I love posts like this where they are a deep dive into a topic from an expert; I get to learn so much about the intricacies of a system that I don’t normally get exposure to. Every time I learn...
I love posts like this where they are a deep dive into a topic from an expert; I get to learn so much about the intricacies of a system that I don’t normally get exposure to.
Medicare Advantage (MA), the federal program in which patients’ Medicare benefits are turned over to a health plan, creating an arrangement known as capitation in which the health plan receives a fixed sum (adjusted for patient age and preexisting illnesses) to care for a patient, usually over a full year. Such arrangements give health plans a powerful incentive to minimize their expenditures.
Every time I learn more about the health care system in the U.S., the more I think there’s no reasonable way to structure fully private for-profit health insurance companies without creating perverse incentives.
I’m still open to private health insurance but I just think they should be non-profits with executive pay limit and legal requirements to put any extra money towards medical R&D, premium discounts, additional care, etc. The profit incentive just breaks everything.
I think that quote might simplify the situation a little too much. The profits for insurance plans are already regulated. Obamacare requires the "loss ratio" (the amount of premiums spent on...
I think that quote might simplify the situation a little too much. The profits for insurance plans are already regulated. Obamacare requires the "loss ratio" (the amount of premiums spent on medical care) for Medicare Advantage and larger insurance plans to be at least 85%. If they pay out less than that, the profits go to the government. So I imagine they'd try to get it to exactly 85%?
This doesn't mean they can't game it, but it's not as straightforward as paying out less on insurance. For example, a big health company could have one subsidiary that sells insurance and another that provides medical care, so they also earn profits from providing the care.
Also, if they keep costs down, they can advertise a lower premium and maybe get more customers. When I was shopping for insurance for my mother, there were some plans that had no cost to the consumer (it's all paid for by the government) and others that charge an extra amount per month. I'd hope that if they charge more you get better service somehow, but it seems impossible to tell from the outside.
I've said elsewhere that I have a personal animus towards UnitedHealth, so take this with whatever size grain of salt you deem appropriate. The massive UnitedHealth Group conglomerate includes an...
I've said elsewhere that I have a personal animus towards UnitedHealth, so take this with whatever size grain of salt you deem appropriate.
The massive UnitedHealth Group conglomerate includes an insurer (both private insurance and Medicare Advantage plans), pharmacy benefit management, a physician network, hospitals, home healthcare, diagnostic centers, a massive payment processor, its own IT consultancy, and more.
Up until Brian Johnson's murder, UnitedHealth was by far the most profitable of the similar integrated health systems. It could extract money throughout its subsidiaries, not just via the profit-limited insurance plans. The insurance arm was boasting a 32% claims denial rate, including the use of proprietary AI to deny in-patient rehabilitation care.
I won't link every source that's available to a cursory search for the numerous lawsuits, Federal violations, and criminal fraud claims.
As an example of the perverse incentives involved at every step of the process, UnitedHealth denies and delays care, and uses the unpaid claims monies as an interest-free revolving loan for acquisitions. Those acquisitions, in turn, establish oligopoly or local monopoly power in multiple health-related market segments. Its PBM arm can inflate profits by forcing use of preferred overpriced generics. Its physician networks can manipulate pricing for in/out-of-network services and limit use of expensive drugs, tests, and procedures whether necessary or not... Again, this is all well-documented, and a hell of a business model if you can pay off the right politicians to keep it (mostly) legal.
I don't believe that better prior authorization methods or capitation will fix any of this. Looking at other countries' health systems, there will always be bottlenecks that delay or restrict care - labor supply, drug costs, diagnostic equipment, facilities. The ultimate evaluation concerns should be efficacy, value, and fairness, in the face of limitless consumer demand for longer life and less suffering.
Buried deeply in Medicare and other countries' national health systems is something called the quality adjusted life year (QALY). In the original construction, QALY is a summary measurement of the economic value of an intervention in providing extended years of life with better quality (less disability and suffering). Medicare and the UK National Health use QALY determinations to decide which drugs and treatments to pay for, for better or worse. As a threshold for prior authorization, QALY is a fairer, more objective standard than the back-and-forth arguments of self-interested private providers and insurers. QALY can become unfair when medical advances or pricing monopolies obsolesce the calculations, or different groups experience disparate impact, but it's still better than the current mayhem.
I think it's about incremental steps. It's obviously always going to be a fight as long as private healthcare exists, it may even be a fight when/if we ever got single payer, but I don't think...
I think it's about incremental steps. It's obviously always going to be a fight as long as private healthcare exists, it may even be a fight when/if we ever got single payer, but I don't think it's wrong to try to incentivize better payment arrangements that put patients wellness or outcomes first, even if they can be games. It's really about what ends up with the best outcomes, and frankly the situations being so bad (like your example) is because healthcare in the US is just insanely expensive, frankly it's astounding how cheap some services end up being, even if they'd make someone in another country blush. We ended up paying maybe 2k total for my daughter's birth, which was a full on surgery and had 4 days inpatient.... it's crazy that just the salaries of everyone in the operating suite for that time period easily exceeded our out of pocket costs, not including the post-op stay or the medications/equipment. Healthcare is in the US......somewhat a load bearing labor sector, and we pay for that. Our MDs, Nurses, technicians all make above median income in the US, and would be considered some of the highest earners around in EU. I don't really know where I was going with this. But I think that working within the confines of our existing bad system is still the right path forward. The median American would rather pay more money out of their paycheck than ever vote for single payer :/
For reference and to disclose CoI, I work in health insurance and have worked in healthcare for over 15 years, including hospitals and doctors offices and I've been on every single side of prior authorization, and every line of business including capitated Medicare advantage affordable care organizations (including ones UHC bought) as well as commercial and currently Medicaid. People are trying to make things better at every level, but it's working against a tide :/
I wasn’t aware! That actually changes the article quite a bit. Because that implies if their insurance plan receives more funding, their profit maximum goes up. So the theoretical incentive is...
Obamacare requires the "loss ratio" (the amount of premiums spent on medical care) for Medicare Advantage and larger insurance plans to be at least 85%. If they pay out less than that, the profits go to the government. So I imagine they'd try to get it to exactly 85%?
I wasn’t aware! That actually changes the article quite a bit. Because that implies if their insurance plan receives more funding, their profit maximum goes up. So the theoretical incentive is actually the opposite of what the article’s author claims: a fixed cap on benefits is also a fixed cap on profits for each plan. They would prefer to convince the government for more general funding.
I still believe that private health insurance should be strictly a non-profit endeavor. Although society could probably do just fine with a strong board enforcing antitrust measures on profit-based companies.
Sometimes I really hate this timeline. So we've obscured the problem with layers of overpowered robot minions rather than addressing it. Great.
Of course, the insurance companies responded in kind, deploying their own AI to review – and often reject – doctors’ AI-generated prior auth requests. We quickly found ourselves in a ludicrous prior auth arms race, with AI serving as the primary weapon on both sides.
Sometimes I really hate this timeline. So we've obscured the problem with layers of overpowered robot minions rather than addressing it. Great.
Prior auth is the system by which the payer (generally an insurance plan, but sometimes a healthcare delivery organization accountable for the cost of care) sets and enforces standards to be met before agreeing to pay for a medication, test, or procedure. Prior auth requirements exploded with the growing popularity of Medicare Advantage (MA), the federal program in which patients’ Medicare benefits are turned over to a health plan, creating an arrangement known as capitation in which the health plan receives a fixed sum (adjusted for patient age and preexisting illnesses) to care for a patient, usually over a full year. Such arrangements give health plans a powerful incentive to minimize their expenditures. (The plans, of course, would say their incentive is to encourage the delivery of appropriate, evidence-based care.) Today, more than half of Americans over 65 are enrolled in Medicare Advantage, up from 17 percent a decade ago.
...
Physicians complain bitterly about prior auth, for good reason. For every physician in an office practice, the doctor and staff spend an average of twelve hours a week submitting prior auth requests. Physicians consider the process soul-crushing and often harmful to their patients, by either delaying needed care or sometimes blocking it altogether. For years, doctors have been desperate for a tool to help them do battle with the insurance companies.
AI entered the prior auth wars soon after the public release of ChatGPT in November 2022. Within weeks, Doximity, which describes itself as LinkedIn for physicians, rolled out a prior auth request generator. “All you had to do was type the letter ‘O’ and it automatically created a prior auth for Ozempic [the weight loss drug], addressed to UnitedHealthcare,” Doximity CEO Jeff Tangney told me, with a mix of amusement and awe. Today, tens of thousands of physicians use Doximity’s prior auth tool, noting that it not only saves time but, by pulling in key patient data from the electronic health record, markedly cuts their denial rate.
Of course, the insurance companies responded in kind, deploying their own AI to review – and often reject – doctors’ AI-generated prior auth requests. We quickly found ourselves in a ludicrous prior auth arms race, with AI serving as the primary weapon on both sides.
...
Dealing with the bureaucratic miasma of prior auth sometimes involves more than the generation of a written authorization request. One start-up, Infinitus Systems, built an AI program to automate the process of calls to the insurance company for authorization. Basically, the bot twiddles its digital thumbs during the on-hold period, then signals the clinic staff when a human from the insurance company picks up the phone. Just take that in for a second: A solution that mostly serves as an automated on-hold Task-Rabbit has raised more than $100 million in venture funding. That fact alone should give you a sense of how desperate health systems and physicians are to slice through the Gordian knot of prior auth.
...
For clinicians and patients alike, a world without prior auth seems blissful, but it’s not in the cards. There are simply too many examples of patients being subjected to expensive tests and treatments completely unsupported by evidence. Moreover, there are appalling (and to most physicians, embarrassing) examples of fraud and abuse. Just read this scandalous story about skin substitutes or my wife Katie Hafner’s exposé of Mohs surgery abuses in private equity-owned dermatology practices and try to defend the notion that there should be no oversight or accountability of any physician’s decision regarding any test or procedure, particularly when the program in question – Medicare – is funded by tax dollars and on the brink of insolvency.
...
To reimagine prior auth, we need to think about automating the entire process, starting with connecting the payer to the provider’s electronic health record. The ability of large language models to review clinical notes (i.e., to read unstructured data) means that such EHR-centered reviews can now serve as the core of prior auth decisions, replacing today’s system of ping-ponging faxes.
What would this look like? In response to a physician’s order for a limited number of prior-auth-requiring medications, tests, or procedures, the insurer would perform an AI-enabled review of the chart to see if the patient meets the criteria. If the answer is no, such a system could smooth – and perhaps automate – the process by which the clinician provides evidence supporting her choice.
...
Some health systems and payers are beginning to implement these types of automated, EHR-based, AI-enabled solutions. Louisiana-based Ochsner Health has connected its EHR to the computer systems of its largest insurers and now receives instant approvals for about half the requests on a select group of procedures. Even when an approval isn’t instantaneous, the link has sped up the process – often shortening the time from appeal to decision from days to hours.
I love posts like this where they are a deep dive into a topic from an expert; I get to learn so much about the intricacies of a system that I don’t normally get exposure to.
Every time I learn more about the health care system in the U.S., the more I think there’s no reasonable way to structure fully private for-profit health insurance companies without creating perverse incentives.
I’m still open to private health insurance but I just think they should be non-profits with executive pay limit and legal requirements to put any extra money towards medical R&D, premium discounts, additional care, etc. The profit incentive just breaks everything.
I think that quote might simplify the situation a little too much. The profits for insurance plans are already regulated. Obamacare requires the "loss ratio" (the amount of premiums spent on medical care) for Medicare Advantage and larger insurance plans to be at least 85%. If they pay out less than that, the profits go to the government. So I imagine they'd try to get it to exactly 85%?
This doesn't mean they can't game it, but it's not as straightforward as paying out less on insurance. For example, a big health company could have one subsidiary that sells insurance and another that provides medical care, so they also earn profits from providing the care.
Also, if they keep costs down, they can advertise a lower premium and maybe get more customers. When I was shopping for insurance for my mother, there were some plans that had no cost to the consumer (it's all paid for by the government) and others that charge an extra amount per month. I'd hope that if they charge more you get better service somehow, but it seems impossible to tell from the outside.
I've said elsewhere that I have a personal animus towards UnitedHealth, so take this with whatever size grain of salt you deem appropriate.
The massive UnitedHealth Group conglomerate includes an insurer (both private insurance and Medicare Advantage plans), pharmacy benefit management, a physician network, hospitals, home healthcare, diagnostic centers, a massive payment processor, its own IT consultancy, and more.
Up until Brian Johnson's murder, UnitedHealth was by far the most profitable of the similar integrated health systems. It could extract money throughout its subsidiaries, not just via the profit-limited insurance plans. The insurance arm was boasting a 32% claims denial rate, including the use of proprietary AI to deny in-patient rehabilitation care.
I won't link every source that's available to a cursory search for the numerous lawsuits, Federal violations, and criminal fraud claims.
As an example of the perverse incentives involved at every step of the process, UnitedHealth denies and delays care, and uses the unpaid claims monies as an interest-free revolving loan for acquisitions. Those acquisitions, in turn, establish oligopoly or local monopoly power in multiple health-related market segments. Its PBM arm can inflate profits by forcing use of preferred overpriced generics. Its physician networks can manipulate pricing for in/out-of-network services and limit use of expensive drugs, tests, and procedures whether necessary or not... Again, this is all well-documented, and a hell of a business model if you can pay off the right politicians to keep it (mostly) legal.
I don't believe that better prior authorization methods or capitation will fix any of this. Looking at other countries' health systems, there will always be bottlenecks that delay or restrict care - labor supply, drug costs, diagnostic equipment, facilities. The ultimate evaluation concerns should be efficacy, value, and fairness, in the face of limitless consumer demand for longer life and less suffering.
Buried deeply in Medicare and other countries' national health systems is something called the quality adjusted life year (QALY). In the original construction, QALY is a summary measurement of the economic value of an intervention in providing extended years of life with better quality (less disability and suffering). Medicare and the UK National Health use QALY determinations to decide which drugs and treatments to pay for, for better or worse. As a threshold for prior authorization, QALY is a fairer, more objective standard than the back-and-forth arguments of self-interested private providers and insurers. QALY can become unfair when medical advances or pricing monopolies obsolesce the calculations, or different groups experience disparate impact, but it's still better than the current mayhem.
I think it's about incremental steps. It's obviously always going to be a fight as long as private healthcare exists, it may even be a fight when/if we ever got single payer, but I don't think it's wrong to try to incentivize better payment arrangements that put patients wellness or outcomes first, even if they can be games. It's really about what ends up with the best outcomes, and frankly the situations being so bad (like your example) is because healthcare in the US is just insanely expensive, frankly it's astounding how cheap some services end up being, even if they'd make someone in another country blush. We ended up paying maybe 2k total for my daughter's birth, which was a full on surgery and had 4 days inpatient.... it's crazy that just the salaries of everyone in the operating suite for that time period easily exceeded our out of pocket costs, not including the post-op stay or the medications/equipment. Healthcare is in the US......somewhat a load bearing labor sector, and we pay for that. Our MDs, Nurses, technicians all make above median income in the US, and would be considered some of the highest earners around in EU. I don't really know where I was going with this. But I think that working within the confines of our existing bad system is still the right path forward. The median American would rather pay more money out of their paycheck than ever vote for single payer :/
For reference and to disclose CoI, I work in health insurance and have worked in healthcare for over 15 years, including hospitals and doctors offices and I've been on every single side of prior authorization, and every line of business including capitated Medicare advantage affordable care organizations (including ones UHC bought) as well as commercial and currently Medicaid. People are trying to make things better at every level, but it's working against a tide :/
I wasn’t aware! That actually changes the article quite a bit. Because that implies if their insurance plan receives more funding, their profit maximum goes up. So the theoretical incentive is actually the opposite of what the article’s author claims: a fixed cap on benefits is also a fixed cap on profits for each plan. They would prefer to convince the government for more general funding.
I still believe that private health insurance should be strictly a non-profit endeavor. Although society could probably do just fine with a strong board enforcing antitrust measures on profit-based companies.
Sometimes I really hate this timeline. So we've obscured the problem with layers of overpowered robot minions rather than addressing it. Great.
From the article:
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So...the solution they're advocating is handing over our entire medical records and every test we've ever taken to insurers?