A new study by Paul Ginsburg at the Center for Health System Change reveals what we on the inside of the insurance industry have long ‘known’:
The balance of power in rate negotiations has moved decisively from payers to providers
and
Payers without market share have higher medical costs and little chance of improving their position.
Let’s focus on the second point.
According to Ginsburg, “Average inpatient payment rates in the eight market areas varied widely, ranging from 147 percent of Medicare rates in Miami to 210 percent in San Francisco…San Francisco had the highest average rate across the four insurers, it was the highest-priced market for only two insurers. Presumably, this reflects such factors as health plans’ differing market shares…”
The implication is clear – the dominant payers in San Francisco were able to negotiate reimbursement deals that were much more favorable than those payers with little share.
What does this mean?
If competition is to flourish, there has to be some way for new entrants to compete effectively. In the health insurance business, success is largely driven by price; payers with lower cost structures win and grow; payers with higher cost structures shrink and disappear. If a payer doesn’t have enough share in a market – defined as membership – then providers will find little need to give them significant discounts, to comply with onerous utilization review processes, to provide quality data and vary their treatment, scheduling, and billing practices to accommodate an insurer that delivers few patients to their office/imaging facility/hospital.
One of the flaws of the ACA (health reform bill) was it did little to address this fundamental problem. The ‘free’ market hasn’t solved the problem, so some form of regulatory intervention is necessary if new competitors are going to have a chance to compete with the big health plans.

There’s no question the Accountable Care Act needs work – everyone agrees on that.
So let’s talk about the specifics – what needs fixing, why, and how can we get those fixes passed.
First, let’s understand how bad our current ‘system’ is. Some who want to repeal and/or replace the ACA continue to publicly state we have ‘the best health care in the world’. (here, and herel)

While that may – or may not – have been true at some point, it is increasingly clear that the US health care system is not anywhere close to ‘best in class’. A just-released study done by the Commonwealth Fund compares our system to those in ten other industrialized countries, with sobering results.
Here are key findings:
– Adults in the United States are far more likely than those in 10 other industrialized nations to go without health care because of costs, have trouble paying medical bills, encounter high medical bills even when insured, and have disputes with their insurers or discover insurance wouldn’t pay as they expected.
– One third (33%) of U.S. adults went without recommended care, did not see a doctor when sick, or failed to fill prescriptions because of costs, compared to as few as 5 percent to 6 percent in the Netherlands and the U.K.
– One-fifth of U.S. adults had major problems paying medical bills, compared to 9 percent in France, the next highest country, 2 percent in the U.K., 3 percent in Germany, and 4 percent in the Netherlands.  
One finding is particulary scary – “Although the uninsured were at highest risk for skipping needed care, working-age U.S. adults with below-average incomes who were insured all year were significantly more likely than those with above-average incomes to go without needed care because of costs and have serious problems paying medical bills–nearly half (46%) went without needed care and one third had one bill problem, double the rates reported by above-average income insured adults.”
You read that right – having insurance does not mean you get health care, and if you do, you still have to pay a substantial portion of the bill out of your own pocket. 
The study examined health care and health insurance in eleven countries, all with much lower costs than the US – a differential that undoubtedly helps them compete in international markets. As globalization continues, American companies will find the disparity in health care costs will be a growing problem, diminishing their ability to compete with companies from Germany, Japan, Korea, and Switzerland.
That said, ACA is anything but perfect. Let’s start our discussion with something that isn’t in the bill – Medicare physician payment reform.
Fixing Medicare’s horrendously broken physician reimbursement ‘scheme’ known as RBRVS is critical. Congress has to come up with a long term solution that:
a) better recognizes the primary importance of primary care;
b) incentivizes outcomes rather than pays for piece work:
c) is less likely to be abused by Congressional cowardice and ineptitude.
A big part of the solution is already in place – the Independent Payment Advisory Board (IPAB). This from California Healthline:
“Beginning in 2014, IPAB must recommend Medicare spending cuts if the program’s growth rate exceeds the average of the consumer price index and the Medical Care CPI. Barring congressional action to make equivalent cuts, IPAB’s recommendations would become law. The board would exempt decisions affecting hospitals and other provider groups until 2020, but the Congressional Budget Office estimates that IPAB still could hold down Medicare spending by $15.5 billion between 2015 and 2019, according to a new report from Stephen Zuckerman of the Urban Institute.”
A good start to be sure, but just a start. And note that we’ve still got to wait ten years before IPAB can address hospital costs, ten years that will likely produce significant inflation driven by technology, utilization, and price increases. We’re already seeing hospitals successfully thwart the new severity-adusted DRGs through more sophisticated coding…
Instead, we should move up IPAB’s effective date by at least a year, and ideally two for physicians and perhaps seven years for facilities.
If we are serious about deficits, then let’s get serious. What the new Congress does about IPAB will tell us a lot about whether it will live up to the oft-voiced commitment to reduce government spending.
What does this mean for you?
Watch what Congress does about physician payment reform. If this isn’t addressed in a meaningful, comprehensive, and sustainable way than there’s little chance Medicare costs will be controlled until IPAB goes into effect.

The recession, coupled with increasingly unaffordable health insurance premiums, pushed the number of those without insurance for some part of 2009 over the fifty-nine million mark.
Here are a few relevant findings from a new CDC report:
– the number of uninsured has increased by over a million for each of the last few years
– 40% of the uninsured had at least one chronic condition such as diabetes, hypertension or asthma
– those with a chronic condition were more likely than insured people to go without necessary care
– 50 million were adults, the rest dependents
– One-third of middle-income adults weren’t covered for some part of the year. Fully half of the increase in the uninsured were middle income adults.
– for those fortunate enough to have coverage, 26.6% of those under age 65 years were enrolled in a high deductible health plan (HDHP); past research indicates many of them didn’t have enough funds set aside to cover their deductible.
For all of its warts, the Affordable Care Act will dramatically reduce the number of uninsured, covering an additional 32 million Americans.
One can – and some loyal readers certainly will – argue that this somehow ‘overstates’ the problem of uninsurance as it includes people who went without insurance for only a few days or weeks. In reality, the data show 33.9 million Americans had been without insurance for more than a year at the time of the interview – over eleven percent of the population.
Which raises a very difficult question. If the new Congress is looking to ‘repeal and replace’ the ACA, what replacement will stem the rising tide of uninsurance?
Anyone??