In Part I of this series, we discussed the shocking response some Americans had to the cold-blooded murder of United Healthcare executive Brian Thompson on the streets of New York. While most were outraged that this could happen to anyone, some actually cheered the brutal murder of a health insurance executive as if “he had it coming to him.” This raises the question why some Americans are so angered by the health insurance industry.
We learned in Part I that most Americans like their health insurance and a substantial majority give positive ratings to their health plans. But there are some problems that need to be addressed. John C. Goodman tells us in Forbes that “With one exception described below, no insurer in our health care system wants a sick person. No employer. No commercial insurer in the marketplace. No Medicaid managed care plan. And no safety net institution. Every time someone with an expensive medical problem enters one of these plans, the organization loses money. If the patient leaves the plan (for whatever reason) the plan makes money. If the plan develops a reputation for being really good at handling serious medical problems, it will attract more sick people and incur more losses. Given the horrible economic incentives that government regulation has created, the surprise is not that some patients experience mistreatment. The surprise is how few there are.”
The exception is Medicare Advantage plans. More than half of Medicare enrollees are now in private health insurance plans, called Medicare Advantage, or Part C. Like everyone else in the country they pay community-rated premiums that are independent of their health status. But unlike every one else, their premiums are topped up by Medicare, based on individual risk assessments. As a result, the total premium that the plans receive makes the healthy and the sick equally attractive from a financial point of view.
There are other advantages. The Medicare Advantage Program is the only place in our healthcare system where a doctor who discovers a change in a patient’s health status can send that information to an insurer (in this case Medicare) and receive a higher premium payment—reflecting the new expected costs of care. Accordingly, MA plans have financial incentives to discover patient problems early and solve them. These plans make money by getting patients the care they need and keeping them away from the emergency room and out of the hospital.
And, unique in our health care system are MA plans that specialize in such chronic conditions as diabetes, heart disease, cancer, etc. These MA plans actually seek to enroll patients that conventional health insurance would like to avoid. Medicare Advantage costs less than traditional Medicare and is of higher quality. Moreover, as MA presence expands in an area, medical practices begin to change – resulting in lower cost, higher-quality care for other patients.
Could the system be better? Sure. For example, United Healthcare is said to deny about one-third of its claims. But there are MA plans in Houston that have denial rates as low as 3 percent.
Goodman responds: “There are often good reasons to deny a claim. But how many are successfully appealed and how long does it take to adjudicate them? Insurance companies should be free to advertise these facts and compete on how well they take care of their enrollees after they get sick. Then, we should explore ways of making individualized risk adjustment available to the rest of the healthcare system. Economist John Cochrane believes that would happen naturally in a free market for health insurance. Maybe it’s time to give that idea a try.”
Medicare Advantage is growing in popularity, even though the Biden administration has made it more difficult for the private health insurers in the system. If you’re considering a MA plan, be sure to check with your doctors to see if they participate in the plan or you may be looking for new doctors.
