Deadly Spin (13 page)

But under the surface—waiting to boil over again—was the fact that millions of American families were going without health insurance and therefore not part of any managed care solution.

Something else was boiling, too, by the time Bill Clinton was elected to the White House in 1992: the dominance of a handful of for-profit insurance providers that had consolidated their control over the health care system even more successfully than the AMA.

The Reagan years produced no meaningful debate over health care, but they produced several changes in response to employer concerns about selection bias and HMO pricing. In October 1988, Congress enacted some pro-business amendments to the HMO Act that relaxed regulations of federally qualified HMOs, basically freeing employers to negotiate HMO rates and coverage more easily—and lifting federal equal-contribution requirements for companies.

This political period, in fact, merely solidified the control of our health care system in the hands of a very few large corporations under the broad category of “managed care,” which I’ll explain further in the next chapter.

With the large, for-profit insurance companies now firmly in control, Hillary Clinton came to Washington to crusade for reform.

And I wasn’t far behind, working against her.

C H A P T E R   V I

Consumer-Driven Care

T
HERE
have been no Remote Area Medical expeditions to Pequot Lakes, in central Minnesota, but if Stan Brock leads one there before all the provisions of the current national health care reform kick in, Tom and Katie Brennan and their five children might be first in line.

Like millions of Americans, the Brennans are finding out what it means to be underinsured—and how far the American system of financing health care has strayed from the original concept of insurance, which was to spread risk over a large pool of policyholders so that everyone, regardless of age or health, paid the same amount for coverage.

The Brennans are a two-income family—Tom is self-employed; Katie is a schoolteacher—but they can barely afford the ever-increasing premiums and out-of-pocket expenses under their so-called consumer-driven health plans.

Because the premium increases for family coverage by the local school district had been in the double digits for years—26 percent in one recent year alone—Katie dropped her family from that policy. “The cheapest family plan our school offers has an $858 monthly premium and an $11,000 deductible, which means nothing is covered until you exceed that amount,” Katie said when I talked to her. “That’s just too expensive for most schoolteachers. Only half of the eighty teachers are still on one of the district’s insurance plans.”

Katie is now enrolled in a plan through the district that covers only her, with $150 monthly premiums (the school district pays an additional $300) and a deductible of $5,000. Tom pays $450 a month for a $5,900-deductible policy he obtained on the individual market for himself and their children.

Even with that coverage, they had to fight their insurance company last year when their son Jack broke his arm. The fight was not to get the insurer to cover expenses related to the accident—the Brennans paid all the bills because the total expenses did not exceed $5,900—but merely to get credit for the money they paid toward the deductible.

“[The insurer] said we needed to provide proof that it was not a preexisting condition,” Katie said. “This was a little ridiculous since he broke his arm in July and we had had coverage with this insurance company since February.”

The Brennans are thinking now that they would be better off without insurance. They pay more than $7,000 a year in premiums and still have almost $11,000 in combined deductibles—and they have to pay the full cost of prescription drugs because medications are not covered under either of their policies.

“Because of the high deductibles, we still wind up paying for everything out of pocket,” said Katie. “We now avoid going to the doctor. It is just too expensive. The cost of our premiums and out-of-pocket costs exceed our monthly mortgage payments. We do not take family vacations, and we drive older cars because our budget is so tight.”

While most of the people who seek medical care at RAM’s expeditions have jobs but no health insurance, a fast-growing percentage are people like Tom and Katie Brennan, who have insurance that doesn’t come close to covering their medical expenses. According to a study by the Commonwealth Fund, the number of underinsured Americans reached twenty-five million in 2007—up 60 percent since 2003.
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At that rate of growth, the fund anticipates, at least forty million Americans might be underinsured—despite the reform bill just enacted—when it does a follow-up study in 2011. The reform legislation will help by limiting maximum out-of-pocket expenses that an insurer can require, but for many Americans these deductibles will still be more than they can afford.

A consequence of underinsurance is that many people don’t get the care they need. In a separate study by the Center for Studying Health System Change, covering the same years as the Commonwealth Fund survey, one in five Americans reported delaying or forgoing needed care in 2007, up from one in seven in 2003, in many cases because they were underinsured.

Middle-income families are especially hard-hit by this trend.
American Medical News
noted in a 2008 story about the two reports that middle-income insured Americans “are increasingly experiencing health care access difficulties that are more commonly associated with their lower-income counterparts and the uninsured.”
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This rapid growth in the number of underinsured Americans is a consequence of the continuous shifting of health care costs—through high deductibles and coverage limitations—from insurance companies to their policyholders.

As an insurance industry PR executive, I had the responsibility of helping create the perception that the high-deductible and so-called limited-benefit plans that insurers and employers were forcing Americans into were consumer-friendly and essential weapons in the industry’s battle against escalating health care costs. I was expected to hype these plans as part of a “consumerism” trend that was started by Americans who wanted more control over their health care and their health care dollars. To perpetuate the myth that Americans were clamoring for health insurance plans that required them to spend more of their own money for their medical care, my colleagues and I were expected to follow the lead of our CEO and industry marketing types and call these plans “consumer-driven.”

“Consumerism is an inescapable trend,” declared Ed Hanway, CIGNA’s CEO, in November 2005 at the company’s Consumerism Forum for Investors, held at the überexpensive Mandarin Oriental, the swanky Manhattan hotel in Columbus Circle overlooking Central Park. “Like a tidal wave, it’s building in size and intensity … The crowd is chanting more: more choice, more control over health benefits, more quality and value, and consumers know that they have more at stake both financially and, most importantly, in terms of their own health.”

MANAGED CARE
:
WHAT WAS THAT ALL ABOUT?

“Consumer-driven” plans started appearing in the early 2000s when it became clear that the techniques of managed care—the insurance industry’s silver bullet of the 1990s—had not lived up to expectations. They might have, had the big for-profit insurers not done irreparable harm to this once-popular means of keeping people healthy at relatively little expense. By the time they were done with it, managed care companies (usually HMOs) were almost universally loathed.

The forerunner of managed care plans—which require enrollees to seek care from a limited network of health care providers in exchange for relatively low premiums and out-of-pocket expenses—came into existence in the late 1920s and enjoyed wide support for decades, although mostly in Western states. A doctor and Lebanese immigrant named Michael Shadid is generally credited with developing the first one, in Elk City, Oklahoma, in 1928. Members of the cooperative, mostly farmers and their families, paid a fixed monthly fee in exchange for care at Shadid’s clinic. Soon, in California, Drs. Donald Ross and H. Clifford Loos established a prepaid plan for employees of the Los Angeles water department.

The idea caught on. Industrialist Henry Kaiser was so impressed with what Drs. Ross and Loos had accomplished that he set up a similar arrangement for his workers who were building a large aqueduct in Southern California. That plan was the forerunner of the Kaiser Permanente health system, which now serves more than eight million enrollees in several states. The Ross-Loos Medical Group also experienced steady growth, eventually including a hospital and nineteen clinics in Southern California.

It was not until the Nixon administration, however, that these prepaid plans started spreading eastward. As I mentioned earlier, Nixon put his support behind a bill that would encourage the creation of health maintenance organizations, the new name for the plans. The HMO bill attracted bipartisan support and became law in December 1973. The growth of HMOs was assured through a provision that required employers with twenty-five or more workers to offer an HMO plan if they also offered a traditional indemnity plan.

When the big indemnity insurance companies started losing customers to HMOs, they did what they had to do in order to survive: They began buying their new competitors. CIGNA was among the first of the big national multi-line insurers to get into the HMO business through a series of such acquisitions. One of the first was the Ross-Loos Medical Group, soon renamed the CIGNA Healthplan of California.

CIGNA and the other big insurers set out to convince their corporate customers that they could keep their employee-benefit budgets under control if they moved their workers out of traditional indemnity plans, which allowed workers and their families to get care from any doctor or hospital, and into HMOs, which paid only for care provided by doctors and hospitals in defined and limited networks. HMOs could save money in a way that indemnity fee-for-service plans could not, by negotiating favorable rates with health care providers they wanted in their networks and by refusing to pay for care given to their members by providers who were “out of network.” Later permutations of managed care plans, like preferred provider organizations (PPOs), would provide some coverage for out-of-network care, although enrollees would be on the hook for higher coinsurance payments if they went to a non-network physician or hospital.

My first experience as a promoter of HMOs came in 1985 when I was hired by the Baptist Health System of East Tennessee to run its advertising and PR operations. Baptist had just recently launched its own HMO with a network of its own three hospitals in the Knoxville area and the doctors who admitted patients to them. Many of the hundreds of HMOs that sprang up as a result of the HMO Act were local plans established by hospitals like Baptist, which saw HMOs as a means to attract patients.

I had no trouble being an HMO promoter while at Baptist. My family and I liked our HMO’s emphasis on preventive care and the fact that we had a primary care physician who would coordinate care with specialists should we ever need them. Just as important, we liked knowing that visits to doctors would never cost more than a $10 copayment—and that we would never have to file another claim.

Attitudes toward HMOs began to change for the worse, however, when the big for-profit insurers began to take over. These insurers knew that the more HMO members they had in a given market, the more leverage they would have over local doctors and hospitals. Not only could the insurers demand deep discounts from doctors once they acquired significant market share, but they could also influence—through their reimbursement policies and coverage guidelines—how the doctors practiced medicine.

One of the reasons membership in HMOs grew so rapidly in the 1990s was because insurers were remarkably successful in getting their big-employer customers to move their employees out of indemnity plans and into HMOs. As recently as 1994, according to the Employee Benefit Research Institute, traditional indemnity plans were still the most commonly offered type of employer-based health plan. Just three years later, only 15 percent of workers were still enrolled in indemnity plans. The forced “migration” of workers to the managed care world was stunningly swift and successful.

It didn’t take long, though, for doctors to start pushing back against the HMOs’ policies of providing lower payments for services and requiring doctors to follow strict care guidelines to even be paid, which they considered an inappropriate intrusion into their practice of medicine. In 2000, doctors joined a massive class action lawsuit against all of the big national and regional insurers, including CIGNA. The lawsuit contended, among other things, that HMOs used a software program designed specifically to cheat doctors out of millions of dollars. The suit was eventually settled out of court, although the managed care companies admitted no wrongdoing. As part of their settlements, CIGNA and the other insurers agreed to make significant changes in the way they paid physicians and to reimburse more than seven hundred thousand doctors for claims they had previously denied. CIGNA’s settlement alone was valued at four hundred million dollars.

By then, HMO members had also begun their own rebellion. They didn’t like being told which doctors and hospitals they could choose and—even worse—being forced out of the hospital before their doctors thought they were ready. As described in chapter 1, the front-page stories in 1996 about HMOs insisting on one-day hospital stays for mastectomies and deliveries touched off a massive public outcry. Hardly a week went by when I didn’t get a call from a reporter with an HMO “horror story.”