Regular readers of these posts know that I believe the chief problem with “The Patient Protection and Affordable Care Act,” often referred to as Obamacare, is that it undermines the actuarial foundation of health insurance, and thus opens the door to a host of unintended consequences that ultimately will destroy the private health insurance system that, despite its shortcomings, has served the vast majority of Americans very well over the last fifty years. My main concern is that the results of this giant social experiment will be that health care will be worse instead of better.

If the young, healthy adults who make up the majority of those who do not carry health care insurance by choice are forced to buy it (at inflated prices to strike more of a “balance” between the young and the old), they will use medical services at a much higher rate than they have in the past. It’s human nature to want to get what you pay for. Forced to pay health insurance premiums, the uninsured-by-choice will seek tests, screenings, and costly medications that they would forego if they had to pay for them out of pocket. The influx of patients will overburden a system that will be losing doctors and nurses as the Baby Boom generation retires and foreign-born doctors and nurses no longer have the same financial incentives to practice in the United States due to cost controls. I foresee severe rationing of care; but a noted expert on patient safety, Rosemary Gibson, sees something else: dangerous overuse of the medical system.

The author of the 2010 book The Treatment Trap: How the Overuse of Medical Care Is Wrecking Your Health, and What You Can Do About It, Gibson has spent the last 16 years leading efforts to improve patient safety as an executive with the Robert Wood Johnson Foundation. Gibson told Jordan Rau, a correspondent with Kaiser Health News, that the new law will make a whole generation of generally healthy individuals vulnerable to unscrupulous healthcare providers. “Health insurance used to be about giving patients access to providers,” explained Gibson. “That’s still true, but it is also about giving providers access to patients. The 32 million people estimated to be getting health insurance coverage when the law takes full effect will be exposed to overuse.”

I have pointed out that forcing insurance companies to pay unlimited benefits while preventing them from charging more violates the principles of actuarial science and is not sustainable. Gibson sees another problem: “The health reform law also removes annual and lifetime caps. That can be an enormously valuable benefit to those who have a serious illness and need medical care; at the same time, it’s an open invitation for health care providers, device manufacturers, pharmaceutical companies and every other health care business to increase volume and price. It’s like a credit card without a credit limit. It’s as if we have this tsunami, this surge of tests, procedures and medication. With health reform, we will be merely transferring the bankruptcy of individuals to the eventual bankruptcy of the federal government.”

I couldn’t have said it better myself.

When Rau questioned Gibson’s use of the word tsunami right after the Japanese earthquake, the patient safety expert did not back down. “There’s an estimated 8,000 deaths from the tsunami, and that toll is certainly going to increase. It’s a terrible tragedy. The National Cancer Institute estimates there are 14,500 deaths every year from cancer because of radiation exposure associated with diagnostic imaging. That’s just one example. In Japan at least they had a warning system; in U.S. health care we have no warning system about that potential harm of too much medical care.”

There also is an unintended consequence to controlling medical costs by fixing the amount medical providers are paid, Gibson says. “If we pay for episodes of care, suddenly we have a lot more episodes, particularly if we ratchet down the payment per episode. What we know in fee-for-service is if we reduce the payment per unit that creates the incentive to increase the volume.”

Gibson’s suggestion to stop overuse is to document the results of care. “If a hospital wants to perform a back surgery, then that information has to be put into a registry and in real time we track outcomes,” says Gibson. “You combine that data with everybody else doing back surgery, you track the outcomes to find out if people are actually better off. That is the only way we’re going to make progress.”

The problem is, who is going to track outcomes and what is it going to cost? Right now, private insurance companies track outcomes as part of their fraud prevention programs, but Obamacare limits the amount health insurance providers can spend on administrative programs. If the government begins to track outcomes, that is another unforeseen cost the taxpayers will have to pay.

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In my last post, I described how United States District Judge Roger Vinson struck down “The Patient Protection and Affordable Care Act,” also known as Obamacare, as unconstitutional because it turned the Commerce Clause of the U.S. Constitution on its head, describing the inactivity of individuals who do not purchase health insurance as a kind of economic activity that is subject to regulation. I promised to explain how the arguments of those defending Obamacare actually made the point I have written about at some length here: that the new legislation violates the principle of shared risk and will destroy private health insurance.

Anticipating—accurately, as it turns out—that the district court might not accept the argument that the Commerce Clause applies to the individual mandate to purchase private health care insurance, lawyers for United States Department of Health And Human Services argued that the individual mandate is “a valid exercise of Congress’s authority if the provision is analyzed under the Necessary and Proper Clause.” Judge Vinson subtly mocked this line of reasoning, writing, “This argument has been appropriately called ‘the last, best hope of those who defend ultra vires [beyond the powers] congressional action.’” In other words, the Necessary and Proper clause is seen by some as a catch-all power that can be used to salvage legislation that is constitutionally flawed. Judge Vinson then went on to outline the Obama administration’s argument:

Oversimplified, the defendants’ argument on this point can be reduced to the following: (i) the Act bans insurers from denying health coverage (guaranteed issue), or charging higher premiums (community rating), to individuals with pre-existing medical conditions (which increases the insurers’ costs); (ii) as a result of these bans, individuals will be incentivized to delay obtaining insurance as they are now guaranteed coverage if they get sick or injured (which decreases the insurers’ revenues); and (iii) as a result of the foregoing, there will be fewer healthy people in the insured pool (which will raise the premiums and costs for everyone). Consequently, it is necessary to require that everyone “get in the pool” so as to protect the private health insurance market from inevitable collapse.

If that line or reasoning sounds familiar, it is because I have been saying the same thing in this space for more than a year. What I find strange is that supporters of Obamacare are now openly admitting that their scheme will destroy private health insurance unless everyone “gets in the pool.” This is their argument to bolster the individual mandate, but the mandate in its current form will not solve the problems created by guarantee issue and community rating. That is because the fine for not buying insurance is only a fraction of the price of insurance. As a result, risk-taking consumers can ignore the mandate, pay the penalty, and still save money, knowing that they can get insurance if they ever need it.

Judge Vinson did not accept the Necessary and Proper justification for the mandate, either. He pointed out that the law without the mandate would have the effect of destroying private health insurance. The individual mandate was tacked on “to avoid the adverse consequences of the Act itself.” Judge Vinson explained that this creates a problem not just of logic, but of accruing power to the government:

Such an application of the Necessary and Proper Clause would have the perverse effect of enabling Congress to pass ill conceived, or economically disruptive statutes, secure in the knowledge that the more dysfunctional the results of the statute are, the more essential or “necessary” the statutory fix would be. Under such a rationale, the more harm the statute does, the more power Congress could assume for itself under the Necessary and Proper Clause. This result would, of course, expand the Necessary and Proper Clause far beyond its original meaning, and allow Congress to exceed the powers specifically enumerated in Article I. Surely this is not what the Founders anticipated, nor how that Clause should operate.

Judge Vinson concluded, “The individual mandate is outside Congress’ Commerce Clause power, and it cannot be otherwise authorized by an assertion of power under the Necessary and Proper Clause. It is not Constitutional.”

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On January 31, Senior United States District Judge Roger Vinson ruled on a lawsuit brought by 26 states against United States Department of Health And Human Services, challenging the constitutionality of “The Patient Protection and Affordable Care Act,” the national health insurance reform legislation that Congress passed and President Obama signed into law almost exactly one year ago. In a carefully reasoned, 78-page opinion, Judge Vinson declared the health care insurance law, sometimes referred to as Obamacare, unconstitutional.

Judge Vinson considered several motions and many different arguments offered by both the plaintiffs and the defendants. One by one, the judge dismissed all of the motions except for the one challenging the constitutionality of the part of the law that forces the public to purchase private health care insurance. The Obama administration argued that the Commerce Clause of the constitution gave Congress the right to regulate the “activity” of deciding whether or not to buy health insurance. Vinson disagreed, writing:

I conclude that the individual mandate seeks to regulate economic inactivity, which is the very opposite of economic activity. And because activity is required under the Commerce Clause, the individual mandate exceeds Congress’ commerce power, as it is understood, defined, and applied in the existing Supreme Court case law.

What was most interesting to me, as an independent health insurance professional, is how Judge Vinson used a basic understanding of the concept of shared risk to explain why this one offending section of the law cannot be separated from the rest of it, leading him no choice but to strike down the law in its entirety. I will explain this aspect in the next installment.

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Two things happened this week that cast even more doubt on how taxpayers will be able to fund government-provided health insurance in the coming decades.

The first thing that happened was that Congress delayed the legislatively mandated cuts in health care insurance payments to doctors for the fifth time this year and the eleventh time overall.

According to budget-balancing measures passed by Congress in the 1990s, Medicare payments to doctors were supposed to be reduced on December 1 by 23 percent, compared to the levels when the law was passed. This was not supposed to be a sudden reduction. It was supposed to have been happening in steps. For example, Medicare doctor payments were supposed to have been reduced by 21 percent last June. Congress delayed that cut, too, prompting President Obama to criticize lawmakers for “kicking cuts down the road,” an action, he said, that “just isn’t an adequate solution to the problem.” Now the lame-duck Congress has done the same thing.

Another cut is supposed to go into effect on January 1, 2011. By then, the reductions in payments are supposed to reach almost 25 percent of the original levels. According to Republican congressman Frank Pallone of New Jersey, Congress will use the next 30 days to come up with a lasting solution to the payment problem. “This bill is a stopgap measure to make sure that seniors and military families can continue to see their doctors during December while we work on the solution for the next year,” said Pallone, the chair of the House Energy and Commerce health subcommittee.

Unless Congress allows the payment cuts to go into effect, Medicare will shell out $300 billion more than expected over the next 10 years. This will offset three-fifths of the Medicare savings that were supposed to “pay” for a large part of the Patient Protection and Affordable Care Act passed in March.

That bill, commonly known as Obamacare, was originally supposed to cost no more than $788 billion over the first ten years, according to the Congressional Budget Office (CBO). The money for the program was supposed to come from $500 billion in savings from Medicare plus new taxes. The same month the bill was signed, however, the CBO revised its estimate of the program’s cost upwards by $152 billion to $940 billion. This increase was not “paid for” by any new taxes or spending cuts, so it wiped out the $140 billion surplus the program was supposed to generate. In May, the CBO added another $115 billion to its estimate of the cost of implementing Obamacare, bringing the total price to $1.05 trillion and the unfunded liability to $127 billion. If the decrease in doctor payments never occurs, $300 billion in “savings” will never be realized over the next ten years, pushing the total deficit for Obamacare to $427 billion over ten years.

That brings up the other event of the week that cast doubt on the ability of the country to afford government-provided health care. President Obama’s deficit reduction committee failed to garner enough votes from its members to force Congress to take up its recommendations, the most controversial of which addressed the unfunded liabilities of Medicare. Twelve of the eighteen members of the commission were elected officials, but only six of them—five senators and one congressman—endorsed the commission’s deficit reduction plan. The commission voted 11-7 to adopt the plan, but fell short of the 14 votes needed to send the plan to Congress for a vote.

Together, the two events leave one lingering question: If our elected officials are not willing to carry out a ten-year-old plan to reduce the deficit by cutting payments to doctors, how are they ever going to reduce the enormous unfunded liabilities of Medicare and the the Patient Protection and Affordable Care Act?

Reminder: Open enrollment for Medicare ends on December 31, so if you, a friend, or family member needs to change Medicare plans, now is the time to do it.

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Americans went to the polls last week, and the results astounded even those who expected shift in the balance of power in the House of Representatives. Republicans picked up more than 60 seats in the U.S. House of Representatives, six seats in the U.S. Senate, and 650 seats in state legislatures across the country. As with the special election in Massachusetts earlier this year, national health insurance reform legislation was a major issue. Many winning Republicans campaigned on a promise to repeal the Patient Protection and Affordable Care Act, while few Democrats campaigning in closely contested districts touted the federal law as a success.

After the votes were in, Representative John Boehner of Ohio, the current minority leader in the House and the presumptive speaker of the House, was asked about the campaign promise to repeal and replace the health care insurance reform law. He answered:

I believe that the health care bill that was enacted by the current Congress will kill jobs in America, ruin the best health care system in the world, and bankrupt our country. That means that we have to do everything we can to try to repeal this bill and replace it with common-sense reforms that’ll bring down the cost of health insurance.

Senator Mitch McConnell of Kentucky, the leader of the Republican minority in the Senate, agreed that the voters expressed a desire to repeal the Patient Protection and Affordable Care Act, but he cautioned that it was not realistic to expect President Obama to go along with such an effort:

On health care, that means we can — and should — propose and vote on straight repeal, repeatedly. But we can’t expect the president to sign it. So we’ll also have to work, in the House, on denying funds for implementation, and, in the Senate, on votes against its most egregious provisions. At the same time, we’ll need to continue educating the public about the ill-effects of this bill on individuals young and old, families, and small businesses.

At a press conference the day after the election, President Obama was asked if he believed the voters to be demanding a re-set on health insurance reform:

QUESTIONER: Thank you, Mr. President. Health care — as you’re well aware, obviously, a lot of Republicans ran against your health care law. Some have called for repealing the law. I’m wondering, sir, if you believe that health care reform that you worked so hard on is in danger at this point, and whether there’s a threat, as a result of this election.

THE PRESIDENT: Well, I know that there’s some Republican candidates who won last night who feel very strongly about it. I’m sure that this will be an issue that comes up in discussions with the Republican leadership. As I said before, though, I think we’d be misreading the election if we thought that the American people want to see us for the next two years relitigate arguments that we had over the last two years.

With respect to the health care law, when I talk to a woman from New Hampshire who doesn’t have to mortgage her house because she got cancer and is seeking treatment but now is able to get health insurance, when I talk to parents who are relieved that their child with a preexisting condition can now stay on their policy until they’re 26 years old and give them time to transition to find a job that will give them health insurance, or the small businesses that are now taking advantage of the tax credits that are provided — then I say to myself, this was the right thing to do.

So the stage is set: Indifferent to the fate of private health insurance and unconcerned about the burden placed on tax payers, the Democrats remain focused on promoting the unfunded benefits of the legislation. The Republicans seem to understand that the benefits the president alluded to in his answer—unlimited lifetime benefits, unlimited annual benefits, unlimited access to insurance benefits regardless of preexisting conditions—undermine the actuarial foundations of private health insurance and ultimately will destroy it. Who will prevail?

Stay tuned.

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This week the House of Representatives Committee on Energy and Commerce released a report entitled “Coverage Denials for Pre-Existing Conditions in the Individual Health Insurance Market.” The report summarized the findings of the committee’s investigation into the extent of coverage denials and exclusions for pre-existing conditions in the individual health insurance market.

Chaired by Henry A. Waxman, the Democratic Congressman from Los Angeles, the committee found, “From 2007 through 2009, the four largest for-profit health insurance companies, Aetna, Humana, UnitedHealth Group, and WellPoint, refused to issue health insurance coverage to more than 651,000 people based on their prior medical history. On average, the four companies denied coverage to one out of every seven applicants based on a pre-existing condition.”

Janet Adamy of the Wall Street Journal wrote an article on the findings with the headline “Insurers Denied Coverage to 1 in 7.” I was not surprised that the committee would produce a report critical of the private health care insurance industry and supportive of the Patient Protection and Affordable Care Act, passed by the House in 2009 and signed into law on March 23 of this year, but I was surprised that a Wall Street Journal reporter would simply summarize the committee’s findings without appearing to critically examine them.

I immediately had questions about the report, which I sent in an email to Ms. Adamy:

1. Is there any way to know if the 651,000 applicants denied health insurance coverage over the three-year period includes any duplication? If an applicant was denied coverage by one insurer, did anyone check to see if he or she applied to another insurer within the three-year period?
2.  Is there any way to know if any of the applicants applied more than once to the same insurer over the three-year period?
3. Denial of coverage is a vague term. Did you attempt to pin down the authors of the report to specify if all 651,000 were denied coverage outright?

Ms. Adamy has not responded to my email.

Most of us are taught early on that statistics can be tricky things. “There are three kinds of lies: lies, damned lies, and statistics,” wrote American humorist Mark Twain, who attributed the famous line to nineteenth century British Prime Minister Benjamin Disraeli. That is why I challenged Adamy to critically examine the statistics put out by the congressional committee.

A critical component of the report was the time period the study covered. Three years is plenty of time for an applicant to receive a denial and then reapply to another health insurance company. I also have known people to simultaneously apply to several health insurance providers. Duplication of applications and thus denials is another important component. If the same people were turned down by all four health insurance companies, then the number of individuals denied coverage would be reduced by a factor of four, from 651,000 to 162,750.

The report stated that “approximately 15.7 million adults under 65 received their health care coverage through individual health insurance policies.” It also concluded that 1 out of 7 applicants was denied coverage by the four health insurance companies studied. With no duplication of applicants, and assuming the denial rates were the same everywhere (which is not likely, as the four companies studied are among the most aggressive regarding controlling costs), the implication of the report is that 2,242,857 people nationwide were denied health insurance coverage over the past three years.

However, if the same people were denied coverage over and over—say by all four insurers—then the number denied coverage would be 1 in 28 or 560,714 individuals over three years. That seems like a large number until you realize that in a country of 310 million people, it represents less than two tenths of one percent of the population.

It is also possible that some of the applicants in the study applied to the same health insurance provider more than once, which would drive the real number of individuals denied coverage down even more.

Then there is the issue of what “denial” means. Many of those “denied” coverage might have only had the one condition excluded, or may have had a waiting period imposed with full coverage after the waiting period was over—serious situations but not as serious as complete denial of coverage.

As I have stated before, if taxpayers want to make sure those denied health insurance coverage are covered, our elected officials could set up a superfund to pay their medical bills, and their bills alone. This would be much more efficient, and far less costly to everyone else, than upsetting the entire private health insurance system to extend coverage a miniscule portion of the population.

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In my last post, I discussed one of the most important changes to health insurance coverage mandated by the Patient Protection and Affordable Care Act that went into effect on September 23: the elimination of lifetime caps on “essential” health insurance benefits, which have not been defined by the Department of Health and Human Services (HHS) but normally include emergency services, ambulatory patient services, hospitalization, laboratory services, maternity and newborn care, prescription drugs, preventive and wellness services, and chronic disease management.

Several other health care insurance mandates also took effect on September 23 that could affect you and your family. Here is a brief summary:

Annual Limits on Essential Benefits
The new law calls for phasing out annual benefit caps over a three-year period for plans sold between now and 2014.

Anti-Rescission Rules
Health insurance providers cannot rescind (retroactively cancel) a plan member’s coverage for medical reasons. However, health insurance companies can still cancel coverage in cases of fraud, such as intentional misrepresentations of health-related fact. Insurers also can cancel coverage for failure to pay health insurance premiums.

Preventative Health Care Services
Health insurance plans must provide full coverage—without co-payments, deductibles, or co-insurance—for preventative services recommended by the Centers for Disease Control, such as immunizations. Health care insurance plans also must fully cover the cost of preventative care and screening for infants, children, adolescents, and women that is recommended by the Health Resources and Services Administration. Individual health plans sold before March 23, 2010 and group plans created before that day may be exempted from the preventative care mandates.

Adult Dependents Coverage
Health plans that cover dependents must now extend that coverage to adult children until they reach age 26.

No Pre-existing Medical Condition Exclusions for Children
Health insurance providers cannot delay or deny coverage for children 19 and under due to preexisting health conditions. (Grandfathered plans are exempt.)

Right to Choose Primary Care Provider
Health insurance plans that require the policyholder to choose a Primary Care Provider (PCP) must allow the policyholders to choose any participating PCP accepting new patients. When choosing a PCP for a child, the policyholder can designate any participating physician specializing in pediatrics. Similarly, female policyholders can designate  any participating OB-GYN as a PCP.

Coverage for Emergency Medical Services
Health insurance plans that cover emergency services no longer can require prior authorization of the services. Such plans also must cover emergency care at the same level of cost sharing regardless of whether the provider of the emergency care is participating provider.

Appeals Process
Group health insurance plans must offer an appeals process that follows U.S. Department of Labor regulations. Individual health insurance plans must offer an appeals process in line with the standards created by the Secretary of Health and Human Services. Both individual health insurance plans and group health insurance plans also must offer an external appeals process in line with existing law or the NAIC Uniform External Review Model Act.

I encourage all of my clients to take full advantage of these changes in the health insurance law. At the same time, I would be remiss if I did not add that the Patient Protection and Affordable Care Act provides no mechanism for private health insurance providers to recoup the added expense of these benefits, other to increase premiums. All of the provisions that went into effect on September 23, 2010, will cost more money. In the case of the open-ended lifetime and annual benefits, a single patient could receive literally millions of dollars in benefits over a lifetime (see previous post). Someone will have to pay for those benefits. Caps on benefits were not created because health insurance providers are mean or greedy, but because actuarial science requires them for the private insurance model to work. Open-ended benefits are not sustainable.

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On September 23, health insurance providers will be required by the Patient Protection and Affordable Care Act—the national health care insurance reform law enacted in March—to remove lifetime benefit caps from all new policies they sell or renew.

With this change, health care insurance consumers no longer will have to worry about their benefits running out, should they sustain a catastrophic injury, contract an extremely serious disease, or give birth to a child with a serious medical condition.

Lifetime health care insurance caps typically are set at $1 million or more, so most people never bump up against them or even know they exist. (Of course, I always advise my clients to read their policies completely. When caps were in place, I made a point of telling them what the lifetime cap was.) However, a small but significant percentage of people did run into the lifetime caps.

Edward Burke of Palm Harbor, Florida, is one such person. Julie Rovner, a reporter for National Public Radio, told his story this week. The point of her report was to dramatize how this new provision of the health insurance reform law will improve the lives of people will serious illnesses. However, it unwittingly illustrates how this government mandate violates the principle of shared risk, driving up costs and undermining the sustainability of private health insurance.

Edward Burke is a hemophiliac in his fifties. His parents discovered his condition when he was a baby, around 1960. In 1970s, pharmaceutical companies developed factor eight, a substitute for the chemical in the blood that allows normal clotting—the blood “factor” that hemophiliacs do not have. With factor eight, bruises that had to be iced for four or five days disappeared in 24 hours. Factor eight allowed Burke and other hemophiliacs to lead relatively normal lives. Naturally, the drug came at a price. Burke told NPR, “It was easily about $900,000 a year for me to take factor eight prophylactically, as what we were told to do, to prevent bleeds from happening.

Needless to say, it didn’t take Burke long to reach his lifetime caps. To continue receiving factor eight, he would quit one job and take another. This, by the way, illustrates that fallacy that people with pre-existing conditions cannot get health insurance: Group plans offered by employers must accept people with preexisting conditions. “After two years, you’d have to leave the company you were with, or go on—if you had a spouse, go on theirs, because you capped out,” Burke said. Burke said he had done this “twice over the last seven years,” and might have done it more except for the fact that the companies he was with—in the healthcare industry—experienced a number of mergers. “The companies kept changing names and being acquired, so you started over again, or I would have capped out four or five times,” Burke explained. Needless to say, Burke is excited about the change in the law, adding, “The fact that they can’t cap me out is a huge blessing, if you ask me.”

No doubt. But who is going to pay his $900,000 worth of factor eight? It would take another 199 policyholders paying $4500 a year in health insurance just to cover the cost of Burke’s drugs. Actually, it would take 230 policyholders, since the health insurance companies are allowed to spend 15 percent of premiums on profit and overhead, including their employees’ salaries and benefits, buildings, technology, marketing, research and development, and everything else (see previous post).

Spreading the loss among 230 policyholders is the essence of shared risk, the foundation of private insurance. The problem is that those 230 policyholders are not going to go the entire year without having claims, or losses, of their own.

Unlike car insurance or homeowners insurance, in which the policyholders fervently hope not to incur losses, health insurance is viewed by many as a service to be used. Any time someone pays $4,500 a year for something, they want to “get their money’s worth.” As a result, those 230 policyholders not only will visit the doctor when sick or injured, but also will get checkups, preventative tests, medications, and more, generating what is known as the per capita claim.

Under standard insurance modeling, the per capita claim for a period must equal the total payments in a period divided by number of insured persons:

C = P/L

where:

C = Average per capita claim

P = Total payments in a period

L = Number of insured persons

When insurance companies are no longer able to cap annual or lifetime benefits, the average per capita claim will skyrocket. There are 20,000 people with hemophilia in the United States. If they each require $900,000 a year worth of factor eight, that would be $18 billion a year in benefits paid to 0.00005 percent (five one-hundred thousandths of a percent) of the population, adding $60 to the average per capita claim of every insured American. Perhaps that burden is assumable, but hemophilia is not the only high-cost disease. Treatment of heart disease, various cancers, rheumatoid arthritis, diabetes, HIV, and other chronic conditions also can exceed lifetime caps.

Lifting the cap on lifetime health insurance benefits no doubt is a blessing to Edward Burke and others like him, but it ignores actuarial reality and is not sustainable.

The more per capita claims rise, the higher the total payments will be, increasing the costs on individuals. As costs rise, fewer people will be able to afford them (we are seeing this now), and they will stop participating in the system. A smaller number of people in the pool will drive costs even higher. The private health insurance model will break down, clearing the way for the government to take over completely. At that point, care will be rationed, and I suspect Edward Burke will be among the first to feel the pinch.

Be careful what you wish for. You just might get it.

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New research published by Health Affairs shows that almost 5 million U.S. children not covered by health insurance now are eligible for enrollment in government-funded Medicaid or Children’s Health Insurance Program.

Nationally, 82 percent of eligible children participate in these low-cost or even free health care insurance programs. However four western states and Florida have participation rates lower than 70 percent, including Nevada (55.4 percent), Utah (66.2 percent), Colorado (68.9 percent), Montana (69.3 percent) and Florida (69.8 percent). By contrast, states in the East have higher rates, including  Maine (92 percent), Vermont (94 percent), and Massachusetts (95 percent). Participation in Connecticut was 85.2 percent, slightly higher than the national average.

Poorer families took advantage of the government programs at a higher rate than wealthier ones did. Families that earned more than $88,000, or twice the federal poverty rate of $44,100 for a family of four, had the lowest participation in the programs, because they did not know their children are eligible or perhaps because of the social stigma of accepting government help.

Health and Human Services Secretary Kathleen Sebelius has challenged the states, which administer the programs, to sign up an additional 5 million children over the next five years. Sebelius said the study shows that states can find and enroll the uninsured children. “The study confirms that a lot of states do a very good job,” Sibelius said. “But the study also gives us a much sharper focus on where kids are who need coverage.”

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An association of state health insurance regulators voted Tuesday to adopt definitions of the types of expenses that health insurance providers can count toward patient care—and which expenses do not.

Under the federal health care insurance reform legislation signed into law in March, health insurance providers must spend at least 80 percent of an individual or small-group health plan’s premiums on health care. The insurers must spend even more—85 percent—of a large group plan’s premiums on health care.

Under the new law, the determination of the “medical loss ratio” fell to the National Association of Insurance Commissioners (NAIC), comprising commissioners from the various states. The NAIC adopted a narrow definition of medical care and quality improvements.

The health care advocacy group Health Care for America Now (HCAN) praised NAIC’s action. “Today the NAIC took a step toward ending the health insurance companies’ stranglehold on our health care,” declared Ethan Rome, the executive director of  HCAN. “The top state insurance regulators from across the nation voted to put patient care above insurance company profits.”

Not surprisingly, the insurance industry saw things differently. By refusing to accept fraud prevention and other cost control measures as quality improvements, the NAIC’s actions “could have the unintended consequence of turning-back-the-clock on efforts to improve patient safety, enhance the quality of care, and fight fraud,” observed Karen Ignagni, president and CEO of America’s Health Insurance Plans (AHIP).

The NAIC’s narrow definition of quality improvements is short sighted, Ignagni maintains. “Preserving patients’ access to high-quality health care services is essential if the key goals of health care reform are to be achieved.”

In an 11-page letter to the NAIC, health insurers asked the regulators to count several industry practices as part of quality improvements:

• Fraud reduction claim reviews, “a key tool in targeting the dangerous overutilization of services, falsification of medical records, and medical identity theft;”
• Costs associated with the adoption of new billing codes that will “improve the ability of health plans to share clinical data among clinicians for quality improvement and care coordination activities, thereby promoting a better understanding of diagnoses and procedures at institutional settings of care to allow better treatment and quality improvement;”
• Review of duplicate procedures, such as imaging, which experts believe are commonly overused;
• Wellness incentives that the national healthcare reform law is counting on to reduce healthcare costs in the long haul.

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