http://www.boston.com/business/healthcare/articles/2011/01/25/tufts_harvard_pilgrim_explore_merger/?page=fullHarvard Pilgrim Health Care and Tufts Health Plan are close to signing a memorandum of understanding that would combine their operations in four New England states and make them a stronger competitor to the market leader, Blue Cross Blue Shield of Massachusetts, in their home state. (Update: the memorandum of understanding was signed today.)
Consumer advocates said it is unclear how the insurers? subscribers might be affected by the union, which would leave Massachusetts with only two major health companies.
"There has been tremendous value in having three strong locally based health plans in terms of choices for consumers," said Nancy C. Turnbull, associate dean at the Harvard School of Public Health and a former deputy insurance commissioner. "But on the other hand, this could create a consolidated plan that could create a stronger competitor to Blue Cross and it could create a plan that has stronger leverage than either of them individually in negotiating with providers."
Partly in reaction to the pressure to switch from fee-for-service to global payments, several Massachusetts hospitals have combined operations, while others say they are seeking buyers.
Comment by Don McCanne of PNHP: Choice. Wasn't that the clarion call during the campaign for health care reform? We could have our choice of keeping the health plan we have, or choosing from a market of plans in the health insurance exchanges. Since Massachusetts had a head start in establishing the model of reform selected for the nation, let's see what choice has meant to them.
Has health plan competition in the marketplace kept Massachusetts' health care costs under control? No. They have the highest health care costs in the nation, and costs continue to rise.
Well that didn't work. So now Massachusetts has begun the process of reducing the competition to two major health plans. That creates an oligopoly, which suppresses competition. Out with the market theory that competition reduces prices. In with the market theory that concentration provides the health plans with leverage to extract greater price concessions from the providers of health care. Of course, choice is a casualty of concentrated markets.
How do the providers fight back? Hospitals are already merging, in an effort to establish market dominance. Physicians are evaluating the concept of accountable care organizations (ACOs) as called for in the Patient Protection and Affordable care Act. Although the intent of the law is that ACOs would control costs (after all, they're supposed to be accountable),
physicians and their health provider partners will certainly use them toleverage their end of price negotiations (i.e., fight for higher prices, not lower).
Fundamental to competition is that when you have winners, you must have losers. That might be appropriate in sporting events, but it is an ethical breach to establish a health care financing system that automatically moves a significant portion of our health care providers into the column of losers. We need a financing system that makes patients winners by providing them access to a health care delivery system that strives for optimal care through cooperation, rather than competition.
That is partly what a single payer system is all about. Using global budgeting and negotiation, the public administrator works with the providers - all providers - to pay legitimate costs and provide fair margins.
Under such a system, competition becomes moot. Eliminating private health plans obviously eliminates health plan competition. If consolidation of health providers improves efficiency, quality and access, then there is no reason to be concerned about a lack of competition there either. Even without consolidation, appropriately compensated providers still can fully
engage themselves in serving their patients, unencumbered with the distraction of having to compete.
My comment: Health care economics is like fire department economics--competition increases costs.
My employer used to offer three health care plan options—Cigna, Premera and Group Health. They just cancelled all but Premera. So much for “choice” and “competition.” The reason why they eliminated choice ought to be obvious—by giving Premera a much larger captive risk pool, they likely got a much lower per capita price for the insurance. Eliminating choice and competition is saving them a lot of money. And now Vanna, tell our contestants what they will win if they correctly answer the grand prize question “What is the biggest and cheapest possible risk pool of all?”
The answer is obvious—the entire population of the country. Large risk pools that reduce choice are cheaper by nature, which is why health care risk sharing trends toward being a natural monopoly, like the provision of electrical power. And any natural monopoly which is not either owned by or regulated by the public will inevitably screw consumers big time just because they can.
The last time a big state gave in to the ridiculous argument that deregulation, fragmentation and “choice” was the answer to reducing energy prices, we had Enron and Reliant withholding power from the California market to jack up prices, causing a major energy “crisis.” Few in the mainstream media noise machine bothered to point out that none of the cities with municipally owned utilities had any “brownouts.”
Creating as many small risk pools as possible is NOT the way to hold down health care costs. The reality is that all private health insurance, whether for profit or non-profit, currently operates on the Enron/Reliant business model, and current health “reform” offers nothing but throwing our tax dollars at Enron/Reliant and asking them to pretty please not charge members of the public as much. Data for calculatiing medical loss ratios comes from insurance companies, obviously.
It is a general economic principle that competition in the area of what should be public goods does nothing but drive costs skyrocketing upwards. If you aren’t familiar with the studies demonstrating that communities of similar size with more than one hospital have health care costs that are much higher than those communities with only one hospital, you could at least apply basic common sense to the issue.
If Seattle had three competing for-profit fire departments, fire protection costs would rise dramatically, as the public would have to pay capital and operating costs for three duplicate sets of equipment. If a new hospital opens in a town with one hospital, the public is not going to obligingly start to have more heart attacks. Both hospitals will have fewer patients per item of capital equipment, and will dramatically raise prices to compensate.
It is certainly possible to approach universal health care gradually, but only if there is a government-run program for a risk pool that is large enough. A public option that anyone could join would have worked, given that about 60% of the population wants government-paid health care. So would gradual Medicare expansion, assuming that the problem of geographic inequities in reimbursement rates would be addressed. Of course insurance companies successfully shot down both of those things on the grounds that they could lead to single payer, which is why our bought and paid for representatives eliminated even extremely watered down and restricted versions of these two options, as well as government-negotiated drug prices and drug reimportation.
Therefore the issue is not gradual vs. immediate implementation of public control of health care costs; it is how long the public is going to tolerate Enron-style abuse of a pricing monopoly.
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