First off, disclaimer: I am not a policy expert on healthcare or anything related to it. But I wanted to write this to explain how my thoughts evolved over a recent public discourse that exploded these past two weeks. You may be thinking I am going to discuss the murder of UnitedHealthcare CEO Brian Thompson, but I’m not. All I will say on that issue is that anyone who is lionizing his alleged killer Luigi Mangione is deeply misguided and has no realistic desire to make a change to the deeply flawed healthcare system in the United States.
I want to talk about the Anthem Blue Cross Blue Shield policy decision and the commentary surrounding it.
What was the proposed policy by Anthem?
Anthem announced they were changing their billing process to implement time limits for procedures. That sounds insane! I certainly thought it did. The American Society of Anesthesiologists issued a furious statement condemning Anthem's decision. New York Governor Kathy Hochul and Connecticut Senator Chris Murphy also fervently lambasted it.
For the first 24 hours after I heard about such a decision, my social media feed was stormed with memes and rage posts about how horrendous Anthem was. It was brought up at the family dinner table, and we discussed how the company was evil or just plain stupid.
Then something interesting happened; people I trusted more than myself on healthcare began defending the proposed Anthem policy change. One post by Will Stancil, a former Minnesota State Assembly candidate and economics writer, in particular caught my attention:
So what happened here is that the lobbying group for anesthesiologists made a press release attacking an insurer for trying to hold their practice to Medicare payment standards, lefty online agitators shared it in order to go viral and get retweets, and now we’re trying to get the CEO assassinated? I mean, this is insane. The internet has cooked all of your brains. The anesthesia thing is not what you think, the doctors are a rich cartel trying to protect massive paychecks! The left is unable to stop lying for attention! And dumb memes you believed aren’t grounds for murder!
I had to do many double-takes and rereads of this (admittedly slightly charged post). So, I went digging a bit further. Was I actually misled? This led me to the following article from VOX written by Eric Levitz.
Levitz’s central argument is that while plenty of fury is correctly directed at insurance companies, in this case, Anthem was attempting to employ practices similar to those of the Centers for Medicare and Medicaid Services. Such a policy change was aimed at cost-controlling the procedures, a practice employed by numerous European countries to force Anesthesiologists to accept lower rates of reimbursements. Absent a Medicare-for-all system, the only people who can negotiate these prices for us are the insurance companies themselves; it is what we literally pay them to do! Specialists like Anesthesiologists are highly paid, and there is evidence of widespread over-billing and insurance fraud. The Anthem policy change cost would also not fall on the consumer due to the contract signed by the anesthesiologists and the insurance providers. Rather, the specialist could then appeal if the surgery extended beyond the procedural limit.
My mind was blown. I admit my ignorance (naivety?) in this field. I did not realize we even had a provider-side issue in our healthcare system in the United States. Levitz also provided a study from the Kaiser Family Foundation, which reports that healthcare spending is driven more by the provider side than the insurance side of things (though there is a dispute over this, which I will get to later).
But then, we got into a weirder world where there was an overreaction to public lack of knowledge by the pundit class, where we had people just straight up defending insurance companies as if they held no bad practices themselves.
Noah Smith (who I have cited before) wrote a whole article discussing how bloat in the American healthcare system and higher costs is basically entirely on the provision end of the issue. He also cites the Kaiser study and reiterates the need for insurers to negotiate lower prices with providers, similar to how Medicare does as a result of the Inflation Reduction Act. Smith’s use of profit margin to defend insurance companies as evidence that the blame is mainly on the provider side is a bit fishy to me. Another thing that stood out to someone else when I was discussing this issue was the following statement from Smith:
But when we look at United Health Group’s operating costs in the diagram above, they’re only 22.6% of the actual cost of medical care.
They made a good point. Does that seem like a not-so-insignificant amount? Yet Smith seems to brush it under the rug as if it is negligible.
However, at this point, I think it is safe to say that Anthem’s policy change proposal was to combat a rent-seeking medical cartel and use previously established practices and data to inform their newer policy. There was never going to be a random stoppage of anesthesia during procedures, and that was meaningless fear-mongering from the American Society of Anesthesiologists, which successfully forced Anthem to revert their policy decision along with public outcry.
However, the story does not end there, as Matt Bruenig of the People’s Policy Project wrote a rebuttal to Levitz and Smith here. Bruenig’s has a few central points. First, administrative costs suck under multi-player healthcare systems, and that said, administrative costs are worse on the insurer's side than the provider's side. Furthermore, the money spent on healthcare administration is a complete waste rather than producing a net positive to society, whereas the provider side produces the medical care itself.
Bruenig further argues that provider-sided administration bloat and rent-seeking behavior are implicit results of the multi-payer system, in which providers are able to charge higher prices. He notes that this does not absolve providers for their bad behavior but merely contextualizes it. He views this as a vicious cycle, as many insurers profit when providers' rates are higher. We waste billions of dollars on a system designed to control providers' rent-seeking behavior but fail to do so because of maliciousness.
From my layman’s perspective, this makes the failure of Anthem’s policy seem even more tragic because said insurance company (while we can’t definitively say it was out of moral outrage) was attempting to finally control the rent-seeking behavior of overpaid specialists in the United States—which, as Bruenig points out, is what they are supposed to do!
Levitz and Smith have both since responded to Bruenig.
Levitz basically completely concurs with all of the above that Bruenig argued. However, he believes Bruenig misrepresented his argument in that Levitz fully believes insurers are bad actors but that such anger at insurers should not stand as an obstacle when the insurer finally engages in a practice that would be beneficial to the public, for example, being the Anthem policy proposal. There is one key murky disagreement going back to the original Kaiser study is whether or not excess costs in the U.S. healthcare system are attributable to providers or insurers. You can find Bruenig’s reply here. There seems to be once again agreement that these two medical institutions, the provider lobbying interest groups and the insurance companies, feed off each other to extract further rent. Another way to understand that the degree of blame is not so black in white is that provider representatives like the American Medical Association have been fighting against Medicare For All for a long time.
Smith had a much briefer and less engaging response to Bruenig. He added a brief update to his original post and claimed Bruenig’s argument did not pass the smell test because of how bad insurers are at extracting profits because they themselves are less profitable than the rest of the S&P500. Bruenig quickly responded that Smith was essentially smelling up his ass and that there is exact data on where the administrative expense bloat comes from in a cross-examination between Medicare FFS run by CMS and the insurance equivalent.
Levitz chimed in on Bruenig and Smith’s quarrel about how funny it was that all three authors want the same exact system but potentially disagree on structural barriers to getting to that system. He reiterated that our distaste for insurance companies should not stand in the way of them doing something beneficial to the public.
I wish I could provide expert insight on who exactly is correct or wrong, but I can provide insight from a guy who is learning all of this for the first time and who has, at the very least, taken an intro to macro and microeconomics course!
Often, I hear that our healthcare system is inherently flawed, but the innovation it produces is 10x that of other industries around the world. There has to be some truth in this; we did develop the COVID-19 vaccine in record time, right? But something does not add up here. In essence, our healthcare innovation would then subsidize every other country worldwide that buys the products developed by our medical and pharmaceutical fields but not our own. It cannot be the reality that to have such medical advancements, we have to be the country that reaps a low amount of positives from said advancements relative to comparable countries around the world.
Something that is clear to me is that I am completely convinced there are numerous bad actors at play here. Both providers and insurers enjoy our multi-payer system in the state that it exists today as it allows them to charge more and reap more profits. This whole debate has only reiterated my desire for a system like in the UK, where we have a public option without the abolition of private insurance, though that is not perfect either.
Finally, I want to put my two cents about healthcare reform here. It should come as no shock that Americans talk one way and vote another. The irony that we are having this conversation in the wake of electing Donald Trump to a second term in office is not lost on me. Still, many Americans resist the Affordable Care Act (ACA), with people not knowing that “Obamacare” is the same thing. However, we are finally at a point where the ACA is quite popular, so much so that at this point, President-elect Trump has been saying he saved the legislation, much to the chagrin of the people who actually saved the legislation from Trump’s efforts to destroy it back in 2017.
I bring this up because healthcare change can take a lot of work to achieve. Look at the latest YouGov poll from earlier this month. People are much more likely to have a favorable view of their personal healthcare plan than the system at large. Funnily enough, this phenomenon can also be seen when you ask people about their local representatives and Congress as a whole; people love their representatives but think Congress is a mess! This is all to say there will be immense struggles in the effort of healthcare reform, not least of which will be to keep whatever we have intact during the Trump administration over the next four years. Beyond that, there will be immense fear-mongering and opposition to attempts to implement a public option in the United States.
So, to the extent that I have summarized the online debate about provider vs. insurer administrative bloat and who is to blame, I have almost certainly made mistakes. If you have any corrections or opinions, please feel free to share them in the comments.
Once again, this illuminates how toxic our media environment can be. In defense of an actually good policy proposal, said defense has either been embraced or turned into a defense of lousy insurance practices or, at the very least, has brushed them aside. I am almost positive I missed another’s input into the conversation, but amongst these three authors, the discourse was constant and ripe for consumption.
Anyway, it sucks the Anthem policy decision was reversed, but do not let that sentiment mistake you into thinking that insurers play no role in our messed up system. They absolutely create roadblocks to progress, arguably significantly larger ones than providers.
See you next week!
-Lex
Last week, I included definitions at the beginning, but there were so many for this article that I have put them here for those who may be unfamiliar with the terms discussed above.
Definitions
Single-Payer: A system where one entity collects and pays for all healthcare costs, usually the government. Medicare is an example of such a system, as all of it is managed and run by the government. Such a system is supported by people who believe it will drastically reduce administrative waste.
Multi-Payer: A system where many different entities operate with various plans. There is no consistent one-size-fits-all with numerous factors, such as age, sex, gender, etc., at play when it comes to what plan you fit into. A criticism of this system is the large amount of administrative waste that is produced by having to have such a vast array of plans conform to regulatory standards.
Public Option: An alternative to private health insurance run by the government to compete with them. An example of this is the National Health Service in the United Kingdom.
CMS: The federal agency that provides health coverage to more than 160 million through Medicare, Medicaid, the Children's Health Insurance Program, and the Health Insurance Marketplace. CMS works in partnership with the entire healthcare community to improve quality, equity, and outcomes in the healthcare system.
Cartel (Economics): A cartel is an organization created from a formal agreement between a group of producers of a good or service to control supply or to regulate or manipulate prices. From my understanding, an example would be the numerous providers that lobby to keep single-payer and Medicare expansion down, and also depresses the number of doctors in the industry to begin with. However, this could be an exaggeration of said behavior.
Rent-Seeking Behavior: The goal of a firm or individual is to expand one’s wealth by extracting rent without contributing to the overall productivity of society. From my understanding, a provider charging more for anesthesia in this case would be rent-seeking behavior. They expand their own wealth while providing no added value to society. This is the behavior that insurance companies often fail to address, and by which Anthem billing at CMS rates for anesthesia was attempting to combat.