The major goal of this bill continues to be to extend health insurance to all people living in the US. It is accepted without debate that not having health insurance is a severe health risk. The truth is actually much more complicated, but that is another discussion for another day. This bill goes far beyond simply increasing access to health insurance, however. The bill contains an almost endless list of studies, experiments, demonstration projects, and health improvement initiatives geared to making people healthier.

The following list describes some of these initiatives:
• Establishes the Center for Quality Improvement and Patient Safety to identify best practices and healthcare delivery process improvements
• Medical Homes will be funded to provide medication management services for specific patients that includes in-home services
• Funds a program to develop patient decision aids sensitive to cultural issues to help patients make the right healthcare choices for themselves
• Establishes an Office of Women’s Health to focus on how to improve healthcare for women
• Creates a National Prevention, Health Promotion, and Public Health Council to reduce incidence of preventable illness and disability (includes reduction of tobacco use, sedentary behavior, and poor nutrition)
• Funds more School-based clinics
• Provides for funds to study ways to improve oral health care
• Allows Medicare to pay for a physician visit to put together a personalized prevention plan
• Directs Secretary of HHS to determine which preventive services should be covered by Medicare without co-pays or deductibles
• Funds a tobacco cessation program for pregnant women covered by Medicaid
• Directs the Secretary to research incentives that could be implemented to change risky behaviors in the Medicaid population
• Requires manufacturers to make sure that new healthcare technology is accessible by the handicapped
• Provides funding to increase immunizations
• Requires chain restaurants to label their food with nutritional values
• Funds community centers to develop individualized wellness plans
• Requires employers to provide reasonable break times for nursing mothers
• Creates an initiative to combat childhood obesity
And many more…

Sadly, they left out my favorite health improvement idea. Studies have shown that people with pets tend to be happier and live longer. The authors of this bill should have funded a program of buying everyone a government approved pet. The good news is that this idea and any others that are left out can be added later. The bill calls for the establishment of many new Offices, Centers, and Commissions that can add new programs and initiatives as studies indicate their value.

Clearly, there was a heavy dose of academic input into this bill. Academics love to create studies and recommend courses of action that address the problems and implement the solutions identified by their studies. Obviously, the political sponsors of this healthcare bill have bought into the above academic ideas in a big way. The question is why they have done so now? The answer is embedded in the language that accompanies almost all of the health improvement initiatives. The ultimate goal is healthcare cost reduction. These collective initiatives are one of the cost reduction strategies the sponsors hope will not only pay for the cost of this entitlement, which will be much greater than projected, but also cover the ever growing government deficits caused by the Medicare and Medicaid programs. They are gambling big that healthcare costs can be driven down by preventive and wellness care. They are gambling with their political futures and perhaps the solvency of the US government.
Unfortunately, their gamble is going to fail because of the inherent immutable truth of the lead into this piece. Whatever other benefits these initiatives will generate, cost reduction will not be one of them. A simple thought experiment and real life example demonstrate this fact. Think about what would happen to the national cost of healthcare if an inexpensive cure for cancer was found tomorrow. The academic answer would be that healthcare costs would decline significantly. All the costs associated with diagnostic tests, surgery, chemotherapy, radiation therapy, and other related treatments would disappear overnight. The real answer, however, is that healthcare costs would decline in the short term and then begin to increase again until the increase swamped any savings generated by no longer providing cancer services. The reason is that anything that extends life almost certainly causes an increase in healthcare costs over time (as well as increasing the costs of non-healthcare programs like Social Security). Only the mix of healthcare services that are utilized would change assuming overall access to healthcare remains unchanged. Because cancer would no longer end people’s life prematurely, more will have to be spent on the increased incidence of other chronic diseases associated with aging such as congestive heart failure and dementia. Perhaps the best real world example of this conundrum involves cigarette smoking. It is very clear that the significant reduction in the number of people in the US who smoke cigarettes (from 37% in 1970 to 22% in 2003; a 40% reduction in the number of smokers over that time) has had no impact on the rate of inflation in the nation’s healthcare costs. Despite this reality, the federal government still publishes reports on how much cigarette smoking is costing the nation in terms of healthcare expenditures.

Hopefully, there are better strategies being considered than the ones discussed here to “bend the healthcare cost curve”. If not, the light at the end of the tunnel is a train.

It is generally agreed that the recently passed House Reform Bill will cause healthcare costs to explode. Providing more people with insurance coverage and making certain services free to the patient (e.g. there will be no cost sharing for preventive services) will cause an explosion in demand. As the Massachusetts experiment has shown, the only restraint on the increase in demand will be the shortage of physicians, especially primary care physicians.

This is not to say that none of the provisions in the Bill address healthcare costs. It is worth reviewing some of these provisions.

Reducing Fraud and Abuse:

The Bill increases funding for fraud and abuse investigations. Congress learned in the 1990s after passage of the Kennedy-Kassenbaum Bill that there is potentially a lot of money to be recovered from misbehaving providers committing Medicare fraud. There have definitely been some egregious cases of fraud where providers have engaged in scams to get Medicare reimbursement for fictitious services. For the most part, however, this fraud is small dollar fraud relative to the size of the Medicare budget. The big recoveries have come from cases where the fraud was dubious at best and at worst were attacks on specific industries or companies. The actions against lab companies, home health agencies, dialysis companies, and Columbia/HCA in the 1990s and early 2000s come to mind. The accusations mostly involved different interpretations of various regulations between Medicare and the providers. In most of the cases, the government decided to go after providers for long established practices that were well known. This is not true fraud and speaks more to the complexity of Medicare’s regulations and the government’s incompetence than anything else. If the government goes after major recoveries based on “new” interpretations of what is acceptable practice, no cost reductions are being accomplished. Medicare will recover the funds, but the providers will have to seek other revenues to replace what is lost and cover the fines. As they have for 50 years, they will look to private insurers (if they are still around). This is cost shifting, not cost reduction.

Establishing Clinical Standards:

Perhaps the more interesting cost-control provision of the Bill establishes a Center for Comparative Research inside the Agency for Healthcare Research and Quality. The purpose of this new Center is “to identify the manner in which diseases, disorders, and other health conditions can most effectively and appropriately be prevented, diagnosed, treated and managed clinically” i.e. this Center will be establishing new clinical standards. For opponents of the Bill, this Center is the dreaded “Death Panel”. They fear that the Center and its related Commission inevitably would establish standards that limit care for cost reasons. However, to avoid this criticism, the following language was added to the Bill:

“Nothing in this section shall be construed to permit the Center or Commission to mandate coverage, reimbursement or other policies for public or private payers.”

“Nothing in this section shall be construed to authorize any Federal officer or employee to exercise any supervision or control over the practice of medicine.”

The Bill’s opponents can decide whether these latter two provisions provide enough security from the federal government meddling in people’s healthcare decisions. From my perspective, it is simply a missed opportunity for the government to initiate some meaningful reform. The lack of consistently applied and dynamic clinical standards is perhaps the greatest weaknesses of the healthcare system today. No other industry operates in such a manner. This lack of standards makes it impossible for insurers to adequately describe what they cover (or do not cover) and for patients to understand what they should expect from their providers. This vacuum leaves the door wide open for attorneys to sue providers and insurers for their decisions when their client did not get the desired outcome. Without standards, there is always an “expert” available to say that the care could have been better. The lack of standards also allows many medical device and pharmaceutical companies to market inferior, more expensive, and sometimes even ineffective therapies in partnership with bought off medical researchers.

While undertaking comprehensive healthcare reform, the government has a real opportunity to bring some discipline to the provision of medical services. The physician’s decision to order tests or treatments is always an exercise in probability. The current system that exposes doctors to severe malpractice risks and financially protects patients from the cost of their care leads physicians to order tests and treatments that have a low probability of providing useful information or getting effective results. Clinical standards that are developed after consideration of clinical probabilities and costs of various treatment alternatives could be very helpful to physicians. While physicians have been generally resistant to these efforts, I believe their concerns can be addressed. If the standards are tied into protection from baseless malpractice suits, physicians will be more open to the idea. The process for setting standards would have to be dynamic so that they change as new technology and information become available. They would also have to clearly indicate where physician judgment is necessary. Most importantly, insurance companies should be allowed to make coverage decisions based on these standards. Their decisions could be reviewed by an outside panel where there is disagreement. Because the standards would be based on an evaluation of probabilities, patients should always be allowed to pay for tests and treatments that are not within the standards. Research companies could also pay for “non-covered” services for their purposes.

It is absurd to think that when the government gets to the point that it is paying 60 to 70% (whether this is appropriate is another discussion) of the nation’s healthcare bill that it should not make decisions about the value of what is being purchased. It is the same discretion that any intelligent person exercises when a significant purchase is being considered. Unfortunately, the House Bill is setting up the scenario where the government will eventually pay a large percentage of the nation’s healthcare bill and have to forego a valuable tool to manage its expenditures. It is a missed opportunity.

At first glance, this would appear to be a significant and positive change for the future financial stability of hospitals. Under the old bill, the government plan would have had such an enormous advantage over private insurers in terms of what it paid providers in general and hospitals in particular that it was hard to see how the private insurers could survive. Their decline and eventual demise would have eventually reset provider rates across the country to Medicare rates, which do not cover the cost of operating hospitals by today’s standards.  Furthermore, the Health Choices Commissioner (HCC) was given power to restructure the payment methodology for providers that potentially could have caused even more havoc in the industry (the Bill still allows for experimentation with the Medicare payment methodology).

However, after reading the new House Bill that just got passed by the House, it appears there really is not much of a reprieve for providers if this Bill or something like it becomes law. The (HCC) was given even more powers to regulate the private insurance industry than the previous bill. These new powers in essence make all the private insurers de facto government run plans. The single most important new power is to approve annual premium increases. This gives the HCC the same power that the States have over their public utilities. There are several big differences however.  In my state, the Corporation Commission that has control over the public utilities rates is governed by an elected Board. They are not accountable to the State’s governor. The decisions of the Corporation Commission also do not significantly affect the State budget. As expensive as utilities can be, they do not make or break the State budget. By this bill, the HCC will be accountable only to the President and will have a powerful voice in how much the federal government pays for healthcare. The federal budget for this program will be significant and it will be very politically sensitive. 

The future HCC is going to face the inevitable squeeze of being between a rock and a hard place. As premiums continue to increase faster than inflation (as there are no cost reducing measures in this bill), the cost of the government provided affordability credits (subsidies to low income individuals and families to buy insurance) will rise as well. This will increase the pressure of the program on the government budget at a time when deficits are already projected to be high. One way to mitigate this budgetary pressure will be to fix the value of the affordability credits. If this is done however, the share of the premiums that lower income people will have to pay out of their own pocket will become unaffordable. This will be politically unacceptable. The other alternative will be to just tell the insurers that they cannot raise their rates as much as requested. This will be much more politically acceptable and reduce the pressure of the program on the government deficit.

By the time the above occurs, the insurers will also be restricted by the government’s target of maintaining at least an 85% medical loss ratio. As a result, they will not have the resources (or power) to implement tough new utilization standards that could help them reduce costs. They will not have any choice but to deny providers’ rate increase requests, the only cost they will be able to control (the government also dictates the benefit structure of each plan). Providers will not really have any alternative to accepting what the insurers offer because all the insurers will be forced to operate almost exactly alike. Providers could receive a double punch at this time. In recent years, providers have negotiated new rates with insurers to not only cover their increasing costs, but to also make up for the inadequate increases of Medicare and Medicaid. If the federal and state governments are limiting increases to providers through these programs at the same time, providers will feel enormous financial stress.

Eventually insurers and providers may again choose to experiment with capitation contracts (it is likely such a change would require government approval). Powerless insurers will want providers to take more risk for utilization and prices. Providers may prefer to take risk rather than accept pricing limits hoping that they can implement effective utilization and cost controls on their own. It seems that no matter what eventually occurs with healthcare reform, hospitals will have to become very innovative in lowering their costs.

(that are never properly considered)

Two healthcare reform proposals have dominated the debate to date; the public option and how to finance the additional cost for universal coverage. However, there are some other significant changes in the House Bill that the general public would find hard to understand that would nevertheless dramatically change the healthcare system if passed.

The new Health Commissioner that will oversee the Health Choices Administration will have enormous powers over the new healthcare exchange and private QHBPs (qualified health benefit plans). The healthcare exchange will act much as the Massachusetts Connector and provide a marketplace for individuals and small employers to purchase insurance. In essence, it will allow individuals and small employers to increase their purchasing power by forcing insurers to put them into large risk pools.

Some of the requirements in the House Bill for QHBPs are as follows:

• May not consider pre-existing conditions
• Guaranteed issue and renewability
• Premium rate variability:
  • Age – limited to 2-1 ratio from most expensive age group to least expensive
  • By area
  • By family make-up; ratio to individual premium must be consistent
• Parity in mental health and substance abuse benefits to medical benefits
• Must meet minimal medical loss ratio established by Commissioner; if does not meet it must make a refund to subscribers
• No annual or lifetime limitations
• No deductibles or co-pays for preventive services
• Limit to annual out-of-pocket expenses; $5,000  per individual, $10,000 per family
• Basic plan benefits must cover 70% of the expected cost of healthcare for the population; enhanced plan must cover 85% and premium plan must cover 95%

Some of the powers of the Health Commissioner are as follows:

• Commissioner has right to determine adequacy of network and force an insurer to pay in-network rates where their contracted network is deemed inadequate
• Commissioner can adjust premiums revenues among plans to adjust for adverse selection
• Under the public option, the provider payment mechanisms and policies may be changed from the Medicare methodology to include patient-centered medical home and other care organizations, value based purchasing, bundling of services, differential payment rates, performance or utilization based payments, partial capitation, and direct contracting with providers.

                The Unintended Consequences of Healthcare Reform – #1
                The Unintended Consequences of Healthcare Reform – #2
                The Unintended Consequences of Healthcare Reform – #3 Part 1
                The Unintended Consequences of Healthcare Reform – #3 Part 2
                The Unintended Consequences of Healthcare Reform – #4

Native defenders of the Canadian system are firing back at American critics. These Canadians defenders refute the allegations that there are long waiting lines for elective services, that many Canadians come to the US for care they cannot get or wait to receive in Canada, and that Canadians are unhappy with their system. They have some impressive statistics from a government study (Healthy Canadians: Canadian government report on comparable healthcare indicators) that back their arguments.  

• The median wait time in Canada to see a specialty physician is a little over four weeks with 89.5% waiting less than 3 months.
• The median wait time for diagnostic services such as MRI and CAT scans is two weeks with 86.4% waiting less than 3 months.
• The median wait time for surgery is four weeks with 82.2% waiting less than 3 months.
• The median wait time in Canada to see a specialty physician is a little over four weeks with 89.5% waiting less than 3 months.
• 85.2% of Canadians reported that they were “satisfied” or “very satisfied” with the way health care services are provided in their country and an even higher number (89.8%) rated their physician in the same way though slightly lower ratings were awarded to hospitals (79.9% being “satisfied” or “very satisfied”).
• Only an estimated .5% of Canadians get their care in the US (Canadian National Population Health Survey Study).

People in the US may be able to get services faster than described above, but for many people getting insurance authorization for different procedures increases the waiting time closer to what Canadians experience. It is also doubtful that the extra wait times in Canada are significant to their clinical outcomes.

In the hyperbole of the debate however, the real difference in the US and Canadian systems is being missed. A 2005 report  by the Canadian Institute for Health Information (Medical Imaging in Canada) comparing MRI and CT utilization in the US and Canada highlights the real differences in the two systems.

The U.S. performed more than three times the number of MRI exams, reporting 83.2 MRI exams per 1,000 population in 2004–2005, compared to 25.5 in Canada and 19.0 in England. When comparing CT exams per population, the U.S. performed nearly double the exams, with 172.5 CT exams per 1,000 population, compared to 87.3 in Canada (Medical Imaging in Canada; Canadian Institute for Health Information).

 A very old study shows a similar pattern for coronary artery bypass surgery (Use of coronary artery bypass surgery in the United States and Canada. Influence of age and income; Institute for Clinical Evaluative Sciences, Ontario, Canada 1993)

There is little doubt that there would be similar findings with other clinical services. The real debate then should be about the value of the “extra” tests and procedures being done in the US, who should decide what is valuable, and who is going to pay for those decisions? Currently, physicians and their insured patients decide what is valuable and then send the bill to the government or their employer who have little to no say in the decision. This is the most untenable of situations. Demand for services far outstrip the value they produce. A popular number in the literature is that 30% of all healthcare services provided in the US are unnecessary.

 In a single payer system run by the government, the government is going to decide what is valuable. In a true free market system, the patient decides with advice from his or her doctor and then pays for that decision. As employers cut back on insurance benefits for their employees and in the absence so far of a significant government takeover, the US is moving toward the free market approach by default.  No matter whether the US moves toward a free market system by default or a single payer system by law, the utilization of elective healthcare services per capita is going to eventually decline and that is something providers better start considering in their long term future plans.

Just as in Part 1 above, providers will benefit by more people being covered. Bad debt should decline and volumes increase fairly quickly. And just as above, the healthcare cost problem is going to be exacerbated going forward. At some point in the future (when Medicare and Social Security are substantially increasing the annual deficit, the new healthcare entitlement is more costly than expected, and the government’s ongoing operating deficit is unsustainable), the federal government will again have to take on the issue of healthcare costs. At that time, there will not be as profound an access problem complicating the debate. This new debate will focus on controlling healthcare costs.

To see into the future about how the government will proceed, it is best to look at the past. The major Congressional initiatives to control Medicare costs after they started to get out of hand were to implement the CON program in the early 70s, begin implementing prospective reimbursement in the early 80s, increase the anti-fraud efforts in the 90s, and reduce provider annual increases in the 2000s. Not once during any of those times was there a serious discussion about cutting back on Medicare benefits. Nor is there any reason to believe there will be any serious discussion of this possibility in the future. The baby boomers will be a large voting bloc that no politician will want to upset. Considering that a vast majority of this group will also not be financially prepared for retirement, they will vote to hold onto as many government benefits as possible. As in the past, the government will focus on a variety of ways to reduce their payments to providers.

It would seem that no matter whether there is a robust public option included in the current reform effort or not, the future challenges facing hospitals and all providers are fairly well mapped out. At some point in the future, providers are going to be faced with the challenge of how to survive with fewer revenues while the demand for services is rising. The providers that can establish clinical standards to ensure that each service provided is clinically “necessary” will be way ahead. The greatest barrier to setting such standards will likely not be physician obstruction. The greatest barrier will be the liability risk for limiting services based on low probabilities of clinical harm to patients.

                The Unintended Consequences of Healthcare Reform – #1
                The Unintended Consequences of Healthcare Reform – #2
                The Unintended Consequences of Healthcare Reform – #3 Part 1
                The Unintended Consequences of Healthcare Reform – #3 Part 2
                The Unintended Consequences of Healthcare Reform – #4

Much has been said about the impact on insurers and physicians if the robust public option is implemented. Less has been said about the impact on hospitals. The immediate impact on hospitals will be a reduction in their average reimbursement per patient encounter. The “robust” public option will pay providers Medicare-like rates. Some analysts have estimated that Medicare on average reimburses hospitals between 30 to 40% less than private insurers. As subscribers move from their private plans to the public option, hospitals’ revenue per patient encounter will begin to decline.

The upside for hospitals is that bad debt as a % of revenue will also decline if most people are covered after the reform is implemented. In fact, the dollars written off to bad debt should decline much faster than reimbursement. This is because universal coverage will be implemented immediately while the transfer of people to the public option will occur over time. Patient volumes should also increase. History shows very clearly that insured people increase their demand for healthcare services.

As a result, hospitals could enter into a last golden age that may last for 3 to 7 years. After this period ends, an extended dark ages would appear to be inevitable. As many critics have pointed out, the reform initiatives currently on the table will not reduce the % of GDP currently spent on healthcare. This reform’s major accomplishment will be to create a new entitlement.  The notion that giving healthcare access to the uninsured will make them healthier and therefore less expensive in healthcare terms has never panned out. People with insurance coverage continuously demand more healthcare services than those who do not have it. Healthcare costs for the country as a whole and the government will rise at an even higher rate that the already high rate experienced during the last decade.

It seems that most everyone no matter what their ideology or position is on the current debate agrees that the US must reduce what it spends on healthcare services. The government will have basically two ways to reduce its healthcare costs when it finally gets serious; cut benefits or reduce the costs of providing those benefits. History teaches us that governments only rarely cut back on the benefits they offer to voters. It is much more politically palatable for governments to cut costs or raise revenues from either a small group of voters or from institutions that do not vote. The other option of course is to just borrow more money and not deal with the problem. It would seem that the clock is ticking on this latter strategy for a whole host of reasons. 

Hospitals can be sure that no matter what else happens their reimbursement will be one of the first targets for cuts when the government needs to rein in its budget. If there is any doubt, review what is currently happening in Massachusetts, which is some years into its universal healthcare experiment.  There is a very serious proposal on the table to convert providers to a capitation reimbursement system. Such a system would allow the State government to set an annual healthcare budget at a specific amount and put the financial risk for cost overruns on providers.  As hospitals learned in the 80s and 90s, this is a prescription for fiscal disaster. To survive hospitals will have to successfully reduce the level of services provided to patients despite patients having the same high expectations for services they have always had and doctors being more concerned about lawsuits than the hospitals bottom line.  Cutting hospital reimbursement will reduce healthcare costs in another way besides just paying hospitals less money. The number of institutional providers of all types will decline. Lowering the number of providers will act as a cap on how many healthcare services can be delivered. Rationing will ultimately occur not by government policy but by default. It is worthy to note that the Healthcare Commissioner is given the power to implement a capitation type reimbursement system in the future.

                The Unintended Consequences of Healthcare Reform – #1
                The Unintended Consequences of Healthcare Reform – #2
                The Unintended Consequences of Healthcare Reform – #3 Part 1
                The Unintended Consequences of Healthcare Reform – #3 Part 2
                The Unintended Consequences of Healthcare Reform – #4

Individual subscribers will make an informed choice about what plan to purchase through the healthcare exchange. Initially, people who have utilized the healthcare system at a high rate will purchase a plan providing a high level of benefits if they can afford the monthly premium. People, who are healthy or choose minimal healthcareintervention will choose the plan that has the lowest premium and lower benefits. In other words, the plans providing the highest level of benefits will naturally experience adverse selection. If the premiums become too expensive for these plans, sick people who cannot afford these premiums will have to consider plans with lower benefits and higher out-of-pocket costs. They will be between a rock and a hard place.

It appears that the House Bill will give the Commissioner the power to address the above problem. The Commissioner can adjust the premium revenues from one plan that has healthier/lower utilizing patients to another plan that is covering sicker patients. How this determination will be made is anyone’s guess. How often the Commissioner will use such power is also hard to project. If he or she is aggressive in the use of this authority, the individual decision regarding the benefit-premium tradeoff may become meaningless. Choosing a 70% benefit plan with premiums that are adjusted upward to cover the higher utilization of the people who choose the 95% plan will not make any sense. Purchasing the higher benefit plan will be the better value.

In the scenario described above, a large percentage of the population could eventually be covered by plans that virtually protect them from paying any of the costs of their utilization of healthcare services. Utilization and costs will increase as a result. The current projections for the cost of this healthcare reform could be tremendously understated.

                The Unintended Consequences of Healthcare Reform – #1
                The Unintended Consequences of Healthcare Reform – #2
                The Unintended Consequences of Healthcare Reform – #3 Part 1
                The Unintended Consequences of Healthcare Reform – #3 Part 2
                The Unintended Consequences of Healthcare Reform – #4

If this provision is included in a final reform bill that passes, it will be another example of the government trying to make private business operate in a certain way that will have many unintended and negative consequences. The authors of the House bill want to limit insurers’ profits, executive pay, and ensure that as much money as possible is spent on actual healthcare services. They believe that limiting profits and administrative costs will ultimately lower premiums.

They will be in for a big surprise. This provision is much more likely to raise costs than lower them. For the authors of the House bill, administrative costs bring to mind some fat cat smoking a big cigar making hundreds of millions. However, there are many facets to insurers’ administrative costs. They include costs for marketing, utilization review, quality assurance, etc. These latter two are especially important. Insurers have invested significant percentages of their premiums to reduce unnecessary utilization by requiring precertification of certain expensive elected services and refusing to pay for rendered services that they determine in retrospect were unnecessary. These initiatives have created significant conflict between patients, providers, and insurers, but have been effective. Ironically, Medicare has reaped significant benefit from these efforts without paying for similar types of administrative services. As providers changed their practice habits in response to private insurers’ efforts, these new habits often carried over to how they treated all other patients including Medicare patients.  Insurers will reduce their efforts in these areas if the medical loss ratio is set too high in order to preserve some profit margin.   

Most importantly, insurers will be financially better off if healthcare costs increase in this scenario. Profit will be a function of a government established percent of premium. Nominal profits will therefore increase as premiums increase i.e. it is better to have 5% of $2 billion than it is to have 5% of $1 billion. With the government requiring all people to have insurance and putting in mechanisms to ensure no plan suffers the consequences of adverse selection, insurers will quickly shed as much administrative cost as they can and watch their profits grow as premiums increase due to higher utilization of healthcare services.

It is very dangerous to regulate a complex industry using simple formulas to determine which company is managing its business well and which is not.

                The Unintended Consequences of Healthcare Reform – #1
                The Unintended Consequences of Healthcare Reform – #2
                The Unintended Consequences of Healthcare Reform – #3 Part 1
                The Unintended Consequences of Healthcare Reform – #3 Part 2
                The Unintended Consequences of Healthcare Reform – #4