Thursday, January 29, 2009

A Must Read

Sean Trende has a great article on Governor Paterson's appointment of Representative Kirsten Gillibrand. We should definitely count our blessings because this is about as conservative a Senator as we could have gotten right now.

If you're a fan of maps and data, then definitely check out Trende's articles where he teams with fellow RCP resident Jay Cost - author of the must-read HorseRaceBlog.

Monday, January 26, 2009

United Health Group and the Cost of Healthcare Part I

Gabriel Caine: Do you know the difference between a hustler and a good con-man?
Fitz: No.
Gabriel Caine: A hustler has to get out of town as quick as he can, but a good con-man - he doesn’t have to leave until he wants to.

There’s probably not a better quote to begin a post about insurance companies and con-artist, class-action lawyers – who will be called CA lawyers the rest of the article so you can choose which words the C and A stand for.

There’s also not a better opportunity for me here in New York to post on the Minnesota blog Truth v Machine about one of the biggest companies in their state, United Healthcare, and cross-post on my home state’s blog Red Albany regarding the industry I work in – employee benefits.

UnitedHealth Group is comprised of many different insurance and healthcare-related companies that were acquired over the last two decades. Last week, United made two major moves regarding out-of-network coverage that affects nearly all medical carriers nationwide. Both items have flown under the radar due to Obama’s inauguration and the fact that they were announced within a day of one another making it seem like one event. This news will likely come up again as healthcare becomes a topic for national discussion during this economic downturn.

United reached a retrospective settlement in a class action lawsuit for out-of-network claims payouts that were shortchanged. They also made a prospective agreement with New York State Attorney General Andrew Cuomo regarding out-of-network claims going forward. I’ll focus on the CA lawyers’ settlement today and follow up with the future arrangement later this week.
Now for the background: United, like all medical carriers, makes deals with doctors to be “in the network” so those doctors will charge less for medical services performed. This idea first came about in certain parts of the country and then exploded when Richard Nixon signed the HMO Act in 1973. By that time, many doctors (especially newer ones) were eager to have an instant customer base that was willing to see them based on less payment administration, cost, and vicinity.

The problem this created is at the heart of the healthcare mess in America. Doctors gave up two things a smart businessperson would never dream of giving up control over: 1) the pool of potential clients 2) their revenue and pricing scheme. This is made all the worse because they gave up those two vital components to insurance companies. Insurance hasn’t had the most stellar business reputation since the first time a Cro-Magnon man offered to replace a poor Neanderthal’s stolen PC with a Mac – clearly not the same thing as only one button on the mouse was just too confusing for Neanderthals and homo sapiens alike. Before I go on, let me quickly apologize to Cro-Magnons for using them in an insulting manner by calling them Mac users.

Fast forward a few thousand years later to 1994-2008 when a number of patients and doctors complained that United was being stingy with out-of-network reimbursements for services. When the complaint seemed legitimate, the American Medical Association petitioned on behalf of the plaintiffs. Oh yeah, they’re plaintiffs at this point because the CA lawyers work fast to get that rabbit out of the hat; they have to. CA lawyers eat what they kill and can sniff a large case against an unsympathetic defendant a mile away so I imagine this one wasn’t hard to organize. Of course as the years go on, a number of organizations that sometimes need to prove their reason for existing (like numerous “state medical societies” that found a way to become part of the plaintiff class) saw an easy target in an insurance company to crusade against.

For those not familiar, a person with private health insurance who goes to an in-network doctor pays less out of pocket and the doctor charges a significant amount less to the insurance company for the remainder of the service per the agreement he has as an in-network doctor.

When an insured person goes out-of-network they either have no coverage (in the case of HMO’s and EPO’s) or out-of-network charges are partially covered by the medical carrier. In the latter instance, the patient pays a deductible directly to the out-of-network doctor and then shares the remaining costs for medical care with the insurance company – this is called coinsurance. Out-of-network coinsurance is typically 60% - 80%, which is the percentage of charges paid by the insurance company with the remaining 20% - 40% paid for by the patient. Given the cost of medical care, it’s easy to see why most people choose to stay in-network when receiving care even when they have coverage to go out-of-network.

Now the insurance company doesn’t just take the medical bill created by the out-of-network doctor, subtract the deductible from the amount billed, and then pay the 60% - 80% of what’s left over as mandated in the contract. Instead, the contract says that the insurance company pays 60% - 80% of the Usual, Reasonable, and Customary (UCR) charges for the geographic area the doctor is in. The reason for this is the out-of-network doctor is not discounting the care like an in-network doctor does. The out-of-network doctor can charge a lot more and the insurance company is protecting themselves from a large bill by using the UCR as a payment guideline.

Here’s what was being fought over. The UCR is determined by geographic region through collecting all aggregate payment and billing data submitted by 100 major contributors including other insurance companies and claim administrators. The company most well-known and most often used by medical insurance carriers to collect this data to determine out-of-network reimbursement is a Minnesota-based firm called Ingenix. The higher the UCR determined by Ingenix, the higher the amount an insurance carrier has to pay for out-of-network claims.

The company that owns Ingenix is UnitedHealth Group. This is a clear conflict of interest that should have been caught way earlier by the Federal Trade Commission. Now that the hand is red, United is claiming “no admission of wrongdoing” and will be paying a settlement to the tune of $350 million to the CA lawyers, the AMA, doctors, state medical societies, and patients. That list is in roughly the order of who probably made out the best.

A few things to note here: the first is that United paid $60 billion in total medical claims since that year and $350 million dollars is only 0.6% additional to what was paid out already. Second, doctors who are not in United’s network and United patients who chose to go outside of that network know that United is only going to pay the coinsurance percentage (60% - 80%) of the UCR so there is going to be a very high out-of-pocket cost for the patient regardless of United paying slightly more due to a higher UCR. Yes, it is sad to see the anecdote of the woman with cancer who was on some news programs and is in tens of thousands of dollars of debt because of her illness. However, that woman decided to go out of network and to a premiere Cancer Center like Sloan-Kettering. Even if United paid more, she would still be thousands of dollars in debt. She chose to get the best care regardless of affordability. A choice nearly everyone would make as most would prefer to be alive paying off a debt than dead with a net worth.

Last, and I will elaborate on this point in the next article, if United and other carriers paid out more for all of their out-of-network claims because Ingenix increased the UCR for all procedures, that cost would be passed along to the policyholders and would possibly increase the extremely high cost of medical coverage even more.

Friday, January 23, 2009

Conservative Party Blog

I just received an email from the Conservative Party of New York. They're running a blog now entitled The Good Fight. It's following the news with their patented lean. Check it out.

Thursday, January 15, 2009

Stop the iTax

Assembly Minority Leader James Tedisco has decided he's going to fight the power, and Paterson's proposed iTax. He begins with a video on his new site Stop the iTax. The cleverly set up website focuses on an issue that is important to younger New Yorkers, the attempt to levy a tax on internet purchases - including those from iTunes and other music download services. The arguement is that there are ways to fight the bloat in our budget without increasing taxes. I tend to agree.

Thursday, January 8, 2009

Monserrate on Tape

Recently arrested State Senator Hiram Monserrate will get convicted of assault according to law enforcement officials. Why? They have him on a security camera stabbing his girlfriend with the broken glass. The incident, which led to 20 stiches near her eye, is being called an "accident" according to Monserrate. According to Monserrate, the tape will exonerate him. According to local law enforcement, the recording will show Monserrate assaulting his girlfriend and dragging her around while she clings to her eye with a towel, him tossing her handbag down a garbage chute, and an instance where his girlfriend knocks on a neighbor's door asking for help. A neighbor said that she "...heard a lot of crying and then she ran down the stairs screaming and rang on my bell frantically, three times." The neighbor found a bloody towell on the stairs when she went out into the hallway. If convicted, Monserrate will be automatically removed from office and change the Senate numbers to 31 Democrats to 30 Republicans, possibly leading to a special election to replace him.

Wednesday, January 7, 2009

Statement by Assemblyman Marcus J. Molinaro (R,C,I-Red Hook)

Governor David Paterson reminded us today that New York State faces a historic fiscal crisis. Not since the Great Depression has our state and nation faced such complex economic peril; placing extraordinary burdens on every business, middle-class family and senior in America.The middle-class people living and working in the Hudson Valley cannot, however, afford to shoulder the burden of this crisis. We cannot afford 137 new taxes and fees that amount to about $6 billion in new revenue, presented in the Governor’s Executive Budget. Rather we should offer tax relief to help stimulate the economy.Many New Yorkers have lost faith in state government and they look to us, their elected representatives, to chart a bold, new course for this great state. As we tackle our fiscal challenges, we must advance innovative, fresh ideas that will reform state government, protect our environment, improve our quality of life while growing our economy. I will continue to work with my colleagues on both sides of the political aisle in an effort to bring a new generation of leadership to the Empire State.

RIP Senate Republican Majority (1964-2008)

The Senate is 32-30, with the Republicans officially no longer in the majority. The Gang of Three buckled to Malcolm Smith and are each handed some powerful chairmanships or vice chairmanships in the Senate. Same-sex marriage, the issue Democratic State Senator Ruben Diaz actively opposes, was discussed in secret, but not publicly. Smith denied these discussions occurred.

2010 will be the chance for the Republicans to recapture the majority in the upper chamber. Outgoing Deputy Senate Majority Leader Thomas Libous says that no Republican will cast a vote for Malcolm Smith for leader and that his caucus is committed to recapturing the chamber in 2010. This is very important considering New York may be losing a Congressional seat in the next census and redistribution needs to be done fairly.

Saturday, January 3, 2009

Legislative column by Assemblyman Marcus J. Molinaro (R,I,C-Red Hook)

New York State is facing its worst fiscal crisis since the Great Depression, leaving many families to worry about how they will make ends meet. For those who were already struggling, the crisis has made it even more difficult. However, from challenges we can grow stronger and together make New York State great again.

With innovative and fresh ideas we can chart the bold, new course that our state so desperately needs in order to confront this economic downturn and redefine the way government functions. It is with passion, energy and persistence that I proudly carry that message to our state Capitol in hopes of making fiscal responsibility and true reform a reality.

This week the Governor unveiled his proposed 2009-2010 state budget that forecasts a $15 billion deficit and spending reductions to vital services like healthcare and education. Reining in state spending is essential and we must make cuts across the board. However, because education spending is not merely an expenditure, but an investment in the future, education cuts must be made carefully. We cannot only reduce spending, we must also reduce costs. Accountability from all levels must be a priority. We can cut unnecessary spending within school districts; but must also eliminate unfunded mandates that drive up costs, compel the federal government to pay for its commitment to public education, restrict growth in new spending and enact comprehensive property tax reform that eases the burdens placed on homeowners and small businesses already struggling to make ends meet.

Unfortunately, the Governor’s budget does not seem to include these measures and instead proposes 137 new tax and fee hikes that will be shouldered by middle-class families already hurting from current economic conditions. This budget doesn’t decrease spending from last year but it does increases taxes in a most regressive way, expands Medicaid spending and reduces antifraud measures, while perpetuating a business as usual atmosphere where state government spends more than it can afford and raises taxes on those who can afford them least to make up the difference.

The Governor has asked for alternatives, and my Assembly Republican Conference and I have advanced several proposals to reduce spending and prevent tax increases. Freezing pork-barrel spending, as well as eliminating, consolidating and freezing top management level positions (i.e. Deputy Commissioners) would show our civil service employees and citizens that we are serious and everyone will need to do more with less. We can reduce the overall state government payroll through a hiring freeze and early retirement incentives. While the Governor proposes reducing oversight on Medicaid fraud and abuse, we propose aggressively attacking it, saving taxpayers
$4.5 billion. We need to lead by example and do everything in our power to rein in excessive spending by making tough, bold decisions.

I commend Governor Paterson for the serious way in which he has addressed this fiscal crisis. Releasing his Executive Budget four weeks early allows all of us to engage in the important dialogue necessary to make needed changes. It is time to put politics and regional differences aside so that a balanced budget can be adopted. By earnestly beginning the budget review process and genuinely considering all options we can adopt a budget and set an agenda that puts us back on the path to economic recovery while lessening the burdens being carried by too many of our state’s residents.

Please contact me with your thoughts and questions as we enter the 2009 Legislative Session and embark on intense budget negotiations. Feel free to contact me in my district offices in Red Hook at (845) 758-9790, Greenport at (518) 822-8904 or via e-mail at

Again, together we can make New York State great again!

Friday, January 2, 2009 Live is now live. I posted the second post there explaining the current situation with the New York State Senate. Here's a link. I will begin cross-posting my Flip4 postings after this article.