A cardiologist friend just got a New Year’s greeting from Blue Cross Blue Shield of DC/Maryland/Virginia. She’s a healthy woman in her 40s. They are raising her personal health insurance rates by 30 percent. Can she recover this from the reimbursements that they will pay her for the work that she does on patients’ hearts? Maybe not; they are simultaneously cutting payments to cardiologists by 35 percent. Her explanation: “insurance companies are crooks and the healthcare reform/debacle will only make it worse”.
8 thoughts on “Happy New Year from Blue Cross Blue Shield”
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Same thing happening at BCBS in Louisiana. Raising personal insurance rates by 10-30% and cutting payments (with nasty public media to boot) to the largest healthcare facility in the state.
When will smart, entrepreneurial solutions to the healthcare payment problem be developed and how will they work?
This is analysis is simplistic and misleading. Here’s why insurance companies are behaving the way they are:
1. Health care expenditures are rising — due to poorer population health (e.g. obesity), supply-driven demand (e.g., excessive MRIs; see Gawande or the Dartmouth Atlas) and general inflation/GDP growth.
2. Private healthcare spending (insured and uninsured) only accounts for 54% of total spending (see http://www.cms.hhs.gov/NationalHealthExpendData/25_NHE_Fact_Sheet.asp). Medicare and medicaid are the single largest individual payors for healthcare.
3. Medicare often does not pay full cost for medical services. Doctors and hospitals often lose money treating medicare and/or medicaid patients. (Particularly medicad.)
4. When this happens, healthcare providers must engage in “cost-shifting” to break even. Simply put, people with private insurance subsidize medicare/medicaid patients that the hospital loses money on.
5. If health expenditures rise faster than the medicare payment rates/budget, all the increase is pushed onto private payers.
6. This magnifies the rate increases on private health insurance. Assuming a 50%/50% public/private split, if costs rise 5% overall, and public payments remain flat, then hospitals will raise prices 10% on private insurers.
7. The insurers are not without fault here — they typically will pass on the price increases, and keep the same profit margin. But calling them crooks is pretty off-base.
Sam: Thanks for the comment. Remember that I am quoting a cardiologist, not providing an independent analysis of my own. My cardiologist friend is not an economist or insurance specialist; she studied… cardiology!
I’m not sure that your comments completely explain the phenomenon. You say that due to Medicare/Medicaid payments being too small, costs to private payers must rise. But in this case, Blue Cross is a private payer and they’ve said that they are cutting their payments to cardiologists by 35 percent. Obviously the money is going somewhere, but I don’t think it is obvious where!
Why would medical professionals treat Medicare/Medicaid patients at a loss? There is no requirement that they do so.
Beavis: Some doctors and clinics do refuse Medicare/Medicaid patients, e.g., as covered in this story: http://www.bloomberg.com/apps/news?pid=email_en&sid=aHoYSI84VdL0 (on the Mayo Clinic in Arizona). As noted in http://philip.greenspun.com/politics/health-care-reform , there are comparatively few doctors in the U.S. and there is a limit to how far even a dictatorship can go in cutting their fees. I don’t think hospitals and doctors are truly losing money on the average marginal Medicare patient. Perhaps the Medicare patient isn’t covering all of his or her share of fixed costs, but certainly the hospital will be more profitable bringing in an older American for a $200,000 death in the ICU than leaving that patient to die at home. Only a provider with a fantastic marketing ability can afford to turn away half of potential revenue (the government pays for about half of all health care in the U.S.).
I live in MA where health care is mandatory. I am in the early 40s good health. I am using BCBS way before it became mandatory in this state to carry health insurance and the cost was reasonable. As soon it became mandatory the cost has more than doubled… you guess that if there is more coverage the cost should go down in the area. This year in order to maintain the same monthly payment I had to increase deductibles. So something is way wrong. It is just the insurance company? I am not sure. What I know is that a friend of mine in TX pays for his family what I pay just for myself every month.
For the people raving of a public system I invite them to check what is going on in case of a serious illness. I am Italian by birth and I have seen myself reputable hospitals in wealthy areas where the waiting period just for a cat scan was of more than 2 months! Sure they fix your broken leg at the emergency room at basically at no cost though. And I can say the same for Germany France and Great Britain places where I have been and where I have friends that work there. Last year a relative was carried to the hospital here in MA. The ambulance ride, for less than 5 miles, has been billed to the insurance over 7K… So I fear the heath care system problem is much deeper and there is not just one cause for that. Common denominator is the same one of the current financial crisis in my simplistic vision: a lot of greediness…
In some cases medical professionals do have to take Medicaid patients at a loss. If they walk into an ER, you can’t turn them away. Pharmacies in some states are also required to give Medicaid patients their drugs without a copay if the patient says they can’t pay.
Hey Phil,
Very similar here in CA — BCBS raised premiums for a healthy mid-30s couple by 25%. At the same time, my sister received notice that they were cutting reimbursement to Physical Therapists by 30% and reducing the number of sessions they would pay for a given patient.
Insurance companies are required to maintain large financial reserves and I’m wondering if these investments might have taken a pretty severe hit with the economic crisis. This would be an effective way to rebuild the stockpile.