In the ‘Aren’t We Hated Enough?’ Category

December 30, 2009

I’ve never been a big fan of minimum medical cost ratios for health plans, but this suggestion from The Value At Risk blog on how health plans might respond if minimum MCRs were including in the final healthcare reform legislation isn’t fair — and it isn’t very nice either.

Medical costs and operating expenses combined have come close to – or in most cases exceeded – premiums received by the major health insurance companies. Therefore, health insurance firms are not able to turn a profit from premium revenue alone. Profitability, it seems, is achieved by two other sources of revenue: fees and investment income….If I could make a recommendation to the industry, it would be to arbitrarily “invent” new fees. Maybe introduce another stage to the application process that would require payment of additional fees. To introduce a little bit of irony to the situation, the industry could pretend that it now faces burdensome ratio compliance costs, and must assess a few cents worth of compliance fee upon every claim. Remember: Focus on the Fees.


Have a Merry, Healthy Christmas — Immigrants Too

December 25, 2009

The U.S. Senate gave the nation a Christmas gift yesterday with the passage of a substantial healthcare reform bill, which when reconciled with the House bill will help improve the lives of millions of people.  The bill has flaws and shortcomings, as I’ve noted before.  But it’s a significant step in the right direction on the road to universal coverage.  And who knows, maybe all the debate over whether the bill will or won’t save money at the very least gets us thinking about one day actually affecting administrative simplification, evidence-based medicine and real cost savings (Hey, it’s Christmas, I can dream). 

One more thing, you know, being the birthday of Jesus Christ and all:  The Economist offers yet further proof of the need to include immigrants in the healthcare safety net.  (Hat tip: Infectious Greed):

Immigration keeps America young, strong and growing. “The populations of Europe, Russia and Japan are declining, and those of China and India are levelling off. The United States alone among great powers will be increasing its share of world population over time,” predicts Michael Lind of the New America Foundation, a think-tank. By 2050, there could be 500m Americans; by 2100, a billion. That means America could remain the pre-eminent nation for longer than many people expect. “Relying on the import of money, workers, and brains,” writes Mr Lind, America is “a Ponzi scheme that works.”

This has special meaning for me as I sit down to Christmas dinner with my Japanese-born wife, my Italian-American mom, and my half-Japanese, half-Italian, All-American daughter.

Quote of the Day: John Boehner

December 24, 2009

House Minority Leader John Boehner (R-OH), following passage of the Senate healthcare reform bill, which doesn’t include a public option and assures private insurance companies an important role going forward:

“Not even Ebenezer Scrooge himself could devise a scheme as cruel and greedy as Democrats’ government takeover of healthcare.” 

In the spirit of Christmas, I’ll refrain from comment.

Healthcare Reform and Innovation — Part 4: Payment Changes

December 23, 2009

In an opinion piece in BusinessWeek, C.J. Bolster of the Hay Group sees in healthcare reform the potential for real changes — and cost-savings — tied to the shift from a fee-for-service model to bundled, global or other types of payment arrangements.

One thing is certain: The government and insurance companies won’t be paying more for services than they pay now. So health-care providers are becoming more efficient and effective. Regardless of what the final health-care reform bill looks like, private insurers will be driving down costs. In our work at Hay Group with some of the nation’s major health-care organizations, we are observing significant changes including effective implementation of new medical and surgical technologies that improve outcomes and conserve resources.

CVS Caremark Taps Lofberg

December 23, 2009

CVS Caremark has named Per Lofberg as head of its pharmacy benefit management business, effective Jan. 4, 2010.  Let’s take it from the top.

Lofberg, 62, is co-founder and chief executive of genetic testing company Generation Health, an organization that CVS took a minority stake in last month.  The same day CVS announced Lofberg’s appointment, the company also said it was increasing its stake in Generation Health.  (There must not be any connection between the two announcements because they were made in separate CVS press releases).

Lofberg is a former top executive of leading PBM Medco and later chairman of Merck-Medco Managed Care, the wholly owned unit that drug maker Merck formed after its acquisition of Medco in 1993.  That ill-fated merger — which struggled with various conflicts of interest — resulted in Merck spinning off Medco in 2003.  This happened about three years after Lofberg had already left the PBM unit to head up Merck Capital Ventures.

The structure of the spin-off left the new entity, Medco Health Solutions, holding the bag (Merck came out smelling like roses).  But Medco’s new management team led by David Snow was able to right the ship — and enjoy tremendous success — in part because as onerous as Medco’s separation agreement was with Merck, at least the two companies were separate.  Medco could eventually move on, and it did.

I have no doubt Lofberg knows a thing or two about PBMs.  But let’s be clear.  The issue here isn’t management per se.  The issue is the lack of synergy and the channel conflicts between a PBM and a drugstore chain, in the same way the issue for Merck-Medco was the conflict of interest inherent in the merger of a drug company (which makes its money selling drugs) and a PBM (which is supposed to make its money helping manage drug costs).

Merck-Medco, which Lofberg headed for seven years, still ended up a bad marriage.  Why should we think CVS Caremark with Lofberg running the PBM operation will be any different?

Healthcare Reform and Innovation — Part 3: Silicon Valley

December 21, 2009

Others have addressed this question before (see prior post), but here’s a good piece by David Leonhardt of The New York Times on how concerns about healthcare can stifle American innovation.

In the cradle of American innovation [Silicon Valley], workers are making career choices based on co-payments, pre-existing conditions and other minutiae of health insurance. They are not necessarily making decisions based on what would be best for their careers and, in turn, for the American economy…Economic research suggests that more than 1.5 million workers who would otherwise have switched jobs fail to do so every year because of fears about health insurance. Some of them would have moved to companies where they could have contributed more, and others would have started their own businesses….Just consider the economic research showing that people married to someone with health insurance are more likely to work at small companies than people who aren’t so lucky.

Quote of the Day: Jonathan Gruber

December 21, 2009

Jonathan Gruber of M.I.T. compares the Senate healthcare reform bill to the House bill (from The New York Times):

Take the Senate on cost control and the House on affordability, and you’ve the best possible bill.

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