Insurers and Health Care Costs

In a recent interview, Senator Olympia Snowe commented - "We need a lever to force the [insurance] industry to drive down prices." This is a common view. Unfortunately, it's a view that contributes to public misunderstanding of the drivers of health care costs.

Single payer advocates point to insurance-driven administrative overhead - within insurance companies themselves and at provider sites to cope with the complexities of billing - as the source of runaway costs and the key potential source of savings. Single payer advocates anticipate savings from eliminating insurance companies. But these aren't the savings Senator Snowe is talking about. She, along with many other legislators, are counting on market mechanisms and competition between insurers to drive expenditures down more than on administrative savings.

Here's where the problem comes in. Insurers can only achieve non-administrative savings in two ways. Decrease the volume of services or decrease provider prices. But by putting insurers in the doghouse we've made it next to impossible for them to get a grip on either volume or prices.

We clinicians know that the U.S. buys much more medical care than than we need. As individual clinicians we may believe our own care patterns are fine, and the problem is with our colleagues. But I've never met a clinician who didn't see lots of opportunity to reduce the volume of interventions we provide, without any loss of health. But the time between any proposal to reduce the scope of what we offer and an eruption of death panel nonsense would be nanoseconds! And since insurers have been so vigorously portrayed as "villains," they can't expect much support if they try to reduce Dr. Kildare's charges.

Portraying "health reform" as "health insurance reform" may be effective politics, but we can't expect "villainous" insurers to deal effectively with our bloated care system. For the moment we've created a no-win situation with regard to cost containment. We reject reject the single payer alternative, vilify insurance companies, and then expect those "villainous" companies to carry out the delicate function of reforming the U.S. delivery system. Locking horns with providers and convincing the public that we currently purchase vast quantities of unnecessary, and often harmful, care, requires trust. And we've systematically portrayed insurers as untrustworthy.

I don't expect this impasse to be solved in the current legislative process. We've barely mentioned delivery system reform in a way the public understands. Policy wonks understand the importance of the Dartmouth Atlas and recognize that high quality systems like Geisinger, Kaiser Permanente, Mayo Clinic and Harvard Vanguard can provide better care at a lower cost. But the public doesn't get it yet, and won't until there has been a substantial educative process.

The real work of health reform will happen after whatever legislation emerges from the Congressional struggles we're still in the midst of.