Matt Modleski on Healthcare Reform, Part II

OurBlook interview with Matt Modleski

Editor's Note: Matt is vice president of Stovall Grainger Modleski, Inc., health care consultants … and he did a fine Q&A with us the first time around on issues in health care reform legislation. Now he's back for an encore on incentivized insurance.

Prelude: At Stovall Grainger Modleski, we teach the Evolution of Health Care as part of a strategy course. Before one can distill a position of competitive advantage, he/she must know the terrain in which they compete. One of the things really missing from the discussion in health care reform today is a complete understanding of how we got to where we are today and how the paradigms of all the stakeholders were built over the course of 40-plus years (modern insurance era). Without that context, it will be impossible to bring America together for meaningful reform because every part of the system is broken in some way. The Auto Insurance Model is a direct attempt to reform the “demand” (pull) side of health care and it absolutely must be reformed. The other side which must be reformed is the “supply” (push) side of health care which will involve reforming the care delivery models in conjunction with the reimbursement system. We’ll leave that for another day.

Auto insurance goes up or down depending on your behavior ... down if no accidents, up if you have one. But most health insurance stays the same no matter what you do. Would it be a good idea to promote the use of incentivized health insurance plans that promote preventive medicine (i.e., individuals are rewarded for good behavior, penalized for bad)?

MM: It would absolutely be a great idea to use car insurance as a model to discuss health care reform because in that area of our lives, we use insurance as it is meant to be used, to fix “big problems.” We don’t use car insurance for new brakes or tires, nor do we use it to put gas in our tanks. Can you imagine what would happen to oil consumption through the use of our automobiles if “someone else paid” for our gasoline with car insurance? In a nutshell, that’s what we’ve done with health insurance. Instead of using it to “fix us after a crash,” we’ve come to expect (through the Evolution of Health Care) that insurance should “put gas in our tank,” too. In America, if we would like to retain options and make our own choices for care, we need to be educated on the real costs of treatment choices, incentivized to make value-based decisions, and we need to treat health insurance like car insurance. Anything other than that means someone else will be making these decisions for you.

What would be the disadvantages?

MM: First of all, it is the only true way to control the consumption of health care while retaining choice in our system. People will not accept this fact unless they understand how we got to where we are today and can see the personal benefit (financially) to consuming health care as an educated consumer vs. an entitled beneficiary. This is the fundamental flaw with any public option. The disadvantage to treating health care insurance like auto insurance and linking rates to behavior is the fact that most people don’t know how broken the current system is, so they are unwilling to entertain a shift in accountability for their health. There is also the problem of how to determine true genetic disposition for certain conditions vs. poor behavior. Many people would want to claim genetic disposition for certain ailments (and some rightfully so) and so there would be difficulty in establishing rates based purely on behaviors. It is not an insurmountable problem, but it would be a challenge to be solved.

Would there be overall cost savings for the U.S. health care system? If so, should such plans become mandatory? Would there be any impact on the American culture?

MM: Yes, yes, and yes! The only way to truly curb the costs of health care is patient-based consumption changes. We all fill our tank with gas because someone else pays for all the gas we can use once we pay our “premium.” If we don’t educate and encourage the use of incentivized insurance, we will continue to run up huge costs. The current bills in Congress concede that and the writing is on the wall in terms of who will control consumption. It will be the government agencies that run the “Public Plan” (at last estimate, that will be 100,000 new federal employees). Americans don’t culturally like to be told what they can and cannot do. The true costs of health care have been hidden from them for more than 40 years. The question is really very simple, either we are going to curb our consumption of health care on our own or the government is going to do it for us. Either way, that’s a cultural change.

Could you give us an example or two of how it would work for an individual? While it's easy to reward good behavior, how tough is it to penalize bad?

MM: The first step and the one that’s being skipped is education on the problem, how we got here, and the choices to fix it. he key objective that no one wants to lay out there is we have to consume less care. The second step is to then design insurance plans that are more like auto policies in terms of benefits. The only thing the policy covers is my wellness efforts and my crashes; otherwise I buy tires, oil changes and gas on my own. I also fix my own engine if I choose not to change the oil and it blows up (the equivalent of having a bad lipid panel and choosing to eat fast food every day). It’s pretty easy to track basic blood panels (tests) and see how well people are modifying their behavior. When it’s made mandatory vs. voluntary is when the legal challenges seem to mount. I will also say I believe insurance companies need further regulation in terms of profitability and here’s my reasoning. Buying shares in a publicly held health insurance company is investing in an artificially safe place. If 50 percent of every dollar spent on health care is already a government (tax) dollar, then by definition the investment in an insurance company that benefits in that climate is more like a government bond, not a true free market stock. When I say regulation, I mean rules that protect how much money is spent on care and a cap on profits that aren’t shared with members covered by the plan. If the profits were shared with the members of the plan as well as the shareholders, we might need a lot less other regulation.

Are any major insurance companies or employers already doing this and if so, what are the results?

MM: Yes, Safeway is a self-insured employer that has done an outstanding job implementing many of the aspects of the things we’re discussing here (with their non-union employees) and with unbelievable results. Here’s the link to the WSJ article detailing their approach and success: http://online.wsj.com/article/SB124476804026308603.html

Is health insurance the major way to expand preventive health care or are there other methods? Have you found that people with health problems have to be forced to engage in good behavior?

MM: Wellness and preventative care do have to be forced in the current environment because there are no consequences for poor behavior in today’s system. The data I’ve looked at show that most Americans are more incented by financial incentives than true “health” incentives. Go back to the auto insurance model for a moment. Why don’t people drive their cars at 100 mph (OK, 85, just to take the safety issue off the table)? For the most part, they are afraid of the fines and subsequent insurance increases if they are caught. A poor lipid panel is “being caught speeding,” we just don’t have meaningful consequences.

Is there anything else you'd like to say about incentivized health insurance plans?

MM: Someone is going to control the consumption of health care in our country. It’s either going to be an educated population through meaningfully incented reforms of insurance, care delivery models and reimbursement models or it’s going to be done by the government. I hope we choose the first option. It all starts with understanding how we got to where we are today and identifying with real transparency a clear objective. We need real reform of both the supply and demand sides of health care. Thanks for focusing on the real issues in what would be a true reform of health care as we know it vs. a very different system altogether.

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Comments (1)

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written by ClubPenguinCheats, June 19, 2010

It will be the government agencies that run the “Public Plan” (at last estimate, that will be 100,000 new federal employees). Americans don’t culturally like to be told what they can and cannot do.

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