Blue Shield of California CEO on single payer
The Orange County Register
March 30, 2005
‘Vicious cycle’ of care
By Bernard J. Wolfson
Bruce G. Bodaken, the chief executive of Blue Shield of California… warned that the state’s private-sector health-care market is in deep trouble and could implode unless all the players collaborate to provide coverage for the uninsured and reduce costs that are sending premiums skyward.
Without action to overcome the problems of cost and access, Bodaken warned, “the market will get to the point where the balance of power will move from the private market to the halls of government. And when that happens, it’s hard to know what the solution coming out the door will look like.”
He warned that one possible solution “always out there,” especially in California, is a single-payer, or government-run, system - a notion that is anathema to the insurance and underwriting industries.
State Sen. Sheila Kuehl, D-Santa Monica, has introduced a single-payer bill, which Bodaken said had little chance of making it through the Legislature and past Gov. Arnold Schwarzenegger. But it could return in a few years as a ballot initiative, which might have a better chance of passing, he said.
Bodaken was the first major insurance-industry leader to propose universal health coverage, and he reiterated his support for it, though a different version of it was narrowly defeated by voters last December. In his plan, individuals who could afford insurance would be required to buy it; employers would also pay their fair share; and the government would provide a safety net for those who couldn’t pay.
Q: You’re opposed to a single-payer system, yet isn’t Medicare really just a single-payer system for part of the population? Do you oppose that single-payer system too?
A: The one that already exists is merely a financial mechanism for redistributing tax dollars from individuals and employers back to (medical)providers. That’s not what’s envisioned by most single-payer advocates. Typically, it’s a much more interventionist type of oversight in terms of benefit design and reimbursement. If you look at the details in Kuehl’s bill, there are government agencies and quasi-government agencies that are setting benefits.
Q: So, what’s wrong with government intervention in health care?
A: It’s inefficient.
Q: But Medicare has lower administrative costs than private-sector health plans, doesn’t it?
A: If you look at Medicare administrative costs and private plans, it’s an apples to oranges comparison. Medicare doesn’t do nearly what private plans do in terms of managing care and building systems of interface with patients, providers and (health-plan) members.
Q: What about expanding Medicare to a wider group of people. Would that
A: A lot of people have talked about expanding Medicare to the general population. We’re not doctrinaire about how to solve the problem of the uninsured. I don’t support Medicare for everybody, but what if the Medicare age went down to 60, with the view that individuals would pick up a lot of the costs?
Q: One of your big objections to single-payer plans is that their proponents often do not acknowledge the need for taxes to pay for it. What if they were completely upfront in advocating tax increases?
A: It seems to me that those tax dollars could be used a lot more efficiently to cover people in the private market. But we’re on the record as saying that if we want to get everyone covered, there’s going to have to be some sort of tax increase or revenue increase. It’s not realistic to think you’re going to cover 45 million uninsured Americans for free. It would be som sort of sales tax or payroll tax.
Q: So you do support quite a bit of government involvement in health care in your plan. You seem a bit like a Swedish socialist.
A: The system closest to what we’ve described is probably the German program, which is a universal, publicly funded program but privately provided.
Q: In your luncheon speech, you mentioned a bare-bones insurance package, costing about $50 a month that would help address the uninsured problem. Could you elaborate?
A: There may be incremental steps that make sense and get us part of the way there.
Q: What would such a plan include?
A: Approximately six physician visits, three hospital days, and generic drug coverage with a limit. Those would be the main elements. You’d obviously burn through that very quickly if you had a chronic illness, but it would cover about 90 percent of what the uninsured need.
Q: You talked about all the complexity in health benefits, and how even you had trouble following it. Could you repeat that?
A: I enrolled in a product we call Active Choice - Blue Shield Active Choice. It has $750 of first-dollar coverage, before you hit your deductible. But only certain things apply toward that coverage, and I was not very well educated on what counts and what doesn’t. I’m no different than anybody else: I didn’t look at my information until I had the (prescription), and that’s when I found out that some of it applied and some of it didn’t. I’m not proud of it, but it’s the reality. So I understand when people say they’re confused.
Comment: Bruce Bodaken, CEO of Blue Shield of California, like single payer advocates, acknowledges the fact that, in order to achieve the important goal of universal coverage, the government must play a role and financial support must be provided through the tax system. The primary disagreement is that he believes funding should be through both public programs and private plans, whereas single payer advocates believe that we should have only one universal, publicly administered program. So how strong is his case for leaving private plans in place?
From his comments, it is quite clear that he believes that the current approach is unstable, and without intervention the private plans will be replaced with a government system, most logically a single payer system.
Wading through his anti-government rhetoric, this is clearly a concession that a single payer system would be more capable than our current fragmented system of providing both universal coverage and affordability, not to mention the establishment of an equitable system of funding care.
In support of the role of private plans, he dismisses Medicare as “inefficient” in spite of the much lower administrative costs. He suggests that private plans are providing a benefit for their non-medical spending in the form of “managing care and building systems of interface.” But most health care consumers would find little health care value in these wasteful administrative interventions that diminish choice of health care providers.
Although Mr. Bodaken touts his bare bones policy that covers a maximum of six physician visits and three days in the hospital, it’s quite clear that such coverage would result in an unbearable financial burden for the 20% of people who consume 80% of health care. And what healthy individual can predict that he/she will not become one of the 20%? Since private plans are stripping
benefits to make insurance premiums more competitive, they are losing their function of preventing financial hardship in the face of medical loss.
Perhaps Mr. Bodaken’s strongest argument that should make everyone question the future role of private plans is his own personal experience with his own plan from his own company. Although high-deductible private plans are being touted by some as the be-all and end-all of health care coverage, he says that he “has $750 of first-dollar coverage, before you hit your deductible.
But only certain things apply toward that coverage, and I was not very well educated on what counts and what doesn’t. I’m no different than anybody else.”
Do you suppose that Mr. Bodaken might be a closet single payer supporter held captive as a CEO in the corporate insurance world?
Message 2: The fiction of health plan competition
American Medical News
April 4, 2005.
Health plans’ dominance: More muscle in more markets
… in the four years the AMA has released its annual report, “Competition in Health Insurance: A Comprehensive Study of U.S. Markets,” health plan market concentration has continually grown worse, as measured by the Dept. of Justice’s own scale.
Of the 92 metropolitan areas in 21 states studied, 93%, or 86, would be considered “highly concentrated” HMO/PPO markets using Justice Dept. Guidelines, according to the 2004 version of the report, released in February. Of the 27 other states where reliable metropolitan-level data were not available, the result was the same — 93%, or 25, of those states would be considered “highly concentrated” in the HMO/PPO market.
For PPOs alone, the metropolitan and state data reveal that fully 100% of them would be considered “highly concentrated.” That’s a first for the AMA study.
Keep in mind that these numbers are only as of Jan. 1, 2003. They don’t even take into account last year’s multibillion-dollar health plan megamergers: Anthem and WellPoint Health Networks, and UnitedHealth Group and Oxford Health Plans. But they do reflect the bulk of the 400 mergers between 1995 and 2003 involving health insurers and managed care organizations, few of which drew substantial Justice Dept. scrutiny.
Comment: Let’s see. Why is it that we continue to insist that private plans instead of a government program be used to fund health care?
Is it because the private sector is so much more efficient than government bureaucracies? This doesn’t seem to be the reason since private plans utilize a much greater percentage of funds in providing administrative services, not to mention the profound administrative burden that their fragmented system places on the health care delivery system. So it’s not the efficiency of the private marketplace.
Could it be that a multitude of private plans provides us with greater choice? By choice, most of us mean choice of our health care professionals and hospitals. But most private plans limit our choice and assess severe financial penalties for failing to use their preselected choices. Since a government program does allow free choice, this can’t be the reason for preferring private plans.
So why should we prefer private plans? The reason most often given is that a multitude of private plans provides competition within the health care marketplace, and competition is key to providing greater health care value. By health care value, we mean higher quality and lower prices, the magic of Adam Smith’s “invisible hand” of free markets.
But what do we have? Mediocrity for most of us, and skyrocketing health care prices. And a shift of insurance risk from the insurers to the patients. And a system that threatens average Americans with bankruptcy should they have the misfortune of developing major medical problems. (Then what is the purpose of insurance?)
Now we find that, by Justice Department guidelines, 93% of HMO/PPO markets and 100% of PPO markets are “highly concentrated.” So much for competition!
If we leave the plans in place, what options do we have? Everyone agrees that the status quo will never do since costs are skyrocketing, access is diminishing, and quality is not improving.
Should we relax regulatory oversight to allow the markets to work more effectively? We have already proven that the plans will sell to the healthy and dump the sick. That’s appropriate behavior for a business in the marketplace, but shouldn’t our policies address those who do have health care needs? Why even have an industry that caters to those who don’t need it, but neglects those who do?
Should we instead increase regulatory oversight through innumerable policies that would require plans to provide equitable financial security for everyone with significant health care needs? Once you have done that, you would have created a de facto single payer system in which the health plans would transform into vendors contracted to provide only the administrative services that we actually do need for health care financing. Instead of introducing profound regulatory complexities that would always be skirted by the industry, wouldn’t it be simpler to establish our own single payer system?
Unfortunately, it appears that the invisible hand of the health care marketplace is wearing a rectal glove.