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Tuesday, 13 April 2010

Massachusetts Health Plans - Damned if You Do and Damned if you Don't!

Yesterday Superior Court Judge Stephen Neel denied the request from six not-for-profit Massachusetts health plans to be allowed to go forward with the rates they proposed on April 1 for the small group market. The insurance commissioner had rejected 235 of 274 rate proposals.

Massachusetts insurers dominate the U.S. News & World Report ranking of commercial health plans: Harvard Pilgrim is first, Tufts Health Plan is third, Fallon Health Plan is seventh, Health New England is eighth, Blue Cross/Blue Shield is number twelve,and Neighborhood Health Plan is 50th (out of 239 that were ranked). All typically earn small margins, and last year four were in the red. Now they're being pilloried for gouging the public. No good deed goes unpunished!

Many years ago I participated in a workshop led by Barry Oshry that divided a management group into tops, middles and bottoms. Middle managers were caught between the suspicious and resentful bottoms, the demanding and bossy tops, and the expectations of external constituents. Middles felt disempowered, unappreciated, and jerked around by forces they couldn't control.

Oshry's exercise focused on internal organizational function. But the findings apply to the external world as well, where health plans are caught between (1) providers whose services they pay for, (2) employers whose insurance premiums they are entrusted with, (3) enrollees who want access to the doctors and hospitals they prefer, and (4) regulators who oversee the health sector.

Here's my six step explanation of what's happening:
  1. No one wants to acknowledge the need to manage health care, because doing so requires acknowledging how much we physicians don't know and how ultimately vulnerable we mortal beings are.

  2. In the 1990s, when public policy asked insurers to take on the nasty business of managing care, some insurers - especially among the for-profits - seized the opportunity to rip revenues out of the system, without much worry about the impact on patients. But some, like the not-for-profit plans in Massachusetts, did the job well, as judged by clinical and ethical criteria.

  3. Providers turned against the concept of managed care itself, not just badly managed care. Public opinion and politicians followed them, creating an unstoppable backlash.

  4. Insurers were then told not to manage care.

  5. Between the backlash against managed care and the consolidation of providers into larger groups with power to demand ever higher payment, costs have soared into the economic stratosphere.

  6. Now, with Massachusetts in the vanguard, insurers are pilloried for the how much care is costing.
To show how fast the social learning curve is evolving, consider the following statements:

William Van Faasen, CEO: "I won’t invest any energy of mine, and I don’t want the company to invest any, in arguing that the current rate of increase in health care costs is appropriate."

Jay McQuaide, vice president: "We’re confident in the final outcome of the case. We’ll be playing the process out. We look forward to having an opportunity to demonstrate that the costs we filed are appropriate and reflect the expected medical costs of insuring these customers."

What's interesting about the quotes is that they're both from today's paper and they both come from the same company, Blue Cross and Blue Shield of Massachusetts.

From a narrow actuarial perspective, McQuaide is correct. The rates reflect the bills the insurers are paying for the enrollees' care. From a societal perspective, however, Van Faasen is correct. It would hardly be possible to design a health system better designed for profligate expenditure and poor value for money than we've done in the U.S.

Tomorrow Massachusetts Senate President Therese Murray is expected to propose an approach to resolving the standoff by bringing the key stakeholders together, presumably under the wing of the state government, which would allow competitors to cooperate without a threat of prosecution for anti-competitive practice.

The wild rumpus has moved from Washington DC to Massachusetts!


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