that do not get involved will go through their HSA quicker and use their HDHP faster. At least the system will save money on those who are involved and over several generations people will begin to see that there are ways for everyone to utilize services appropriately.
Will the medical coach be subject to medical malpractice?
No. These persons present information only. They provide literature research and reviews. All actual medical decisions are still made between the patient and physician. However, as patients get more involved in the management decisions, there may in fact be less malpractice claims and less defensive medicine yielding additional cost savings.
Won’t some people withhold their medical services to save money?
That is certainly a possibility, but such practice also exists with the current business model. Perhaps if the contract to provide regional HDHP is put out to bid, the requirement could be made that such an insurance agency has the responsibility to ensure that routine exams, preventative medicine and follow-up care is provided. It would be a nice benefit having the insurance company work for and be involved with providing medical coverage!
Who would pay for the medical coach?
There are several arrangements available for paying for the “medical coach”. Such an advisor could be offered by an insurance company as part of a bundled package (the HSA, HDHP and the medical advisor all together) as a marketing tool. Alternatively, the medical coach services could be completely independent. Like financial advisors who can be judged on their rates of return, medical coaches could be judged over time by patient satisfaction, decision making processes and ability to save their clients (i.e., the patient) money in the HSA. The medical coaches that are more successful in these areas will prevail.
Bernie Saks, MD
Written: February 18, 2008
Revised: March 20, 2009
The final mark-up to the Health Care Platform of California Gubernatorial candidate Dr. Tom Campbell, with which I assisted, shows how Tom Campbell and his team included many of the points just discussed in a very concrete manner. Click here to see Tom Campbell's Health Care Platform document.
Evaluating the business model and its variables
When we look at the ills of our current health care system we can easily point fingers at all of the major players: the insurers, the physicians, the patients and, to some lesser degree, the lawyers. No one sector is immune from responsibility. The current medical economic business model is an indemnity based model where premiums are paid prior to service being rendered and medical dollars are aligned with the insurer rather than the patient. The two major historical events leading to this model were wage freezes during World War 2 (necessitating employers to offer health insurance as an entitlement to entice workers) and the Great Society of the 1960's expanding Medicare. These events lead to a model, with the dissociation of payments for services rendered, unlike any other segment of our free market system. This dissociation contributes to and in fact encourages utilization beyond what is necessary. It drives the medical system to excess as there is no tendency nor desire to rein in utilization.
The current health care debate is unfortunately gravitating towards nominal issues of cost by tinkering at the periphery of the business model rather than addressing the core issues of appropriate utilization and the appropriateness of the model to conduct the business of medicine. For example, artificially manipulating up front costs by forcing an insurance company to charge less or forcing a physician to receive less for a service rendered does not deal with the core issues of delivery of medical services. If physicians wish to maintain their income in this setting they merely perform more services. If the insurers pay claims for more services while artificially reducing premiums they will eventually (similar to the current bank bailouts) claim insolvency and premiums will then again begin to climb unsustainably. The business model must change to reflect this inherent weakness. Dealing with it otherwise will only push the current problem further down the road and delay the day of reckoning.
We are a nation of consumers. We consume more of the world's resources per capita than any other nation and our consumption habits for medicine are no different than that of any other commodity. If we are spending more than other nations for lesser outcome determinants or quality of life then we are obviously overconsuming. How do we control this overconsumption and overutilization? We can control overutilization in one of two ways: either externally or internally. If we control utilization externally it is called rationing and if we control utilization internally it is called conservationism. In either instance we utilize more appropriately and align our purchased services versus outcome with other nations. This is the first decision that we need make: conservationism and appropriate purchasing or rationing. Then we as a nation should decide who should be rewarded by these decisions. If we cannot control our own habits and decisions, then rationing shall come (as there we be a point where squeezing out additional productivity from physicians or cost constraints on insurers will not be sustainable). However, if we can control our own habits and decisions, then who should be rewarded? I contend that it should be the individual/consumer who deserves the reward in that instance. Unfortunately that reward does not occur in the indemnity model.
Let us now review the specific players in the medical business model (the insurers, physicians, patients and lawyers) and their individual roles in health care reform.
Insurers serve an actuarial role in the indemnity medical business model. That concept is a simple one although the variables are multi-factorial. You define the insured population: age, gender, likelihood of illness and use of medical services statistically. You then define a premium based upon these services plus an administrative fee. It is at this point that the business model become murky. What do the insurers do with the premiums? If more monies come in than are paid out as claims, is the money retained by the insurers or paid back to the patients as dividends? While holding the money do the insurers invest it? If invested, who gains from the profit of those investments or who suffers from the loss of poor investments? What do the insurers do to earn your business once your premiums have been paid? Do they make sure that you are receiving preventative medicine or obtaining screening and medication to stave off problems?
It is obvious that a significant portion of our health care dollars (up to 70%) are directed toward chronic illness and preventable diseases including heart disease, stroke, obesity, diabetes and cancers. How do we control such behavior that leads to these conditions and their inherent outcomes and cost? As with all of human nature we can punish poor behavior or reward good behavior. The indemnity model, with its lack of dividends, certainly does little if anything to reward good behavior and in fact reinforces bad lifestyle choices as those individuals receive more than their fair share of medical resources for their money. This encourages overutilization. Do we resort to "sin" taxes on cigarettes, alcohol, sugar and fatty food? My personal belief is that we should align the patient/consumer with the medical dollars to positively reinforce good behavior, lifestyle choices and cost conscious consumerism of medical resources.
In all but a few truly managed care or capitated systems, physicians are remunerated directly for services performed. The more the physician works, the more they earn. If patients come seeking care, the physician is not remunerated for time spent with the patient convincing the patient that there is nothing that need be done. This model encourages over-utilization. However, once a service is rendered how is the fee defined? Is it negotiated with the patient? Is it posted by the physician? Is it negotiated independently from the patient behind closed doors between the physicians and the insurers? Or is the fee defined regionally by a governmental agency? Almost universally the fee is negotiated between physicians (in blocks) and insurers or defined by the government and equates to a fixed priced scenario that inhibits free market competition between physicians on a procedure by procedure basis.
Although bonifide malpractice exists, there are few penalties for abuse of the tort reform system for personal profit. To limit their own liability exposure in malpractice lawsuits, physicians commonly order diagnostic tests beyond what they deem reasonably necessary for the optimal health of their patients. Some studies claimed that as much as 10 percent of all health care costs nationally are the results of "defensive medicine", costs which will naturally be passed on to patients through higher premiums or government expenditures. One New England Journal of Medicine study claims that only 17 percent of malpractice suits involve real physician negligence, meaning 83 percent have little merit.
Solutions to the Health Care Dilemma
I propose a unifying business model to deal with the health care dilemma. The model must make health care costs transparent and make each medical "transaction" appear to be a real cost event between the consumer and physician. The patient must be made to feel that they are spending real dollars for care to fulfill their role as guardians of health care costs. With this guardianship comes responsibility to control utilization and cost. With this guardianship should come benefits and financial reward.
The Intelligent HSA
If we are to control costs without rationing, patients must wish to control utilization and should be rewarded for it. That requires an informed and involved patient. If patients are to be rewarded for their involvement, medical premium dollars must be aligned with them. We must first establish Health Saving Accounts (HSA) Universally. These can be funded either by employer contribution or government mandate/assistance depending upon income, as deemed appropriate. With the HSA's come the mandatory catastrophic safety net of the High Deductible Health Plan (HDHP).
Now that the health care dollars are aligned with the patient we need to empower the patient to be an educated consumer to make wise and cost conscious medical decisions based on and guided by their own personal needs and desires. The educational and empowerment role will be served by the medical coach. The patient needs to have available to them a person or panel that is independent of the doctor patient relationship from whom they can receive advice that is not driven by profit motive.
Insurers should basically serve an actuarial role in the health care arena and should divest themselves from other profit motives that take money out of the health care delivery stream. Premiums should pay for claims made and for predetermined administrative costs which are capped. If the High Deductible Health Plan is put out to bid regionally (single payer non-governmental insurer) and the winning insurer is treated like a utility, we will reduced administrative costs and redundancy. Then, if the insurers work harder to assist the patient in maintaining health, they can share in those savings.
Tort reform should curtail frivolous lawsuits and could perhaps be addressed by extra-judicial arbitration boards. Adopting a modified English Rule may be worthwhile. The English rule states that if the court rules in favor of the defendant, the plaintiff would be required to remunerate the defendant for court costs. Additionally, caps on damages and caps on legal fees should hold down excessive malpractice awards, reward the patient rather than the lawyer for successful malpractice claims and hopefully reduce the number unjustified claims ultimately reducing malpractice premiums.
Transparency in pricing for medical services needs to be instituted. Patients need to be consumers of medical services similar to how they purchase any other commodity or service. Prices need to be posted and set by the providers not fixed by the insurers through negotiations with the doctors, as they are currently. Physicians should compete amongst each other to provide services. As physician set their rates, patients could then shop for services based on perceived quality, cost and ultimately value and service. Free market rates would hopefully decrease costs as physician vie for position in the marketplace. As health care dollars are aligned with the patients via their HSA accounts, the patients would be actively involved in this free market purchasing process seeking out value.
Response to critics of the Intelligent HSA
I have been working on The Intelligent HSA business model for nearly four years and have heard several recurring questions of the plan all of which are easily addressed. Critics of HSA's say that there is an increased financial burden on lower income individuals based on higher out of pocket expenses with the associated High Deductible Health Plans. Insurance premiums are inversely related to levels of deductibility (i.e., lower deductible plans have high premiums and high deductible plans have lower premiums). If the difference in premiums between the low and high deductible plans was placed in the individuals HSA account, the overall action would be one of potentially higher individual expenses (should the individual actually incur expenses), however, those expenses would be offset by the HSA contributions. The overall net effect would merely be shifting money from the insurer's hold to the individuals HSA without additional financial exposure to the individual as a cost neutral event. The individual rather than the insurer controls the principal and benefits from the interest on the HSA. The individual then sees the immediate and direct reward of healthy lifestyle and cost-conscious consumerism. There should be no additional risk to the individual with this arrangement, if the HSA account is fully funded.
Gail Shearer of the Consumers Union wrote a position paper to the United States House of Representatives Health Subcommittee on Ways and Means in May of 2008 entitled "Impact of High Deductible Health Insurance and Health Savings Accounts on Consumers". I personally spoke with her about that paper. See Gail Shearer correspondence. She states that HSA/HDHP is "misguided policy", that "overtime the 'choice' of high deductible coverage is likely to crowd out low deductible choices" and as more sickly people are left behind in a shrinking premium pool low deductible plans with undergo upward "premium spirals", that "people with high incomes and low health care costs are most likely to be attracted to the high deductible/HSA option" and that "we should be moving full-steam toward the goal of guaranteed, quality, affordable health care for all consumers and not spending countless resources creating and analyzing new models that promise to split the healthy from the sick".
Those statements are correct, but based on several flawed suppositions. The first supposition is that the current indemnity insurance plan is the appropriate business model to control costs without rationing. I contend that the current indemnity model does not and will not control cost without rationing. The indemnity plan has lead to unsustainable costs and although our goal is to insure everyone, merely getting everyone insured is not a laudable goal by itself if it is within the confines of a broken system. Encouraging the indemnity model over the HSA model (in a setting of universal coverage) merely forces us all to buy into a "lemon".
The second supposition relates to a "voluntary health insurance marketplace". If we address that supposition first it weakens all the other arguments. I believe strongly in Universal Health Care coverage. If all individuals are insured and if all individuals are insured under a unified health insurance model the premium pool remains large and diverse. Contrary to her conclusion about misguided HSA/HDHP's, if we remove the indemnity model in favor of the HSA/HDHP model and apply the HSA model uniformly and universally we then arrive at the best business model to control utilization without rationing, have a large and diverse premium pool (without the adverse selection that "promises to split healthy from the sick") and have health care dollars aligned with the individual rather than being controlled by the insurers. The key is to have a single umbrella of uniform insurance rather than the hodge-podge health insurance marketplace currently in place.
Labor, Business and The Intelligent HSA
There must be cooperation between labor and business to help control health care costs. Contrary to popular belief, this can be accomplished in an HSA business model. There has been public discussion about "Cadillac Health Plans", taxing such high end plans and wage and salary concessions in return for such health care security. I am pro-labor, but realize the need for businesses to be competitive in a national and global marketplace. To negotiate for something that can potentially undermine the solvency of the business is a "poison pill"
To see the advantages and disadvantages of the different health business models we merely need to follow the health care dollar and see the effect on each of the different players. The players include-- patient (or employee or union member), the employer, the physician and the insurance company. Let us look at several business models--traditional indemnity health insurance (scenario #1), traditional indemnity insurance within a physician-hospital organization (PHO) or an accountability group (scenario #2), a conventional HSA/HDHP (scenario #3) and The Intelligent HSA (scenario #4).
What we are trying to accomplish in this exercise is cost saving by adopting prevention/healthy lifestyle and cost conscious consumerism.
In scenario #1 (traditional indemnity plans), premium dollars are paid to the insurance company by the employer. Should the patient live healthier, reduce illness by prevention or seek less health care services what happens to the health care dollar? In the short term, the patient sees little saving, perhaps a reduction in some co-pay fees or less pharmaceutical costs. The employer sees little short term savings based on ongoing premiums. The physician sees less health care dollars as they provide less services. The insurance company sees the largest short term reward as they collect premiums based on previous health care claim patterns, but have reduced claims going forward. Unless the insurers are nimble in reducing premiums based on short term trends, premium reductions will not occur promptly and insurers will continue to reap the financial benefits until a persistent trend has developed. It is not until that point that cost savings will slowly be passed on to the employer in reduced health insurance premiums. It will be even longer, if ever, for financial rewards as increased salary, to reach the employee.
The short term score would read as follows:
Patient--healthier outcome, making sacrifices (including utilizing less services), receiving little if any financial reward. (+/-) *the (+) for health; the (-) for lack of financial reward or increased salary.
Employer--healthier employee, still paying high premiums for insurance (neutral)
Physicians--potential losing income (-)
Insurers--big winners, seeing current premium dollars with less expenditures(++++)
The long term score (when medical expenditure reductions are sustained and money filters back to the employer in reduced premiums) would read as follows:
In scenario #2 (traditional indemnity plans but with PHO's/Accountability Groups) nothing changes except that physicians negotiate and align with insurers to be rewarded for improved medical outcomes. Why do physicians want or need this? In scenario #1 the physicians are losers if patients are healthy. The typical indemnity plan does not reward the physician for keeping the patient healthy nor reward time spent making sure the patient does not need hospital or physician services. Physician wish to be rewarded for doing the right thing and keeping the patient healthy. They, therefore, wish this type of model in an exercise of prevention/healthy lifestyle and cost conscious consumerism.
The short term score:
Patient-- healthier outcome, making sacrifices (including utilizing less services), receiving little if any financial reward. (+/-)
The long term score:
In scenario #3 (the conventional HSA/HDHP) the insurance premium for the high deductible health plan is made by the employer (if we wish to continue the current employer based model for health care). The individual can make contributions to the HSA on their own. The HSA can be treated as a vehicle to save money in a tax free manner. If the individual makes contributions and maintains health that money can grow. If the patient uses those HSA dollars for deductible payments they save no money. However in either instance the individual still maintains a high deductible health plan as a safety net for catastrophic events/surgery or hospitalization.
In this exercise if the patient can accomplish prevention/healthy lifestyle and cost conscious consumerism there would be less medical expenditures.
The short term score:
Patient- (-) if HSA contributions are minimal and deductibles are made by the employee/patient subjecting them to more financial exposure
Employer-(+) reduced premiums
The long term score (when medical expenditure reductions are sustained and money filters back to the employer in reduced HDHP premiums) would read as follows:
Patient-(neutral to +)
In scenario #4 (The Intelligent HSA) the insurance premium for the high deductible health plan is made by the employer (if we wish to continue the current employer based model for health care) or the government as decided. The difference in premium between the high deductible plan and conventional indemnity health insurance represents a savings. That saving is used to fund the employee's health savings account (HSA). The potential financial exposure to the employee from the higher deductible is offset by the additional contribution to the HSA.. This therefore would be a cost neutral event for the patient.
In this exercise if the patient can accomplish prevention/healthy lifestyle and cost conscious consumerism there would be less medical expenditures.
The short term score:
Patient--healthier outcome, making sacrifices and utilizing less, retention of medical dollars in their HSA (+/++)
The long term score (when medical expenditure reductions are sustained and money filters back to the employer in reduced HDHP premiums) would read as follows:
With indemnity models, both employers and employees lose and insurers gain. In indemnity models with accountability organizations, insurers and physicians gain in the short term, employers gain in the long term if medical expenditure trends can be reversed. However, in both of these models the individual perceives themselves as the party making the daily lifestyle sacrifices and utilization changes while all other parties are rewarded.
Conventional HSA/HDHP's definitely establish a business model with which to control expenditures, but penalizes the individual when structured typically. Typical HSA's are anathema for Democrats and Labor, but there is the rub and the paradigm. HSA/HDHP's need to be structured atypically and creatively! Labor negotiates for workplace control, staffing levels and share of corporate profits, yet readily relinquishes all control of the huge pool of medical premium dollars! Labor sits across the negotiating tables from management and negotiates, in lieu of salary, for "Cadillac Health Plans" which may ultimately be taxed, conceded or contribute to premiums which may compromise the financial integrity of the company.
If labor and management instead worked creatively and cooperatively in "The Intelligent HSA" model they would see that they are both on the same side of the negotiating table and that insurers are on the other side. With such changes and structure, the first group rewarded is the employee as money is shifted to their HSA's to control and conserve. The Intelligent HSA does not subject the individual to additional financial exposure. The first group to lose in this setting is the insurers.
The individual is the ultimate player in the medical system and will have the greatest success at controlling utilization and costs, especially if rewarded first. In the short term this model should be financially neutral to the employer, but will financially benefit the employee. This should create a positive perception of management by labor. If the individual employee then takes that reward and builds upon it by establishing appropriate utilization trends, premiums stabilize. With stable premiums the employee in essence reciprocates and rewards the employer for their faith in them.
Insurers will not sit still if there is a trend toward HSA/HDHP's. Insurers make money by holding, controlling and investing premium dollars. Like banks who make profits in good times and socialize losses in bad times, insurers can "socialize" their losses by raising premiums. An article in USA Today in 2009 entitled "Costs for individual health plans soar" suggests that individuals were paying for the "deflated investment portfolios" of the insurers with rising premiums. Premiums can be raised for HDHP's artificially to approximate the premiums of low deductible premiums. That would discourage individuals from purchasing HSA/HDHP's and drive the individual to the lower deductible plans which are more lucrative for the insurers. That insurance practice should end. See LA Times Rebuttal.
" Cadillac plans" and taxation present a Catch-22. Why does Congress wish to tax "Cadillac plans"? I believe it is because Congress rightfully realizes that such plans drive up the cost of medicine. However, I also believe that Congress naively equates the "cost" of medicine with the "price" of premiums rather than focusing on the medical delivery system. The true cost of medicine is the inappropriate delivery system and inappropriate utilization. Taxation on "Cadillac plans" generates revenue to pay for health care expansion rather than health reform. However, if the goal is to drive consumers from these plans, such conversion ironically and ultimately decreases the revenue to pay for health care expansion.
Individuals and labor should be involved and should fight to control and conserve the premium dollars. Labor should work with management to structure policies that create no additional financial exposure but allows the employee, not the insurer, to profit from the investment of the HSA dollars.
Physicians and Health Reform and The Intelligent HSA
As I have said in previous correspondence, I am a physician and not a member of the AMA. The following reflections are personal, anecdotal and I would suspect do not reflect the position of the AMA nor most other physicians. I am a radiologist who was in top tier academics at UC San Francisco and has been in various private practice models for nearly 25 years.
How should physicians be rewarded? How should physicians provide service? The indemnity model rewards the physicians for performing procedures and doing "something". In the indemnity model there is an inherent expectation by the patient that "something" be done. Both factors lead to overutilization, but also satisfies both parties.
As reimbursement for services fall, I have found myself and others working harder and doing more work while our incomes stay level or decrease (like the proverbial hamster on the tread wheel). Personally, I do not mind earning less, but I would like to do it in an environment where I am practicing and utilizing appropriately and doing less. It is progressively more frustrating to subsidize medical costs with lower reimbursement while nobody wishes to address appropriate utilization.
I fervently believe "The Intelligent HSA" model will control inappropriate utilization with patient involvement. I fervently believe in the need for transparency in pricing for medical reimbursement and to let the marketplace help set the rate. With money in the patients hands they may then shop for cost and quality and ultimately service and value.
As a physician in my local community I have always been treated well and with respect. I believe that our society as a whole appreciates their physicians and wish them to be remunerated well. If we can perform less, but more appropriate service, I would hope that the fee for services would normalize to allow physicians to break the vicious cycle of doing more for less. Perhaps less inappropriate and less overall services could alleviate the physician shortage and allow the current physicians to provide greater coverage for previously ununsured patients who would now be covered universally.
I cannot speak to the true cost effects of "defensive medicine". I see a significant number of imaging studies being performed which are of limited value. People wish for their problems to be taken seriously and sometimes the best way for the physician to appear to be taking the problem seriously is to "order a test". The patient perceives this event as the physician doing "something" for them and that alone satisfies them! However, oftentimes the test result, even if positive, does not change the management decision. We are doing something out of curiosity.
People are inherently impatient. They want to know results now. When a patient presents with a symptom there are often multiple processes that could explain it. Some of those processes are common and some can be extremely rare. If we can be patient, some conditions are self-limiting and will go away on their own. If we can be patient, we can order tests one at a time to confirm or exclude the most common conditions (and those that we can potentially treat) and then move on to the next test as results become available. Unfortunately, in our rush, physicians often order multiple tests at once to speed up the process, a "fast-food mentality" that racks up costs.
I believe that some of this thinking and practice pattern has become ingrained in the physician psyche and that "rushed medicine" can seem like "defensive medicine". Therefore, I do not know how much physicians practice patterns would change in a setting that discouraged defensive medicine. Some studies state that 10% of medical dollars are spent on "defensive medicine". I do not know how much cost saving could be had by merely practicing less rushed medicine. The patient needs to be educated that "doing something" is not always needed. The indemnity model does not reward that behavior, while "The Intelligent HSA" model does.
Before performing any exam the following questions should always be asked by both patient and physician: What is the test going to uncover? With either a positive or negative result how is that information going to change what is done? Are the treatment options for a condition something that can be tolerated by the individual in their current state? Will it change the quality of life? In essence, we should be thinking through the process more thoroughly to decide what we are doing, why we are doing it, how it will change management and whether the individual is an appropriate candidate for any particular therapy.
I do not write my opinions as fodder for those who criticize the perceived impact of defensive medicine nor those who make light of the need for tort reform. Quite the contrary. Frivolous lawsuits are frivolous, whether medical or not, and should be discouraged. To address this Tom Campbell proposed "The English Rule". With controlled malpractice claims, potential reductions of malpractice premiums, reducing the "fast food mentality" of medical practice patterns and performing tests based on parameters that change management decisions for patients who are appropriate candidates for such therapy, medical expenditures can be further reduced. All of these components are supported by and rewarded in "The Intelligent HSA" model.
LA Time Editorial Rebuttal (2)
- Written by Bernie Saks MD
Los Angeles Times.
March 4, 2009
My name is Bernie Saks, MD and I am a physician (Radiologist) who grew up in Southern California (Undergraduate at UC San Diego and MedicalSchool at UCLA). Although I now live and practice in Iowa I have been involved in Health Care Reform individually for a while and have been putting forth a medical business model which I call “the Intelligent HSA” which I believe is a successful plan to manage our health care crisis. I was given your recent article “Health accounts are bad medicine” by a friend who lives in Southern California.
“The Intelligent HSA” plan is based on Health Savings Accounts coupled with High Deductible Health Plans (as you describe), but also includes the component of a “medical coach” independent of the doctor patient relationship to help the consumer make educated and cost conscious medical decisions.
I had the opportunity to meet with the Dean of the Haas School of Business at UC Berkeley last year and presented him with the position paper on “The Intelligent HSA”. Although I am a lifelong Democratic, Dean Campbell is a Republican and I now understand he is considering a run for Governor of California. He has told me that he would like to work with me on this model as the basis for a Health Care Reform platform in his candidacy.
In your article entitled "Health accounts are bad medicine", you accurately portray the proponents of HSA’s speaking for control over health care spending and becoming savvy medical consumers and the critics saying that there is adverse selection of the healthiest and the wealthiest with health savings accounts and that insurance policies only kick in after the higher deductible has been reached. Both of those statements are true in the present hodge-podge system of medical economics that we have.
However, once we step into the realm of Universal Coverage (which personally I believe that we need to), the argument of adverse selection becomes moot and we need only to look at what is the best business model! The typical indemnity insurance model is a dismal failure as a business model. Money that could otherwise go to the employee as income is taken from the employee (patient) as part of an entitlement package by their employer PRIOR to medical services being rendered. There is the tendency, no actually the desire, to get the MOST medical services that you can to get your monies worth. If you are a savvy consumer you do not get a dividend check from the insurance company. If you over-utilize you get your monies worth!
There is no check on utilization in the current system. If you applied the same business model to food (just as basic a need) as to health care the model would seem preposterous. Have the employer pay for food insurance, let the employee go the supermarket and make a co-pay, then go through the market with the advice of the supermarket employee (i.e. the physician) and grab whatever food they want. If obesity is bad now, how bad would it be with that business model? We currently have the same obesity in our health care model.
As I discussed with George Will, I believe that everybody in the United States needs health care, but I do not believe in the current health insurance model. I believe that individuals need to be in control of their own health care and health care expenses, but need expert advice in discharging that function. I believe that health care costs will only be controlled when we control utilization. However, if utilization is controlled externally it is called “rationing”, but when controlled individually it is called “conserving”. I believe that we will only begin to conserve when the individual is immediately and directly rewarded for such behavior. That reward occurs in the HSA model, but does not occur in the traditional indemnity health insurance entitlement model.
You may wish to review several of the arguments you presented in your article or at least consider delving more deeply with some follow-up questions. You mention anecdotally about an Anthem customer who describes a whooping increase in premiums and says she doesn’t mind a high deductible/ low premium plan but why get a high deductible with a high premium? That is a very honest concern. However the response by the Anthem spokesman deserves some scrutiny (i.e., premiums reflected rising costs). You follow with Georgetown’s Pollitz comments about insurers playing the odds saying that over time claims will be made and that insurers don’t “want you sticking around too long with lower premiums”.
Unfortunately, you then make a faulty jump in logic saying “That’s one of the flaws of Health Savings Accounts”. That is not the flaw of the Health Savings Account. That is both the flaw with the insurance company and their bias against high deductible plans. Think about it. Premiums should be inversely related to high or low deductibility. The more you pay out of pocket the less the insurance company pays. If both high and low deductible individuals utilized the same, the insurance companies still pay more on claims for the low deductible individuals. If the healthy and wealthy prefer the HSA’s (as is the typical argument) the insurance company pays even less claims! Yet in your example the premium difference between the high and low deductible plans is narrowing??? If utilization is the same between the high and low deductible plans and the increasing needs drive up costs (according to the Anthem spokesman) you should have a similar percent increase in all plans. Wouldn’t that lead to a similar increase between both plans, at minimum, or a divergence in premiums (considering proportionate increases in unequal premium basis) between the plans if we are utilizing more services?
Insurance companies make money by holding premium dollars and investing them rather than just acting as an actuarial. There is every incentive for them to drive patients away from plans where the patients hold their own money and can earn returns on it! That is what Anthem is doing. As the article entitled "Costs for individual health plans soar" in USA Today on February 2, 2009 says among other things, we are paying for the “deflated investment portfolios” of the insurers.
David, we need universal health care in the US, but we do not need a system that dissociates the cost of health care from the patient doctor relationship. Such a system will continue to make health care costs rise. We need to fund HSA accounts either by government taxes and/or employers mandates and then make the patient a savvy consumer so that they can save their own money and are immediately and directly rewarded for good medical behavior (all within the confines of the safety net of the HDHP). We do not need the redundancy of insurance companies that all basically provide the same actuarial service.
Not all patients will make money in their HSA accounts, but even if some do and the others merely go through their employer/government HSA’s to begin utilizing their HDHP sooner, it still means overall there is more motivation and reward to utilize appropriately. Then health care costs have the possibility of slowing. Insurance companies want your premium dollars for other reasons and they will drive people from HDHP’s at every opportunity.
Please read the attached position paper that I wrote to Dean Campbell at Berkeley last year.
I will gladly speak with you by any manner in which you choose to follow-up this communication. Health care reform is too important an issue to not get right.
please click on the About The Intelligent HSA tab above, or
copy and paste the link below to read the entire position paper