Richard Fogoros, M.D.  

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The Problem With Health Insurance

Aug 29, 2009 - 11 comments

health insurance




health reform


health insurance reform

Something touched a nerve yesterday.  I kind of lost my composure when someone tried to defend the insurance industry and responded out of emotion – perhaps putting aside some reason in the process.

I used to get mad at myself or embarrassed when this happened, but now I stand back and try to analyze my reaction.  What is it that touched a nerve in me?  Why did I feel so strongly?  We don’t feel things without reason, and my reaction doesn’t necessarily betray weakness on my part, it shows the depths of my emotion.  That passion usually comes from something – most of the time it is personal experience; and my personal experience says that insurance companies are causing my patients harm.  That makes me angry.

I don’t think the people in the insurance industry are bad people.  I think vilifying people is the easy way out.  The people there feel like they are doing the right thing, and are no less moral than me.  But I do not think the way to fix our system is through letting them do their business as usual in the name of “free market.”  Defending the current system of insurance ignores some obvious problems in our system:

1.  They are financially motivated to withhold services

If you hire a contractor to work on your house, how wise is it to pay them 100% in advance?  You have just given them financial incentive to do as little work as possible, as it will maximize their profits to do so.  The insurance industry is in such a situation; despite any good intention, they are put in a position to decide between profits and level of service.  It is much better to pay more for better service, not worse; but that is what we have done with health insurance companies.

2.  They have been given the ability to withhold services

If all United Health Care (for example) did was to provide insurance, they would not be vilified as they are.  But since the only data available for medical care was the claims data they hold, they were put in a position to control cost.  This was sensible initially, as they had both the data and the means (denying unnecessary care) of cutting cost.  It’s OK that women aren’t kept in the hospital for a week after having a baby.  It’s OK that I can’t prescribe expensive brand-name drugs when there is a reasonable generic alternative.  There was a whole lot of fat to cut, and they did a good job cutting that fat.

The problem came when all the fat was gone and they were used to big profit-margins.  Once there was not any more unnecessary care to cut, they had two ways to keep their profit-margins: increasing premiums or cutting services.  They did both.  Both of these have hurt my patients.

    * Patients have had premiums increased or have been dropped because they were diagnosed with medical problems.  I have had patients beg me “don’t put that in my record,” as they know a diagnosis of diabetes or heart disease will be disastrous.  I am then caught between the pleas of my patients and the demands of honestly practicing and documenting my care.
    * I do what I can to follow evidence-based standards, but there are times when people fall out of the norms.  Medicine is not science, it is applied science.  This means that I am trying to take an individual and somehow match them with the scientific data.  Sometimes it works, but everyone is different.  If something is true 90% of the time, 10% of the people will be exceptions to the rule.  I have repeatedly been told by “gnomes” (people with minimal medical education who sit in front of a computer screen with a protocol for care) what “good medicine” looks like.  They see things as black and white when it is just not that way.  This has caused people to be unnecessarily hospitalized, it has required them to get unnecessary tests to follow their rules.  There is no arguing with people in front of computers.

3.  They covertly ration

Dr. Rich Fogoros (whom I recently met) has coined this phrase to explain what happens in our system.  Because it doesn’t look good to deny necessary care, insurance companies (including government-run ones) resort to making things exceedingly complex.  This makes it look like care is being offered, but not taken advantage of.    What does this mean?

    * The burden of proof is put on the provider to show the tests ordered are necessary.  The assumption is that a test will be denied unless the doc can prove otherwise.
    * Tests are sometimes inappropriately denied.  They then can be appealed, but the appeal process is even more difficult than the initial approval process, and so some people give up.  Every time someone gives up, less is paid out by the insurance company and their profits go up.
    * The rules for coding and billing are so complex, that it is very easy to make mistakes.  This means that an appropriate test ordered by a doctor that is not perfectly coded doesn’t get paid for.  The patient gets the bill and must get the doctor to appeal the denial.  This appeal process, again, is difficult.

Because of this, I have to hire staff whose sole task is to learn all of the rules of the different insurance carriers (including public ones) and then play the game properly with them so that we get as few denials as possible.  I probably spend $70-80 thousand per year to deal with the frustratingly complex system we have.


I have health insurance.  I do understand why it needs to exist, but I also see how harmful the current state can be to my patients.  I get frustrated with Medicare and Medicaid as well, but that is not my point.  Just because government run insurance has problems doesn’t do anything to change the problems with private insurance.  The fact that you can be killed by firing squad doesn’t make the gallows any better.

The cost of care has gone up dramatically over the past 10 years while my reimbursement has dropped.  Where is that extra money?

But the system is very broken right now.  It needs to be fixed.  Things need to be changed in both the private and public sector.  When I was in DC I made the point that our ship is sinking and we are arguing about who will be the captain.  The problems in our system are not simply who is writing the checks.

Honestly, I don’t really care who writes the checks.  All I want is for the system to reward good care and to stop hurting my patients.  Those who deny the reality of either of these problems will invariably draw my ire.

*This blog post was originally published at Musings of a Distractible Mind*

Why Dr. Rich Is Encouraged By Alternative Medicine

Aug 16, 2009 - 1 comments

alternative medicine




complimentary medicine

It is quite popular among certain medical bloggers, who count themselves as scientifically sophisticated, to disparage so-called “alternative medicine.”

Indeed, there are entire websites devoted to demonstrating (in homage to Penn and Teller) that various forms of alternative medicine - such as homeopathy, therapeutic touch, the medical application of crystals, Reiki, naturopathy, water therapy, bio-photons, mindfulness training, energy healing and a host of others - are completely devoid of any scientific merit whatsoever; are pablum for the uneducated masses; are, in short, irreducibly and unredeemably woo.

These same medical authors are scandalized into virtual apoplexy by the fact that the NIH has funded an entire section to “study” alternative medicine, and worse, that most respected university medical centers in the land now seem to have embraced alternative medicine, and have established well-funded and heavily-marketed “Centers for Integrative Medicine” (or other similarly-named op-centers for pushing medically suspect alternative “services”).*

Until quite recently, DrRich counted himself among the stalwarts of scientific strict constructionism. He was truly dismayed that the NIH and some of our most well-regarded academic centers (under the guise of wanting to conduct objective “studies” of alternative medicine) have lent an aura of respectability and legitimacy to numerous bizarre ideas and fraudulent claims masquerading as legitimate medical practices. To DrRich, such developments were yet another clear and unmistakable sign of the End Times.

Furthermore, DrRich (a well-known paranoid when it comes to covert rationing) saw a more sinister advantage to the official and well-publicized support that government-funded institutions were giving to the alternative medicine movement. Namely, fostering a widespread impression among the unwashed rabble that alternative medicine is at least somewhat legitimate (and plenty respectable) will further the cause of covert rationing. That is, the more people who can be enticed to seek their diagnoses and their cures from the alternative medicine universe, where they are often spending their own money, the less money these people will soak up from the real healthcare system. With luck, real diagnoses can be delayed and real therapy put off until it’s far too late to achieve a useful outcome by more traditional (and far more expensive) medical means.

So, for several years alternative medicine was seen by DrRich pretty much as it is seen by all of the anti-woo crowd - as an unvarnished evil.

But in recent days the scales have fallen from DrRich’s eyes. He now realizes he was sadly mistaken. Rather than a term of opprobrium, “alternative medicine” may actually be our most direct road to salvation. Indeed, DrRich thinks that far from damning alternative medicine, we should be blessing it, nurturing it, worrying over it, in the precise manner that a mountaineer trapped in a deadly blizzard would worry over the last embers of his dying campfire.

What turned the tide for DrRich was a recent report, http://news.yahoo.com/s/ap/20090730/ap_on_he_me/us_med_unproven_remedies_cost, issued by the U.S. Centers for Disease Control and Prevention, estimating that in 2007, Americans spent a whopping $34 billion on alternative medicine. Even more remarkably, a goodly chunk of this money was paid by Americans themselves, out of their own pockets.

The implications of this report should be highly encouraging to those of us who lament the impending creation of a monolithic government-controlled healthcare system, and who have been struggling to imagine ways of circumventing the legions of stone-witted, soul-eating bureaucrats now being prepared (Sauron-like) to descend upon us all, doctor and patient alike.

This is why DrRich has urged primary care physicians to break the bonds of servitude while they still can, strike out on their own, and set up practices in which they are paid directly by their patients. Such arrangements are the only practical means by which individual doctors and patients can immediately restore the broken doctor-patient relationship, and place themselves within a protective enclosure impervious to the slavering soul-eaters.

One reason so few primary care doctors have taken this route (choosing instead to retire, to change careers and become deep-sea fishermen, or simply to give up and become abject minions of the forces of evil) is that they do not believe patients will actually pay them out of their own pockets.

Well, ladies and gentlemen, this new report from the CDCP demonstrates once and for all that Americans will, indeed, pay billions of dollars from their own pockets for their own healthcare - even the varieties of healthcare whose only possible benefits are mediated by the placebo effect.  DrRich believes that many of the people buying homeopathic remedies are doing so less because they believe homeopathy works, and more because they feel abandoned by the healthcare system and by their own doctors, and realize they have to do SOMETHING. The CDCP report, in DrRich’s estimation, reflects the magnitude of the American public’s pent-up demand for doctors whose chief concern is for them, and not for the demands of third party payers.

Perhaps more importantly, this new report implies that it will be somewhat more difficult than DrRich previously believed for the government to outlaw private-sector healthcare activities. Creating a monolithic government-controlled healthcare system would naturally require the authorities to make it illegal for Americans to spend their own money on their own healthcare, thus rendering direct-pay medical practices illegal, and putting the final stake into the heart of the doctor-patient relationship. But the rousing success of the alternative medicine universe will make such laws difficult to enact.

To see why, consider just how encouraging this new CDCP report must be to the third-party payers. Thanks in no small part to the efforts of the government (and the academy) to legitimize alternative medicine, Americans are spending $34 billion a year on woo. This amount indicates tremendous savings for the traditional healthcare system. The actual amount saved, of course, is impossible to measure, but has to be far greater than just $34 billion. Some substantial proportion of patients spending money on alternative medicine, had they chosen traditional medical care instead, might have consumed expensive diagnostic tests, surgery, expensive prescription drugs, and other legitimate medical services. Furthermore, those legitimate medical services (as legitimate medical services are wont to do) often would have generated even more expenditures - by extending the survival of patients with chronic diseases, by identifying the need for even more diagnostic and therapeutic services, and by causing side effects requiring expensive remedies. (While alternative medicine is famous for being useless, it is also most often pretty harmless, and tends to produce relatively few serious side effects - except, of course, for causing a delay in making actual diagnoses and administering useful therapy, but that’s a good thing if you’re a payer.) So the amount of money the payers actually save thanks to alternative medicine must be some multiplier of the amount spent on the alternative medicine itself.

What this means is payers (which under a government system means the government) will be loathe to do anything that might discourage the success and growth of alternative medicine, and this fact alone may stop them from making it illegal for Americans to pay for their own healthcare.

Still, we musn’t be too sanguine about these prospects. Under a government-controlled system, the imperative to control every aspect of healthcare (in the name of fairness) will be very, very strong. It is easy to envision the feds declaring several varieties of alternative medicine to be covered services, so people wouldn’t have to buy alternative medicine themselves.

But alternative medicine (bless it) will be impervious to government control. Practitioners of alternative medicine aren’t doing what they are doing in order to be subject to federal regulation and bureaucratic meddling. If the feds declare, say, homeopathy and therapeutic touch to be legitimate, covered services under the universal health plan, why, the alternative medicine gurus will simply come up with entirely new forms of alternative medicine specifically to remain outside the universal plan. (New varieties of alternative medicine already appear with dizzying speed, and can be invented at will. No bureaucracy could ever hope to keep up.)

Therefore, as long as the central authorities depend on alternative medicine as a robust avenue for covertly rationing healthcare, the purveyors of woo will always be able to flourish outside the real healthcare system. And this, DrRich believes, represents the ultimate value of woo, and establishes why we should all be encouraging and nurturing woo instead of disparaging it.

DrRich has speculated before on various black market approaches to healthcare which could be attempted by American doctors (and investors) should restrictive, government-controlled healthcare become a reality.  Some of these were: medical speakeasies; floating off-shore medical centers on old aircraft carriers; medical centers just south of the border (the establishment of which, at last, would stimulate the feds to seal the borders against illegal passage once and for all); and combination medical center/casinos on the sovereign land of Native American reservations.

But now, thanks to the success of alternative medicine, there is a direct and straightforward path for American primary care physicians to practice a form of now-long-gone “traditional” American medicine, replete with a robust doctor-patient relationship, right out in the open. Simply declare this kind of practice to be a new variety of alternative medicine. Likely, you will need to come up with a new name for it (such as “Therapeutic Allopathy,” or “Reciprocal Duty Therapeutics”), and perhaps invent some new terminology to describe what you’re doing. But what you’re actually doing will be so fundamentally different from what PCPs will be doing under government-controlled healthcare as to be unrecognizable, and nobody will be able to argue it’s not alternative medicine. In fact, it will seem nearly as wierd as Reiki.

Alternative medicine, in other words, will provide American doctors who want to practice the kind of medicine they should be and want to be practicing with the cover they need to do so. And this is why we must support medical woo, and celebrate its continued growth and success.

    * A list of these academic medical institutions now sporting Centers of Woo is maintained by Orac, and can be found here (http://scienceblogs.com/insolence/2007/11/the_woo_aggregator.php). The length of Orac’s cavalcade of woo, and the famous names appearing on it, is truly stunning. The sinking feeling one gets from looking at Orac’s list can only be surpassed by actually clicking on a few of the links he provides, and sampling some of the actual woo-sites offered by these prestigious academic centers, which read like excerpts of some of the more unguarded moments from Oprah, or even the Huffington post."

*This blog post was originally published at The Covert Rationing Blog*

There’s Not Enough Waste And Inefficiency In Healthcare

Jul 20, 2009 - 7 comments



healthcare reform

In what is quickly becoming a bad habit, DrRich once again provides a misleading title. Obviously, there’s plenty of waste and inefficiency in our healthcare system, enough to suit almost any taste, and DrRich deplores every bit of it.

Indeed, DrRich strongly suspects that at least 20 to 30% of all healthcare spending is completely wasted, and has seen claims (masquerading as proof) that the actual value is as high as 50%.  So again, despite the title of this post, no matter how you look at it there is plenty of waste and inefficiency to go around.

It’s just that there’s not, well, enough.

Before you go away mad, let DrRich quickly explain (quickly, at least, for DrRich) what he means here. Healthcare reform is in the air, and we all know that any effective healthcare reform is going to have to find a way to control healthcare spending.  And a central assumption of any reform plan yet proposed is that we can control spending by eliminating - or at least substantially reducing - the vast amount of waste and inefficiency in the healthcare system. Some propose to do this by incorporating the efficiencies of the marketplace (though these individuals have now been run out of town and won’t be bothering us anymore), some by adopting and enforcing stricter regulations, others by introducing a single payer healthcare system, and still others by mandating new technologies such as electronic medical records. But one way or another, each scheme for reforming healthcare proposes to bring spending under control by reducing waste and inefficiency.

Another way of describing what the reformers are telling us is: There is so much waste in the system that we can avoid healthcare rationing by getting rid of it. Most Americans believe this. Most policy experts believe this. DrRich suspects that even most of his loyal readers believe this, despite what he’s been telling you all this time.

But this is unfortunately false. No matter how much waste and inefficiency you think might be plaguing our healthcare system today, there’s not enough to explain the uncontrolled rise in healthcare spending we have been seeing for decades, and therefore, not enough to allow us to avoid rationing altogether.

And in this sense, there is not “enough” waste and inefficiency in healthcare.

DrRich has tried to explain this before, but he will now try to do it better, because it’s important. He will do it using one of the three universal languages, the language of Math (the other two being the language of Love and the language of Healthcare Rationing, both of which are encumbered by expressions of impassioned pledges, heartfelt exaggerations, and other blandishments, and are thus unsuited to a sober discussion of unpleasant truths).

But first, there is an underlying concept we must agree upon, a concept our political leaders are loath to address. To wit: The real fiscal problem with our healthcare system is not simply that we’re spending a lot of money on healthcare, or even that we’re spending a large proportion of our GDP on healthcare. Surely, if we simply had to live with continuing to spend 15% of our GDP on healthcare, we could figure out a way to do that. But that’s not really the problem. The real problem is that healthcare expenditures are growing at a double digit rate of inflation, several multiples faster than the overall inflation rate, such that, over time, an ever larger proportion of our annual GDP is being consumed by healthcare expenditures. Unless this disproportionate rate of growth is stopped, eventually healthcare spending will consume our entire economy. (Rather, what will actually happen is that it will grow to the point of producing societal upheaval, sending us back to a more typical era  for mankind, where healthcare is a little-thought-of luxury, and not a necessity or a right. This will happen well before healthcare consumes 100% of the economy.)

To reiterate, it’s not the amount of spending on healthcare that is creating a fiscal crisis, it’s the rate of growth of that spending.

There are only two things that can possibly account for this excessive inflation in healthcare expenditures.  Either it is caused by unrelenting growth in wasteful spending (as we are assured by our political leaders), or it is caused by unrelenting growth in useful healthcare spending. If it is the latter, then in order to get spending under control we must ration. So therefore (we all fervently pray), the rate of growth must be caused by wasted spending.

This desired conclusion, unfortunately, leads to mathematical absurdities, and therefore (for anyone who eschews magical thinking) turns out to be utterly false.

DrRich is going to show you data from a spreadsheet. It illustrates what would have to happen in order for wasteful spending to account for our current healthcare inflation.  The spreadsheet is based on the following four assumptions:

Assumption 1) The proportion of healthcare spending today that is wasteful is taken as 25%. The actual number, of course, is not possible to discern with any real confidence. It depends, for one thing, on who gets to define “wasteful.” If I’m a 92-year-old man who gets a $12,000 stent procedure to eliminate my angina, I and my doctor might consider it money well-spent, while you might consider it wasteful. DrRich has arbitrarily chosen a number that falls within the range of popular estimates. But it’s a spreadsheet. If you don’t like 25%, substitute your own estimate. You will find that the rate of wasteful spending we assume for Year 1 in this spreadsheet has little effect on the outcome.

Assumption 2) The annual overall rate of growth of healthcare spending (i.e., healthcare inflation) is 10%.

Assumption 3) The annual growth rate of useful (i.e., not wasted) healthcare spending is economically well-behaved. That is, it matches the rate of overall inflation. The spreadsheet therefore assumes a 3% annual inflation rate for useful healthcare spending. (We must make this assumption if we would like to avoid healthcare rationing, because if useful healthcare spending were not economically well-behaved, that is, if the growth rate for useful healthcare expenditures were substantially higher than the overall rate of inflation, then no matter what the rate of growth for wasted healthcare spending, we would still have disproportionate healthcare inflation - and rationing would be unavoidable.)

Assumption 4) The difference between the “well-behaved” growth of useful healthcare spending and the overall rate of healthcare inflation is accounted for by spending on waste and inefficiency. This of course, is the assumption that underlies all proposals for healthcare reform.

(Note: If you would like to play with the actual spreadsheet itself, e-mail DrRich and he’ll send it to you: DrRich at covertrationingblog *******)

(see photo for table1 )

We see from this table several things. First, as expected, the amount of money we’re spending on healthcare, assuming a rate of healthcare inflation of 10%, is doubling roughly every 8-9 years, a growth rate that is ultimately unsupportable.

Second, in order to account for this unsupportable growth in healthcare spending by invoking waste and inefficiency, the proportion of healthcare spending that is caused by waste must increase to ridiculous proportions very rapidly, such that (for instance) by the 10th year we will have more than doubled (59%) the proportion of all healthcare expenditures that are wasteful; and by the 20th year, nearly 80% must be wasteful. Similarly, the proportion of the annual increases in healthcare spending that would have to be due to waste and inefficiency rapidly climbs to equally ridiculous proportions. By year 5, wasteful spending will have to account for 82% of the annual increase in healthcare expenditures, and that proportion continues to climb, eventually approaching 100%.

To DrRich, these numbers seem absurd on their face. But if you still need to be convinced, consider that in real life, runaway healthcare inflation has already been taking place for decades - so our position on such a spreadsheet would not be at year 1, but at year 20 (or higher).  And no matter what value for wasteful spending we might have plugged in at year 1, by year 20 wasteful spending would have to be well above 80%, and more likely approaching 100%.  In order for waste and inefficiency to account for the situation in which the American healthcare system finds itself today, therefore, one would have to believe that virtually all healthcare spending is wasteful.  (And if you believe that, then what does it matter that tens of millions can’t afford healthcare?)

Now let us illustrate the same point in a slightly different way.  This time, let’s assume that as recently as 2006, our healthcare system was 100% efficient. That is, only three years ago there was no waste whatsoever.  Then let’s allow that the remaining three assumptions given above are still operative. The following table results:

(see photo for table 2)

We can see from these results that, even if only three years ago we had a completely efficient healthcare system, in order for waste to account for the excess growth in healthcare spending we’ve experienced since that time, then as much as 74% of today’s annual increase in spending has to be due to waste and inefficiency.  Indeed, unless at some point within the second term of George W. Bush we actually had a completely efficient healthcare system (which seems doubtful), this spreadsheet tells us (again)  either that our fervently held belief that waste and inefficiency accounts for healthcare inflation is completely wrong, or that today virtually all of our annual increase in healthcare spending must be due to waste and inefficiency, and none due to useful healthcare.

Play with the spreadsheet yourself. You will quickly see that as long as we insist that wasteful spending must account for the unsustainable growth we’re seeing in healthcare costs, then whatever our assumptions may be regarding the current proportion of wasteful healthcare spending - whether we say it’s 20% or 50% or 0% - we very quickly encounter the same mathematical absurdities.

One can only surmise from this analysis (done, DrRich reminds you, with actual Math) that our desired conclusion is wrong. A substantial proportion of our growing healthcare expenditures must necessarily be coming from real, honest-to-goodness, useful healthcare. And if we’re going to substantially curtail that growth, we’re going to have to curtail useful spending. Which means we have to ration.

But, once again, we’re Americans and Americans don’t ration. Which is why we’ve commissioned the big insurers and the government to do the rationing covertly, a task they have accepted with great gusto. DrRich is compelled to point out, once again, that waste and inefficiency is the sine qua non of covert rationing. Disguising all the rationing activity as something other than rationing fundamentally requires opaque procedures, unnecessary complexity, bizarre incentives, Byzantine regulations arbitrarily and variably enforced or ignored, and the diversion of healthcare dollars to non-healthcare ends (such as corporate profits, expanding layers of government bureaucracies, and other massive bureaucracies within the healthcare system created to defend against government bureaucracies). Covert rationing multiplies waste and inefficiency, and does so systematically. To reduce the necessary rationing to the smallest amount possible, we will have to figure out a way to do the rationing openly, and not covertly.

In the meantime, DrRich does not kid himself that exposing the mathematical absurdity of the chief assumption espoused by our political leaders, in their brave efforts to reform healthcare, will change hearts and minds.  American political partisans, not to mention the American media, eat mathematical absurdities for lunch.  And magical thinking amongst the populace, at least when it comes to the exuberant accumulation of household (and national) debt and the application of medical science, far from being discouraged, is actively promoted.

*This blog post was originally published at The Covert Rationing Blog*

No Easy Way Forward For Healthcare Reform

Jul 13, 2009 - 6 comments



healthcare reform



Even with the soaring popularity of our new President, and the general feelings of goodwill projected toward him by Americans and non-Americans alike, and despite the fact that the party he leads holds large majorities in both houses of Congress, and despite the general agreement by both political parties and by all the major stakeholders in the healthcare universe that the time has finally arrived for substantial reform, one gets the sense that Mr. Obama is losing some of the initiative on his healthcare reform plan.

Some of the leaders in the Democratic party (who, really, are the only ones who count) have balked at the price tag that has been attached to the Obama proposals (estimated currently at $1.5 trillion over 10 years, and most admit this projection uses the rosiest of assumptions), and now they’re balking as well at the much-desired (by the Obama administration, at least) “public option,” the Medicare-like insurance plan for all (http://www.nytimes.com/2009/07/10/health/policy/10health.html?_r=3&partner=rss&emc=rss).

Worse, new schemes for healthcare reform - schemes which differ in fundamental ways from the Obama proposals - seem to be springing up all the time, and furthermore, many of these new proposals seem to be taken seriously by the press and by members of Congress. Even if none of these new plans ever ends up going anywhere, the mere fact that people in positions of authority are calling for them to receive honest consideration is a strong indication that the Obama plan might not come to a vote any time soon.

It is also a sign that Congress might be balking a bit, preparing to break sacred protocol, and actually preparing to subject any healthcare reform bill to careful consideration and debate prior to voting on it. Such action would be in stark contrast to the now-standard practice - honed with the TARP bill, the first (and one prays, only) stimulus package, and (in the House) the Cap and Trade bill - of voting on major legislation without a single congressperson taking the time to read it.

It seems clear (to DrRich at least) that the administration’s overarching strategy is (while invoking a sense of ultimate urgency), to ram through all of its incredibly high-cost policy initiatives, before the general sense of crisis and panic among the populace dissipates, and before sober reflection reveals to us that we’re already hamstringing our posterity with crippling debt. (Our motto: What’s our posterity ever done for us, anyway?) So any delay can only spell trouble for the Obama health plan.

Fortunately, DrRich is here to reassure the Obama administration that the thing is still well in hand. While the road may be a bit bumpier than you might have hoped, it still leads where you want to go.

To see why, one simply needs to consider for a few minutes those alternate reform proposals now circulating amongst policy wonks. DrRich will briefly describe three of these alternative proposals, ones that seem to have gained at least some traction, and which may on the surface seem to be quite good (and thus the most threatening to the Obama plan). Then he will demonstrate why these plans simply cannot work.

The Healthy Americans Act (http://www.standtallforamerica.com/issue/health_care/), sponsored by Sen. Ron Wyden (D-Oregon), requires that individuals buy private health insurance that at a minimum would offer “Blue Cross standard” care. Individuals would be able to afford this insurance (which will be available to all regardless of age or medical history) because everybody would get a big raise (by statute) when their employers no longer have to buy it for them. People earning less than 400% of the poverty level would receive government subsidies to purchase their own insurance. The Wyden plan has the great advantage of having been “certified” as being budget-neutral by 2014 - so “officially” it would be a trillion or two cheaper than the Obama plan over the next decade.

The Patients’ Choice Act (http://www.house.gov/ryan/PCA/index.htm), sponsored by four Republican Congressmen (Coburn, Burr, Ryan and Nunes), also places ownership of health insurance in the hands of individuals, instead of the employers. Individuals will buy their own insurance, which will be available to all, and which will be available through one-stop shopping via state-run “regional insurance exchanges.” Families will recieve a tax credit of $5700 ($2300 for individuals) to purchase this insurance, and those with low-income would receive further subsidies. Those who do not make an active insurance choice will be automatically enrolled in a private plan paid for by the tax credit.

And finally (finally for this blog post, at least), there is Bob Laszewski’s proposal, the Health Care Affordability model (http://healthpolicyandmarket.blogspot.com/2009/06/health-wonk-review-health-reform-whats.html). Laszewski is a noted healthcare blogger and well-respected policy expert, and accordingly, his proposal is being taken quite seriously by some members of Congress. Laszewski is so smart and his proposal is so detailed that one with DrRich’s limited capacity has difficulty getting through the whole thing. But essentially he proposes to have the feds set formal cost-cutting targets which every private health plan must meet. Those who fail to meet these targets will lose their tax advantages (i.e., companies that continue to provide their products will no longer get tax deductions). Clearly, this will provide a strong incentive for insurance companies to meet those cost targets, and healthcare costs will, accordingly, eventually come under control. Lazsewski emphasizes that his proposal is not really a stand-alone plan, but can be attached to any other plan that’s out there. It will simply give insurance companies the added incentives they need to actually cut costs.

Now, DrRich is not opposed to any of these plans. In fact, he rather likes the Wyden plan and the Republican plan, because they both place the consumer in charge of choosing his/her own health insurance, and they provide for better competition among insurance products within the marketplace.

But alas, all of these alternate plans (and any plan that relies on private insurance) are doomed. The reason is simple. As DrRich has pointed out several times in the past, health insurance companies are no longer interested in providing health insurance. You can’t institute a healthcare reform plan that relies on private insurance - no matter how logical and wonderful that plan might otherwise be - when the insurance companies are all desperately seeking an exit strategy.

People, listen up. The health insurance companies just don’t want to play any more.

Private insurance companies have had 15 years of more-or-less unfettered free-reign to institute any efficiencies they want to. They entered the fray in 1994 (after vanquishing with extreme prejudice the Clinton’s attempt at healthcare reform) with great confidence and enthusiasm, cheered on (initially, at least) by the public and by public officials alike. In the ensuing years they’ve tried all kinds of legitimate ideas for reducing healthcare costs, such as managed care, gatekeepers, clinical pathways, disease management programs, pay for performance, wellness programs, medical homes, and even a ruthless consolidation of the industry to achieve “efficiencies of scale.”  They’ve also tried sneaky and underhanded ideas for reducing cost, like cherrypicking patients, making specialty care as inconvenient as possible, browbeating PCPs into zombie-like compliance with care directives, refusing to cover expensive-but-effective services, and cancelling the policies of tens of thousands of patients after they get sick, based on trumped-up technicalities. They’ve tried everything short of dispatching teams of Ninjas in the dark of night to slaughter their most expensive subscribers in their beds.

Yet the cost of healthcare continues to skyrocket, entirely unabated. And despite annually increasing their premiums by more than 10%, insurance companies can see that they have no prospect of long-term profitability.

The insurance companies have shot their wad. They are in despair, entirely bereft of ideas. They want out, and they are now working their exit strategies as hard as they can.

The last thing they want is for Congress to adopt the Wyden plan, or the Republican plan, or the Laszewski plan, or any plan that relies on THEM to figure out how to get healthcare costs under control. They regard such a prospect with the same enthusiasm you’d get if you told a battered, shell-shocked WWI doughboy to leap from the trenches one more time, and trudge through bullet and shell, across 200 yards of mud, blood, barbed wire and bodies, to attack that same machine gun nest once again. Somehow they just don’t believe that, this time, the results will be any better.

This is why the insurance companies are “complicit” with the Obama plan. The Obama plan offers them, at worst, a graceful exit strategy that they can break gently to their shareholders, over time. With luck, they may end up with a long-term business as claims processors for a government plan. They may even get one last windfall in profits, from government-supplied insurance premiums for some of those 47 million uninsured. At the very least, the Obama plan won’t expect them to control the cost of American healthcare. Indeed, the Obama plan expects them to be completely incapable of competing with its public insurance option.

The Obama plan will allow the health insurance companies to stay in the relative safety in their trenches, hunker down, and await the armistice. Any alternate reform plan that hopes to be successful will need to offer the insurance industry a deal at least as sweet.

So as the move toward healthcare reform begins to bog down, President Obama still has an ace in the hole: the insurance industry has nowhere else to go. The support Mr. Obama enjoys from that industry is offered not out of mere political expediency, but out of  utter necessity. The undying support of the insurance industry will likely make the administration’s healthcare reform plan unstoppable.

DrRich is glad to have been able to ease the administration’s concerns as their hour of darkness approaches.

*This blog post was originally published at The Covert Rationing Blog*