Off Just a Tad . . .

ACO's (Affordable Care Organizations) are one way Obamacrap hopes to reign in the cost of health care. The other ways are paying doctors, hospitals and drug manufacturers less than they pay now, reducing funding for Medicare Advantage plans and increasing risk sharing for Medicare beneficiaries.

But we have looked at ACO's before and on the surface at least, they seem to have some merit.

Some . . . merit . . .

A press release from the AHA (American Hospital Association) seems to indicate that CMS (Center for Medicare Services) might have stubbed their toe.

The study found that the costs of the necessary elements to successfully manage the care of a defined population is considerably higher – $11.6 to $26.1 million – than the $1.8 million estimated by the Centers for Medicare & Medicaid Services (CMS) in its proposed rule for start-up and one year of ongoing operations.

Misses the mark by a factor of roughly 10x. That stretches the limit of the old saw "close enough for government work". These figures are not even in the same universe.

The information gathered from four case studies was used to create two hypothetical examples to estimate the start-up and ongoing costs of establishing an ACO. The first represents a single free-standing hospital, 80 primary care physicians and 250 specialists. The second example includes a five-hospital (1200 bed) system, 250 primary care physicians and 500 specialists.

The study was prepared for the AHA by McManis Consulting of Greenwood Village, CO, and is based on a series of case studies of organizations that have already taken steps to manage the care of a defined population in a manner similar to that of an ACO.

So unlike the government, that likes to pull figures out of their butt, these numbers are based on real life situations where a type of ACO actually exists.

Fantasy vs. reality.

Reality wins.

Government Business Model

Find a high demand product. Make it easy to obtain and price it aggressively, below the market. If that fails, cut the price by 40%.

Yes, I know Hank posted on this a few days ago but reading this from ABC just drove home how incredibly stupid the folks in DC really are.

Not only will premiums be reduced by 40% in some states, but "people who would like to enroll in the program, the Pre-existing Condition Insurance Plan (PCIP), no longer need to provide a letter from an insurance company denying them coverage. Instead, they just need a letter from a doctor saying they have a medical condition."

How hard is it to get a rejection letter from a carrier if you really have a serious medical condition? I have referred people to PCIP and it took them all of 5 minutes to get a declination letter.

Since it began last summer, only 18,000 people have enrolled. The Congressional Budget Office estimated 200,000 people would sign up each year.

Michael Cannon, director of health policy studies for the libertarian Cato Institute, said the lack of enrollees shows that the program was never popular to begin with.

"They're giving away health insurance, and people don't want it," he said.

I beg to differ, but they are not "giving it away". If it were free (as most expected it would be) no doubt they would have hit their numbers and then some.

The problem is, even though you can buy a standard issue policy at rates less than what tobacco users pay for comparable plans, the participants are required to pay a premium that is more than $0.

Of course when it is free the problem won't be getting people in to the system it will be finding a way to pay for it while at the same time saving Medicare and paying off our friendly Chinese bankers.

Down to the last penny?

Health Care Reform legislation mandated temporary federal assistance to medical benefit plan sponsors toward the cost of their early retiree (i.e., pre-Medicare) benefits. Congress appropriated $5 billion of taxpayer money to fund this mandate, called the early retiree reinsurance program (ERRP). In the legislation ERRP was set to end no later than January 1, 2014 when the main provisions of health care reform kick in - - and thus is temporary.

It now appears ERRP is even more temporary than Congress imagined.

The Department of Health and Human Services released this report on ERRP May 13, 2011. [look under "Recent Changes"] The report shows that ERRP payments for requests submitted through March 31 and paid thru May 3 totaled almost $2.5 billion, or nearly half the total appropriation.

HHS notes in their report that, “due to the significant response among the employer community, the program ceased accepting applications on May 6, 2011.” Significant reponse is an understatement. But, remember, it was supposed to be temporary.

As it turns out - - very temporary.

Considering applications received after March 31 that are not yet reflected in the total ERRP payments, it’s clear that the money is running out much sooner than expected. It’s even possible plan sponsors whose applications were approved after March 31 will not be reimbursed for the full amount of their 2011 eligible expenses. And as for 2012, 2013? - - fugheddabouditt !

The HHS report lists the benefit plan sponsors that have received ERRP payments, and the amounts paid. There are 1,748 plan sponsors on the list. Of these, 16 (fewer than 1%) received a total of just over $1 billion (42% of all the payments). These 16 plan sponsors include 5 corporate plans (e.g., AT & T, Verizon) which were paid about $301 million; 2 union benefit trusts paid about $246 million; and 9 State employee retirement systems (e.g., Ohio, Kentucky) paid $485 million. The largest single recipient is the United Auto Workers Retiree Medical Benefits Trust which, according to the HHS report, was paid $220,717,012.70.

Your tax dollars at work - - right down to the last penny.

On the other hand, ERRP is a metaphor for the health reform legislation of which it is a part: big on promise, inadequate on delivery, and grossly unprepared for the actual demand.

Fraudulent Carrier Tricks: UHC and Medco

Fraud: A false representation of a matter of fact—whether by words or by conduct, by false or misleading allegations, or by concealment of what should have been disclosed—that deceives and is intended to deceive another so that the individual will act upon it to her or his legal injury. [emphasis added]

People wonder why health insurance carriers are held in such low esteem.

It's pretty simple: when you pull idiotic stunts like this, you will get bit in the behind.

We're all for consumer-driven healthcare, which means that we take seriously the idea that we should exercise good judgment when purchasing said care. My co-worker takes a certain medication which has gotten rather pricey, and United HealthCare recommended that she switch to the lower cost generic equivalent. Like many carriers, UHC outsources its prescription medication function to a Pharmacy Benefits Manager (PBM); in this case, that's Medco.

My co-worker saw the wisdom in this course of action, and went online to get pricing for the new medication. The Medco site specifically told her that it would be $33.12 for a 90 day supply (this in contrast to the $132 brand-name version). Since this represented a great savings (and since we're covered under a high deductible HSA plan), she immediately pulled the trigger for the $33 generic.

Imagine her surprise when, the next day, her credit card was charged for $153 - a 450% increase.

Is this fraud?

Well, look at the definition above, and draw your own conclusion.

My co-worker then spent quite a bit if time on the phone with the Customer NOservice folks, who assured her that they'd "look into it," and that she should call them back in 72 hours.

I had a better idea:

I contacted our service rep, explained the problem, and provided documentation. I also informed her that I needed resolution by 9:00 AM the following day. She did call me back, and told me that she had been told that the pricing my co-worker had been given (based on our plan and group number) was available only after she had met her deductible. Unfortunately for UHC/Medco, not only was none of this disclosed on the site, but clicking on the link "How is my cost determined" actually confirmed the $33.12 price tag, putting the lie to UHC/Medco's little dodge.

I had originally given UHC/Medco until 9:00 AM yesterday (June 2nd) to resolve this problem. Because I'm basically a fair guy, I decided to extend that by 24 hours.

Which has now come and gone.

And so:

First, this post alerting our readers that UHC and Medco seem to have no compunctions about bait-and-switch when dealing with med's, nor are they forthcoming with details as to how rx claims are adjudicated. This makes it impossible for insureds to budget, or to make informed decisions.

Next, I'll be calling the Ohio Attorney General, to report this apparent case of fraud.

Finally, I'll be calling my CongressCritter, and suggesting that this may represent a much bigger number of victims than just my co-worker.

Now you may ask: "Henry, why so serious?"

And here's my answer: I spend a lot of time and energy explaining to people why a gummint-run health care system is so much worse than one run by private industry. But this is no better than the stunts pulled by the MVNHS©. So tell me again why our system's better?

Update: RESOLVED!

Stoli (with a) Twist

As we continue to follow the strange case of the Life Partners debacle, Bob tipped me to this related item:

"Gilbert Eastin’s finances have fallen steeply from 2008, when the West Bloomfield man’s net worth was estimated at more than $2.5 billion ... Eastin, 82, is being sued for more than $2 million in U.S. District Court in Detroit, accused of inflating his net worth to obtain millions of dollars in life insurance."

His (alleged) mark? John Hancock Life, which was somehow persuaded to approve $50 million in coverage.

$50 Million??

One can only imagine the medical exam for that much insurance.

As we saw with the LP fiasco, this appears to be a growing, if not already widespread, problem:

"Insurance industry experts say the allegations appear to match a pattern of fraud emerging nationwide. Senior citizens are recruited to inflate their net worth ... and then transfer the policies to investors in exchange for money."

On the one hand, I still maintain that a legitimately purchased life insurance policy is the same as property (that is, the owner is free to dispose of it as he or she sees fit). The problem, of course, is that these policies are, in fact, fraudulently purchased, and enjoy no such latitude.

The alleged "victim" here earns The World's Smallest Violin:

"Eastin now admits he's no billionaire ... The retired Chrysler plant supervisor says he's a victim of shadowy businessmen from New York."

Of course, of course.

"Crooks will do a lot of things to develop a patsy," says the perp, er, "victim."

But he was the one who completed the application, took the exam, and presented whatever false documentation was necessary to "perpetrate the fraud" in the first place.

All he had to say was "no."

Here's a first: Fire Sale on Health Insurance

Last we checked, the goofy ObamaPool© program had few takers, and the new numbers aren't encouraging; only "about 18,000 people nationwide have enrolled in the plan over the past year."

Keep in mind, the Congressional Budget Office had estimated that something like 4 million Americans would qualify for the program. That's a response rate of less than one-half of one percent.

Ouch.

So the program's a bust, even though it offers immediate coverage for pre-existing conditions (even maternity!) at extremely competitive rates. A normal, profit-driven insurer would take stock, examine the marketplace, and immediately close it down.

But this is ObamaCare©, so the gummint's response would be?

Of course:

"The federal government said Tuesday that it will slash premiums by 40 percent to entice more Arizonans to join a high-risk insurance plan for people with pre-existing medical conditions." [emphasis added]

Rest assured, the Grand Canyon State won't be the only one to reap the benefits; with the $5 billion initial seed money already on the table, the other 56 states won't be far behind in demanding their fair share of the premium reduction bonanza.

The good news, such as it is, is the the Federales may be onto something with this wrinkle:

"In addition to reducing premiums and making it easier for people to enroll, the federal government will expand its outreach to the business community ... Sayen said Medicare officials this fall plan to reach out to insurance brokers ... to reach more potential customers."

Gee, where have we heard this idea before?

The catch?

"He said it is too early to tell what type of commission may be available to insurance brokers."

More rocket-surgery from Washington.

Cavalcade of Risk #132: 5th Anniversary Edition

Russell Hutchinson hosts this very special, 5th Anniversary Cavalcade of Risk. And he does it with style, panache and some helpful graphics. Please check it out.

And please drop us a line if you'd like to try your hand at hosting. It's fun, easy and a nice traffic bump.