Geisinger Health Pricing Innovations Not Appreciated by Other Health Plans.

For most service industries, standing behind your work is hardly considered to be innovative, nor is it considered a marketplace differentiator. But, healthcare is not most service industries and it is a big deal when a hospital says that it will guarantee its work for 90 days.

That is exactly what Geisinger Health System is doing. According to The Washington Post, Geisinger, located in the coal country of Pennsylvania, offers a 90-day warranty on elective heart surgery, promising to get it right the first time, for a flat fee. If complications arise or the patient returns to the hospital, Geisinger bears the additional cost.

The Post reports that not only does the health system guarantee its work, but heart patients have fared measurably better, and the health system has cut its bypass surgery costs by 15 percent. Today, Geisinger has extended the program to half a dozen other procedures.

One might look at this as a great example of how innovation can lower healthcare costs and improve outcomes. You would think that health insurance carriers would embrace such a system and encourage other systems to adopt similar practices. This is, however, not the case. In fact, Geisinger runs the program through its own insurance unit and only benefits those who are covered by these health plans.

The Post’s article said that other insurers “are not convinced that the savings would be large enough to make it worthwhile for them to renegotiate contracts with the health system. Many still feel more comfortable with the traditional pay-per-procedure approach, even though they run the risk of having to pay thousands of dollars to fix surgeries that go wrong.”

What is even worse is that the Post’s article notes that “most hospitals are also skeptical of Geisinger’s innovation, saying they would lose money by being unable to bill for treatment of patients who must return.”

With health care costs quickly approaching the level where they are a threat to the national economy, it is disappointing to learn that “best practices” like those being demonstrated at Geisinger are not being embraced by the health care industry.

To find out more about Geisinger and how they have developed their guarantee, click here.

Wireless Health Institute to Explore New, $2B Industry.

A report published in the San Diego Business Journal today said that Qualcomm and Scripps Health announced plans for an institute dedicated to improving health care using wireless technologies. The center will be funded initially by a $45 million grant from the Gary and Mary West Foundation, and take the name West Wireless Health Institute.

According to the Business Journal, the organization’s research and engineering teams will conduct clinical research using wireless solutions to better prevent, diagnose, manage and treat major health conditions, ranging from Alzheimer’s to heart disease to obesity.

The article went on to point out some possible applications, for instance, wireless sensors can track blood sugar, blood pressure, vital signs, sleep state and even caloric metabolism.

Organizers were quoted as saying that the Institute will bring together science, medicine, engineering and technology in the delivery of health care.

Wireless health care is expected to grow into a nearly $2 billion industry in the next five years, analysts say.

New Online Tool Helps Takes Guesswork out of Buying Health Insurance.

I had the chance this week to talk with James S. Downey, an insurance agent from San Diego, CA, who is working to change the way that small employer groups and individuals go about selecting their health insurance plans. Downey, who has been a life and health agent since 1974, is using web-based technology to enable health insurance buyers to make purchase decisions based on the total cost of the plan, and not just the premiums.

Downey’s website,, can be used by health insurance brokers and agents in California to help insurance purchasers compare the total cost of any health plan currently being sold in California.

“In California, there are over 180 small group plans. And it’s almost impossible to compare them all in every detail – HMO, PPO, maximum out-of-pocket, deductible limits, co-pay to name a few,” Downey said. “In fact, that requires running 1,905,120 comparison outcomes per employee!”

Here is all that SuperAgent does, it:

1. Analyzes all health plan carriers for a given group of employees, taking into account their ages, families, tax bracket and rating area.

2. Ranks each carrier by the percentage saved over the current plan.

3. Measures the differences between health insurance carriers.

4. Identifies the best value health plans and shows how they perform at different claim levels.

5. Evaluates and graphs every plan based on various claim scenarios.

6. Determines which plan offers the greatest benefit and lowest risk and cost.

7. Analyzes every plan upon the predictive analysis of morbidity studies.

8. Automatically completes enrollment forms downloading personal information for you.

Downey explained that most employers and employees select health plans based on the premium cost alone. The SuperAgent tool also takes into account deductibles, co-pay amounts and out-of-pocket limits to take into account the total cost of the plan. The tool then makes it easy to identify the health plan that is the best value for each employee based on their individual health care spending patterns and it graphically illustrates the best plan for them to buy.

Downey said that he is just now launching the site in California and is licensing access to the tool to other agents for a monthly fee. He said that, while the engine is ready for other states, he has no immediate plans to expand the service beyond California.

Tools like SuperAgent holds promise to lower health care costs by clearly showing insurance buyers what they are buying. To see a demo of the SuperAgent tools go to:

Two Senate Bills Would Change Tax Code for Long Term Care and Self Employed.

Two bills were introduced this week in Congress that would change the tax code affecting health insurance,

The Long-Term Care Affordability and Security Act of 2009 (S.702) sponsored by Senator Chuck Grassley (R-IA) would amend the Internal Revenue Code of 1986 to allow long-term care insurance to be offered under cafeteria plans and flexible spending arrangements and to provide additional consumer protections for long-term care insurance. The bill is cosponsored by Collins (R-ME), Ensign (R-NV), Graham (R-SC), Johnson (D-SD), Klobuchar (D-MN), Lincoln (D-AR), Snowe (R-ME).

A second bill (S.725) introduced by Senator Jeff Bingaman (D-NM) is called the Equity for Our Nation’s Self Employed Act of 2009 and it would amend the Internal Revenue Code of 1986 to allow self-employed individuals to deduct health insurance costs in computing self-employment taxes. It is cosponsored by Senator Orrin Hatch

Healthcare Reform Already at Hand

Despite all the talk coming out of Washington for the need to radically reform healthcare, news continues to trickle to the surface about the success of consumer-driven health plans, especially those that utilize Health Savings Accounts (HSAs).

A report released this week by Canopy Financial, a company that supplies healthcare banking technology, said that account balances in HSAs continued to grow in 2008, despite the downturn in the economy. The report also noted that employee contributions to HSAs significantly outpaced employer contributions.

“What we’ve seen throughout 2008 is that consumers who select HSAs to manage their healthcare spending are not simply using these accounts to pay for their immediate healthcare needs. They are also funding their HSAs above and beyond their employer contributions and using them as long term savings and investment vehicles,” said Vik Kashyap, CEO of Canopy.

The report indicates that individual HSA balances increased 33%, and family HSA balances increased about 12% between the first quarter and fourth quarters of 2008.

In the fourth quarter, employees contributed an average monthly payment of $206 for a family account, while employers contributed $133.

Individual accounts fared similarly; Employees contributed $111 on average, while employers contributed $69.

Another article appearing in The Wall Street Journal warned that if you’ve lost your job, or think you’re at risk of that happening, you need to pay attention to any money you’ve been stashing away in a flexible spending account for medical expenses.

The article notes that workers who think there’s a risk of job loss, should take steps to spend the money they have already set aside on qualified medical expenses. Otherwise, they could lose those dollars if a lay-off occurs.

The article was quick to note that a job loss doesn’t have that same impact on money in a health savings account, a separate type of tax-advantaged savings account that is typically used in conjunction with a high-deductible insurance plan.

“HSAs are more like 401(k) retirement plans in that if people lose their jobs, they get to keep the assets in these accounts when they leave. There’s no annual requirement to “use it or lose it,” as with the money in an FSA.”

Perhaps we need to take a close look at what is already working before we charge off to fix what might not be broken.

Health Insurance Industry to Congress: “We will drop risk rating.”

The boundaries of the healthcare reform debate took another dimension this week as representatives of two large health insurance trade groups sent a message to Congress that said they were now willing to drop “risk rating’ of health insurance policies. The offer from America’s Health Insurance Plans (AHIP) and the Blue Cross and Blue Shield Association (BCBSA) is a potentially significant shift in the debate about overhauling the nation’s healthcare system.

It was reported in the Boston Globe that in a letter to key senators, the two insurance industry groups said their members are willing to “phase out the practice of varying premiums based on health status in the individual market” if all Americans are required to get coverage.

According to the New York Times, the trade groups stated in their letter that if Congress enacted an enforceable requirement for everyone to carry health insurance, “we could guarantee issue of coverage with no pre-existing condition exclusions and phase out the practice of varying premiums based on health status in the individual market.”

However, according the Times article, the trade groups didn’t stop there. They also said they could accept more aggressive regulation not just of their premiums, but also of their benefits, underwriting practices and other activities. Such strict regulation, they said, would make it unnecessary to create a new public insurance program offered through the federal government.

The Times pointed out that insurers remain staunchly opposed to creation of a government-run health insurance plan. But the industry’s willingness to change its rate-setting practices could make it easier for Congress to reach a consensus on legislation to overhaul health care.

This is indeed an interesting development in the positioning that is now taking place in the healthcare reform debate. Just last Friday I commented on Sen. Chuck Grassley’s (R-IA) statement indicating that erecting some form of new government benefit, which Democrats refer to as the public plan option, is a deal-breaker for Republicans. Could this concession on the part of the industry be enough to get around this hurdle to reforming healthcare?

Healthcare Reform Debate Heats Up

This was the week when the gloves started to come off for those in Washington who are key players in the health care reform debate. Up until now, principals on both sides of the aisle had been talking about how a bi-partisan effort could produce reform that would lead to affordable, accessible, and quality health care.

This week talk became tougher. The Washington Post this morning reported that House Democrats, in consultation with the White House, will give Republican lawmakers until September to reach a compromise on President Obama’s signature health-care initiative — otherwise, they will use a shortcut to move the measure through Congress without Republican votes.

These “shortcuts” known as budget reconciliation, would permit lawmakers to roll Obama’s health-care proposals into a bill that cannot be filibustered, meaning Democrats could push it through the Senate with 51 votes, instead of the usual 60. Since Democrats control 58 seats in the Senate, they could approve a reconciliation bill without Republican votes or the support of some reluctant conservatives in their own party.

Meanwhile, on the Republican side, Sen. Chuck Grassley (R-IA), the ranking minority member of the Senate Finance Committee made statements that suggest he may be less helpful in reaching bipartisan consensus than reform advocates have hoped.

According to an article published on Grassley said that erecting some form of new government benefit, which Democrats refer to as the public plan option, is a deal-breaker for Republicans.

“This is a deal-breaker for Republicans if it’s in and it’s a deal-breaker for Democrats if it’s not in,” Grassley said during a briefing with reporters hosted by the nonpartisan Kaiser Family Foundation on Thursday. “I think it’s a step toward single-payer, government-run healthcare for everyone,” he said.

The article noted that, despite the obstacle of how to handle the public plan option, Grassley reiterated his view that comprehensive health reform is necessary and that it must be legislated in 2009.

This debate promises to get very interesting.

Cap on Employer Tax Exclusion for Employee Benefits Almost Assured.

For federal income tax purposes, employers may deduct the cost of health insurance provided to employees. Employees may also exclude the value of this benefit from their income. The “cost” of the exclusion in 2007 was about $134 billion (OMB, Analytical Perspectives FY2009 (PDF)). The exclusion also means that Social Security and Medicare taxes are not paid on this employee benefit; this “cost” is not measured by the government.

No wonder that eyes are now being turned to this employer exclusion as a way to pay for healthcare reform proposals, but it is not a popular idea. A Washington Post article published today noted that the Democratic Congress summarily dismissed the idea two years ago when President George W. Bush included it in his budget request, and that many senior House Democrats continue to oppose the idea, arguing that it could be catastrophic at a time when companies are scaling back coverage for their workers and dropping it completely for retirees.

Still, as noted in the Post article, many economists and tax analysts have long argued for changing current tax law on health coverage, which some say disproportionately benefits wealthier workers. The law also may encourage people to enroll in the most comprehensive health plans on offer, the so-called Cadillac plans that provide vast coverage, mask the true cost of health care and contribute to skyrocketing costs.

Republicans we talked with last week on Capitol Hill seemed to be looking for ways to tap this employer exclusion to at least equalize the tax benefits between those who receive their health insurance from employers and those who purchase their own health insurance.

As the Post points out, many lobbyists and others involved in the health-care debate say they see few other places to go for the kind of money that will be needed to meet Obama’s demand for ambitious change. In their view, the question is not whether employer benefits will be taxed but how much of the benefit will be spared.

Based on what I heard on the Hill last week, I would agree that there will at least be a cap placed on the employer tax exclusion in any healthcare reform legislation that might be passed this year.

Aetna’s Six Year Study Of Consumer-Directed Health Plans Shows Savings.

Aetna yesterday announced the results of a six-year study of health care claims and utilization for members in its consumer-directed health plans (CDHPs). The study included 2.6 million Aetna members and found that employers saved money and members received the care they needed.

The results also show that Aetna’s CDHP members are seeking increased levels of chronic and preventive care, using generic drugs more often and accessing online tools and information at higher rates than PPO members, while experiencing lower annualized medical cost increases.

Key findings include:

  • For full replacement HRA and HSA plans, employers saved $21 million per 10,000 members over the five year period.
  • For employers who offer Aetna HealthFund plans as an option, they experienced savings of $7 million per 10,000 members over the five year period.
  • For employers who offer Aetna HealthFund plans as an option and implemented the strategies that Aetna identified as best-in-class, they achieved savings of $23 million per 10,000 members over the five year period.

Click here for more on the survey.

Kennedy’s Health Could have Key Role in Healthcare Reform Passage.

During yesterday’s trip to Capitol Hill with ECFC, I had the chance to meet with staffers representing one Democratic and two Republican lawmakers. We also heard from Sen. Ted Kennedy’s chief healthcare policy advisor, former CMS director, Tom Scully, and former Sen. Bob Dole, among others. They all agreed on one thing: the current healthcare system is not working and needs to be fixed. They also agreed that this is the best chance Washington has had in years to reform the healthcare system. And, they all expressed the desire to preserve the existing employer-based system, and for the legislative process to be inclusive and bi-partisan. Furthermore, there was agreement about the problems that are afflicting the system, namely, access, affordability and quality were themes that echoed throughout the day. I also sensed a universal desire to get it right, and to make healthcare an economically sustainable proposition for the government, employers, and individuals. The steaks are huge.

There was also a great deal of agreement about who the players will be. President Obama, of course, has a major role in what will unfold. The very afternoon that we were attending meetings on The Hill, the president was conducting a White House summit on health care to underscore importance of this issue and to call for dialogue and participation from all the stakeholders.

Key players in the Senate include Chuck Grassley (R-IA) for his role as a member of the Senate Finance Committee, Max Baucus (D-MT), Chairman of the Finance Committee and the author of  a white paper on healthcare reform, “Call to Action: Health Reform 2009“, and of course, Ted Kennedy (D-MA) , a long-time advocate for healthcare reform. It has been widely acknowledged that Kennedy’s team has been meeting with various healthcare stakeholders for the last seven months in an attempt to build consensus on a program to achieve healthcare reform. John McDonaugh, Kennedy’s chief healthcare policy advisor told us that he expected there would be committee mark-ups on Kennedy’s bill during May and June and that the bill would be on the floor of the Senate prior to the July 4th recess.

The House has been a little slower to get out of the gate with regard to health care reform.  In this chamber, the experts we heard from expect a “top down” approach to writing legislation. That means the House will catch up very quickly with the Senate and will soon introduce its own health reform legislation. Heading this effort will be Pete Stark, (D-CA), a senior member of the powerful Ways and Means Committee, and currently the Chairman of its Health Subcommittee. Joining him will be Henry Waxman (D-CA), Chairman of the Committee on Oversight and Government Reform, the principal investigative committee in the House. And also, from California, and also a Democrat, House Speaker Nancy Pelosi.

Kennedy staffer, John McDonough, spent some time with us laying out the basic issues that the Kennedy team has identified as being key to reform. They are:

  • Coverage – McDonough said that there needs to be a systematic change to the way that individual healthcare insurance is marketed. He talked about eliminating individual underwriting, marketing policies through “connectors” like those being used in Massachusetts, and an individual mandate requiring everyone to be covered in some way.
  • Delivery System Reform – This area deals with how healthcare providers are paid, ramping up primary care, the management of chronic care, Health IT, price transparency, and comparative effectiveness.
  • Prevention/wellness and finance fill out the basic issues being discussed.

McDonough also said that his team wants to achieve tax equity for individuals who buy their own insurance and that they preferred one individual insurance market as opposed to high risk pools for people with serious medical issues. Furthermore, he noted that there would be no “fundamental surgery” done to ERISA in the Kennedy plan, but did say that the existing employer tax exclusion for the cost of providing health insurance is “on the table.”

Republicans we spoke with also agreed about the need for reform. Andy Chasin, Health Policy Counsel for the Senate Republican Policy Committee said that republicans acknowledged that the healthcare system is not working and needs to be fixed. He pointed to the stress being placed on families to pay for health care as well as the burden on state and federal budgets. Chasin noted that 32% of state budgets now go to paying for Medicare, and that this is the single most important way to control the federal budget for the long term.

Having agreed that healthcare reform is needed, Chasin laid out, from the republican perspective, the key principles they would like included in any new proposals.

  • Private competition – Not government-run, like a proposed government program that will competed with employer plans and ultimately drive people from employer plans.
  • Affordable options – Baseline programs need to be reasonable and include lower cost options like HSAs.
  • Paid for and Sustainable
  • No new taxes on small businesses
  • No expansion of unsustainable entitlement programs

Now that both sides have agreed for the need to reform healthcare and have laid out their basic issues and principles it is time to get down to the details. Staffers, especially those working for the republican lawmakers, asked us detailed questions about employer tax exclusion and how it might be capped to free up funding to allow for the tax code to be equalized for individual insurance buyers. By the questions we were asked it seems like they were searching for places where compromises can be made as program is negotiated.

There is no doubt that this kind of political give-and-take will continue over the next couple of months as each party attempts to achieve their interests in the reform legislation. Likewise various interest groups ranging from healthcare providers to health insurers, to unions, to employers, to pharmaceutical companies will all be looking for a plan that will preserve their vested interests in the system.

Tom Scully, who served as the head of CMS in the recent Bush administration, is a veteran of political fights having guided much healthcare legislation over the past two decades including the legislation that became Medicare Advantage. Now, in private life, Scully is free to speak more frankly about the political process without fear of upsetting the opposition.

In remarks that he made to our group at the close of our meetings on Capitol Hill, Scully talked about how it was a mistake that the Clinton’s did not introduce their reform plan during the first year of Mr. Clinton’s first term. By the second year of the term when the legislation was finally delivered in the form of a fully developed plan, the honeymoon was over and mid-term elections were fast approaching.

Scully was also candid in saying that Sen. Kennedy’s health could play a pivotal role in enacting proposed legislation. He noted that the mental health parity legislation had stagnated in Congress for years, but was quickly passed last year to honor long-time advocate of such reform, Pete Domenici.

With Kennedy’s precarious health condition, Scully suggested that healthcare legislation bearing his name could be quickly enacted this year. I would not be surprised if this prediction came true.