Archive | Insurance Company News – California

Aetna CEO Sees Obama Health Law Doubling Some Premiums

Health insurance premiums may as much as double for some small businesses and individual buyers in the U.S. when the Affordable Care Act’s major provisions start in 2014, Aetna’s chief executive officer said.

While subsidies in the law will shield some people, other consumers who make too much for assistance are in for “premium rate shock,” Mark Bertolini, who runs the third-biggest U.S. health-insurance company, told analysts yesterday at a conference in New York. The prospect has spurred discussion of having Congress delay or phase in parts of the law, he said.

“We’ve shared it all with the people in Washington and I think it’s a big concern,” the CEO said. “We’re going to see some markets go up as much as as 100 percent.”

Bertolini’s prediction is at odds with Congressional Budget Office estimates that the law will have little effect on small and large-employer plans and the Obama administration’s projections that middle-class families will actually save money. The 2010 law is expected to extend health care to about 30 million people who otherwise couldn’t get insurance, paid for by new taxes and fees on companies and wealthier individuals.

Those taxes will make coverage more expensive for insurers, as will other provisions such as a ban on discriminating against people with pre-existing medical conditions, Bertolini said. Premiums are likely to increase 25 percent to 50 percent on average in the small-group and individual markets, he said, citing projections by his Hartford, Connecticut-based company.

High Estimate

The one-time jump in rates also includes increases in costs that would come even without the law, Bertolini said.

“That just seems silly,” said Gary Claxton, a vice president at Kaiser Family Foundation, aMenlo Park, California- based nonprofit that studies health issues. “I can’t imagine anything going on in the small-group market that would change the average premium that much. On the individual market, there’s arguments for things changing, but those magnitudes seem high.”

The Obama administration said last year that “middle-class families” buying insurance through the law’s new online exchanges may save as much as $2,300 a year starting in 2014. Nick Papas, a White House spokesman, declined to comment on Bertolini’s predictions.

The CBO estimated in 2009 that the law will increase premiums 10 percent to 13 percent for individuals and have little effect on small and large-employer plans. After the subsidies are factored in, individual bills will go down by about 60 percent, the agency predicted.

About 43 percent of people who buy on the exchanges, or individual markets outside of them, won’t be eligible for subsidies, according to the report. They would see premium increases “somewhat less” than 10 percent to 13 percent, CBO predicted.

*Modified from a Bloomberg article


Insurers’ Proposed Rate Hikes in California Draw Criticisms

Consumer advocates are criticizing insurers’ planned premium rate hikes in California as an attempt to boost profits while the U.S. prepares to implement the Affordable Care Act, the San Francisco Chronicle reports (Colliver, San Francisco Chronicle, 11/29).

Details of Anthem’s Planned Rate Hikes

Recently, Anthem Blue Cross proposed premium rates hikes for next year that average 18% for more than 630,000 individual policyholders. Some of Anthem’s policyholders could experience premium increases of as much as 25% in February 2013.

Anthem also is seeking a separate rate hike averaging 15% for an additional 100,000 policyholders whose plans are regulated by the state Department of Managed Health Care (California Healthline, 11/28).

Details of Additional Planned Rate Hikes

According to filings with state officials, other insurers that have proposed premium increases include:

Aetna, which has proposed a nearly 19% rate hike for about 69,000 individual policyholders in April 2013;

Kaiser Permanente, which has proposed an 8% rate hike for more than 220,000 policyholders in January 2013; and

UnitedHealth Group, which has proposed a 10% rate hike for about 11,000 policyholders in January 2013.

Criticisms of Planned Rate Hikes

Consumer advocates say that insurers are trying to raise premiums in advance of Jan. 1, 2014, when the ACA will be fully implemented and insurers will not be able to deny coverage to individuals with pre-existing conditions. Jamie Court — president of Consumer Watchdog — said insurers want to boost their premiums going into 2014 to account for uncertainties in the law and to make sure they can make as much money as possible. He said, “This is a pre-emptive strike against the implementation” of the ACA.

Insurers’ Response

Darrel Ng — an Anthem spokesperson — said that the insurers’ rate increases “represent an economic reality faced throughout the entire industry, indicating health care costs continue to escalate faster than the growth of premiums.” Anthem also argued that the lagging economy has caused people to drop their health insurance to save money. As a result, many of those who keep their policies tend to be sicker and use their insurance more, according to Anthem (San Francisco Chronicle, 11/29).


Insurers Question Physicians’ Acceptance of Medi-Cal Kids

Some California health plans are expressing concerns that there will not be enough physicians who are willing to accept children moved from the Healthy Families program to Medi-Cal, California Watch reports.

Healthy Families is California’s Children’s Health Insurance Program and Medi-Cal is California’s Medicaid program (Jewett, California Watch, 11/29).


In October, California Health and Human Services Secretary Diana Dooley announced that the state is moving forward with plans to shift about 863,000 children from Healthy Families to Medi-Cal next year. Dooley said that the transition will help streamline and simplify government health care programs for California children.
Eliminating Healthy Families is estimated to reduce state spending by $13 million this fiscal year and $73 million annually after the transition is finished, according the state. The Department of Health Care Services said it plans to move all children enrolled in Healthy Families into Medi-Cal by Sept. 1, 2013. The beneficiaries are expected to be moved in four phases, depending on whether their physicians and health plans already accept Medi-Cal (California Healthline, 10/17).

Details of Concerns

Health Net has notified the state that it is unsure of how many of its physicians will continue to care for children after they are moved to Medi-Cal, which pays physicians less for health care services than Healthy Families.

Health Net covers about 86,000 children in four counties:

Los Angeles;
Sacramento; and
San Diego.

Health Net said it could not determine physicians’ willingness to take on children enrolled in Medi-Cal without seeing reimbursement estimates. CalViva — a plan that contracts with Health Net and has nearly 15,000 members in Fresno, Kings and Madera counties — reported similar concerns to state officials.

State Actions

In response to the concerns, state officials moved the transition date for Healthy Families beneficiaries covered by Health Net and CalViva from Jan. 1, 2013, to March 1, 2013. Norman Williams — a DHCS spokesperson — said that the agency provided physician payment information to Health Net on Nov. 5 and is continuing to collect data about whether physicians will accept Medi-Cal beneficiaries (California Watch, 11/29).



Sears Switches to Defined Contribution & Private Exchange Model

Sears Holdings Corp. has joined the ranks of thousands of businesses small and large, by announcing it will move to a Defined Contribution model for employee health benefits in 2013. Through the plan, Sears will allocate a fixed dollar amount for employees and their dependents to purchase health insurance through a private health exchange.

The goal of the shift is to combat the rising cost of providing health benefits to Sears’ 90,000 eligible employees.

The cost per participant under traditional group health plans is on the rise. Employers are also feeling the pinch from minimum requirements such as the minimum percentage of the premium that must be paid by the employer, and the requirement that a minimum percentage of employees join the group plan. If either of those minimums is not met, the entire plan is canceled.

Sears’ Defined Contribution Model

Under the new plan, Sears will be able to cap their monthly health benefits cost per employee by giving a fixed dollar amount (the “defined contribution”) to each employee. Each employee will choose a health insurance plan on the private exchange that works for them, their spouses, and their dependents.

For decades, U.S. employers have been offering a one-size-fits-all plan with benefits that some employees may not need. Defined Contribution gives employees more choice and mitigates an employer’s financial risk from unexpected claims.

About the Private Health Exchange

The states and feds may still be hashing out the details of the state health exchanges, but businesses like Sears are pushing private exchanges forward. Sears employees will now have 15 choices for health insurance instead of the existing 4. Coverage options are available from five different medical insurers.

The objective of providing more choice through an exchange is to create competition and drive prices down for the policyholders.

“The more insurance providers compete, the better,” said Chris Brathwaite, spokesman for Hoffman Estates-based Sears. “I will have an opportunity to shop for a health care provider who meets my medical and my pocketbook needs.”*

Sears has not revealed how much it will allot for employees, but the amount will generally cover the insurance premium of one of the plans under the exchange. Depending on the amount and class of employee, employees could be responsible for paying a portion of the remainder of expenses they incur. All of the available plans provide catastrophic protection and cannot reject people for medical history or pre-existing conditions.

Health Reform and Companies’ Defined Contribution Shift

It is anticipated that more companies will adopt the Defined Contribution healthcare model as they are faced with rising expenses as 2014 nears.

“The best decision for most employers and their employees will be to eliminate their company-sponsored health insurance in favor of a defined contribution HRA solution,” says renowned economist and Zane Benefits founder, Professor Paul Zane Pilzer.

“That’s because employees no longer need employers to purchase quality health insurance, and, starting in 2014, employees earning less than 400% of the FPL (~$92,000 for a family of four) per year who purchase a personal policy will receive a large federal subsidy on their premium if their company doesn’t offer a group plan.”

As a result, all of the following Defined Contribution plans are expected to become mainstream:

  • Health Reimbursement Arrangement (HRA)
  • Medical Expense Reimbursement Plan (MERP)
  • Fixed Contribution Plan
  • Section 105 Plan

Modified from a Zane Benefits Blog 11/20/2012


Health-Care Law Spurs a Shift to Part-Time Workers

Some low-wage employers are moving toward hiring part-time workers instead of full-time ones to mitigate the health-care overhaul’s requirement that large companies provide health insurance for full-time workers or pay a fee.


Several restaurants, hotels and retailers have started or are preparing to limit schedules of hourly workers to below 30 hours a week. That is the threshold at which large employers in 2014 would have to offer workers a minimum level of insurance or pay a penalty starting at $2,000 for each worker.

The shift is one of the first significant steps by employers to avoid requirements under the health-care law, and whether the trend continues hinges on Tuesday’s election results. Republican presidential nominee Mitt Romney has pledged to overturn the Affordable Care Act, although he would face obstacles doing so.

President Barack Obama is set to push ahead with implementing the 2010 law if he is re-elected.

Pillar Hotels & Resorts this summer began to focus more on hiring part-time workers among its 5,500 employees, after the Supreme Court upheld the health-care overhaul, said Chief Executive Chris Russell. The company has 210 franchise hotels, under the Sheraton, Fairfield Inns, Hampton Inns and Holiday Inns brands.

“The tendency is to say, ‘Let me fill this position with a 40-hour-a-week employee.’ “Mr. Russell said. “I think we have to think differently.”

Pillar offers health insurance to employees who work 32 hours a week or more, but only half take it, and Mr. Russell wants to limit his exposure to rising health-care costs. He said he planned to pursue new segments of the population, such as senior citizens, to find workers willing to accept part-time employment.

He described the shift as a “cultural change” toward hiring more part-timers and not a prohibition against hiring full-timers.

CKE Restaurants Inc., parent of the Carl’s Jr. and Hardee’s burger chains, began two months ago to hire part-time workers to replace full-time employees who left, said Andy Puzder, CEO of the Carpinteria, Calif., company. CKE, which is owned by private-equity firm Apollo Management LP, APO -0.74% offers limited-benefit plans to all restaurant employees, but the federal government won’t allow those policies to be sold starting in 2014 because of low caps on payouts. Mr. Puzder said he has advised Mr. Romney’s campaign on economic issues in an unpaid capacity.

Home retailer Anna’s Linens Inc. is considering cutting hours for some full-time employees to avoid the insurance mandate if the health-care law isn’t repealed, said CEO Alan Gladstone.

Mr. Gladstone said the costs of providing coverage to all 1,100 sales associates who work at least 30 hours a week would be prohibitive, although he was weighing alternative options, such as raising prices.

The Costa Mesa, Calif., company currently offers benefits to workers who put in at least 32 hours a week.

Supporters of the health-care overhaul said most large employers already covered workers voluntarily, and requiring others to do so or pay a penalty was important to level the playing field between businesses.

A spokeswoman for the Department of Health and Human Services said the administration didn’t believe the law would substantially affect employment, citing the Massachusetts health-care overhaul signed by then-Gov. Romney in 2006.

“Consistent with the experience in Massachusetts and projections of the Congressional Budget Office, the health-care law will improve the affordability of health care while not significantly impacting the labor market,” spokeswoman Erin Shields Britt said in a written statement. “This law will decrease costs, strengthen our businesses and make it easier for employers to provide coverage to their workers.” Administration officials declined to answer further questions.

Companies in industries that already offer full benefits have indicated that they weren’t planning major changes around the law. Several employers with hourly workforces, including Marriott International Inc. MAR -0.14% hotels, the Costco Wholesale Corp. COST +1.67% warehouse chain and the Panera Bread Co. PNRA +0.56% restaurant chain also said they had no plans to change employee hours in response to the law.

But benefits consultants said most retail and hotel clients have explored shifting toward part-time workers.

Those industries are less likely to offer health coverage now, and if they do, the plans typically are too skimpy to meet the minimum-coverage requirements.

“They’ve all considered it,” Matthew Stevenson, a workforce-strategy principal at Mercer. In a July survey, 32% of retail and hospitality company respondents told the consulting firm that they were likely to reduce the number of employees working 30 hours a week or more.

Consultants have warned that companies that use more part-time labor risk productivity losses from high staff turnover and lower morale. Laurence Geller, who until last week was CEO of Strategic Hotels & Resorts Inc., BEE +13.29% said he weighed moving toward part-time workers but decided against risking that highly trained staff at his high-end hotels would go elsewhere. The company owns hotels bearing the Four Seasons, Fairmont and Ritz-Carlton names.

The insurance mandate applies to companies with the equivalent of 50 or more full-time workers, a calculation based on the number of people employed by the company and an average of hours they work in a week. Companies are adjusting schedules now because they will have to review employment rolls for up to a year in advance to determine which workers will be deemed full-time under the law.

A company will have to pay a penalty of $2,000 for every such worker, after the first 30, if it doesn’t offer qualifying health coverage. If a company offers health insurance but the coverage is deemed sparse or unaffordable, the company must pay $3,000 for every worker who gets a federal tax subsidy to purchase coverage as an individual.

Darden Restaurants Inc. DRI +0.72% was among the first companies to say it was changing hiring in response to the health-care law. The Orlando, Fla., parent of Red Lobster and Olive Garden in February began testing hiring part-time workers in four markets to replace some full-time employees who had left, a spokesman said.

Ken Adams said his 10 Subway restaurant franchises in Michigan have about 60 employees who work 30 hours or more in a given week. Before year-end he plans to cut their hours to below 30 and, in some cases, to reduce positions altogether, he said. A Subway corporate spokesman said it was up to individual franchisees to make such decisions.

*Modified from a WSJ article by Julie Jargon, Louise Radnofsky, and Alexandra Berzon


Health insurance options for low-income families

Tamara E. Holmes – October 18,2012

Many Americans get health insurance as a benefit through their jobs. But for those without health benefits – especially those on a very tight budget – maneuvering through the health care system can be challenging.

With the average health insurance premium at $5,615 a year for an individual, according to the Henry J. Kaiser Family Foundation, low-income people are especially hard-pressed to find coverage for themselves and their families. Fortunately, some low-income Americans can take advantage of government-backed and private insurance plans.

Medicaid is an option that some people may not realize they’d qualify for, says Stephanie Cohen, CEO of Cohen & Golden, which sells health insurance and financial products. Under Medicaid, certain people whose income is too low to be able to afford to buy health insurance may receive free or low-cost medical services.

Medicaid is federally and state funded; eligibility requirements differ from state to state, although all states must adhere to certain federal standards. For example, in New York, a family of four must have $15,208 or less in annual income to qualify for Medicaid. In Oklahoma, a family of four may qualify for Medicaid if they make $6,996 or less per year. People who are pregnant or who have disabilities typically can qualify for Medicaid at higher income levels.

Not all Medicaid programs are the same

The services covered under Medicaid also vary by state. Some benefits must be offered by all state Medicaid programs, including inpatient hospital stays, laboratory tests and X-rays. Other services are optional. For example, while all states must provide dental coverage to children, states can determine whether they’ll offer it to adults.

According to a study by the Kaiser Family Foundation, three states – Alabama, Delaware and Tennessee – do not offer dental coverage to adults, while half of the states provide only emergency dental care and do not cover routine dental visits. Most states offer expanded eligibility to pregnant women, meaning they can qualify for Medicaid even if their income is higher than the state’s requirements.

In 2014, more people will be eligible to receive Medicaid as a result of the federal health care reform law. Starting then, people who make 133 percent of the federal poverty level, which now is $29,700 for a family of four, will qualify for the service.

  • Although low-income families may qualify for Medicaid, it might be challenging to find a doctor. Some physicians refuse to accept patients covered by Medicaid because the reimbursement for services is so low, says John Barrett, founder of California-based Health Insurance Brokers, which provides health insurance solutions to individuals, small businesses and seniors. In fact, a recent study by medical staffing company Jackson Healthcare found that 66 percent of dermatologists, 64 percent of endocrinologists and 58 percent of internists said they can’t afford to take on new Medicaid patients.

Your state’s health department can connect you to a local Medicaid office, which can help you find a physician who accepts Medicaid.

For those who have children under age 19, the Children’s Health Insurance Program (CHIP) is another government-backed insurance option. It provides coverage to children in families with incomes that are too high to qualify for Medicaid. As with Medicaid, each state oversees its own CHIP.

Some states run their CHIPs as part of Medicaid while others run the two programs separately. The income requirements, again, differ from state to state. For example, in West Virginia, the income of a family of three must be no more than $55,590, while in Maine the income level for a family of three must be no more than $37,060.

Private options available

Private insurance options are available for low-income Americans, particularly those who are relatively healthy. High-deductible health insurance plans typically have low premiums because the policyholder agrees to pay more of the costs when services are delivered.

For example, if you bought a plan with a $2,500 deductible, you would pay the first $2,500 in medical expenses and the insurance plan would pick up the rest. As long as you’re healthy, you’ll save money on premiums with such a plan. If you suffer a catastrophic illness, you’ll be covered above that initial $2,500.

“Mini-med” health plans are another option people with low incomes can explore. These plans provide limited health insurance coverage for treating illnesses and certain inpatient hospital procedures. These plans also are best suited for those who are relatively healthy; the plans tend to have low annual coverage limits, meaning you’ll likely run out of benefits quickly if you’re diagnosed with a major illness.

  • Low-income people who have limited insurance plans can also visit free clinics, Barrett says. For example, Planned Parenthood offers free mammograms and breast cancer screenings, as well as colon cancer screenings, routine physical exams and men’s health services in some locations.
*Modified from an article

Cheesecake Factory Medicine

The liberal assault on Paul Ryan’s Medicare reform has often been ugly, but that’s not to say it hasn’t been instructive. While ripping Mr. Ryan, ObamaCare’s intellectual architects have been laying out in more detail their own vision for the future of American health care. It’s a vision that all Americans should know about before they go to the polls in November.

No one did more to sell the Affordable Care Act than Peter Orszag, the former White House budget director who claimed during 2009-2010 that as much as a third of health spending is “waste” that doesn’t improve outcomes. But now that he’s repaired to Wall Street and writes an online column, he’s deriding the idea that better incentives can reduce costs and sneering at the “health-care competition tooth fairy.”

So get a load of Mr. Orszag’s Tinker Bell alternative, which he called the “most important institutional change” after ObamaCare passed in 2010: the Independent Payment Advisory Board composed of 15 philosopher kings who will rule over U.S. health care.

Who are these Orszag 15? Well, nobody knows. The board was supposed to be up and running by the end of September, but the White House is avoiding naming names for Senate confirmation until after the election. No one knows, either, what this group of geniuses will propose, but that too is part of the grand Orszag plan.

ObamaCare included dozens of speculative pilot programs that are supposed to make health-care delivery and business models less wasteful. Mr. Orszag’s payment board is then supposed to apply the programs that “work” to all of U.S. medicine through regulation, without Congressional consent or legal appeal. Seriously.

It doesn’t take a mythical childhood metaphor to mock this theory. Mr. Orszag’s style of central planning—in what was already the heaviest regulated U.S. industry before ObamaCare—has failed over and over again in Medicare since the creation of the fiat pricing fee schedule in the 1980s.

Meanwhile, another ObamaCare godfather, the surgeon and influential New Yorker magazine writer Atul Gawande, has further instructions for the medical masses, this time from—believe it or not—the Cheesecake Factory, the chain restaurant.

Dr. Gawande’s point is that medicine would function better if care were delivered by huge health systems that can achieve economies of scale, like commercial kitchens. Care ought to be standardized like preparing a side of beef, with a “single default way” to perform each treatment supposedly based on evidence, with little room for personalization.

No doubt health care could learn a lot about efficiency from a lot of industries, but to understand the core problem with assembly-line medicine, recall that ObamaCare actively promotes medical corporatism. The reason isn’t to encourage business efficiency but for political control. Liberals believe in health-care consolidation because fewer giant corporations are easier for Mr. Orszag’s central committee to control, and more amenable to its orders.

Thanks to ObamaCare, Cheesecake Factory medicine is already becoming a reality. Irving Levin Associates, a research firm that tracks health-care mergers and acquisitions, reports that M&A hit $61.2 billion in the second quarter and the highest annual levels since the 1990s. Three of five hospitals now belong to a parent company’s network, while more than half of physicians are employed by hospitals or systems, not independent practitioners.

On the insurer side, too, incumbents are demolishing their smaller rivals. Aetna is buying Coventry Health Care, a company that administers Medicare and Medicaid benefits, for $5.6 billion. WellPoint made the same play in acquiring Amerigroup for $5 billion in July, while last October Cigna laid out $3.8 billion for HealthSpring.

This bureaucratization will amplify everything patients and businesses despise about the current system: the unintelligible $103,234.61 bill for a turned ankle, the doctor who can’t take a phone call because of how the hospital schedules shift.

Why aren’t mom’s eight specialists aware of each other’s existence? Why is health care mostly conducted via a pad and pen, and beepers and fax machines, in the iPhone era? Why are there so few geriatricians when the first wave of Baby Boomers is already turning 65? Why is it still so hard to find usable information about quality and prices?

The reason isn’t a lack of hospital administrators or technocratic experts. More often than not it’s that patients aren’t the true consumers. The government is, and medical providers inevitably serve the paymaster.

Mr. Ryan’s insight is that health care would work better if patients were controlling their own dollars. His reform accepts the fact that health, disease and treatment are usually complex, individual and unpredictable, not commodities that can and should be reduced to protocols, metrics, algorithms.

The immediate danger of the Orszag-Gawande-Obama vision is that layer on layer of new regulation will lock in less-than-best practices. This makes the status quo worse, because too-big-to-fail oligopolists have less incentive to innovate to reduce costs and improve quality.

The longer-run danger is that the cost board starts to decide what types of care “work” for society at large and thus what individual patients are allowed to receive. One way or another, health costs must come down. And if Mr. Ryan’s market proposal is rejected, then government a la Orszag will do it by brute political force.

A murderer’s row of liberal health-care gurus—Zeke Emanuel, Neera Tanden, Don Berwick, David Cutler, Uwe Reinhardt, Steve Shortell, Mr. Orszag, many others—recently acknowledged as much in the New England Journal of Medicine. They conceded that “health costs remain a major challenge” despite ObamaCare. That would have been nice to know in, oh, 2009 or 2010.

Anyhow, their big idea is the very old idea of price controls that are “binding on all payers and providers,” much as post-RomneyCare Massachusetts is already doing. When that strategy fails as it always has, and the public denies further tax increases, the Orszag payment board will then start to ration or prohibit access to medical resources that it decides aren’t worth the expense.

These political choices will be unpopular and even deadly, which is why Mr. Orszag worked so hard to insulate his payment board from oversight or accountability. Congress can only reject the board’s decisions if it substitutes something else that reduces costs by as much. More amazing still, only a minority of the board can be “directly involved” in the provision of health care.

This latter provision is supposed to prevent the alleged conflicts of interest that come from knowing something about how health care is provided in the real world. What it reveals instead is that this board isn’t about medical quality at all. It is purely a balance-sheet exercise to make sure that the Orszag-Obama agenda of top-down health care can’t be undone by something as crude as democratic consent.

And they claim that Paul Ryan’s proposal is “radical”?

What the debate over Mr. Ryan’s reform is revealing is that the real health-care choice, and the real choice this November, is about the role of government. The Orszags of the world ultimately have what President Obama would call an “ideological” preference for coercion over individual choice. They want to impose the unilateral decisions of the state over those of millions of Americans.

The larger irony is that ObamaCare’s architects claim that all of this will lead to more equity in the delivery of medical services, but in practice it will have the opposite effect. Americans of even middle-class means will not tolerate being told they cannot spend their own money to improve their own health or save the lives of their loved ones, so under price-controlled ObamaCare we will quickly see the emergence of a two- or even three-tier system outside the reach of government.

The affluent will get their own special level of service. Certainly Mr. Orszag, a vice chairman of corporate and investment banking at Citigroup, won’t be getting treatment at some municipal hospital. The Cheesecake Factory is a great place to eat but you probably wouldn’t want to be operated on there—especially if it’s run by the government.

*Modfied from a WSJ Opinion article


The Wal-Mart Effect Comes To Health Care

Health Care: Giant discounter Wal-Mart says it will soon offer vaccinations for a wide variety of ailments. Can the “Wal-Mart Effect,” which has helped slash U.S. inflation, do the same thing for soaring health care costs?

Everyone knows Wal-Mart has been a positive influence on inflation. A few years back, the highly respected National Bureau of Economic Research even estimated that the government’s consumer inflation data were overstated by about 15%, due largely to the unrecognized impact of Wal-Mart’s everyday low prices on the economy.

A separate 2007 study by the investment advisory and forecasting firm Global Insight estimated that in 2006, Wal-Mart’s low prices saved consumers roughly $287 billion — or about $2,501 per household. The impact — especially on low-income consumers — has been enormous.

John Tierney, a New York Times columnist, even suggested that Wal-Mart receive a Nobel prize for helping to pull so many people out of poverty.  Well, the retail giant may be at it again —this time in health care. As reported last week, it’s expanding customer offerings into vaccines. That’s right, vaccines.

The Benton, Ark.-based company has been moving into health care since 2006, when it started selling generic drugs at a flat $4 fee. Now, in addition to the low-cost vaccines for influenza and pneumonia it offers at 2,700 stores, it’s expanding into 10 other common vaccines, including shingles, meningitis, hepatitis and the human papillomavirus. This will give millions of Wal-Mart customers who never see a doctor the chance to get cheap preventive care.

Quietly, Wal-Mart’s changing the face of health care. Last year, it played down the leak of a 14-page internal document that outlined its plans to “build a national, integrated, low-cost primary health care platform.”

But the fact is, Wal-Mart is rapidly expanding its presence as a primary health care provider, and it’s not alone. Other retailers are getting into the act, opening clinics and providing health services at low cost.
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Is it having any impact? Retail prescription drug outlays rose just 1.2% in 2010, down from increases of 14% a year just a few years ago. And as the chart shows, health care spending increases have slowed sharply in recent years — partly due to Wal-Mart.

Once again, markets respond to problems — while government creates more. If we’re lucky, Wal-Mart and other retailers may even help sink that other failed health care model, ObamaCare.

*Modified from an Investors Business Daily Editorial.


John C. Goodman: Why the Doctor Can’t See You

The demand for health care under ObamaCare will increase dramatically. The supply of physicians won’t. Get ready for a two-tier system of medical care.


Are you having trouble finding a doctor who will see you? If not, give it another year and a half. A doctor shortage is on its way.

Most provisions of the Obama health law kick in on Jan. 1, 2014. Within the decade after that, an additional 30 million people are expected to acquire health plans—and if the economic studies are correct, they will try to double their use of the health-care system. Meanwhile, the administration never seems to tire of reminding seniors that they are entitled to a free annual checkup. Its new campaign is focused on women. Thanks to health reform, they are being told, they will have access to free breast and pelvic exams and even free contraceptives. Once ObamaCare fully takes effect, all of us will be entitled to a long list of preventive services—with no deductible or copayment.

Here is the problem: The health-care system can’t possibly deliver on the huge increase in demand for primary-care services. The original ObamaCare bill actually had a line item for increased doctor training. But this provision was zeroed out before passage, probably to keep down the cost of health reform. The result will be gridlock.

Take preventive care. ObamaCare says that health insurance must cover the tests and procedures recommended by the U.S. Preventive Services Task Force. What would that involve? In the American Journal of Public Health (2003), scholars at Duke University calculated that arranging for and counseling patients about all those screenings would require 1,773 hours of the average primary-care physician’s time each year, or 7.4 hours per working day.

And all of this time is time spent searching for problems and talking about the search. If the screenings turn up a real problem, there will have to be more testing and more counseling. Bottom line: To meet the promise of free preventive care nationwide, every family doctor in America would have to work full-time delivering it, leaving no time for all the other things they need to do.

When demand exceeds supply in a normal market, the price rises until it reaches a market-clearing level. But in this country, as in other developed nations, Americans do not primarily pay for care with their own money. They pay with time.

How long does it take you on the phone to make an appointment to see a doctor? How many days do you have to wait before she can see you? How long does it take to get to the doctor’s office? Once there, how long do you have to wait before being seen? These are all non-price barriers to care, and there is substantial evidence that they are more important in deterring care than the fee the doctor charges, even for low-income patients.

For example, the average wait to see a new family doctor in this country is just under three weeks, according to a 2009 survey by medical consultancy Merritt Hawkins. But in Boston, Mass.—which enacted a law under Gov. Mitt Romney that established near-universal coverage—the wait is about two months. When people cannot find a primary-care physician who will see them in a reasonable length of time, all too often they go to hospital emergency rooms.

Yet a 2007 study of California in the Annals of Emergency Medicine showed that up to 20% of the patients who entered an emergency room left without ever seeing a doctor, because they got tired of waiting. Be prepared for that situation to get worse.

When demand exceeds supply, doctors have a great deal of flexibility about who they see and when they see them. Not surprisingly, they tend to see those patients first who pay the highest fees. A New York Times survey of dermatologists in 2008 for example, found an extensive two-tiered system. For patients in need of services covered by Medicare, the typical wait to see a doctor was two or three weeks, and the appointments were made by answering machine.

However, for Botox and other treatments not covered by Medicare (and for which patients pay the market price out of pocket), appointments to see those same doctors were often available on the same day, and they were made by live receptionists. As physicians increasingly have to allocate their time, patients in plans that pay below-market prices will likely wait longest. Those patients will be the elderly and the disabled on Medicare, low-income families on Medicaid, and (if the Massachusetts model is followed) people with subsidized insurance acquired in ObamaCare’s newly created health insurance exchanges.

Their wait will only become longer as more and more Americans turn to concierge medicine for their care. Although the model differs from region to region and doctor to doctor, concierge medicine basically means that patients pay doctors to be their agents, rather than the agents of third-party-payers such as insurance companies or government bureaucracies.

For a fee of roughly $1,500 to $2,000, for example, a Medicare patient can form a new relationship with a doctor. This usually includes same day or next-day appointments. It also usually means that patients can talk with their physicians by telephone and email. The physician helps the patient obtain tests, make appointments with specialists and in other ways negotiate an increasingly bureaucratic health-care system.

Here is the problem. A typical primary-care physician has about 2,500 patients (according to a 2009 study by the Centers for Disease Control and Prevention), but when he opens a concierge practice, he’ll typically take about 500 patients with him (according to MDVIP, the largest organization of concierge doctors): That’s about all he can handle, given the extra time and attention those patients are going to expect. But the 2,000 patients left behind now must find another physician. So in general, as concierge care grows, the strain on the rest of the system will become greater.

I predict that in the next several years concierge medicine will grow rapidly, and every senior who can afford one will have a concierge doctor. A lot of non-seniors will as well. We will quickly evolve into a two-tiered health-care system, with those who can afford it getting more care and better care.

In the meantime, the most vulnerable populations will have less access to care than they had before ObamaCare became law.

Mr. Goodman is president of the National Center for Policy Analysis and the author of “Priceless: Curing the Healthcare Crisis” (Independent Institute, 2012).

*Modified from a Wall Street Journal article


Washington Post Examines Impact of Health Reform Law on Premiums

The article noted five factors that could lead to higher insurance premiums:

1. Currently insurance companies offer lower premiums to younger Americans, since they generally have lower health costs. But starting in 2014, the law implements an age band so that the amount an older individual pays will be no more than three times what a younger individual pays. So if a state currently allows an age band of 5:1, older Americans might see a premium decrease — but younger Americans would see a premium spike.

2. A similar dynamic exists with the law’s requirement that insurers selling policies through the health exchanges will no longer be able to charge different premiums based on a person’s health status when coverage is first purchased. This is known as a community rating. So healthier individuals generally will see higher premiums.

3. The popular provision that requires insurers to accept everyone regardless of their health status (i.e., pre-existing conditions) also will transfer costs to healthier individuals.

4. Insurers must offer an “essential health benefits” package, providing coverage in 10 categories. The list includes: ambulatory patient services; emergency services; hospitalization; maternity and newborn care; mental health and substance use disorder services, including behavioral health treatment; prescription drugs; rehabilitative and habilitative services and devices; laboratory services; preventive and wellness services and chronic disease management; and pediatric services, including oral and vision care.

It’s a great package, but the benefits are more extensive than what most individuals and small businesses already purchase. So that will also boost premiums, especially if you currently have a less extensive plan. A report in the June edition of Health Affairs found that “more than half of Americans who had individual insurance in 2010 were enrolled in plans that would not qualify as providing essential coverage under the rules of the exchanges in 2014.”

5. The law also contains various taxes and fees, including a health insurance tax. Those costs presumably would be passed on to consumers, resulting in higher premiums.


*Modified from a Washington Post Article