First of all, we don't have a health care system. We have a health care maze. And we don't have a health care crisis. We have a health crisis. Eighty percent of the $2 trillion we spend on health care in this country is spent on chronic disease. If we don't change the health of this nation by focusing on prevention, we're never going to catch up with the costs no matter what plan we have. The reality is it's a health crisis, and I would further say that one of the challenges we face is that a lot of the Democrats want to turn it over to the government, while the Republicans want to turn it over completely to the private insurance companies.
I think the better idea is to turn it over to each individual consumer and let him or her make that choice. I trust me a lot more than I trust government or a lot more than I trust the insurance companies.
And we've got a situation with 10,000 baby boomers a day signing up for Social Security, going into the Medicare system. And I just want to remind everybody when all the old hippies find out that they get free drugs, just wait until what that's going to cost out there.
– Mike Huckabee Republican Primary Debate in October 2007
The irony that the one politician that split the arrow in the center of the bull’s eye about healthcare in America by telling the truth that speaks to the core of the problem is a man called the Huckster.
What’s unbelievable is the 20-20 hindsight that Huckabee had this all correct and was running the campaign that should have been run by all of the candidates from either side of the aisle going back to mid-2007. Right now, Americans are equally distrustful of both the government and corporate America. Huckabee had a softer version of Democrat John Edwards’ message to the middle class that wasn’t so heavy on reparations and entitlements for the poor, but still maintained the same powerful elements of disenfranchisement so many people have with the way things are right now. Unfortunately, Huckabee must have gotten confused by combining that with the Medium John Edwards’ message with public statements about the Constitution being changed to fit God’s law. Had he stuck to the issues that could be rendered unto Caesar, then perhaps he would have fared better with greater suburban appeal. It would have also helped if he wasn’t a socialist that was soft on criminals.
In Part I, I discussed the retrospective arrangement UnitedHealth Group made to pay $350 million as a settlement in a class-action lawsuit accusing United of understating out-of-network payments made to members going back to March 1994. The main basis for the lawsuit was that there was a conflict of interest for United to own a company called Ingenix. Ingenix collected and synthesized the data for out-of-network reimbursements by non-network physicians and facilities. That data was then used by health insurers like United Healthcare (and its many subsidiaries acquired over the last 20 years) to reimburse for out-of-network care. By paying the money to the CA lawyers, the medical lobbying firms, and then the doctors and patients, United was able to acknowledge that there was an incentive for their subsidiary Ingenix to state that the Usual, Customary and Reasonable (UCR) charges were lower than they really were. This would allow United to pay out less for out-of-network claims. At the same time United could admit to “no wrongdoing” by not dragging out the lawsuit any further.
Here in Part II will be an explanation of the prospective arrangement made by UnitedHealth Group through an agreement with New York Attorney General Andrew Cuomo. The agreement was predicated upon the same potential conflict of interest created by UnitedHealth Group owning Ingenix, whose databases are used to establish out of network allowable charges. Cuomo also claimed that Ingenix's data was not accurate and the UCR values they were using were understated (thus the insurance payments to individuals and doctors using out-of-network benefits were too low).
From the UnitedHealth Group release:
The agreement commits UnitedHealth Group to pay $50 million to fund a qualified, independent not-for-profit entity to help develop and own a new, independent database product to replace the Prevailing Health Charges System (PHCS) and Medical Data Research (MDR) database products owned by UnitedHealth Group's subsidiary, Ingenix, Inc. Both database products are used by a number of health plans and employers as tools that help determine the amount to reimburse members who receive physician services outside their managed care networks. When the new database product is ready, Ingenix will close the PHCS and MDR database products.
The designated not-for-profit entity will make information on the prices charged by physicians available to health plans in place of the Ingenix database products. Finally, the not-for-profit entity will develop a Web site designed to educate health care consumers more directly about market prices for health care services.
The company believes the agreement will enhance the transparency of information related to physician fees for out-of-network services.
Aetna has also joined the fray by announcing an initiative with Cuomo and contributing $20 million to the new university-run database. Aetna is a national health insurance carrier that is a direct competitor of United. Aetna also utilizes the Ingenix databases to determine UCR for out-of-network reimbursement. Since they are in no legal trouble, Aetna’s news release emphasized how the new university-run database will enhance the member’s ability to be educated about reimbursement rates and cost of non-network providers.
The new database will likely not be ready for another few years. By that time, most of the use of the database will be for promoting information in a customer-driven healthcare environment (i.e. many policyholders will have HSA plans) and tools from the web for informing the member to help him make cost-effective healthcare decisions.
There are a few observations to note here. First, only one university (as opposed to a consortium of universities and other agencies) will be placed in charge of the new not-for-profit database that will dictate the new UCR levels and will disseminate information. Second, it will be ironic if this conflict of interest issue is resolved by the New York State Attorney General awarding a New York State University control of the database that United is paying $50 million towards. Throw in the $20 million Aetna is paying and you have one Attorney’s office get one-fifth of the $350 million paid out already in less than one-fifth the time the class-action suit took. Who’s the CA lawyer now?
Even if it’s a private university receiving all of the money, these are national insurers based in Minnesota (United) and Connecticut (Aetna) that are paying money to what will likely be a university in New York. Regardless of what university it is, let’s just say that if you look at a county-by-county result of the 2008 Election, you’ll see a rural county that’s dark blue surrounded by bright red counties in a state that went for McCain. It’s not hard to figure out what kind of institution is turning that county blue because it is a constituency house of tens of thousands of young voters and their enlightened teachers in the middle of a rural area that would otherwise be a GOP wheelhouse.
A third issue could turn into a large problem around the country. It would be strange for the new university-run database to establish the same UCR levels that Ingenix had created prior. Both settlements are predicated on United understating UCR levels. So it is expected that the university that runs that new database will likely establish UCR rates that are a bit higher than what were previously reported. So here’s the problem. If United and other carriers pay out more for all of their out-of-network claims because of an increase in the UCR for all procedures, that cost will be passed along to the policyholders and would possibly increase the extremely high cost of medical coverage even more.
One way out of this is a path some carriers have already chosen and that is to use a percentage of Medicare for out-of-network reimbursements. Medicare is a fixed reimbursement that updates in a more predictable manner than the way Ingenix functions. Health carriers have plan options to reimburse out-of-network claims at 150% of Medicare. That’s quite low so we can expect to soon see some private health insurers offer options for reimbursement levels of 200% of Medicare and so on.
If Medicare becomes the predominant gauge used by private health insurers for reimbursement, then the government will have an indirect price control over out-of-network care. Since there is often a correlation between the best doctors and the doctors that do not belong to networks, this puts the government more involved in some of the best care that was mostly outside the hands of insurers and government. This puts all doctors in the same predicament as a patient in Huckabee’s example of choosing between either the monolith of red tape from a health insurer or the bureaucratic nightmare of government-run healthcare.
In Part III, I will discuss the real cause of healthcare costs: how it currently affects us now and how consumers and doctors will begin to behave in the new marketplace of transparent healthcare information that will soon be afforded to them beginning with these United settlements.