The total medical costs paid by a typical American family of four, with insurance benefits provided by a preferred provider organization, are estimated to be $12,214 in 2005, according to the Milliman Medical Index, an annual medical costs study by Milliman, Inc. The study excluded premium payments, focusing instead on the costs paid by an employer’s benefit plan and the portion paid by the consumer in the form of cost-sharing–in other words, the amounts paid to providers by, and on behalf of, the covered family. Inpatient and outpatient hospital services represent 45 percent of a family’s total annual medical costs. Physician services represent about 37 percent, prescription drugs about 15 percent, and other miscellaneous services represent 3 percent.

Illinois became the fifth state this year to pass medical liability reform legislation that promises to provide insurance rate relief to family physicians in upcoming years. The bill caps non-economic damages in medical liability lawsuits at $500,000. Illinois Gov. Rod Blagojevich has announced he will sign the bill into law.

Among the Illinois law’s provisions are: public hearings when insurers seek rate increases, assurance that physician apologies cannot be used as evidence in litigation, required disclosure of insurance companies’ actuarial data, and required certification by a board-certified physician that a plaintiff’s claims merit a trial. Illinois joins Georgia, Missouri, South Carolina, and Montana in moving to rein in medical liability insurance rates that have driven many family physicians out of hospital practice and obstetric care.

For the third consecutive year, the National Survey of Employer Sponsored Health Plans by William Mercer and Associates has reported increases in CAM coverage among the nation’s self-insured employers.

Employer’s     Acup Acup Chiro Chiro Massage Massage
Plan Type      1999 2000  1999  2000  1999    2000
PPO
500+ workers    23%  24%   83%   84%   12%     13%
10-499          11%  19%   68%   77%    8%     13%
Point of
Service 500+    20%  24%   74%   81%   11%     15%
10-499           8%  18%   57%   65%    6%     17%
HMO 500+        16%  19%   60%   66%    9%     14%
10-499          17%  19%   51%   62%   10%     11%
Traditional
Indemnity 500+  21%  25%   80%   84%    7%     13%
10-499          19%  19%   69%   69%    7%     10%

Mercer’s analysts concluded, with this study, that chiropractic is now the rule, rather than the exception. The most significant 1999-2000 year-to-year-growth was found among smaller employers, with the percent of respondents including acupuncture jumping by as much as 10% in one plan category.

COMMENT: Followers of employer-CAM activity are quick to point out that these data were developed prior to the impact of two shifts in the employer universe. First, employers have seen huge jumps in basic health care premium costs to maintain basic benefits. Second, the economic downturn is expected to raise unemployment, thereby taking the pressure off employers to toss additional benefits into their packages to lure a quality workforce. Mercer’s data for next year should begin to indicate whether the recent up-trend in CAM offerings has stuck to the ribs of basic benefits or will be quickly sloughed off.

Editor’s Note: This is the third in a series of columns on Healthcare by John Stossel (See ‘Time to Rethink Our Crazy Health-Insurance System,” October 1, and “Control Your Own Healthcare,” October 8.)

Healthcare costs overall have been rising faster than inflation, but not all medical costs are skyrocketing. In a few pockets of medicine, costs are down while quality is up.

Dr. Brian Bonanni has an unusual medical practice. His office is open Saturdays. He e-mails his patients and gives them his cell-phone number.

“I need to be available 24 hours a day,” he says. “I want to be there when a patient has questions, and 1 want to be reachable.”
I’ll bet your doctor doesn’t say that.

Shop Around

Bonanni knows he has to please his patients, not some insurance company or the government, because he’s paid by his patients. He’s a laser eye surgeon. Insurance rarely covers what he does: reshaping eyes so people can see without glasses.

His patients shop around before coming to him. They ask a question that people relying on insurance don’t ask: “How much will that cost?”

“I can’t get away with not telling the patient how much exactly it’s going to cost,” Bonanni says. “No one would put up with it. And the difference of $100 sometimes makes their decision for them.”

He has to compete for his patients’ business. One result of that is lower prices. And while the procedure got cheaper, it also got better. Today’s lasers are faster and more precise.

Prices have fallen and quality has risen in other medical Fields where most people pay for care themselves, like cosmetic surgery. Consumer power works-even in medicine.

When government and insurance companies are kept away from the transaction, good new things happen.

A doctor in Tennessee I talked to publishes his low prices, such as $40 for an office visit. Most doctors would say you can’t make money this way. But Dr. Robert Berry told me you can. “Last year, I made about the average of what a primary-care physician makes in this country,” he said.

Berry doesn’t accept insurance. That saves him money because he doesn’t have to hire a staff to process insurance claims, and he never has to fight with companies to get paid. His mostly uninsured patients save money, too. Unlike doctors trapped in the insurance maze. Berry works with his patients to find ways to save them money.

“It’s coming out of their pockets,” Berry said. “And they’re afraid. They don’t know how much it’s going to cost. So I can tell them, ‘OK, you have heartburn. Let’s start out with generic Zantac, which costs around $5 a month.’” When his patients ask about expensive prescription medicines they see advertised on television, he tells them. “They’re great medicines, but why don’t you try this one first and see if it works?”

Sometimes the $4 pills from Wal-Mart are just as good as the $100 ones.

‘Faster, Better, Cheaper’

Speaking of Wal-Mart, medical clinics are popping up in Wal-Mart stores and in other similar markets. The clinics offer people with simple problems such as sore throats and ear infections relatively hasslefree care cheap. Almost everything costs $59 or less. And the clinics are typically open seven days a week.

Grace-Marie Turner, president of the Galen Institute, a health-policy research organization, explains how these clinics thrive: “They’re figuring how to do something faster, better, cheaper! They’re responding to consumer demand because they see that they might make some money on this.”

When consumers pay for medicine themselves, saving insurance for the big things, and doctors deal directly with consumers, doctors begin to compete, They start posting prices and work to keep them low.

And consumers gain more control of their healthcare. Instead of governments’ and insurance companies’ deciding for patients, patients decide.

Competition gives consumers more choices. And choice gives them power. Remember that when you hear a politician promise to make healthcare accessible and affordable through the force of government.

The American Medical Directors Association (AMDA) 2002 survey of its members found that more than 433 nursing home medical directors have had to stop working in facilities because they lost their liability coverage. Also, more than 1,450 nursing home physicians responsible for 168,000 residents are reducing resident care hours, not providing certain services, or are referring more complex cases in reaction to medical liability concerns. Many of these physicians report facing annual premium increases averaging 154%, and 5.6% of medical directors say they are unable to get medical malpractice coverage at all because they work in nursing homes.

“The [AMDA] is closely monitoring the medical liability crisis because of its unfortunate impact on long-term care patients,” said AMDA President Jacob Dimant, MD, CMD, reacting to President Bush’s State of the Union call for liability tort reform. “We are seriously concerned that many frail, elderly Americans are losing access to vitally important long-term care services due to the unavailability of medical liability insurance for our members. As nursing home physicians lose their malpractice coverage, they are being forced out of long term care, leaving their patients with fewer options for quality healthcare.”

Just before Christmas, small-business groups joined big businesses to help defeat a Congressional provision that would have expanded existing law, forcing group health plans to treat mental health coverage the same as medical coverage in companies with more than 50 employees. The legislation, promoted by Sens. Paul Wellstone (D-MN) and Pete Domenici (R-NM), would have forced group health plans to charge patients the same copayment for visits to general physicians and therapists, among other provisions.

Passage would have benefited employees, but business groups saw it as an intrusion that would have removed cost controls such as annual limits on the number of visits to a therapist. “It’s another government mandate at a time when we’re already experiencing health-care inflation,” says Kate Sullivan, health-care policy director for the U.S. Chamber of Commerce.

Although plans for companies with fewer than 50 employees would not have been affected, National Small Business United president Todd McCracken also opposed the bill’s passage. As the bill passed the Senate but not the House of Representatives, he expects another attempt to expand the regulations in 2002.

Although long-term care insurance has been available for many years, it has not been widely purchased, it can be expensive, and it is filled with gaps that may not cover all expenses. Moreover, if Medicaid eligibility is tightened further, many individuals will be forced to either spend down or pay exorbitant out-of-pocket costs for their long-term care.

However, most middle-class Americans do own life insurance–and that might present an answer. As many Americans retire, the primary purpose of life insurance–to ease the financial burdens on families in the event of an untimely death–is no longer present. Most children have left the home and are self-supporting. Although life insurance is available to them as part of their parents’ estate, if out-of-pocket costs for long-term care are required, this presents significant financial burdens for aging individuals and their heirs.

Using and accessing life insurance benefits to pay for long-term care needs (or “life insurance for the living”) is an option. This would allow the benefit normally provided upon death to be paid out during the resident’s length of stay in the long-term care setting.

This is done through front-end spending of a permanent insurance policy that is called the Accelerated Death Benefit (ADB), or Life Benefit. If a policy has this provision, it will pay a percentage of the face value of the policy to the policyholder based on certain conditions. These may vary from state to state but could include diagnosis of a terminal illness or chronic disease, the need for extended long-term care in a nursing facility because of an inability to perform activities of daily living, or permanent confinement to a nursing home. This benefit offers a payout to the policyholder, not the beneficiary, for a specified amount. Policyholders can elect to use the entire ADB, which eliminates their death benefit, or they can use a portion of the ADB, leaving a partial death benefit in place.

ADBs began in 1988 as a way of giving terminally ill AIDS patients a portion of their life insurance proceeds to meet their current needs. This was the impetus for creation of the viatical industry. Viatical settlements were devised in the 1980s for people with terminal illnesses who, needing money to cover their care, would sell their insurance policies to investors for discounted prices–usually 50 to 85% of the face value of the policy. Viatical settlements have been criticized because they have not been heavily regulated and estimates of life span are difficult.

The ADB rider can be added to whole-life insurance policies but not term-life policies because the insured term usually ends at age 65 (although it can be extended). This may be a viable option for individuals who require long-term care services but do not qualify for Medicaid. Living benefits are not subject to federal income taxes. In states such as New York and California, they also are not subject to state income tax. Most companies require that your life expectancy be 12 months or less. Premium payments vary based on the company, with some charging higher premiums for the options, some charging no premium, and others charging only if the rider is accessed. Companies often restrict the amount accessible through this benefit to 50 to 85% of the face value of the policy. New York, for example, allows payment of up to 50 to 75% of the face value. Many insurance companies give policyholders the option to add an ADB at any time, not just when purchasing the policy.

A little more than four years ago, New York State approved legislation that authorized the sale of more diverse life insurance policies that offer ADBs to pay for long-term care services. Conditions for which the ADB can be accessed in New York are terminal illness with life expectancy of 12 months or less; diagnosis of a medical condition requiring extraordinary medical care or treatment, regardless of life expectancy; or certification by a licensed healthcare practitioner of any condition that requires continuous care for the remainder of the insured’s life.

Recommendations

Despite continued attempts at restriction, Medicaid spending will continue to grow exponentially as the population ages. Personal accountability and planning for long-term care can be facilitated by various means, and life insurance, an available and widely held benefit, should be accessible for this purpose. Our specific recommendations for taking advantage of this would be:

* Allow all individuals who have life insurance the option of accessing their benefit via an ADB, should they require long-term care. Because payout upon death is 100%, policy-holders requiring long-term care should be able to access their benefits at 100% of the value of the policy for the duration of their life. This would be an attractive option for individuals who decline to purchase long-term care insurance because of premium costs or for those who purchase plans but might not net a return if they don’t access the benefit. As premiums continue to be paid during today’s rising life expectancies, the cost factor of ADBs to insurance companies will be minimized. For individuals who would seek to acquire additional life insurance, beyond financing their long-term care needs, this could be accomplished by reinsurance of the original policy to provide an enhanced death benefit. For those who do not access long-term care services, the life insurance coverage would remain intact for their heirs.

A state legislator considers a proposal that would require health
plans to cover screening for prostate cancer. While she recognizes
that prostate cancer is an important problem and that mandating
coverage can help increase access to these services, she is also
aware of the controversy among medical experts about the value of
general prostate cancer screening tests and is concerned about what
effect this mandate will have on the escalating cost of health
insurance and the number of uninsured individuals in her state.

The above scenario represents a dilemma facing many state legislators in considering the enactment of new state health insurance benefit mandates. While wanting to make sure that their constituents have access to the health care services they need, in a budget constrained environment the questions they face become: Of what real value are these benefits to the people of the state? Have these benefits been proven to be effective in improving health? And how much will a legislative mandate affect the general affordability of health insurance in the state?

State legislatures have addressed some of these questions by passing mandated benefit review (MBR) laws that inform the decision-making process by requiring a review of existing or proposed health insurance benefit mandates. This paper examines the rise of state MBR laws and the different approaches states have taken to conduct such reviews.

BACKGROUND

State health insurance mandates require that health insurers and/or health insurance products include coverage for a defined group of people (e.g., coverage for dependents, coverage for persons with a specific medical condition); types of providers (e.g., podiatrists, ophthalmologists, chiropractors); or certain treatments, services, pharmaceuticals, or durable medical equipment (e.g., mammograms, diabetes testing strips, orthotics). Additionally, state health insurance benefit mandates can dictate how care will be provided (e.g., minimum lengths of stay in a hospital following childbirth or surgery).

Jensen and Morrisey (1999) describe the history of state benefit mandate law adoption starting with the 1956 Massachusetts law that required dependent coverage for handicapped children. By the late 1990s, there were reportedly over 1,000 state health insurance benefit mandates in effect in the U.S. with a growing number of proposals being introduced and passed in state legislatures each year (Jensen and Morrisey 1999). While the National Conference of State Legislatures has suggested that the rate of state mandate adoption may have slowed in recent years (NCSL 2003), other organizations such as the Council for Affordable Health Insurance, which has identified over 1,800 existing state benefit mandates, argue that mandates remain prominent on state legislative agendas (Bunce and Wieske 2004).

The dramatic expansion of state-mandated health insurance benefits in the 1980s and 1990s was likely due to political factors. To begin, those who realized the benefits of health insurance mandates tended to be concentrated interests represented by well-organized groups of health care professionals and persons or parents of persons with a specific medical condition, who have an intense interest in a particular mandate and its outcome. At the same time, the costs of such benefit mandates were usually diffuse and spread over the majority of the population with private health insurance residing in the state, often amounting to only pennies per month on individual health insurance premiums for any one mandate. Consequently, mandated benefit laws were likely to be “political winners” when they had an organized set of interests pushing for them with little resistance from those who would bear the costs (Wilson 1980).

However, since the late 1990s, when health care costs began to increase rapidly again and the number of uninsured began to grow, the above political formula for success changed. Employers began to balk at rising health insurance premiums and began pressuring insurance companies to look for ways to control costs, while states continued to add new mandated benefits to the coverage offered by health insurers and HMOs. As a result, the health insurance industry began to take a critical view of mandated benefits and began to argue against them based on their impact on increasing premium costs and the escalating number of uninsured.

There has also been a growing concern about the effect of mandates on the cost of health care premiums for workers and for employers’ decisions to provide health insurance to their employees (Battistella and Burchfield 2000). Additionally, the growth of state regulation on health insurance may have stimulated more employers to switch from offering commercial health plans to offering self-insured plans, because of the protections offered under the Employment Retirement and Income Security Act of 1974 (ERISA), which exempts self-funded plans from complying with state health insurance laws and regulations.

The pharmaceutical industry’s corrupting influence on our medical care system usually gets the most attention. Now its corrupting influence on medical journals has come under fire. Yes they’re full of drug ads that prompt the usual suspicions about financial dependency. But that’s the least of it, according to Richard Smith, MD, who resigned last year as editor-in-chief of the BMJ (British Medical Journal).

In a recent commentary for the Public Library of Science, a free online medical journal, Dr. Smith identified the less obvious conflicts of interest that surround the most respected form of research, the randomized clinical trial. Whenever a large trial is published in a high-profile journal, it has that journal’s implicit stamp of approval and may well receive global media coverage thanks to drug company-financed PR. A trial with favorable results will generate far more money for the drug companies than a multi-page advertising campaign, according to Dr. Smith, and that’s why they spend “upwards of a million dollars” on reprints of the trial to send around the world. Doctors won’t necessarily read the reprints, he acknowledges, but the name of a highly respected medical journal will impress them.

Here’s the most disturbing element of this scenario: More and more drug companies are getting the results they want because the trials are often rigged. Most drug trials are now sponsored by the drug companies. They can, and often do, design a trial in such a way as to get results that prove a drug’s benefit. In fact, several reviews have already found that most of the industry-funded trials have findings that favor the drug. Between two-thirds and three-quarters of trials published in the major journals–Annals of Internal Medicine, JAMA, Lancet, New England Journal of Medicine–are funded by drug companies.

To get FDA approval, a company need only prove its drug is better than nothing (a placebo). But even more profits can be made in that relatively uncommon instance when a drug company compares its newer drug against a competitor’s older less expensive drug. The trials can be rigged in a variety of ways, according to Dr. Smith. The comparator drug is purposely given in a weak dose so the sponsoring company’s drug will appear more effective. Or, the drug will be compared against a treatment already known to be inferior. Another common technique is designing a trial with multiple endpoints, or goals, such as reductions in stroke, hospitalizations, and then select for publication only those that favored the drug.

How to Misrepresent with Statistics

What’s more, medical journals allow trial results to be published in relative risk reduction terms, which make the drug appear more effective than it truly is. A classic example: The top-selling cholesterol-lowering drugs called statins will reduce the risk of having a heart attack by 25%. Would you be inclined to take the drug if the same results were expressed this way? The heart attack rate in the placebo group was 4% and the rate in the statin group was 3%. (The 25% is the difference between the two groups.) Worse, the drug companies often provide journals with incomplete data from their trials regarding drug-related harms.

Some journal editors are fighting back. Last year, a new policy was announced by 11 editors of the world’s most prestigious journals, including the New England Journal of Medicine, The Lancet, and Canadian Medical Association Journal. They will not publish results of any trial that has not been registered in a publicly available database before the first participant is enrolled. The policy is aimed at foiling researchers who change the goals of a study while it’s in progress and to stop drug companies from withholding the existence of trials that show negative results.

The likelihood of trial results favoring the trial’s sponsor is not limited to pharmaceutical research. In a 2003 review of all studies that looked at total hip arthroplasty implants, 75% were commercially sponsored, of which 93% reported positive outcomes; whereas independently funded researchers reported good results in only 37% of the studies.

Dr. Smith calls for more public funding of trials that do head-to-head comparisons of all available treatments for the same condition–that would leave journals to concentrate on critically assessing the trials. He is now chief executive for the European division of UnitedHealth Group, the largest health insurance company in the U.S., and a board member of the PLoS Medicine journal.

It remains to be seen whether all medical journals will follow the lead of the 11 that called for the registration of all trials. Success is dependent upon participation of all journals. How carefully will medical journal editors scrutinize a major trial likely to generate worldwide media attention if their own financial well-being is at stake? When the sale of reprints can have a profit margin of 70%, writes Dr. Smith, “an editor may . face a frighteningly stark conflict of interest: publish a trial that will bring in $100,000 of profit or meet the end-of-the-year budget by firing an editor.”

National Report–Keeping the cost of workers’ compensation from escalating is possible, according to some hotel executives. Most importantly, companies need to be aggressive to get injured employees back to work as quickly as possible.

Many jobs in the lodging industry, such as housekeeping, dishwashing and engineering, require a lot of physical work, and injuries create difficult situations for all parties.

“In this industry, there are going to be accidents,” said Gary Guarente, v.p. of human resources for Boykin Management.

Kent Foster, v.p. of human resources for John Q. Hammons Hotels, said there are fewer and fewer companies in the marketplace that want to insure workers’ comp.

“Insurers are very picky about the type of risks they take,” Foster said. “Internally [within the company], there is a ton of effort. We have an awareness of safety issues and that starts at the top.”

Guarente said there are many attorneys looking for work, so there are some unreasonable claims related to job safety.

“Workers’ comp claims always fall in favor of the injured worker even [if] there is abuse by the injured worker,” he said. “It’s become more dramatic than it should.”

Guarente said Boykin conducts a full investigation when an accident occurs and puts employees through rigorous questioning to make sure they’ve followed all the safety rules and to see if they were negligent in any way.

“We take an aggressive approach, [and] we let them know we will take care of them, but we will discipline them if they don’t follow safe work practices,” he said.

Joy Rothschild, senior v.p. of human resource for Omni Hotels, said that in Texas, companies can opt out of the state workers’ comp program.

“It’s the only state in the union in which you can do that,” she said. “We’ve opted out and have contracted with a medical provider. This allows us to control our costs because we’re directing the medical care. We rolled it out in 2002, and it had a dramatic reduction of the number of claims and cost of claims. Companywide, in ‘02 and ‘03, there was a 15-percent reduction in workers’-comp costs. We have nine locations in Texas, so that option in Texas has a big effect on our entire portfolio.”

Different situations

Mary Villarreal, senior v.p. of Remington Hotel Corp., said workers’ comp is different in each state and some states have better controls and measures in place to monitor the claims more closely.

“We have an aggressive back-to-work program,” she said. “You need to do timely reporting of an injury and claim because if it’s not reported within 48 hours, it can be a costly claim. We review accidents on a monthly basis and focus on taking corrective action so the next employee doesn’t get hurt.”

Villarreal said the company checks claims every two weeks to help reduce fraudulent claims. She said that when employees are out of work because of an injury, the human resources department calls them to let them know they are missed and encourages them to come back to work.

Melissa Gruber, c.o.o. of Hospitality Employee Resources, a subsidiary of Focus Enterprises that handles human resources, said the company conducts a safety walk-through once a year, has a return-to-work program and monthly meetings to address safety issues. Valparaiso, Ind.-based Focus Enterprises owns and manages hotels.

“It’s not been a great expense for us,” Gruber said.

She agreed that getting injured employees back to work quickly is important.

“We’re charged 30 percent of a claim if there is no lost time and we get the employee back to work right away,” she said. “If they stay home, the lost-time claim charges 100 percent for the expense.”

Gruber said a company needs to establish a return-to-work program if it hasn’t already.

“Find them work that they can do,” she said. “Bring them back doing something just to get them back to work, even if it isn’t their original job. You can create problems for the g.m. because the employee is not as productive, but it’s better than staying home collecting a paycheck.”

Rothschild said Omni has done some unique things with workers’ comp, such as creating a contest to see which hotel could go a year without lost-time accidents. The prize was $10 per full-time associate and several hotels won.

“We push hotels to get employees back to work and to accept the concept of a modified work schedule,” she said. “It’s a paradigm shift. Get them back to work, even if it means sitting at a coat check.”

Foster said what’s measured can be managed and JQH Hotels measures the types of accidents, the frequency and the severity. He said slips and falls, strains and cuts are the three most common injuries. He said the awareness program is attached to bonuses for the general managers.

“Now they have a vested interest to make sure training is done and up to speed and make sure the associates are getting the best kind of treatment so they can return to work,” he said. “How do we know it’s working? We have [a low] number of incidents per number of man-hours worked.”