Health Insurance Windfall

by Del Meyer, MD

Vanessa Fuhrmans reports in The Wall Street Journal: “Last year, the top seven U.S. health insurers earned a combined $10 billion -- nearly triple their profits of five years earlier. The windfall came as insurers raised their prices faster than underlying health costs. Now the good times may be rolling to a halt. Health insurance has become so expensive that many smaller employers are dumping insurance altogether. If insurers don't do something, they may find their business shriveling. Yet if they restrain price increases, or appear to, they get hammered by Wall Street. . .

“Robert Laszewski, a Washington-based health care consultant and former insurance executive, says the insurers' strategy can work for only so long before their employer customer base dwindles dangerously. 'Where is this industry in four, five years if it can't control health care costs?’ he asks. ‘It's on a long walk off of a short pier.’”

The Pier is Getting Longer
Meanwhile Scott W. Atlas reports in The Washington Times: “As politicians and bureaucrats debate the role of government in our health care system, and as concerns by U.S. citizens and employers about rising health care costs and lack of control and satisfaction are raised, millions of American health-care consumers -- without big-government mandates -- are taking control of their health care dollar and bringing about changes in the health insurance marketplace.

“The latest data from the leading nationwide online marketplace for health insurance,, reveal the success of patient empowerment when choice and price transparency are offered and when competitive markets are allowed to operate in response to consumer demand. High-deductible health insurance plans (HDHPs) eligible for Health Savings Accounts (HSAs), are attractive because they shift authority and control of the health care dollar to the patient, eliminate the administrative burden from small claims and reintroduce the patient as the customer -- all positive steps toward improving our health care system…

“More than 40% of 2005 purchasers were uninsured before buying their new plan, and almost 60% were less than 40 years of age… Also striking is that nearly half of the purchasers of these insurance plans in 2005 had annual incomes of less than $50,000 a year.”

The Administrator as a Patient -- Why Standard Health Insurance Doesn’t Work
During the recent World Health Care Congress, a senior administrator, who now has high-deductible health insurance, relayed her experience with patient-driven health care. After she left her gynecologist's office and was about to start her car, she looked at the laboratory tests that her physician had ordered. She noted that the tests were nearly the same as her internist had obtained the previous month. She returned to the office and explained this to the receptionist. She was told to have the lab results forwarded to the gynecologist's office and that would certainly be acceptable.

She commented that, in the past, she would not have paid much attention to what was ordered since her previous insurance company paid the bill and increased her insurance premiums every year or so. Now that she had a $2,000 deductible on her policy that she paid out of her own pocket, it became important for her to manage her costs.

It is important to note that, in this instance, consumer- or patient-driven health care cut the laboratory costs by 50%, a huge savings not appreciated or accepted by those who want government control of health care. But government cannot control costs; in all countries with government health care, costs are controlled by denial of access and prolonged waiting lists. Even this has not been effective in reducing costs in any system of health care while ensuring high quality of care. Despite the Institute of Medicine focusing on errors, the United States not only has the highest quality of care, the least number of medical errors, but also the most sophisticated health care on the globe. But are there excesses we can cut?

From the Consultation Room
The FDA may require a pharmaceutical house to include a statement in the brochure that a drug needs careful monitoring, e.g., liver-function tests every three months. A large number of drugs have a one- to six-percent toxic effect on the liver. Isoniazide was used for millions of people with tuberculosis when several patients developed hepatic side effects. Some could be rather serious, such as fulminate hepatic necrosis. Liver-function tests were then suggested/required when starting a patient on INH (Isoniazide).

The monitoring revealed that a large number of patients developed elevated liver enzymes. It was also found that, in many cases, the enzymes increased to two or three times normal—not a hundred times normal as in hepatitis. A few brave souls decided the benefits exceeded these risks and continued the INH cautiously. They found that liver enzymes did not increase further.

Hence, a lot of TB patients who would have been taken off of the drug were continued on treatment. Health care improved by controlling a major global killer. In most instances, if the new drug has significant liver toxicity, it will show up in the first few months. If it doesn’t, it is generally safe to continue it with an appropriate caution to the patient to stop the drug if nausea or vomiting occur unexpectedly. Follow-up monitoring becomes the physician's clinical judgment call.

We see patients daily from reputable practices and institutions who are on drugs and have not undergone monitoring for liver function for five or more years after the initial check. This would be about $100 for a liver screen. At the other extreme, we have patients who read the drug company’s entire circular stating that liver-function tests are necessary every three months. I recently had one of those patients.

She had been on Lovastatin for about five years. Her previous physician had monitored her liver function every three months. The record reflected about 20 normal liver-function tests. At a monitoring cost of about $100 per liver-function screen, this patient had a monitoring cost of about $2,000. That is a 20-fold, or 2,000%, increase in health care costs. If we estimate that there are 10 million or more people on statin drugs, that is an extra $20 billion in health care costs. The Council for Affordable Health Insurance states, “Our study suggests that perhaps a third of medical spending is now devoted to services that don’t appear to improve health or the quality of care–and may even make things worse."

What is the Answer?
The pharmaceutical companies will not bear the wrath of the FDA by reducing their recommendations, which they admit informally are excessive. They think, “Why should we take the risk?” Likewise, the doctor is hesitant to instill common sense; many say the same thing: “Why should I take the risk?” The health insurance companies will not dare to exclude this excessive laboratory tests for fear of adverse publicity. The groups writing the rules for the highest quality of care at the Institute of Medicine will certainly not be caught recommending anything less than a liver screen as often as necessary to make sure no one is at risk.

So the answer returns to the patient who must have a financial incentive or risk by paying for excessive health care. The only solution is a percentage co-payment by the patient. A $10 or $20 co-payment will not alter the $2,000 monitoring cost in the patient last week. Only a 20 or 30% co-payment will instill responsible behavior in the patient. No one else in the medical hierarchy can possibly achieve this avoidance of unnecessary medical costs.

Putting the patient financially in charge and responsible will eliminate excessive health care costs immediately without further effort on anyone's part.