Huge fan of this newsletter: first time commenter.
I believe it is a fundamental error to treat health care as a normal good, where individuals enjoy “consuming” it and will always choose to consume more if the price they face is low. Those who actively enjoy doctor’s visits, diagnostic tests, and surgery are frequently described as suffering from one of several mental disorders! Men are famously reluctant to have anything to do with doctors—often to their detriment—and this woman goes to appointments with great reluctance.
Most of us undergo diagnoses and treatment only when absolutely medically necessary, and would do so if care were free.
The notion that price should be used to ration care to avoid significant overconsumption is both deeply ingrained and deeply misguided.
I’m certain the idea of a stranger getting really personal with a new patient will keep people away. I used to have better insurance than Medicare (dis)advantage and I’ve seen a lot of doctors as I approach 75 years old. I know people won’t abuse care and anyone who might could be controlled to a degree by the PCP. Regular checkups are important to detect issues early, before they become more difficult and expensive to treat.
I often see people in public who are limping or something and wonder if they could have that corrected especially if it’s painful if they had access to care they could afford and paid sick time to allow them to get treated with time to recover without destroying the family budget.
“Of all the forms of inequality, injustice in health care is the most shocking and inhumane.” – Martin Luther King, Jr.
Why is it so hard for the cruelty of our sick-care non-system to sink in and force change? The people must demand #MedicareForAll #M4A #HR3069/#S1506 and #HR4406 togo w/state bills. If they want to see it happen for our children and their children.
We have been trying to tell them for years. No one believed us when we said this is untenable.
When profits fall, INSCOs will get out, and move on to another financial grift. It’s all financial. INSCOs are just responsible fiduciaries to their shareholders, right?
And when they take their bazillions and get out, we the people will be left to take over.
That’s their plan. It’s one huge private equity grift, wringing the last dollars from a spent healthcare economy.
In a sad and wasteful way it’s an opportunity. We’ll be forced to do what we should have done decades ago. We’ll finally have to build a new system, without a grifting 3rd industry.
Maybe we can craft a real system that values primary care and a lifetime of health care access, run by doctors nurses and public health experts.
We have the system ready to go! We must demand the politicians support passing #MedicareForAll #M4A #HR3069/#S1506 and #HR4406 togo w/state bills if they expect to get elected. We can expand Medicare to cover all medically necessary care and expand it to all AND SAVE money doing it.
Another item to note, is the insurers have no incentive to really analyze the claims they do have to pay. Out of every $1 spend, $.20 can be used by the insurer for administrative costs. So the more they spend (and make the purchaser pay), the more they get to pocket.
You know, I've seen this claim used by the Republicans, and especially relying on analyses and assertions from a Dr. Brian Blase and his Paragon Health Institute, to argue that there is an inherent inefficiency in the ACA because of that allowance of an 80% payout ratio.
I don't think that the no incentives to analyze claims (or be efficient) is correct. If there are a number of insurers, they should still be competing somewhat to lower their pre-any-subsidy premiums, even for people who pay no premium for an on-exchange ACA plan after subsidy.
(Thus, an insurer with the lower pre-any-subsidy premium will increase the likelihood of their plan being chosen, due to lower net cost. Since the subsidy amount is for the Second Lowest Cost Silver Plan. Plans with higher pre-any-subsidy premium have a higher cost after subsidy.)
--
I don't know if you are sourcing your argument directly from the Paragon Health Institute or indirectly from them through the Republicans, or have come up with it on your own.
I have had issues with the quality of Paragon's assertions and analyses, such as I reported on within:
My source is through my work. I'm an attorney and assist employer group plans to analyze their plan design and review all contracts to ensure fiduciary obligations are met per ERISA. Plans are being screwed by contract language that doesn't even allow review of certain claims at certain price points.
While I agree with a few of the "shoulds" in your comment, that doesn't mean it always happens.
And of course the Republicans are going to talk this up because it's an ACA rule so anything to attack the ACA. I keep politics out of it because healthcare doesn't care if you are blue or red. I just look at the law and what it requires and see how it's being applied in real world conditions.
So I see your experience and analysis comes from work on the employer-group end.
Switching away from my initial point on the ACA, on those group plans, I see:
"Plans are being screwed by contract language that doesn't even allow review of certain claims at certain price points."
I wonder why the insurers insist on that? Maybe it costs too much given what they are being paid for administration by the employer.
(Perhaps the author of the post, who is from the insurance industry, or Wendell Potter knows the answer to that, if you don't.)
--
Back to the ACA thing, and the competition. ("While I agree with a few of the "shoulds" in your comment, that doesn't mean it always happens.")
Yes, I do know that this idea of a few firms offering coverage, making things competitive like the economist-idealized competitive market, may not hold in practice, including the ACA exchanges. The game-theory of a few firms may wind up with every firm acting as though it has a kind of a monopoly. ("Economists say we're supposed to compete? Phooey!") (Especially, I think some counties are down to one ACA plan provider. They do have a monopoly in that case!)
--
I'm glad to see you haven't been taken in by the Paragon Health Institute!
(Their work is a sore-spot of mine.
As well, the blatant deceptions about the prior shutdown being so Democrats could provide healthcare for undocumented immigrants. Deception and lies beyond the pale, as, if you missed them doing it a few months ago, I have documented here:
Jackie is spot-on that 'healthcare doesn't care if you're blue or red'—on the individual/family ACA market, it cares about risk-pool math. Carriers aren't just chasing 'more' enrollees; they are chasing the 'right' enrollees that make the 80/20 math work most predictably.
The perverse incentive to increase claims spending to increase the 20% MLR slice and to use those increased claims to justify premium increases for the the same reason in the ACA market is also influenced by a desire on the carrier side to keep a balanced risk pool. I've sat in on some of the carrier meetings where they've discussed this and have heard many times that they're as concerned with getting the "right" insureds as they are with getting more insureds.
For example, the current push by at least some of the carriers we work with is to shed low-revenue, flight-risk consumers (Bronze) to focus entirely on maximizing revenue and MLR compliance through Silver tier plans, where government subsidies and cost-sharing payments are concentrated. Silver plans generate higher claims payouts relative to the premium, which helps them hit the 80% mark without issuing rebates.
This also explains the network divide you see in the ACA world: the 'price-leader' Bronze plans usually rely on ultra-narrow networks and razor-thin contracted rates to win the price-sensitive shoppers. Meanwhile, the broad-network carriers target the Silver tier, knowing that subsidized enrollees are less price-sensitive and more likely to stick with a plan for the access, even if the gross premium is higher. It's less about 'competition' in the classic sense and more about targeted risk-engineering."
The Medical Loss Ratio (MLR) has transformed health insurance from a risk-management business into a margin-management business. The MLR rule didn't stop insurers from making money; it just changed how they make it. They no longer make more money by denying care (which is good for consumers); they make more money by managing a more expensive pool of care (which is bad for the taxpayer and the deficit).
Well written, Ron. Thank you. Two things that infuriate, disappoint, and sadden me more than anything else are the real estate and the health insurance industries. And it's obvious why: They're built from the same brand of deception and greed.
Hi Ron, thank you for responding. My wife is a professor at a very large medical school and we talk about these issues all the time. I was a former compliance attorney at a midsized residency program and have seen first hand all the disfunction. My best friend is a physician and runs a pulmonary fellowship in a poor southern state and echoed your opinion only it was over five years ago. He likes the idea of tax deductible HSA’s that can become an inheritable asset. He is of the opinion that insurance, addition to the problems you point out create administrative bloat adding to the overall cost. He also believes there are specialists that make way too much money . I still remember stories of my great-great grandfather, a rural East Texas physician taking chickens or milk cows, etc. for payment. I think one reason we are so unhealthy and don’t take better care of ourselves is that we since some else is footing the bill directly we lose the incentive. Please keep reporting on this issue as it is critical to the nation.
It's a no brainer. We need universal healthcare that covers all Americans. We need a government health insurance system that provide healthcare to all Americans. There should be no denial of any medically necessary procedures. The government needs to buy all the hospitals, employ all the medical providers, including doctors, and regulate all prescription medications. Universal healthcare has been working for decades in other countries.
Who will pay for these services? Every working American, including the very rich. We need a revamping of the entire federal tax system, where wages and investments, must be taxed fairly Employer contributions must be made mandatory. NO MORE profit in the healthcare system, period.
I’m looking forward to your next article outlining the proposed solutions and how they address the core problems in our flawed for‑profit health insurance model. Thank you.
I often yearn for the same thing. There's often lots and lots of focus on problems and far less on solutions. What's the plan to fix all of this Health Care un-covered?
"Put policies in place to deny, delay or refuse to pay for care. These policies are going to upset 5% of your membership."
Outside of new legislation at the state/federal level and civil litigation, state department of insurance and regulators can stop this kind of behavior (if they have the power/staffing/will to do so).
The changes going on have little to do with claim denials. Claim costs are up but that shouldn’t be a problem either.
The problem is the government has made a conscious decision to keep revenue increases below cost increases. Both payment rates and risk coding have been cut.
The government could easily decide to increase revenue to cover cost and then problem solved..
The article neglected to state another (beyond) obvious reason for the cost of healthcare in the US. That is the "Not for Profit" Hospital Industrial Complex issue. Thats the one where the "Not for Profit" hospitals make hundreds of millions of dollars of profit a year from the charges that they attach to the care that they give and pay $0 in taxes but pay their CEO's and C-Suite Exec's tens of millions of dollars a year in compensation, all the while distributing a minuscule amount of the hundreds of millions of dollars in profit that they make each year to the charities that that are supposed to be distributing it too. Also consider the fact that the US ranks 15th in the world in quality of care and you see that this system is rotting from the inside. And none of what I just said has anything to do with health insurance.
You bring up a good point. I was not suggesting that insurance companies are the only problem we have in health care. The full list of problems would occupy a whole book. Thanks
There is no magic bullet. It will take many changes. First, we have the fix the financing of health care so that profit motivation is not in opposition of what patients need. We need to create a different market place for how big pharma gets rewarded so that they compete on price as well as innovation. We need to address how doctors and hospitals are paid so that we don't fall off the cliff with the upcoming physician shortage and that rural hospitals stop failing. We need to eliminate as much of the unnecessary administrative costs and time in Health care and have one set of coverage guidelines. Those are good starts. It won't be easy but the crash will be worse. Thanks for the question its the right one!
Excellent framing of the perverse incentive problem. That inverted product model where profit comes from non-use is something I've seen play out in real time when dealing with denials for basic procedures. The part about targeting the "expensive" 5% feels especially insidious becasue it creates a race to the bottom where every insurer is incentivized to dump the sickest patients onto competitors. Reminds me of how CDOs were AAA-rated right before everything collapsed.
Huge fan of this newsletter: first time commenter.
I believe it is a fundamental error to treat health care as a normal good, where individuals enjoy “consuming” it and will always choose to consume more if the price they face is low. Those who actively enjoy doctor’s visits, diagnostic tests, and surgery are frequently described as suffering from one of several mental disorders! Men are famously reluctant to have anything to do with doctors—often to their detriment—and this woman goes to appointments with great reluctance.
Most of us undergo diagnoses and treatment only when absolutely medically necessary, and would do so if care were free.
The notion that price should be used to ration care to avoid significant overconsumption is both deeply ingrained and deeply misguided.
I’m certain the idea of a stranger getting really personal with a new patient will keep people away. I used to have better insurance than Medicare (dis)advantage and I’ve seen a lot of doctors as I approach 75 years old. I know people won’t abuse care and anyone who might could be controlled to a degree by the PCP. Regular checkups are important to detect issues early, before they become more difficult and expensive to treat.
I often see people in public who are limping or something and wonder if they could have that corrected especially if it’s painful if they had access to care they could afford and paid sick time to allow them to get treated with time to recover without destroying the family budget.
“Of all the forms of inequality, injustice in health care is the most shocking and inhumane.” – Martin Luther King, Jr.
Why is it so hard for the cruelty of our sick-care non-system to sink in and force change? The people must demand #MedicareForAll #M4A #HR3069/#S1506 and #HR4406 togo w/state bills. If they want to see it happen for our children and their children.
Support state/local groups listed @ pnhp.org, bit.ly/HCNOW, nnu.org, fixithealthcare.com, HealthCareforAllOhioans.org, onePayerStates.org
We need @MoveToAmend #EndCorporateRule #MoneyIsNotSpeech Get money out of politics! MoveToAmend.org would overturn Citizens United & so much more!
One idea is to establish Global Budgets for Hospitals.
yeah, that’s in there. #MedicareForAll #M4A #HR3069/#S1506 and #HR4406 togo w/state bills.
We have been trying to tell them for years. No one believed us when we said this is untenable.
When profits fall, INSCOs will get out, and move on to another financial grift. It’s all financial. INSCOs are just responsible fiduciaries to their shareholders, right?
And when they take their bazillions and get out, we the people will be left to take over.
That’s their plan. It’s one huge private equity grift, wringing the last dollars from a spent healthcare economy.
In a sad and wasteful way it’s an opportunity. We’ll be forced to do what we should have done decades ago. We’ll finally have to build a new system, without a grifting 3rd industry.
Maybe we can craft a real system that values primary care and a lifetime of health care access, run by doctors nurses and public health experts.
Like they have in not-shithole countries.
Break them up
We have the system ready to go! We must demand the politicians support passing #MedicareForAll #M4A #HR3069/#S1506 and #HR4406 togo w/state bills if they expect to get elected. We can expand Medicare to cover all medically necessary care and expand it to all AND SAVE money doing it.
Totally agree with you, Dr Fake Smile. Well said.
Another item to note, is the insurers have no incentive to really analyze the claims they do have to pay. Out of every $1 spend, $.20 can be used by the insurer for administrative costs. So the more they spend (and make the purchaser pay), the more they get to pocket.
You know, I've seen this claim used by the Republicans, and especially relying on analyses and assertions from a Dr. Brian Blase and his Paragon Health Institute, to argue that there is an inherent inefficiency in the ACA because of that allowance of an 80% payout ratio.
I don't think that the no incentives to analyze claims (or be efficient) is correct. If there are a number of insurers, they should still be competing somewhat to lower their pre-any-subsidy premiums, even for people who pay no premium for an on-exchange ACA plan after subsidy.
(Thus, an insurer with the lower pre-any-subsidy premium will increase the likelihood of their plan being chosen, due to lower net cost. Since the subsidy amount is for the Second Lowest Cost Silver Plan. Plans with higher pre-any-subsidy premium have a higher cost after subsidy.)
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I don't know if you are sourcing your argument directly from the Paragon Health Institute or indirectly from them through the Republicans, or have come up with it on your own.
I have had issues with the quality of Paragon's assertions and analyses, such as I reported on within:
https://normspier828307.substack.com/p/senate-republican-leader-john-thune
And which large technically-equipped organization have had, reported on:
https://normspier828307.substack.com/p/who-are-the-economic-advisors-who-5ef
and
https://normspier828307.substack.com/p/who-are-the-economic-advisors-who
My source is through my work. I'm an attorney and assist employer group plans to analyze their plan design and review all contracts to ensure fiduciary obligations are met per ERISA. Plans are being screwed by contract language that doesn't even allow review of certain claims at certain price points.
While I agree with a few of the "shoulds" in your comment, that doesn't mean it always happens.
And of course the Republicans are going to talk this up because it's an ACA rule so anything to attack the ACA. I keep politics out of it because healthcare doesn't care if you are blue or red. I just look at the law and what it requires and see how it's being applied in real world conditions.
Thanks for the clarification.
So I see your experience and analysis comes from work on the employer-group end.
Switching away from my initial point on the ACA, on those group plans, I see:
"Plans are being screwed by contract language that doesn't even allow review of certain claims at certain price points."
I wonder why the insurers insist on that? Maybe it costs too much given what they are being paid for administration by the employer.
(Perhaps the author of the post, who is from the insurance industry, or Wendell Potter knows the answer to that, if you don't.)
--
Back to the ACA thing, and the competition. ("While I agree with a few of the "shoulds" in your comment, that doesn't mean it always happens.")
Yes, I do know that this idea of a few firms offering coverage, making things competitive like the economist-idealized competitive market, may not hold in practice, including the ACA exchanges. The game-theory of a few firms may wind up with every firm acting as though it has a kind of a monopoly. ("Economists say we're supposed to compete? Phooey!") (Especially, I think some counties are down to one ACA plan provider. They do have a monopoly in that case!)
--
I'm glad to see you haven't been taken in by the Paragon Health Institute!
(Their work is a sore-spot of mine.
As well, the blatant deceptions about the prior shutdown being so Democrats could provide healthcare for undocumented immigrants. Deception and lies beyond the pale, as, if you missed them doing it a few months ago, I have documented here:
https://normspier828307.substack.com/p/exploring-the-mass-deception-and )
Jackie is spot-on that 'healthcare doesn't care if you're blue or red'—on the individual/family ACA market, it cares about risk-pool math. Carriers aren't just chasing 'more' enrollees; they are chasing the 'right' enrollees that make the 80/20 math work most predictably.
The perverse incentive to increase claims spending to increase the 20% MLR slice and to use those increased claims to justify premium increases for the the same reason in the ACA market is also influenced by a desire on the carrier side to keep a balanced risk pool. I've sat in on some of the carrier meetings where they've discussed this and have heard many times that they're as concerned with getting the "right" insureds as they are with getting more insureds.
For example, the current push by at least some of the carriers we work with is to shed low-revenue, flight-risk consumers (Bronze) to focus entirely on maximizing revenue and MLR compliance through Silver tier plans, where government subsidies and cost-sharing payments are concentrated. Silver plans generate higher claims payouts relative to the premium, which helps them hit the 80% mark without issuing rebates.
This also explains the network divide you see in the ACA world: the 'price-leader' Bronze plans usually rely on ultra-narrow networks and razor-thin contracted rates to win the price-sensitive shoppers. Meanwhile, the broad-network carriers target the Silver tier, knowing that subsidized enrollees are less price-sensitive and more likely to stick with a plan for the access, even if the gross premium is higher. It's less about 'competition' in the classic sense and more about targeted risk-engineering."
The Medical Loss Ratio (MLR) has transformed health insurance from a risk-management business into a margin-management business. The MLR rule didn't stop insurers from making money; it just changed how they make it. They no longer make more money by denying care (which is good for consumers); they make more money by managing a more expensive pool of care (which is bad for the taxpayer and the deficit).
Great article - it captures the core problem with for‑profit health insurance. The real question is: who’s actually paying attention.
Well written, Ron. Thank you. Two things that infuriate, disappoint, and sadden me more than anything else are the real estate and the health insurance industries. And it's obvious why: They're built from the same brand of deception and greed.
Hi Ron, thank you for responding. My wife is a professor at a very large medical school and we talk about these issues all the time. I was a former compliance attorney at a midsized residency program and have seen first hand all the disfunction. My best friend is a physician and runs a pulmonary fellowship in a poor southern state and echoed your opinion only it was over five years ago. He likes the idea of tax deductible HSA’s that can become an inheritable asset. He is of the opinion that insurance, addition to the problems you point out create administrative bloat adding to the overall cost. He also believes there are specialists that make way too much money . I still remember stories of my great-great grandfather, a rural East Texas physician taking chickens or milk cows, etc. for payment. I think one reason we are so unhealthy and don’t take better care of ourselves is that we since some else is footing the bill directly we lose the incentive. Please keep reporting on this issue as it is critical to the nation.
Many issues here....
But just one
How much money is paid in Lawsuits when Hospitals/Providers are sued? Total per year?
How much money is paid out when Health Insurance companies are sued? Total paid out per year?
It's a no brainer. We need universal healthcare that covers all Americans. We need a government health insurance system that provide healthcare to all Americans. There should be no denial of any medically necessary procedures. The government needs to buy all the hospitals, employ all the medical providers, including doctors, and regulate all prescription medications. Universal healthcare has been working for decades in other countries.
Who will pay for these services? Every working American, including the very rich. We need a revamping of the entire federal tax system, where wages and investments, must be taxed fairly Employer contributions must be made mandatory. NO MORE profit in the healthcare system, period.
Luigi
I’m looking forward to your next article outlining the proposed solutions and how they address the core problems in our flawed for‑profit health insurance model. Thank you.
I often yearn for the same thing. There's often lots and lots of focus on problems and far less on solutions. What's the plan to fix all of this Health Care un-covered?
"Put policies in place to deny, delay or refuse to pay for care. These policies are going to upset 5% of your membership."
Outside of new legislation at the state/federal level and civil litigation, state department of insurance and regulators can stop this kind of behavior (if they have the power/staffing/will to do so).
The changes going on have little to do with claim denials. Claim costs are up but that shouldn’t be a problem either.
The problem is the government has made a conscious decision to keep revenue increases below cost increases. Both payment rates and risk coding have been cut.
The government could easily decide to increase revenue to cover cost and then problem solved..
It’s all so “patient-centric” 🙄
The article neglected to state another (beyond) obvious reason for the cost of healthcare in the US. That is the "Not for Profit" Hospital Industrial Complex issue. Thats the one where the "Not for Profit" hospitals make hundreds of millions of dollars of profit a year from the charges that they attach to the care that they give and pay $0 in taxes but pay their CEO's and C-Suite Exec's tens of millions of dollars a year in compensation, all the while distributing a minuscule amount of the hundreds of millions of dollars in profit that they make each year to the charities that that are supposed to be distributing it too. Also consider the fact that the US ranks 15th in the world in quality of care and you see that this system is rotting from the inside. And none of what I just said has anything to do with health insurance.
You bring up a good point. I was not suggesting that insurance companies are the only problem we have in health care. The full list of problems would occupy a whole book. Thanks
So Ron, what is your solution?
There is no magic bullet. It will take many changes. First, we have the fix the financing of health care so that profit motivation is not in opposition of what patients need. We need to create a different market place for how big pharma gets rewarded so that they compete on price as well as innovation. We need to address how doctors and hospitals are paid so that we don't fall off the cliff with the upcoming physician shortage and that rural hospitals stop failing. We need to eliminate as much of the unnecessary administrative costs and time in Health care and have one set of coverage guidelines. Those are good starts. It won't be easy but the crash will be worse. Thanks for the question its the right one!
Excellent framing of the perverse incentive problem. That inverted product model where profit comes from non-use is something I've seen play out in real time when dealing with denials for basic procedures. The part about targeting the "expensive" 5% feels especially insidious becasue it creates a race to the bottom where every insurer is incentivized to dump the sickest patients onto competitors. Reminds me of how CDOs were AAA-rated right before everything collapsed.