Featuring Dr. Stephen Kemble, psychiatrist, board member of Physicians for a National Health Program and member of One Payer States, discussing tricks health insurers use to increase profits – at our expense – and a common “Trojan horse” found in state single- payer legislation.
Cherry picking? Lemon dropping? How health insurers weed out sick people
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Welcome to Code WACK!, your podcast on America’s broken healthcare system and how Medicare for All could help. I’m your host, Brenda Gazzar.
How do managed care groups cherry pick and lemon drop their patients? What are the insurance industry’s Trojan horses when it comes to single-payer healthcare proposals? To find out, we spoke to Dr. Stephen Kemble, who practices at a hospital-based primary clinic in Honolulu. Kemble is also past president of the Hawaii Psychiatric Medical Association and the Hawaii Medical Association.
(5-second stinger)
Welcome to Code WACK!, Dr. Kemble!
Kemble: Thank you.
Q: So you recently collaborated on a paper called “Beware of Insurance Industry ‘Trojan horses’ in ‘Single-Payer’ proposals.” What does this mean in layman’s terms?
Kemble: The Trojan horses are ways of organizing health care that turn a supposedly single-payer proposal into a multipayer proposal and sabotage it from achieving any administrative savings, and where this came from, in the single-payer movement, is mainly in California because they have a very large presence of Kaiser and Kaiser is, they get capitated money. You know they’re paid per member, either through premiums from an employer or by the state, if they’re serving the Medicaid or Medicare population. They’re given money per person, and then they have to deliver care within that amount of money so they are the ones taking insurance risk. They then have an incentive to cherry pick and lemon drop. In other words, to hang on to healthy people and get rid of sick people.
So they try to select a healthier than average patient population in order to make ends meet financially. But when you’re in Kaiser, it works pretty well, and it’s popular, so they didn’t want to eliminate Kaiser… Because Kaiser is an integrated system that’s capitated, their proposal is to say, Okay, we’ll pay Kaiser by capitation because that’s what they’re used to, but then you can’t pay their hospital with a global budget because you’ve already paid for it through their capitation budget. You can’t duplicate the payments so you can’t do hospital budgeting if you use capitation payments.
So you have these single payer bills that instead of budgeting hospitals they budget these multi-hospital, physician hospital organizations like Kaiser, with a separate budget. Now, you have multiple risk-bearing entities competing with each other, trying to avoid sick people and capture healthy people and claim that healthy people are sicker than they are to beat risk adjustment formulas…So you can’t do risk adjustment effectively. So you have all of these problems that are reintroduced into the system that add administrative costs and complexity and prevent you from achieving and saving single payer should achieve.
Q: Uh-uh. Got it. And this sounds like it has an impact on patients who might be denied care. Is that right?
Kemble: Yes, I mean one way a risk-bearing entity like an insurance company weeds out sick people by restricting their formulary and not offering the drugs needed for expensive conditions. So if you have those conditions you get hassled every time you fill your prescription so you quit that plan and go to whatever the public like traditional Medicare that has fewer restrictions or you switch to a different Medicaid Managed Care plan hoping that you’ll do better there but all of them are playing the same game because, you know, it’s musical chairs. Who wants to be stuck with the sick people? They keep trying to find a ways to make it difficult for them, and the result is obstruction and denial of care.
Q: Got it. So why should average people care about this?
Kemble: These things, they directly affect someone who’s got say Medicaid and a serious health condition that’s expensive but they drive up costs for everyone because the cost of these things is spread across the whole population. So all of this makes for a far more expensive healthcare system. Our multi-payer, multiple gaps healthcare system costs twice as much as the average of other industrialized countries, and leaves a large percent of the population out, and it’s getting worse all the time and not better, and until we wake up and stop trying to have the system of competing insurance companies… financing healthcare, we’re not going to solve the problem.
You cannot solve it without taking on the whole insurance business model, which is inappropriate to health care. You know if you have a risk like your house burning down which is presumably infrequent and unpredictable, then you might charge them more if they live in a forest than you would if they live in a city because you can see that’s higher risk, but you’re pretty much spreading it across a whole bunch of people because the risk is unpredictable. In health care, the risk is largely predictable. There’s too many people with preexisting conditions where you know it’s going to be expensive so the whole idea of using the insurance system falls apart because all you’re doing is trying to avoid sick people, which defeats the whole purpose of insurance.
Q: I see. How else do these organizations cherry pick patients? How are they allowed to do that?
Kemble: Well, they market to healthy people. I don’t know about California but in Hawaii Kaiser ads are all about “thrive” and people jogging and they offer fitness clubs as bonuses. If you’ve got a chronic heart condition or dementia or renal failure, that’s not going to appeal to you but if you’re healthy, it will so they market to healthy people, they have restricted formularies that are stacked against people with expensive conditions. They have more prior authorizations for people with complex problems. That’s how they do it, and they’re very good at it. I mean there’s studies that have shown there are big differences in the risk pool for Medicare Advantage Plans compared to traditional Medicare. The Medicare Advantage Plans collect healthy people and push out sick people and there’s lots of evidence that that’s the case. That’s actually happening.
(5-second stinger)
Thank you Dr. Stephen Kemble.
Learn more about One Payer States at OnePayerStates.org and Physicians for a National Health Program at PNHP.org.
Find more Code WACK! episodes on ProgressiveVoices.com and on the PV App. You can also subscribe to Code WACK! wherever you find your podcasts. This podcast is powered by HEAL California, uplifting the voices of those fighting for health care reform around the country. I’m Brenda Gazzar.
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