Reinventing the healthcare insurance business model

If there is a more obtuse business model than the one used by insurance companies I have not seen it.  While I am not an advocate of privatization—because I am a right-wing nut who favors capitalism—I do think there is a smarter way to earn profits.

Taken to its extreme, the ideal way for a payor to earn profits is for payors to take in money without ever having to pay out money.  This is the same model your cable company uses—people simply send them money every month, and never get it back.

To contrast the healthcare insurance model with an insurance model that actually provides some degree of benefit, one needs look no further than the automotive insurance model.  While nobody loves paying car insurance, we do so somewhat secure in the fact that if we are in an accident our insurance will cover us.

A large reason we feel this way is because we have a choice in which auto insurer we select.  If we do not like the coverage, we change providers.  Our employers do not tell us which auto insurer we must purchase, and yet they do when it comes to providing health insurance, and yet ninety-nine percent of the people who work for a firm drive, so the insurable population is about the same size for health and auto.

With health insurance, they best we can do when we are ill is hope our insurance will cover us, and we do so with the hidden expectation that it will not.

Health insurers need to change their model.  If a single payor changed its model to actually cover the claims made by its members it would not have to worry about being profitable because they would be beating people off with a stick.

Instead of hiring so many people to figure out how not to reimburse their members, why not change to model to one by which they actually provided their members with what those members need?


How the Grinch stole healthcare

Not much has changed in the last year…or has it.

Every Congressman Down in Congress-ville
Liked Health reform a lot…But the Payors,
Who lived just North of Congress-ville,
Did NOT!

The Payors hated Health Reform! The Congressional reform season!
And as everyone’s heard there is more than one reason.
Was it the fear of losing their monopoly right?
Worried, perhaps, that Congress might indict.
But I think that the most likely reason of all
May have been that the uninsured took them all to the wall.

Staring down from their man-caves with indemnifying frowns
At the warm lighted windows below in the town.
For they knew every Congressman down in Congress-ville beneath,
Canted an ear to hear Congress gnashing their teeth.

“If this reform passes, they’ll kill our careers!”
“Healthcare reform! It’s practically here!”
Then they growled, the ideologues’ fingers nervously drumming,
“We MUST find a way to keep Reform from coming!”

For, tomorrow, they knew…

…Stumbling home from the tavern at a quarter past two What each Congressman, intern, and page just might just do And then all the milieu. Oh the milieu, the milieu
Which the Payors hated more than their mom’s Mulligan stew.

Then all the Congressmen, the left and the right, would sit down and meet.
And they’d meet! And they’d meet!
And they’d MEET! MEET! MEET! MEET!
Implement full provision; cover pre-existing…how sweet
That was something the Payors couldn’t stand in the least!

And THEN they’d do something Payors liked least of all!
Every Congressman down in Congress-ville, the tall and the small,
Would stand close together, their Healthcare bells ringing.
With Blackberrys-in-hand, the Congress would start pinging!

They’d ping! And they’d ping!
And the more the Obligators thought of the Congressman-Health-Ping
The more they each thought, “I must stop reform-ing!
“Why for all of these years we’ve put up with it now!
We MUST stop health Reform from coming!
…But HOW?”

Then they got an idea!
An awful idea!
THE Indemnifiers

“I know what to do!” The CEO Payor laughed in his throat.
And he made a quick Congressional hat and a coat.
And he chuckled, and clucked, “What a great Payor raucous!
“With this coat and this hat, I’ll look just like Saint Bacchus!”

“All I need is a pass…”
The Payor looked around.
Since Congressional passes are scarce, there was none to be found.
Did that stop the old Payor…?
No! The Payor simply said,
“If I can’t find a pass, I’ll make one instead!”
So he called his aide Max. Then he took some red paper
And he dummied up the pass and he started this caper.

He loaded some bags
And some old empty sacks
On a Benz 550
And he rode with old Max.

Then the Payor called, “Dude!”
And the Benz started down
To the offices where the Congressmen
Lay a-snooze in their town.

All their windows were dark. Quiet snow filled the air.
All the Congressmen were dreaming sweet dreams of healthcare
When the Payor came to the first office in the square.
“This is stop number one,” The old Warrantist – a winner
And he slipped passed the guard, like sneaking to a State Dinner.

Then he slid down the hallway, Harry Reid was in sight.
Reid was chumming Pelosi, he planned quite a night.
He got nervous only once, for a moment or two.
Then he realized that the leadership hadn’t a clue
Then he found the Congressional stimuli all hung in a row.
“These Stimuli,” he grinned, “are the first things to go!”

The Payor slithered and slunk, with a smile somewhat mordant,
Around the old Cloakroom, looking quite discordant!
There were copies of the bill stuffed in jackets and on chairs, Why, he even found a copy tucked under the stairs
And he stuffed them in bags. Then the Payor, very neatly,
Started humming the jingle from Blue Cross; rather Cheeky!

Then he slunk to the Senate Chamber, the one facing East
He took the Senators’-copies!—didn’t mind in the least!
He cleaned out that Chamber and almost slipped on the floor.
Saw an Internet router, and thought of Al Gore

Then he stuffed all the copies in the trunk of his Benz.
And he thought to himself, “Why don’t I have friends?” “There’s always Tiger,” he said with no jest But TW’s being chased by reporters, those pests.

The Payor spotted the Grinch having trouble with his sacks
And he lent him a hand—he offered him Max Max was quite pleased, for he knew this December,
That the Grinch would become the Payor’s newest board member.

The Grinch was all smiles–he’d made quite a killing
Offering to help pillage if the Payor was willing.
He stared at the Payor and asked, “New glasses?”
The Payor simply smiled, saying “These people are such (You did that to yourself, not me.)

And, you know, that old Payor was so smart and conniving
When he next saw Pelosi he found himself smiling!
“Why, my dear little Nanc’,” the Bacchus look-alike stiffened,
“Botox in this light makes you look like a Griffin.”
“I’m taking these bills home,” he said pointing to the copy.
“There’s a comma on one page that looks way too sloppy.”

And his fib fooled the Griffin. Then he patted her head
And he gave her a wink, and he sent her to bed
And as Speaker Pelosi shuffled off to her army,
The Payor said to himself, “What a waste of Armani!”

The last thing the Payor needed to do,
Was to mess with these records systems, all four thousand and two.
So he drove to HHS, the DOD and the VA,
And stuffed mint jelly in their servers so their networks would not play

And the one EHR, that still worked in the DC
Was the one bought from CostCo and tucked under the tree.

Then he did some more damage
To HIEs, and the N-HIN,
Making the idea of a healthcare network
Just a has-been!

It was quarter past dawn…
None in Congress were his friends
All the Congressmen, still a-snooze
When he packed up his Benz,
Packed it up with their copies of reform in those bags! Stacked to the leather ceiling,
Manila envelopes with name tags!

Three miles away were the banks of the river,
He was poised with the bags all set to deliver!
“Pooh-pooh to the Congressmen!” he was Payor-ish-ly humming.
“They’re finding out now that no Reform is coming!
“They’re just waking up! I know just what they’ll do!
“Their mouths will hang open a minute or two
“The all the Congressman down in Congress-ville will all cry BOO-HOO!”

“That’s a noise,” grinned the Payor,
“That I simply must hear!”
So he paused and the Payor put a hand to his ear.
And he did hear a sound rising over the snow.
It started in low. Then it started to grow…

But the sound wasn’t sad!
Why, this sound sounded merry!
It couldn’t be so!
But it WAS merry! VERY!

He stared down at Congress-ville!
The Payor popped his eyes!
Then he shook!
What he saw was a shocking surprise!

Every Congressman down in Congress-ville, the tall and the small,
Was singing! Without any health reform at all!
The Congress didn’t care, a few were disgraces,
All they wanted, it seemed, was TV with their faces

And the Payor, with his Payor-feet knee deep in the muck,
Stood puzzling and puzzling: “Man, there goes my bucks.
It could be about healthcare! It could be global warming!
“It could be Al Qaeda, Afghanistan and desert storming”
And he puzzled three hours, `till his puzzler was sore.
Then the Payor thought of something he hadn’t before!
“Maybe Congress,” he thought, “simply needs a free ride.
“Maybe Congress,” he thought…just needs to look like they tried.

And what happened then…?
Well…in Congress-ville they say
That the Payor’s small wallet
Grew three sizes that day!
And the minute his wallet didn’t feel quite so tight,
He zoomed in his Benz passing through a red light
And he brought back the copies of the bill for reform!
And he……HE HIMSELF…!
The Payor calmed the whole storm!


The effect of healthcare reform on others

Somebody had to do this, so it may as well be me.  Sometimes to bring clarity to issues, it helps me if I dumb-it-down.  Which got me to wondering, how would the whole healthcare reform debate play out with Mother Goose?  Here’s what I was able to learn from my interviews.

Jack & Jill went up the hill, Jack fell down, and learned Mother Goose’s insurance wouldn’t cover him because he’s not a real boy.  Having recovered, Jack was soon found not so nimbly jumping over the candlestick.  His charred wooden body is being sanded in an effort to heal the burns.  Not only is Jack not a real boy, he’s also not a candidate for Mensa.

They sent the Little Old Woman who lived in the shoe home with a can of Desenex because her AARP insurance had expired and Medicare told her she already used her share of the money.  Afterwards, she was interviewed by Planned Parenthood for an episode of “I didn’t know I was pregnant.”

And remember that tuffet upon which Little Miss Muffet sat?  It wasn’t the spider who frightened her away, it was the deductible she’d hay to pay to cover the rash she got.  She tried sussing out her own treatment using social media on WebMd.

Jack Sprat could eat no fat, but he forgot to disclose that when he completed his insurance application.  He now suffers anemia anonymously as his not so lean wife left him.

How about Peter Peter Pumpkin eater?  All that fiber blocked his colon—a little personal prevention could have saved him a lot of time posed in the Thinker position.

Mary and Little Bo-Peep had a little mutton for dinner which after having sat on the counter all day produced various toxins which were absorbed into their bloodstream.  This resulted in them being rushed to the Mother Goose Clinic with a case of food poisoning.

Simple Simon met a pieman who knew nothing of pasteurization.  Simple is sitting three seats away from Mary in the waiting room.  The Clinic has been unable to locate either of their records on their EHR which cost in excess of one hundred million dollars.

Old King Cole called for his pipe even though he had a severe case of sinusitis.  CVS was out of Z-packs, and home he went with just a tin of Prince Albert.

All the king’s men tried to make a meal out of Mr. Dumpty.  Several were to learn later that one can get Salmonella from eating a raw egg that had been tromped on by horses.

Pat-a-cake.  The baker’s man, not one for washing his hands before pattying his cakes, caused Tommy to be seen by an internist.  Apparently neither real men nor cartoon men wash there hands.

The Butcher, the Baker, and the Candlestick-Maker, were being treated for nontuberculous mycobacterial disease for poor hygiene having been found bathing together.

It was reported that Georgie Porgie who’d been kissing girls had made them cry when they discovered they had contracted the herpes simplex virus.  Their mother, embarrassed by the turn of events, reported to the school that her twins were out with the H1N1 virus.

The Three Blind Mice were found to have stitched themselves together after unsuccessfully trying to sew back on each other’s tails.  It was later discovered that the tails had been cut off by the Farmer’s wife with the Butcher’s knife.  The mice are suffering from septicemia.  The Crooked Man and Yankee Doodle are trying to ascertain why the Farmer’s Wife and the Butcher were later found hiding in the barn.  The Farmer’s wife is being treated with Effexor on an out-patient basis for clinical depression.  The Farmer was not available for comment.

It’s believed that Willie Winkie is suffering from a plantar wart after running through the town in just his nightgown.  Uninsured, he tried removing the wart with the knife he’d borrowed from the Butcher, only learn the knife had been recently use to amputate the tails of some handicapped mice.

Old Mother Hubbard, a spinster of questionable repute, upon learning that there were no bones in the cupboard for her dog Hannibal, began to get hungry herself.  She settled for a meaty broth, and fava bean soup, and a nice Chianti.  Polly was seen putting on the kettle.  The SPCA continues to look for Ms. Hubbard’s dog.

Is the term “Payor” healthcare’s oxymoron?

One of the great things about fall is that as I prune back the vestiges of my virtual garden I am able to collect basketful upon basketful of overly ripe metaphorical tomatoes, perfect for tossing at aberrant analogies and inappropriate idioms.

It’s a curious time.  We give away money to the middle class and rich so they can upgrade their BMWs on the backs of the poor.  The feds market that idea as though that pittance will either jump start the economy, or to hide the fact that that the administration has managed to budget for a nine trillion dollar deficit gap over ten years.

By now we know there are no quick fixes, no magic formulas for fixing the economy.  Finding a formula that works will be more difficult than learning how to neatly fold a fitted bed sheet.

“Is it the essential paradox of the age of Obama that we have to destroy the village in order to save it, bust the budget in hopes someday we’ll balance it?” Nancy Gibbs, Time, September 9, 2009.

“It takes an idiot to raze a village.” Paul Roemer, today.

Congress is trying to decide what the final bill will look like without ever having read the first draft.  How will we know when they have something that makes sense?  Do we watch the Congressional chimney to see if the smoke is white or black?  Does that mean we have a bill, or is it simply that the chef burnt the Peking Duck?

Then there are the payors.  Get me started, or don’t.  We all know that one of the driving factors for reform is the behavior of the payors.  A friend asks—for full disclosure I note that she is one of “them”—why do people view health insurers differently from auto, life, or home owners insurance.  She was serious.

Here’s my take on the answer.  If the health insurance firms provided life insurance they’d be exhuming the deceased and trying to prove they weren’t dead.  Car smashed, get a check.  House leaks, get a check.  Die, get a check.  Need surgery.  Not so fast.  Let’s see if you’re covered for that.  If not, whew.  If yes, let our doctors decide if you really need the surgery.  It won’t cost you a minute of your time as our doctors don’t even need to examine you.  You see how this plays out?

It happened to me after my heart attack, albeit with my disability payor, sort of the evil step sister of the health side.  My doctor put me on six months disability, naturally, the payor declined to pay.  There doctor, who never examined me decided I was fine, at least that’s what their letter stated.  How do we know these doctors even exist?  Have they ever been seen in the daylight?

Most Americans don’t believe that insurance companies are interested in helping people.  They like us fine when people are payors.  They are much less fond of us when people become patients.  It’s a simple matter of flow theory.  As long as the flow of cash is in-bound, all is well.  When people move to the dark side, from payors to patients, payors have no patience.

Is there anyone who believes that there is a single payor in the country whose mission statement says anything about doing all we can to help those who need us?  Of course not.  Payors have claims adjusters.  What is their role?  It’s certainly not to adjust the payment higher.

Do payors incent their employees to pay out as little as possible?  I believe they do.  Do payors penalize or retrain people who pay out too much?  I believe they do.  Do they design the claims and dispute process so as to make it so cumbersome on patients and doctors that parties give up prior to settling?  I believe they do.

I believe the payor business model is not much different from that of tobacco companies.  For years tobacco firms claimed there was no public evidence to support the fact that nicotine was addictive.  It turns out they buried the evidence.  Payors claim they are not bad actors.  Some claim the moon landing was faked.

I am a firm believer that pictures can sometimes convey more than mere words.  To me, this link explains a lot about what’s wrong with healthcare. Start playing at 6 minutes and 40 seconds.

Does reform need to be reformed?

The following is the comment I posted to,

Kent Bottles: Is It Really Impossible to Control the Cost of Health Care in the U.S.?

Kent, your narrative should be mandatory reading for all those in Washington whose vision of reform stands in stark contrast to the piece. Then, before they are allowed to propose or vote on their vision, they should be forced to explain why their vision doesn’t address these issues.

In my non-luminary opinion, here’s where I think the reformists have failed. The notion of spending funds that don’t exist, to fix things that may not be broken, without fixing those that are could only come from Washington.

Permit me to over simplify things to make a point. When I look at healthcare, I see a three legged stool; pharma, the payors, and the providers—the three P’s. Not exactly in a pod, each working to their own benefits and operating under different business models—models which are in conflict. For example, many hospitals operate as not for profits, which conflicts with the for profit sectors.

I believe the present reform effort will increase the conflict. Why? Because the legislation is siloed—it looks a lot like the word ‘soiled’ which might also be part of the problem. The legislation does not seem designed to address healthcare as in integrated industry. The way reform is positioned, each nudge that is put to one leg of the stool will cause a reaction, an unfavorable one, to the other legs. It is a little like doing an experiment, changing multiple variables at once, and hoping for the best.

Two sides of the stool, the payors and pharma, have behemoths running the show. Among the behemoths, the business models in pharma are quite similar and the same holds for the payors.
I think it is important to distinguish between the business of healthcare (the dollars and cents) and the healthcare business (the clinical side). The provider segment is highly fragmented. There is no behemoth provider cartel. The business of healthcare, is the side most in need of reform. Each of the thousands of providers operates under their own business model. None of these businesses was designed to be interoperable—I do not use this term in the same sense being used by the ONC and CMS.

The business of healthcare, with all of its inefficiencies, is designed to operate within its four walls and across a limited geographical radius. The long term goal of healthcare reform, I believe, is to make the provider side appear as one giant services provider. Just because consolidation sort of worked for steel, the airlines, and the automotive industry does not mean it will work for delivering healthcare.

My final comment has to do with the payor side of healthcare, and I’ll start by acknowledging that this one is more than a little provocative, one for which I have not thought through a workable solution—I’ll leave that to those of you who aren’t grasping for metaphorical tomatoes to throw. I could be convinced to skip the rest of my comments if for a moment I thought that the business model of the payors was—let’s cover everyone who needs care for a fair cost. Ignore for the moment that my statement is naive.

We know that on a small scale it is possible for people to self-insure, to meet their needs without having to rely on payors. I’ll frame my final comment with a question—where is the value-add to healthcare from the payors?

Here is my issue with the current model. You want to go to the movie, you hand me ten dollars for an eight dollar ticket, and I pay the movie theater on your behalf and pocket the two dollars. In this instance I am merely the middle man, I manage the transaction. The theater gets no marginal benefit, and you get no marginal benefit.

Not complex enough? Let’s say someday millions of people want to go to the movies and a ticket will cost them eight dollars. Anticipating that, everyone pays me a dollar a day so that when the time comes they can go. On that day, I pay for movie tickets for those who want to go, pocket the difference, and I keep the money for those who don’t go.

In my small mind, that’s how I view the payor leg of the stool. I think the payors relish reform. I think the more they complain about how badly this will hurt them the more they may like it. It reminds me of the Uncle Remus story in which Brer Rabbitt pleading with Brer Bear and Brer Fox not to throw him into the briar patch.

What industry wouldn’t be salivating if they could find an additional thirty or forty million customers overnight? What if you could charge them a monthly fee and make the co-pay so high that you might not have to cover major medical claims? Does this sound absurd or does it sound a little like the mortgage banking industry? Fess for no service. I am not saying that this will happen in every case, but I do not think one can argue that this will never happen.

Circling back to how to reform reform. From my vantage point, the most advantageous reform idea would be to force multiples of payors to compete in every state. Competition could do wonders for cost control.

A final thought. Earlier this year a House committee passed legislation on “can’t fail” businesses. The Financial Services Committee voted on an amendment that would let regulators dismantle a firm, limit mergers and acquisitions, and force an end to activities deemed systemically risky. The financial industry opposed the measure, as part of legislation to overhaul Wall Street rules. This could be another opportunity for the camel—Washington—to get its nose further under the healthcare tent. There is nothing that limits the legislation to financial services. Call me a cock-eyed pessimist, but what is there to prevent Congress from deciding that the payors need to be dismantled, thereby ushering in a federal payor model? That would give them two legs of the stool. What if…?

Is wellness being overlooked?

The following are my comments to Sue Schick’s blog, Are you ready to commit to a wellness program?

With all of the pronouncements coming from Washington about healthcare reform, it is easy to be waylaid by Gossamer eddies and side currents that pay little attention to one key area—health. There is plenty of discussion about insuring the uninsured, covering pre-existing conditions, and the rollout of a national healthcare model under the guise of healthcare information technology and facilitating the transport of electronic medical records.

I think Sue’s words are spot-on and timely. Even if nobody is going to pay for it, with so many Americans participating in the healthcare conversation, an entire industry being re-engineered, and a trillion dollars to fund the transformation, should not there be more attention paid to wellness, to proactively making one responsible for one’s own health?

Unfortunately, my perspective on this issue is shaped from having been there, done that, got the T-shirt—a heart attack at the age of forty-six. I’ve transformed myself from someone who took twenty-four years off between workouts to barely taking twenty-four hours off between workouts. I didn’t need an employer to sponsor a wellness program; all I needed was a ride in an ambulance.

There may be a lot of different ways to get someone’s attention around wellness, around being responsible. Those who want to be well will have to make that decision for themselves. No company can do it for you, but companies certainly can be supportive of your efforts to help yourself.

There has been a lot of conversation in the healthcare debate about what role the insurance companies have played in driving reform. Right or wrong, a number of stakeholders view payors as bad actors, as the raison d’être of reform.

Wellness seems to offer payors a way to put on the white hat, to be proactive. Patients understand that they do not pay their providers for their healthcare. In the event patients need a provider, patients pay the insurers, cross their fingers, and hope the insurers agree to cover the expense.

I am somewhat of a dilettante to the insurance side of the healthcare model, so I apologize in advance if I misspeak. Here’s my take as to the white hat opportunity, a way to take a leadership role in the matter of wellness. When you apply for insurance, you receive negative ratings for unhealthy and unsafe behaviors; smoking, health history, sky diving. However, if you run five days a week, maintain your weight, eat fish and refrain from drinking, you accrue no points for good behavior. In fact, you are rated as though you made no proactive attempts to manage your own health.

Auto insurance companies raise your rates for certain bad behaviors, and they lower them for certain good behaviors. No accidents for two years—the rate goes down. No traffic violations—the rate goes down. Behavior modification. I am aware of it and I manage my behavior to get lower rates.

Can a similar model work for health insurance? What would it take for payors to offer an incentive model for rewarding good behaviors?

How will reform impact Payors?

I have developed quite a fondness for children’s books, particularly those with a well disguised allegory.  Long favorites of mine include the short stories, Uncle Remus, written by Joel Chandler Harris.  Br’er Rabbit (“Brother Rabbit”) is the main character in each of the stories, a likable troublemaker and prone to tricks.

His opposition is usually Br’er Fox Br’er Bear. In one tale, Br’er Fox and Br’er Bear hope to capture Br’er Rabbit.  Fox constructs a lump of tar and puts clothing on it. When Br’er Rabbit comes along he addresses the “tar baby” amiably, but receives no response.  Br’er Rabbit becomes offended by what he perceives as Tar Baby’s lack of manners, punches it, and becomes stuck. Now that Br’er Rabbit is stuck, Fox and Bear ponder how to dispose of Br’er Rabbit.

With each idea suggested for his demise, Rabbit has no complaints, however the helpless, but cunning, Br’er Rabbit always pleads, “Do with me what you will, but please don’t throw me in to that briar patch.”  Finally catching on to how “frightened” Br’er Rabbit is if the briar patch, Fox, believing he has the upper hand, throws Rabbit into the briars.  As rabbits are at home in thickets, the resourceful Br’er Rabbit convinces his enemies to do what he wanted them to do all along.

Sound familiar?  It should.  Br’er President and Br’er Congress.  The contest is how do they capture Br’er Payor and get Payor to play nicely.

“Let’s put caps on Br’er Payor’s rates,” suggested Br’er Congress.

“Do with me what you will,” pleads Br’er Payor.  “Cap my rates, but please don’t make us cover the uninsured.”

“Why not make Payor cover pre-existing conditions?”  Asked Br’er President.

“Do that,” chided Br’er Payor.  “We’ll even cover hangnails.  But please don’t make us cover the uninsured.”

“You know Br’er President,” said Br’er Congress, “Br’er Payor seems awfully afraid that we will make them cover all of the uninsured.   Let’s do that, let’s hit Payor where it will hurt the most.”

And so they did—made Br’er Payor cover the uninsured—threw them right into the briar patch.  Right where Br’er Payor wanted to be all along.  Thirty-one million new customers—how awful.  Smack dab in the middle of a recession, payor is handed a windfall of new customers.  Premiums.  Times twelve—twelve months.  Let’s estimate a hundred dollars a month.  That’s about thirty-seven billion in new revenues.  Billion with a B.  How is that for cutting healthcare costs.

Now suppose, just suppose that Br’er Payor has little motivation to be a good corporate citizen.  I know I am asking you to take a leap of faith.  Silly me, but I have this question that is gnawing at my craw.  What if Br’er Payor collected all these premiums and set the deductible so high that none of their new customers was ever able to file a claim?  The feds tossed the payors right into the briar patch, didn’t they?