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Former UnitedHealth exec Lois Quam supports public option

Though No. 1 insurer UnitedHealth Group has lobbied hard against a public option and is heavily influencing the health-care reform debate, former division executive Lois Quam says a public option "makes a lot of sense" and has a place in reform efforts.

Best hopes, worst fears in health-care reform

Quam, who left the Minnetonka-based behemoth in 2007 after an 18-year stretch, chaired the commission that created MinnesotaCare, the insurance program for low-income residents. She also served on the Clinton administration's health reform task force in 1993. And, as president and CEO of for-profit UnitedHealth's public and senior markets division, she says she saw firsthand how Medicare and MinnesotaCare have "worked well" as public options. Her support for expanded access to health care dates to her teen years.


"I was with a woman in Becker County last week who talked about how important MinnesotaCare has been to her family," Quam says in a Q&A with me. "And I hear from people, age 61, 62, 63, who really wish they were 65 and they could get into Medicare. The very reason Medicare was created in the '60s, of course, was that the private health insurance market wasn't offering affordable coverage to seniors. So I think a public plan makes a lot of sense, and I would like to see that as a part of eventual health-care reform."

Quam now runs Tysvar, a privately held incubator focused on health-care reform and the new green economy. Between her stint at UnitedHealth and founding Tysvar (named after her grandfather's hometown in Norway), she worked at Piper Jaffray as head of strategic investments, green economy and health. In 2006, Fortune magazine named her as one of America's "50 Most Powerful Women."

Her support for a public option came in response to the last question I typically ask a thought leader for the "best hopes, worst fears" series: "Anything else you want to tell me that I haven't asked you?" The conversation couldn't stop there, of course.

She also compares and contrasts the health-reform efforts of 1993 and now. And she comments on an Aug. 6 BusinessWeek article titled, "How UnitedHealth and rival carriers, maneuvering behind the scenes in Washington, shaped health-care reform for their own benefit."
 
Quam and her husband, Matt Entenza, a gubernatorial candidate in 2010, live in St. Paul with their three sons.
 
MINNPOST: What are your best hopes and worst fears for health-care reform?

Lois Quam
Lois Quam

LOIS QUAM: My best hope is that a broad health-care reform bill will be passed later this year and that the bill will provide coverage for every American and that it will control health care costs for all Americans in a way that improves the quality of care. Extending coverage has been a goal that has been important to me for my whole life. I'm from Marshall, Minnesota, and when I was growing up I had asthma. My father's a Lutheran minister so we had health insurance coverage (though it had a high deductible), and that meant I got to go to a specialist in the cities that really turned things around me.

So by the time I came out of high school, expanding health care access was central to what I hoped could be a part of achieving in my life. Now I have three sons — one in college, two who are seniors in high school — and I think about their future. … You hear so many parents say their kids are going to have trouble getting health insurance when they get into the work force, and that was really on my mind when I was the chair of the Minnesota Health Care Access Commission.

I was appointed chair the week my oldest son was born. So that's my best hope — that we get this started. Another opportunity like this to reform health care might not come along again for a while, and we should see it through.

My worst fear is nothing will get done and that it will in fact further delay further improvement. As a result, we will see more insecurity for more families and it will make it more difficult for us to come out of the recession — both because it's really difficult for individuals as they look for work and it's really difficult for American companies now to compete with companies from other countries because the difference in health-care costs is so great.

This situation is much more severe than it was in '93 [during the Clinton reform effort] and it will not improve on its own.
 
MP: Based on the perspectives gained in each of your distinct roles, what will it take to achieve universal health coverage in the United States?

LQ:
First, it will be important to have an effective public discussion about why health-care reform is important and the key steps that are required to achieve it. When I chaired the Health Care Access Commission [starting in 1989], I traveled around the state talking about the challenges that were faced in Minnesota because of high health-care costs or not having health insurance coverage and then later traveled around state outlining the key principles around a solution.

Two memories stand out: One is when I was driving between Worthington and Luverne and I heard rural radio stations talking about the commission report and how it made sense to them, and I thought that was so important. And then the outcome: Two-thirds of the members of the Minnesota House and Senate signed on as co-authors to the legislation that came from the commission. So I think that was really important.

Health care is by nature complex. It's important, despite that complexity, to put in very human terms why it's important and what it means. So, then I had the experience of working in Washington and that was a much more difficult setting to have a discussion. It's more heated. It's more complicated. There's less of a chance to sit down with people. That kind of shared sense of what we were trying to do didn't emerge in that process.

As I compare what's happening now to then in terms of the discussion, the encouraging piece is that there's been more collaboration between the White House and Congress and lots of different organizations around the discussion than in '93.

I think the difficult and disappointing thing is the tone of these town hall meetings that I frankly find disturbing. Good people can come to different conclusions with the same set of facts, and I think our strength as a country is when we use that as a basis for discussion to try to come up with something better. You can't do that if you're just trying to shout people down. Certainly in '93, there were sharp and heated discussions but there is much less respect and civility in these town hall meetings than anything I saw in town hall meetings in '93. I think that's very disturbing.

What I learned in working in insurance was first of all that health care is so deeply personal. Health care is about saving lives. Health care is about helping someone recover from a difficult illness or an accident and doing it in a way that families have financial security.

I just saw over and over again the opportunity to provide people with better care and to do it in a way that meant that they were able to not only get well but they could get well even if they were in the hospital for a while and could not work. They could do that and not get in financial trouble. I learned that especially because I had the opportunity to work with low-income families who get coverage through Medicaid. I worked with Medicare beneficiaries around the country and I worked with organizations like AARP who represent them.

What you're always taken back to in those settings is that in the end, this is about an individual family where something has gone wrong, someone's been in a car accident; someone just got a diagnosis of cancer. And it's about all the joys of having a new baby and all the sniffles and ear infections of a young child. …

The challenge that I saw year after year as health-care costs went up was the challenge that everybody experiences. As costs have gone up, it has been very tough for anybody to afford it whether that's a family or a company or a state or the Medicare program as a whole. So I think our challenge now is to cover everybody and be able to do it in a way that offers lower costs and lowers those costs in a way that improves care. I know that's hard, but from my experience, I don't think it's too hard to accomplish.

This is a great country that has done much harder things. I just have tremendous confidence that we can find a way to help everybody with health-care costs and provide coverage to everybody.

MP: Members of Congress have been sent home with talking points; the protests are taking over town halls, the spin machines are switched to full blast. President Obama has launched a website to counter the misinformation. Does it sound a little like déjà vu to you? Could you share some insights from the Clinton effort which might come in handy now?

LQ:
Three things: The first is the problems in health care are much more apparent today than they were in '93. There are very few people with insurance coverage who aren't worried about their insurance coverage, and they're worried because their premiums have gone up year over year — way more than their hourly wages or their salaries have gone up. They have higher deductibles and they're not sure if their insurance is really going to be there for them if something happens. Will it be hard to use? Will there be a pre-existing condition thing that will stop them from being able to use it?

So, you see an awful lot of people who have insurance feel very insecure about it, to say nothing of the fact that so many people are losing their jobs or have lost their jobs and with that lose their insurance coverage. I talked to a friend who got laid off yesterday and her husband got laid off a year ago, so she's been providing the health insurance coverage. They're offering her a consulting role so she might get some income but how do you get coverage? Thankfully, there's COBRA in some options but those are expensive and they don't go on forever.

In '93 we heard from a lot of people who had health insurance coverage that they felt pretty good about it and they were pretty happy about keeping it. They were worried about people who were uninsured but they didn't really identify with them. Now, the people who don't have health insurance and a lot of people who do have health insurance feel pretty much like they're in the same camp.

The second thing that's really positive about this year is the broad range of discussion [between the White House, Congress and organizations]. I think that kind of discussion and collaboration is positive. It doesn't mean everybody's going to agree on every point but it's respectful, and I think sometimes in those respectful disagreements, you come out with a better solution. That is the function of a democracy, and I think there have been elements that have worked very well in this process.

In '93, the White House worked very hard to develop a plan. It talked to members of Congress and different people, but it was the White House doing it and touching base versus this much more collaborative process.

The third thing — the thing that is the big difference — is the tone. This kind of tone we're seeing in August I just never saw [in 1993]. I was certainly in some heated town hall meetings. I remember one in Montana in particular where many, many more came to the high school auditorium than there was space for, but there was a tone of respect and politeness. People acted in ways that I think we would all be proud of most of the time.

I'm actually really disturbed to see what's happening at these town hall meetings. I think that it is not good for the country. I think the tone started in some of the rallies that Sarah Palin had, and I don't think it's a healthy tone. I think it's very important that there is respect and civility and politeness in these discussions, and then we'll get to a better solution.

MP: Critics have said that the Clinton reform effort failed because the administration didn't get early buy-in from key industry players. Even though President Obama has won concessions from various players like Big Pharma, he's struggling to gain control of the overhaul. Even Harry and Louise, the couple in the ad often credited for killing the Clinton plan, have had a change of heart about health-care reform. Are there any misconceptions about the Clinton effort that you'd like to clear up, and what could Obama and Congress do to regain their footing?

LQ:
There was a lot of touching base during the development of the Clinton plan, but there was a process that was more centralized in the White House. There's no question about that in the current effort. I think that people voted for Obama with an expectation that he would be good at reaching out to people he agreed with and people he didn't agree with, and I think he has done that in this process. In this country, I think that's very important: Our best ideas come from respectful disagreement and then coming up with a better solution.

I think the president and members of Congress should act as leaders in this situation and should call on people to have a respectful debate. They should seek the best ideas, they should be open-minded about incorporating those ideas into their current thinking, and they should call people to a respectful discussion. Then I think they should work toward pulling together a piece of legislation that's passed and signed into law, and then the hard work of implementation can begin.

MP: In your travels overseas, which country's health-care model has impressed you the most and which, if any, could work in the United States?

LQ:
I think we need an American health-care system and we do not need to borrow any other country's system. Every country has a health-care system that has some good things and difficult things about it. But I think we have the opportunity in this country to create the best health-care system in the world.

Here in Minnesota, you look at what has been created at the Mayo Clinic. I think it is the best innovation in rural health care that has ever been developed. If the whole country provided health care coverage like the Mayo Clinic did, Medicare would cost about a third less. I think Mayo is where we all love to go. We have a fantastic resource in Hennepin County Medical Center. It's a hospital that serves low-income families. It's a hospital that does absolutely top-quality health care. I think we should develop our own system, and our goal should be to be the best in the world and a beacon and a model for other countries.

MP: What would that system look like to you?

LQ:
I think it would have coverage for everybody. I think that it would have built-in ways to better reward the best doctors and hospitals and health care. I get frustrated that at times places like the Mayo Clinic aren't rewarded for providing better quality of care. Sometimes the way systems work, Medicare and otherwise, places like Mayo are disadvantaged for doing the right things. So I think we should cover everybody then develop ways that we pay and deliver that reward the best quality of care and in doing so consistently find ways to make health-care costs less for everybody.

MP: Any ideas about how that would happen?

LQ:
We've got a lot of building blocks in place. If you look at the ideas Mayo has come up with for Medicare, they've developed an interesting road map. I think members of the House had a very good discussion on how to make sure places like Minnesota aren't penalized in Medicare for having lower medical costs than Florida, and that's a good one.

I think Evercare, which is a program I was involved in when I was at United and was developed by group of nurses at the old Bethesda hospital, has done a very good job with how nurse practitioners deliver care to the frailest Medicare beneficiaries and as a result of that, cutting their hospital visits in half because they're healthier. So I think we've got those building blocks and they need to be part of a system. I think everybody needs the security of being covered in that system regardless of what happens to their job.

MP: What, if any, concerns do you have about the individual mandate becoming a key route to universal coverage? There has been some talk in the Senate of backing off of an employer mandate.

LQ:
The discussion about an individual mandate has occurred because of the changing nature of work. People change jobs much more frequently than they did 20 or 30 years ago, so the employer-based model doesn't work as well as it once did. That said, people who have employer coverage that works well for them should keep it. The key to making both individual and employer-based coverage affordable and sustainable is to improve the quality of care and make the entire health-care system more cost-efficient.

MP: Is there an idea you have that hasn't really been discussed much that might work?

LQ:
I am really interested in developing a way that places like the Mayo Clinic and Hennepin County Medical Center, which are just spectacular, can be leaders in Medicare and the new health-care reform in a way that gives them more of an image…and that gives them the opportunity to train and coach other kinds of health-care organizations around the country so that they can do a better job.

MP: If I don't ask this question, I'm pretty sure some MinnPost readers will raise the issue in the comments section. So, I'd like to give you an opportunity to address it in our interview. A BusinessWeek story mentions that UnitedHealth was forced to stop selling "limited benefit" plans with capped payouts through AARP last year. Sen. Charles Grassley of Iowa found that UnitedHealth "paid as little as $5,000 toward surgery costing several times as much." Were these plans designed during your tenure at UnitedHealth's Ovations division, and what was the thinking behind them? Anything you'd do differently?

LQ:
Thank you.

The plans that were referenced were designed prior to Ovations working with AARP, and I left United over two years ago. So, I wasn't there during the period that was referenced in the article.

The plans were designed before Ovations participated in them. Prudential had operated the AARP plans and had developed them, and then the contract was transferred from Prudential to Ovations by AARP. So, that's how that worked. With regard to the discussions with Grassley, they occurred after I left.

MP: Would you have been able to do anything about them as head of Ovations?

LQ:
When I was at Ovations, I worked very hard to try to make a difference on everything I was a part of. Because I left United over two years ago, I don't know what the specific issues that were raised were or how they have been handled after my departure.

MP: Anything else you want to tell me that I haven't asked you?

LQ:
In the current debate, one of the sharpest discussion points has been whether there should be a public option or not. This is a different discussion than occurred in '93, but it has been one of the heated parts of the town hall meetings. I support a public option because I feel that it has worked well within the current Medicare program. And, as you know, I played a key role in creating MinnesotaCare and that public option has worked well, too.

I was with a woman in Becker County last week who talked about how important MinnesotaCare has been to her family. And I hear from people, age 61, 62, 63, who really wish they were 65 and they could get into Medicare. The very reason Medicare was created in the '60s, of course, was that the private health insurance market wasn't offering affordable coverage to seniors. So I think a public plan makes a lot of sense, and I would like to see that as a part of eventual health-care reform.

MP: Why do you think there's so much resistance to a public option?

LQ:
I don't know. Medicare is so popular and it's a public option and it has worked well. Here in Minnesota, MinnesotaCare is popular and it has worked well, so I don't really understand that [resistance]. I think that sometimes people will say, "Well, we don't think the way that Medicare pays doctors is the best way." I think it's a very good idea to develop better ways than Medicare has to reward providers for high-quality care. But I think what a public plan does is provide a kind of security for people and builds on the success in these other areas.

MP: Do you think it's more scare tactics at work?

LQ:
I think there is an element of that because when you step back and you ask people whether they like their Medicare, sure people can think of things that might be a little bit different or better, but people like Medicare as a public option. When I'm in discussions, I constantly hear from people who say how important MinnesotaCare has been to them and they've thanked me for working on that because it's a public option that has provided people with security.

MP: Why couldn't public options like Medicare and MinnesotaCare work for everybody? Why is there so much resistance to a single-payer option?

LQ:
Programs like Medicare or MinnesotaCare could work as a model for the public option.

Both programs are popular with the people who are enrolled in them. When we do enact universal coverage for a targeted population, like we did with Medicare, it works. When we do expand coverage, like MinnesotaCare, it works. As we expand coverage to all, we also begin the hard work to improve the quality of care and make the system more cost-efficient.
 
Historically there has been strong opposition to a single payer-system by organizations and groups who believe such a payment system would threaten their interests, or simply not work. Then there are also just some people on principle who oppose expanded government involvement in the health-care system.

MP: What has it been like for you to observe how MinnesotaCare funding has been cut, how eligibility requirements have been toughened over the years and to hear threats over raiding the Health Care Access Fund?

LQ:
It really takes me back because I was sitting in Fairview St. Mary's hospital when I got a phone call from Rudy Perpich's office asking if I would meet with the governor later that day. They had tracked me down from my office. They didn't know they were calling a hospital. And I said, "Any other day I could rearrange my schedule but I just had a baby (12 hours before); could I meet with them in a couple of days?" [She chuckles.] There was just stunned silence on the other end of the phone.

So that was on a Monday morning and I think I met Perpich that Friday at the State Fair, which is when he named me head of the commission. My son, Ben, came with me to many commission meetings in his little bed. He is now 19 — he'll be 20 later this month — and he's 6-foot-4. When MinnCare was passed into law the first time and vetoed [by Gov. Arne Carlson], that was also very evocative for me because I went into labor with our twins when it was vetoed.

Then there was a very good effort by the Legislature and Governor Carlson to put together a new package, and it was signed into law. I think it has been a program that provided security to people; it's been well-funded. I would have very much thought it would have been possible to have everybody in Minnesota covered by now. ... I have been disappointed when [Gov.] Tim Pawlenty has cut it because I think it does so much good for people.

I give you that sense of the context because I think that 20 years is a long time, and it is time that we address this [universal coverage]. I think we can be very proud in Minnesota of MinnesotaCare and of having a public plan that has been so successful.

Casey Selix, a news editor and staff writer for MinnPost.com, can be reached at cselix[at]minnpost[dot]com.

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Comments (22)

"Even Harry and Louise, the couple in the ad often credited for killing the Clinton plan, have had a change of heart about health-care reform."

Not so much. They are just being paid by the other side this time around...kind of like Lois.

My God, this interview is rich.

After having taken the money, Ms. Quam is now in the process of running. It's such a shame she didn't advocate these views when she was in a position to implement them.

Mr. Swift,

The actress who played "Louise" is very much in favor of extensive reform. She favors a single payer option. She has given several interviews on the subject and very much regrets her role in derailing reform in the '90's.

http://warner.blogs.nytimes.com/2009/08/09/louises-second-act/

HMMMM. Accusations, but no actual refutation of what Ms. Quam, from the very-well-educated perspective of an insurance insider, has to say... priceless! (and useless.)

The reality underlying healthcare reform is that there's no profit to be made in insuring the sick and the elderly. Consequently, the private non-profit and for-profit insurance companies will, without sufficient regulation or incentives, simply find ways not to cover those people or pay claims for them even if they are insured.

Of course in this largely unregulated vampire economy, even the young and those who are not sick are simply used by the insurance companies as a plentiful source of blood (money) to be sucked out of people's lives and livelihoods, not to cover the claims of the unfortunate, but rather, to pay dividends to the investors and outrageous salaries to the executives.

The days are long since passed when insurance companies, especially health insurance companies, regarded their purpose as serving the needs of those buying policies from them. Now the purpose of those insured and those employed by the companies is to serve the perceived needs of the investors and the executives.

THIS is why we need healthcare reform. At least in this case, the government is NOT the problem. "Free market capitalism" as it's come to be practiced, IS the problem.

Thank you, Greg Kapphahn! And Boo! to TS. I no longer bother to read his posts. His mind is made up, and so is mine. The difference is that one of us adheres to reality, as does Mr. Kapphahn.

Thank you to MinnPost for making space for long-form pieces like this and allowing it's staff writers the opportuninty to really dig into issues. This is what's missing from today's newspapers.

Yes, I know the "know-nothings" of today wouldn't read an article like this (if read at all), but there are others in the greater public who would. But now it's not available to them. Just like the lack of coverage of town hall meetings, there is a lot to be learned out there, but we'll never know it because no one is bothering to report on it.

Bravo! And keep up the good work!

Do you think Mr. Lois Quam's campaign was getting a little nervous about the liability of the candidate's wife as a former stock-option-grabbing CEO at UnitedHealth? I'd be curious to know how this story came about.

Meanwhile, here are a few facts you forgot to ask Lois about--

http://tinyurl.com/r7w6e7

http://tinyurl.com/qaf53h

http://tinyurl.com/qdt78p

http://tinyurl.com/qoarqj

Thank you for offering more information about Lois Quam than the oft-repeated charge that she made her fortune and then quit her job. She has work hard to improve health care access and obviously seeks solutions to the current problems with our health care system. (Excuse me, our health insurance system.)

I have one quibble: Mr. Obama's White House advisors are actually advocates for hanging on to the current system of private insurance except for (1) some tweaks that they/we hope will end the industry's most egregious abuses of its customers; (2) will reduce costs (a bad joke, since the plans under offer are modeled on the failed Massachusetts plan). To make matters even worse, some members of Congress are letting the industry help write their bills (Baucus et al.) and some Dems are helping the president sell the program in the hope that a public option survives to reach the floor.

And one disagreement: While the administration did talk to "many" people and the president even referred to them as (if I'm recalling this correctly) "all the stakeholders," the stakeholders left out of the discussion were we patients and voters (over 60 percent of Americans) and health care professionals who want a truly universal, taxpayer-funded but privately provided, saver of $400 billion per year single-payer national health care plan. Health CARE.

George asks how did this story come about. When I came up with the idea for a "best hopes, worst fears for health-care reform" series, Lois Quam immediately came to mind.

Why? She has the unusual experience of having chaired the commission that came up with MinnesotaCare, she served on Hillary Clinton's task force in 1993, she once worked for a for-profit insurer that has become a formidable player influencing the reform debate, and now she's running an incubator for NGE and health reform.

No one from her office or her husband's office called and suggested I interview her. I made the initial contact and pressed for a Q&A.

Here is a link to a Wall Street Journal story about her departure from UnitedHealth. The story mentions that her resignation was not related to the options backdating scandal that led to CEO William McGuire's departure and numerous multimillion-dollar settlements.

http://online.wsj.com/article/SB118774354527904775.html

This sentence may be of interest to readers who are concerned about the options she received as part of her executive compensation package:

"Ms. Quam, 46, was never involved in pricing options, though she volunteered to forfeit any potential gains from backdating."

Hi Greg Kapphahn - In re: your comment there are no profits to be made in health insurance. How can you stop at the insurers? Hospitals, doctors' groups, and pharmaceutical companies all make profits (at MUCH higher margins than the insurers). How will anything change if you just take the profits out of the insurers? It's only $.02-$.03 out of each $1 spent on health care. You can take the profits out of health insurance, savce 2% on costs in 1 year, and then enjoy the same 8% year over year increase in your medical costs. It won't change the trajectory long-term.

It's fine if you want to be anti-profit, Greg, but you have to be consistent about it. All the profits will need to be removed for the system for you to get any kind of real savings. Villifying the insurers, which provide great care for 99.9% of the 180million Americans who have employer-based coverage, won't do anything to change the discussion. Come back to the table with a long-term, holistic change for reform. I'm all ears.

Let's do one thing at a time, shall we? And by the way, profits in the other areas of healthcare will be built into the reimbursement rates and cost controls that the healthcare bill or subsequent bills will contain. No doubt those will bring a whole gnu level of weeping, wailing and gnashing of teeth!

In the meantime, try telling the 87 million uninsured Americans who can't get or can't afford health insurance how WONDERFUL the insurance companies are, not to mention those who have had their policies retroactively rescinded after they got sick,

Try, as well, telling the doctors, including my own who spend far too much time on the phone arguing for the payment of routine charges that are covered by their patient's policies but which the insurance companies are attempting not to pay.

Mr. Francis (#10): In case Greg K. doesn't see your query, I'll address it insofar as I have the facts to do so.

1) The administrative costs involved with private insurance (including those incurred by health care providers and hospitals, plus middle-men who handle claims between providers and insurers, plus marketing/advertising, plus employing two million or so people who specialize in finding reasons NOT to pay claims) are about 30 percent, versus Medicare's admin. costs of 2 percent. Big bucks ($400 billion per year) to be saved just on these costs.

2) Employer-based coverage still exists for a lot of people but not for those who are unemployed or who are yet to be laid off. With premiums rising every year, many companies are either dropping employee coverage or revising their plans to shift more and more of the cost to employees.

3) Insurance profits are not like normal profits other companies make. Insurance profits are enhanced by raising premium costs every year without adding any value, by not paying claims, and by denying coverage to people they feel might get sick. Big bonuses go to the executives who increase profits the most.

4) So how big are these profits? From 2001 to 2007, the insurance industry merged many companies until 10 huge biggies remained in control of most of the U.S. market. These ten companies increased their profits during those same years by 428 percent.

5) So why should we let these companies continue to have control over our entire health care system -- to pay or not to pay, to forbid you to see "out of network" doctors or pay a penalty, and to charge you more each year while giving you no more value?

Yes, to what Sheila Ehrich said

Mr. Francis (#10): Perhaps it was a typo, but your reference to "the insurers, which provide great care", is offensive to providers. Providers deliver healthcare. Please don't confuse us with insurance carriers.

See my August 11 MinnPost / "Community Voices" piece.

Mr. Kapphahn & Ms. Vetsch (#11&12): I know first hand the administrative nightmare (added cost) on the provider side to which you refer. We came to the conclusion the carrier's goal was, if they couldn't actually avoid paying a claim, they could at least delay payment for several months. They would reject claims for various inane reasons they couldn't really defend. But no matter, they never intended to, months later after the claim was reviewed they would finally pay it.

A universal single-payer system would save providers this time and aggravation. I could go on, but see the link in comment (#6) of the above article.

Bernice,

The profits that insurance companies make are re-invested in their businesses. These profits fueled the consolidation of the industry you mention in the past 10 years, which contrary to your opinion that this exerts control over the entire industry, actually helped save administrative costs while still promoting competition in the marketplace. Please don't forget that there are hundreds of non-profit insurers, including many large ones from the Blue Cross Blue Shield organizaiton, that are not profit-driven yet still compete with the for-profit insurers.

These profits were also re-invested in new technologies to lower administrative costs and weed out fraud from the providers who are submitting claims. Yes - read that sentence again - some of the claims which insurers deny are actually because they were submitted by doctors and hospitals who are trying to cheat the system! Please don't be so naive to think a selected few doctors and hospitals aren't trying to fraud the insurers to increase their income.

The administration costs are nowhere near 30% on most employer-based insurance. I am an actuary who consults to health plans. Most large carriers pay 82-85% of their premiums to medical costs. The remaining costs go to administration and profit. Again, if Medicare has as low administrative fees as you say and no profits, you may save as much as 15% in one year. But what are you going do to 10 years from now, after health care costs increases of 6, 8, 10% per year? You will be back where we started this debate, with health care costs which are dwarfing the economy.

Most importantly, with regard to point 2), the insurers have already agreed to remove pre-existing condition clauses. To do this, Congress must simply mandate everyone buys insurance. This way those who are healthy in a given month still pay a premium which helps cover the claims for those who are sick. This risk-pooling is the fundamental definition of insurance. Currently, as people choose to go without health insurance when they are healthy, the insurers must have these clauses to protect them from the huge costs that come along with only covering the sick. It's a personal responsibility issue that as an individual you may need to pay $200-$400 a month for health insurance instead of leasing that new car or taking that big vacation.

Greg, there's nowhere near 87 million uninsured in the country. Here in MN, we have 400K uninsured - and 300K of those are eligible for public programs for which they haven't enrolled. Let's engage some advocacy here to enroll folks in programs we already have before we go shouting about the number of uninsured in the nation.

With regards to your doctor and reimbursement, how do you think she/he is going to negotiate with the government when they deny a claim (which they will be forced to do once the gov't runs out of $$$ to support the program)? Do you think they'll have an 800 customer service line your doctor can call and see what happened? Why would they have any incentive to work with your doctor once they're the only game in town?

Mr. Francis - in regard to your last paragraph, I have three answers:
1) The same way that Medicare and Medicaid recipients do, probably.
2) As if disputing a denial of coverage is easy for current recipients of insurance. From personal experience, I can assure you that it is not.
3) At least public systems are directly subject to political pressure - whereas the opaque, mandatory arbitration systems of private insurers are hidden from public view.

Mr. Francis, I'm sure we'd all love to know who your employer is.

Insurance exists because of the decreasing marginal utility of income: most people would rather have a 100% chance of paying $300 a month than a 1% chance of paying $30,000 a month.

In fact, our hypothetical customer let's call him Thomas, who might very well accept a 100% chance of paying $400 a month rather than take 1% chance of having to pay $30,000, which he might not be able to afford. This is true even though Thomas will lose $100 on this deal in an average month.

There's nothing wrong with this arrangement the customer has improved his marginal utility and the insurance company has made $100. It's a win-win.

The thing is, though, that the insurer hasn't had to work particularly hard for his $100. He hasn't had to figure out how to cook up tastier fries or save you a few bucks off the cost of your next flight to Orlando. All he has to do is to have a bunch of money pooled together, such that he has a different marginal utility curve than you do. He has the luxury to accept the risk of unlikely outcomes, particularly if he can hedge his position by making the same deal with other customers.

Now, what's supposed to happen in the free market is that another company will come in and offer Thomas a better deal: they'll offer him the same coverage for $350 a month, accepting a smaller profit, and Thomas will happily take the deal. There are at least a couple of reasons, however, why this may not be happening in the insurance industry.

The first is that Thomas might not realize he's paying $400 every month for insurance. That's because if he's like the majority of Americans, he's getting his insurance through his work, and except when the HR lady gave him a shiny brochure on his first day at the office, he's probably never thought very much about what this insurance is costing him in terms of foregone salary.

This is particularly so because health insurance benefits, unlike other types of income, aren't taxed, and so Thomas is less cognizant of them if it shows up on his paycheck at all. Not only, then, is the free market maxim of perfect information violated, but it's violated in such a way that creates artificial profits for the insurance industry: the government is effectively subsidizing every dollar that Thomas' company is willing to spend on his insurance benefit.

The profits the insurance industry is making, of course profits artificially boosted by an enormous backdoor tax subsidy don't seem to be buying the customer much of anything in terms of improved service or cost savings. On the contrary, health care costs are rising by as much as 9-10 percent per year, without any concomitant increase in the level of service. If Delta were raising the cost of its fares by 10 percent per year, they'd be out of business.

The reason the insurers are staying in business, though, is because barriers to entry in the health insurance industry are in practice quite high. Insurers benefit from pooling risk. The larger the pool, the better in terms of the insurer's ability to hedge its risk and build negotiating leverage with its providers. That makes it very difficult for a new type of start-up to compete: they'll have trouble getting together enough customers to pool their risk adequately, and even if they do, they won't have as much negotiating leverage as the big guys. Health care providers may demand a better deal or refuse to accept them. As such, they'll never get off the ground.

Insurance, in other words, is a volume business, the main requirements for which are that (1) you have a lot of money pooled together and that (2) you've been around for awhile.

CIGNA and Aetna have a lot of money pooled together and they've been around for awhile but they don't have as much money, nor have they been around as long, as the federal government. It's possible, certainly, that the profit motive in the insurance industry has driven more innovation than we're giving it credit for. But that isn't my bet.

There's no obvious reason that the government couldn't provide more for less. And if we are wrong, we would find out soon enough: if the public option can't deliver more bang for the buck than private insurers, it wouldn't gain much market share from them, and Mr. Francis will have nothing to worry about.

What Mr. Francis's position reflects instead is ideology: who cares that the federal government could build a better mousetrap? They're the government and that's bad. His argument is really no more sophisticated than that.

If a libertarian conservative wants to make this argument, more power to them, but they absolutely should not be turning around and suggesting that a public option would raise health care costs. They're saying, rather, that they're morally opposed to the cost savings that would ensue.

It's my belief that private industry is usually able to deliver more efficient outcomes to the consumer than the government could.

But usually isn't always. And health insurance is one of those exceptions.

This interview does seem to be part of Lois Quam's effort to remake her image so her husband, Matt Entenza, can be elected governor. Her effort, however, is unlikely to be successful. Minnesotans are not likely to trust someone who was in the thick of it for so long at UnitedHealth Group. Consider that Consumer Reports issued a ranking of insurance companies in a recent issue--UnitedHealth Group was second from the bottom. Consumers would be wise to avoid UnitedHealth Group whenever possible. As to Lois Quam, it would be helpful for her to adopt a private role.

Sheila,

I have worked for 2 large mutli-disciplinary consultancies with a nation-wide footprint. My clients have included non-profit and for-profit insurers, as well as self-funded employers and cooperative buying groups.

I don't have the $M in stock options from UNH that Lois Quam has, if that is what you are inferring. I'm a realist who recognizes the actuarial value of health benefits in our current marketplace and am concerned the several proposals under consideration are seriously lacking in their ability to bring about real change in the increase in health care costs.

Kevin's posts do not present an accurate picture. For example, he says: "These profits were also re-invested in new technologies to lower administrative costs and weed out fraud from the providers who are submitting claims." Well, actually, a lot of these CEO's milked the insurance companies of billions at the expense of those served. I've audited some of these insurance companies and this technology Kevin claims they invested in is a mess. He should know this too. The problems are so widespread they are even discussed in newspaper articles.

He also says: ."It's a personal responsibility issue that as an individual you may need to pay $200-$400 a month for health insurance instead of leasing that new car or taking that big vacation." I guess that Kevin should tell that to someone with severe learning disabilities who is set to be cut from Minnesota's public program next year. I wonder where such a person will get $200 to $400 per month. So much also for Kevin's claim that all we have to do is to enroll most in public programs. Duh, the public programs are disappearing fast in Minnesota thanks to the GOP.

He says: "Villifying the insurers, which provide great care for 99.9% of the 180million Americans who have employer-based coverage, won't do anything to change the discussion." This is outright laughable. I know relatively few who think their insurance companies do a great job. Their performance is so bad that some even need to hire consultants at times to sort out the problems insurance companies, with their sloppy and inethical claims handling procedures, create.

I could continue on but I won't. Suffice it to say I agree with those of you who disagree with almost everything Kevin has to say. The "information" presented by Kevin is false and misleading.

Richard has given a great explanation of insurance and illustrated why so many Americans choose to be uninsured rather than pay for a monthly policy. They'd prefer to take the risk themselves than pay an insurer to carry the risk for them. Unfortunately, they're not saving those foregone premiums, and when their rainy day arrives and they need care, they don't accept their responsibility to pay for their care. They complain that they don't get free health insurance from the government. What value is your homeowner's policy or auto policy adding to your life? You wouldn't feel empathy for an individual who didn't carry auto insurance and then totaled their car.

Per Rebecca's comment, I am not implying that indivials who need assistance should not recieve care. Of course we should not be cutting our public programs. Nowhere in my message do I imply that. What I am illuminating is the portion of the population (working individuals with sufficient income to pay insurance premiums) that chooses to not purchase insurance. If those individuals accepted responsibility and joined the risk pool, insurance costs would go down for all. They would receive preventative care and decrease emergency room use. Their insurers would pay their claims and uncompensated care at facilities would decrease. If you have friends and family who are displeased with their insurers, they can use any number of consumer protection programs to contest their insurer. Please don't hypothesize around the % of folks who are happy with their current coverage based on a select few individuals who complain loudly rather than recognize to the silent majority who are pleased.

My contention, which none of you have successfully countered, is that replacing the payer for the same underlying health costs will do nothing to slow the increase in costs. The government would save a small 2-3% of premium in 1 year by removing the profit and a very small amount of administration costs to accept the risk that they will have a worse time containing the increase in costs from doctors and hospitals than the insurers had.