New York Times Article about Health Care Insurance Scams

[leopardprintz]

http://select.nytimes.com/2007/02/16/op ... ugman.html
THE NEW YORK TIMES
February 16, 2007
Op-Ed Columnist
The Health Care Racket
By PAUL KRUGMAN

Is the health insurance business a racket? Yes, literally - or so
say two
New York hospitals, which have filed a racketeering lawsuit against
UnitedHealth Group and several of its affiliates.
I don't know how the case will turn out. But whatever happens in
court, the
lawsuit illustrates perfectly the dysfunctional nature of our health
insurance system, a system in which resources that could have been
used to
pay for medical care are instead wasted in a zero-sum struggle over
who ends
up with the bill.

The two hospitals accuse UnitedHealth of operating a "rogue business
plan"
designed to avoid paying clients' medical bills. For example, the
suit
alleges that patients were falsely told that Flushing Hospital
was "not a
network provider" so UnitedHealth did not pay the full network rate.
UnitedHealth has already settled charges of misleading clients about
providers' status brought by New York's attorney general: the
company paid
restitution to plan members, while attributing the problem to
computer
errors.

The legal outcome will presumably turn on whether there was
deception as
well as denial - on whether it can be proved that UnitedHealth
deliberately
misled plan members. But it's a fact that insurers spend a lot of
money
looking for ways to reject insurance claims. And health care
providers, in
turn, spend billions on "denial management," employing specialist
firms -
including Ingenix, a subsidiary of, yes, UnitedHealth - to fight the
insurers.

So it's an arms race between insurers, who deploy software and
manpower
trying to find claims they can reject, and doctors and hospitals,
who deploy
their own forces in an effort to outsmart or challenge the insurers.
And the
cost of this arms race ends up being borne by the public, in the
form of
higher health care prices and higher insurance premiums.

Of course, rejecting claims is a clumsy way to deny coverage. The
best way
for an insurer to avoid paying medical bills is to avoid selling
insurance
to people who really need it. An insurance company can accomplish
this in
two ways, through marketing that targets the healthy, and through
underwriting: rejecting the sick or charging them higher premiums.

Like denial management, however, marketing and underwriting cost a
lot of
money. McKinsey & Company, the consulting firm, recently released an
important report dissecting the reasons America spends so much more
on
health care than other wealthy nations. One major factor is that we
spend
$98 billion a year in excess administrative costs, with more than
half of
the total accounted for by marketing and underwriting - costs that
don't
exist in single-payer systems.

And this is just part of the story. McKinsey's estimate of excess
administrative costs counts only the costs of insurers. It doesn't,
as the
report concedes, include other "important consequences of the
multipayor
system," like the extra costs imposed on providers. The sums doctors
pay to
denial management specialists are just one example.

Incidentally, while insurers are very good at saying no to doctors,
hospitals and patients, they're not very good at saying no to more
powerful
players. Drug companies, in particular, charge much higher prices in
the
United States than they do in countries like Canada, where the
government
health care system does the bargaining. McKinsey estimates that the
United
States pays $66 billion a year in excess drug costs, and overpays for
medical devices like knee and hip implants, too.

To put these numbers in perspective: McKinsey estimates the cost of
providing full medical care to all of America's uninsured at $77
billion a
year. Either eliminating the excess administrative costs of private
health
insurers, or paying what the rest of the world pays for drugs and
medical
devices, would by itself more or less pay the cost of covering all
the
uninsured. And that doesn't count the many other costs imposed by the
fragmentation of our health care system.

Which brings us back to the racketeering lawsuit. If UnitedHealth
can be
shown to have broken the law - and let's just say that this company,
which
is America's second-largest health insurer, has a reputation for
playing
even rougher than its competitors - by all means, let's see justice
done.
But the larger problem isn't the behavior of any individual company.
It's
the ugly incentives provided by a system in which giving care is
punished,
while denying it is rewarded.

Copyright 2007

The New York Times Company