The Center for Public Integrity

If you want to get a clearer understanding not only of why the U.S. health care system fails so many of us but, more importantly, how we can transform it to make it the best in the world, go to the movies this weekend.

Regardless of your political affiliation or your opinion of Obamacare, you will find “Escape Fire: The Fight to Rescue American Health Care,” a compelling and convincing indictment of a health care system controlled by special interests that profit from the status quo and that spend millions of dollars every year to make sure nothing happens in Washington that would be harmful to their bottom lines.

You will also find that it offers some common sense ideas of how to fix many of the things about our system that are badly broken, including fixes that won’t require an act of Congress but that will require some innovative thinking and risk-taking on the part of health care providers, employers and other stakeholders in the private sector.

"Escape Fire" describes how health care in America has turned into a business, how the quest for money has hurt the quality of care provided to patients and how it has kept millions of us from having access to even mediocre care.

As a consequence of allowing this to happen, our system has become littered with perverse incentives, such as paying for medications and procedures that address only the symptoms but not the underlying causes of illness and disease, and not paying for prevention. Because of those perverse incentives, we have a system that rewards quantity instead of quality and that leads to unnecessarily expensive and often harmful overtreatment. And we spend enormous amounts of money on the latest high tech equipment but give short shrift to high-touch care, which in many cases is exactly what the patient needs.

The months-long Center for Public Integrity investigation into the Medicare program has uncovered a textbook example of the expensive consequences of  what’s known as “regulatory capture.” Doctors and hospitals are likely being overpaid billions of dollars, which is hastening the depletion of the Medicare trust fund, because lawmakers and regulators put lobbying and professional groups representing health care providers in charge of writing the rules that determine reimbursement.  

And to make matters worse, to maximize revenue and profits, some doctors and hospitals have figured out how to game the system to their financial advantage by abusing what has been held out as a means to improve care and reduce administrative costs —electronic health records.  

“Regulatory capture” is a term that describes an all-too-common situation at both the federal and state levels in which special interests — in this case groups like the American Medical Association — dominate regulatory bodies that set the rules and make important decisions affecting them. In many regards,  the Centers for  Medicare and Medicaid Services (CMS) has become a “captured agency” as a result of decisions made decades ago — with the full blessing of both the White House and Congress — to pretty much let health care providers determine how — and how much — they will be paid.

Politicians who are promising to repeal ObamaCare won’t find any evidence in the Kaiser Family Foundation’s analysis of health insurance costs that the law has caused premiums to skyrocket, as many of those politicians have contended.

On the contrary, premiums have increased on average only 4 percent over the past year, the lowest rate of increase in years, according to Kaiser’s 2012 Employer Health Benefits Survey, which was released last week. Double-digit premium increases were once the norm, especially during the George W. Bush administration. Premiums increased 10 percent in 2004 and 13 percent in 2003.

So the good news is that premiums increased only 4 percent. The not so good news is that, because of all those past double-digit increases, the average premium for employer-sponsored health coverage has reached a record high of $15,745. And because employers have been shifting more and more of the cost of coverage to workers, employees are now paying, on average, nearly 30 percent of that total, much more than they used to. The hike in worker contributions has far outstripped the overall rise in premiums.    

A study published last year in Health Affairs found that the gains in wages U.S. workers made over the past decade were more than wiped out by increases in the cost of health care and health insurance. Kaiser’s annual surveys document that: since 2002, premiums have increased 97 percent, which is three times as fast as wages (33 percent) and inflation (28 percent).

That’s not all the bad news, unfortunately. More Americans are now enrolled in high deductible plans, because that’s frequently all their employers are offering. Kaiser found that the percentage of workers enrolled in plans with an annual deductible of $1,000 or more has increased from 10 percent in 2006 to 34 percent in 2012. The growth has been even greater for employees of small firms.

What happened in Maine is a sobering reality check on the oft-repeated myth that getting rid of ObamaCare and other consumer protections is the answer to our health care problems. If the government will just get out of the way, the myth-makers would have us believe, the free market will magically transform our dysfunctional health care systems into one of the world’s very best.

The voters in Maine fell for magical thinking in 2010 when they turned over control of the legislature and governor’s office to candidates who promised to block ObamaCare and implement what they called “common sense” free-market solutions. Once they did, they assured voters, insurance premiums would fall and more people would have access to affordable care.

Sure enough, soon after being sworn in, lawmakers passed legislation that in many ways took Maine in the opposite direction of where President Obama wanted to go. When newly elected Republican Governor Paul LePage signed the bill into law —a bill enthusiastically endorsed by insurance companies — many consumer protections enacted over two decades disappeared. Especially hard hit: people living in rural areas and folks over 40.  

Among other things, the new law abolished protections for rural families that had required insurers to have at least one doctor in their provider networks within 30 miles of where those families lived and at least one hospital within 60 miles. The law also allows insurance companies to effectively double rates for older residents. That provision is affecting not only individuals and families, but also small businesses that employ older workers. Within months of the bill’s passage, insurers began jacking up the rates they charged businesses with older workers by 90 percent or more.

Even so, backers of the new law continued to insist that after it had been in effect for awhile, the measure would help a majority of Mainers.

While listening to the promises to repeal ObamaCare during the Republican National Convention, I was reminded of what those of us in the health insurance industry said when our friends in Congress were able to block passage of President Clinton’s health care reform legislation 18 years ago.

Like the politicians in Tampa, we insisted then that a big government program not only wasn’t needed, but would be harmful — that what the government really needed to do was get out of the way and let the free market work.

Insurance company spokesmen like me assured the public that our then-novel managed care plans, coupled with the invisible hand of the market, would do the trick. Leave it to us, we said, and we’ll get medical costs under control and enroll every American in a good HMO.

The proponents of a pure free-market health care system hope that Americans have amnesia and can be persuaded to blame President Obama for the problems that grew almost immeasurably worse between the demise of the Clinton plan and the passage of the Affordable Care Act. They want us to believe, despite overwhelming evidence to the contrary, that health insurers and the largely unfettered, loosely regulated marketplace can somehow turn things around. And that we should reward insurers for their failure by turning the Medicare program over to them.

As the Republican convention gets underway today in Tampa, we can expect to hear the politicians and delegates gathered there — including GOP nominee Mitt Romney — rail against “Obamacare”, insisting that what we need instead of a “government takeover of health care” is “patient-centered” care, although what that would look like hasn’t been disclosed.

If recent statements by Romney and his VP pick Paul Ryan are an indication of the rhetoric we’ll likely hear, get ready for speech after speech telling us that Obamacare will “cut” $716 billion from Medicare and cost small businesses a bundle.

In anticipation of these sorts of misrepresentations, doctors from all over the country — all members of a four-year-old organization called Doctors for America — have traveled to Florida to serve as a truth squad. And while they’re dispensing facts, they’ll also be providing more than a little free care. When the GOPers leave the Sunshine State, the doctors will hop on a bus and head to Charlotte to try to persuade the politicians and delegates who will gather there that they need to start aggressively defending the reform law.

Doctors for America is a bipartisan grassroots organization of 15,000 physicians and medical students from all 50 states. The organization’s executive director, Dr. Alice Chen, said the doctors decided on the road trip because “politics, not patients, has been driving the health care debate and is threatening to roll back the promise of a better health care system.”

Chen says the mission of the group is to build a health care system that works for everybody, not just the wealthy and fully insured. The group’s message: “Stop messing with health care reform because people’s lives are at stake.” Its “Patients Over Politics Bus Tour," which will make stops in Atlanta and Columbia, S.C. and several other cities between Tampa and Charlotte, will feature press events, town hall-type forums, and preventive health screenings.

When you look closely at GOP vice presidential candidate Paul Ryan’s proposals to restructure Medicare, it’s clear he agrees with many health insurance company CEOs that Americans — especially older Americans — don’t have enough “skin in the game” when it comes to medical costs. If his proposal to largely privatize Medicare becomes a reality, those not already 55 and older will be putting far more “skin in the game” than current Medicare beneficiaries do, and they’ll be required to peel off increasing amounts of skin every year for the rest of their lives.

I can’t tell you how many times I heard my former CEO and other industry executives say that, in addition to the ever-increasing cost of a stay in the hospital, new drugs and new medical technology, a big reason why premiums keep going up is because those of us who make a tiny fraction of what they make are not paying enough out of our own pockets (i.e., “skin”) for medical care.

They use that rather crude term when they talk to Wall Street financial analysts and policymakers to justify their strategy of moving more and more of us into what they euphemistically refer to as “consumer-directed” health plans that are in reality are high-deductible plans that require us to pay far more of our own money for medical care than we have had to pay in the past.

Ryan would change Medicare from what is known in industry jargon as a “defined benefit” plan to a “defined contribution” plan. Medicare beneficiaries would no longer have the assurance of knowing that the government would always pay the lion’s share of the cost of coverage (defined benefit). Instead, the government would give them a set amount of money in “premium-support” payments (defined contribution) every year to buy coverage from private insurers. (The 2011 version of Ryan’s proposal would replace the traditional Medicare program entirely by private insurance plans. In the 2012 version, traditional Medicare would remain an option.)

If Americans who are embracing Rep. Paul Ryan’s “Path to Prosperity” — and that now includes Mitt Romney — spent a few minutes reviewing a few recent research reports, they just might conclude that the Wisconsin Republican’s plan to reduce the deficit might better be renamed the “Path to the Poorhouse” because of what it would mean to the Medicare program and many senior citizens.

Ryan’s proposal, which will get new scrutiny now that Romney has made him his running mate, would end the current Medicare program for everyone born after 1956. It would replace Medicare with a system in which beneficiaries would receive a set amount of money from the government every year to buy coverage from private insurers. That money would go straight into insurance companies’ bank accounts, which would make them far richer and even more in control of our health care system than they already are.

While the amount of money beneficiaries would receive would depend on their health status, the average 65-year-old would get $8,000 under the Ryan plan in 2022, the year it would take effect. That’s the amount the current Medicare program is expected to spend on the average 65-year-old that year. After 2022, the annual increase in the “premium support” payments would be based on the consumer price index (CPI). And therein lies one of the biggest problems for anyone hoping to live long enough to enroll in Medicare and stay alive for a few years.

Aetna’s had a lot to say lately about how business is good. The company disclosed last week that it made $458 million in profits this spring, and said it expected to make more money this year than executives previously thought possible. The firm also signaled it set aside three quarters of a billion dollars from policyholders to buy back shares of its own stock instead of paying more claims. But a few days before that, Aetna’s CEO got a real-world understanding of just how inadequate some of the company’s policies are.

And thanks to Twitter, the rest of us got a better understanding of how U.S. health insurers are able to profit so handsomely from the inadequate policies they sell, especially to students.

A significant part of Aetna’s revenues come from its student health plan business. The company contracts with many colleges across the country to provide coverage to students. Trouble is, those policies typically have low annual and lifetime limits — as was discovered recently by Arijit Guha, a 31-year-old graduate student at Arizona State University who’s been diagnosed with colon cancer. Guha was paying $400 a month for a policy that had a $300,000 lifetime limit. It didn’t take long for his care, including surgery and chemotherapy, to exceed that.

Facing a growing mountain of bills and the very real possibility of having to file for bankruptcy, Guha and his friends decided to set up a provocatively named website — poopstrong.org — and to use Twitter and other social media to raise money to pay the claims Aetna was denying. 

Tweeting as Poop Strong, Guha soon drew the attention of a customer service representative at Aetna and, ultimately, the big guy himself, CEO Mark Bertolini.

Here’s an abridged version of how it went down:

Poop Strong: @Aetna’s 4th qtr profit up 73%: “it continued to benefit from low use of health care.” Helps they can ensure low use.