MANAGED CARE REFORM: Would Be Costly, Barents Study Says
A new cost-impact study of several leading managed care reform proposals predicts major job losses and significant growth in the number of uninsured Americans if the reforms are enacted. Commissioned by the American Association of Health Plans, the study estimates that allowing patients to sue their health plans would increase costs by between 2.7% and 8.6%. The analysis, conducted by the Barents Group of KPMG Peat Marwick, also estimates that defining health plan utilization review activities as equivalent to the "practice of medicine" will increase costs by between 2.2% and 6.9%. Eliminating a health plan's ability to determine whether a particular service is "medically necessary," the study finds, would increase costs by between 4.1% and 6.1%. Finally, the study concludes that requiring a health plan to contract with "any willing provider" would increase costs by between 6.6% and 8.6%. If the four reforms are enacted, the study predicts that as many as 240,000 people could lose their jobs by 2003 and 1.8 million people could lose their health coverage. AAHP President Karen Ignagni said, "The debate thus far has been conducted as if mandates cost nothing and cause no harm. That is simply not true -- their cost and their potential for harm is extraordinary."
Cost To Consumers
According to the Barents study, if the new provisions expanding health plan liability are enacted, working families would have as much as $1,512 less in take-home pay per household from 1999-2003, as wages are cut to offset higher premiums. If the costs of the reforms are shared by employers and workers, Barents estimates that businesses would pay an extra $94.1 billion ($1,284 per worker) in extra premium costs for their workers over five years. Between 1999 and 2003, households nationwide would pay $22.7 billion more for health insurance premiums. Additionally, the federal government would pay $2.9 billion, and state governments would pay $3.5 billion extra to cover the cost of providing health insurance for their employees over the same period (AAHP release, 4/27). A summary of the Barents findings (in pdf format) is available on AAHP's Website. Registration is required, but the online access is free. Click here for the registration page.
Rallying The Troops
Seizing on the Barents findings, a U.S. Chamber of Commerce official said the group "would recommend its members stop providing health insurance to [their] workers if Congress passes legislation extending liability to health plans and employers," CongressDaily/A.M. reports. Bruce Josten, the group's executive vice president, said, "Liability expansion directly threatens the future of employer-provided coverage" (4/28). Josten's remarks came at a Health Benefits Coalition press conference convened to highlight the Barents analysis, which looked specifically at Rep. Charlie Norwood's (R-GA) Patient Access To Responsible Care Act (HR 1415/S 644) and the Democratic leadership's Patients' Bill of Rights Act (HR 3605/S 1890). Coalition members sent a letter to Congress yesterday expressing united opposition to all legislative proposals to expand the liability of health plans and employers (Health Benefits Coalition release, 4/27). National Association of Manufacturers Vice President for Human Resources Policy Patrick Cleary said, "It comes down to a clear-cut decision: do we want to provide the best possible care to workers and their families or will we choose to drive up health care costs? The end result of increased liability is a lose-lose situation: either employees will be faced with greater health plan contributions, or they'll have to go without coverage altogether as employers drop health care benefits because of the high costs of liability exposure" (NAM release, 4/28).
From The Other Side
Responding to the Chamber of Commerce official's warning about employer-sponsored health care, Rep. Norwood said: "To think that an executive of the U.S. Chamber of Commerce would threaten the health care of tens of millions of working families unless these lobbyists get their way is tragic, inexcusable and unconscionable." Norwood noted that the Barents analysis "stands in sharp contrast to four earlier studies" looking at the cost impact of his legislation. "The Barents study is so far off the mark that it's of no use in this debate. But for the sake of argument, if Barents' worst estimate was valid, then the managed care lobby is justifying the elimination of health care for half the nation, all for the sake of $14.62 a month. I believe that a life is worth far more" (Norwood release, 4/27). Consumers Union said it is "skeptical" about the Barents projections: "These are the health plans that are expected to increase their premiums about 10% next year, hardly making health insurance more affordable for low- and middle-income households. AAHP's new found concern about health care affordability appears to be a self-interested attempt to deny consumers the right to hold health care plans accountable for egregious mistakes that cause severe injury or death" (release, 4/27). Jamie Court, the head of Los Angeles-based Consumers for Quality Care, said: "The HMOs' phony, self-serving study completely fails to take into account the deterrent effect of liability laws which reduce preventable medical negligence, an epidemic that adds $60 billion annually to the health care system, according to the Harvard School of Public Health. The HMO industry would produce a study showing the Ten Commandments increase health care costs if they felt 'thou shall not kill' ever jeopardized their profit margins" (release, 4/27).