Friday, January 29, 2010

A New Type of Medical Insurance?

My many years in the political arena in the areas of insurance and tort reform has provided a continuous education on the ongoing battle (and I do not use this word lightly) between healthcare insurers and providers.

A vignette I have intimately witnessed over many years in New Jersey, one that may have considerable relevance to healthcare, is the facts of the evolution of automobile insurance in our state. The story is a bit convoluted but, in the end, the point will be clear.

"No Fault" automobile insurance has been around since 1974, when it was adopted by sixteen states, in an effort initiated by the insurance industry. New Jersey was one of those states.

The basic principle of no-fault is that in order to insure payment of the medical bills of people involved in accidents, regardless of who caused the accident, some form of limitation of liability, the ability to sue, is included as a trade off.

Obviously, this is a good thing for hospitals and doctors involved in the treatment of accident victims, since they don't have to wait for the determination of who is at-fault in an accident in order to get paid for their services.

The story of New Jersey is illustrative of the pitfalls and strengths of the system. Initially, the criterion for the ability to sue or "threshold" was purely monetary. In other words, when the amount of medical bills accrued to a specified amount, then, in theory, the injured party not at fault could then contact an attorney and initiate litigation. New Jersey began with unlimited medical benefits, with very little monitoring by insurance carriers, under a plan of personal injury protection (PIP) and the monetary threshold trigger to sue was a modest two-hundred dollars.

As you can probably surmise, not much time elapsed before "the dark side of the force" realized that they could make a considerable amount of money by reaching the monetary threshold and getting a nice chunk of change at the end of the rainbow. It wasn't long before the insurance industry found themselves confronted with huge bills from doctors for treatment of minor injuries as well as similarly voluminous bills for medical testing to allegedly justify that treatment.

In this light, an additional option of a higher monetary threshold, two-thousand dollars, was added for a modest discount in the liability premium. The higher option was used by a relatively few drivers who were not concerned about suing and wanted to save a few dollars. This was very little in the way of deterrent to those who were determined to profit off the system and the cost of a policy continued to spiral upwards. It was simply a higher target and it motivated unscrupulous practitioners to provide additional "treatment" to satisfy the new level.

Much litigation and political posturing between the trial lawyers and the insurance industry ensued. Both sides were quite powerful and a standoff of sorts eventuated, though a major battle was won in the appellate courts that supported the position of the insurance industry.

In the late eighties, as costs continued to rise off the charts, the insurance industry lobbied to initiate a "verbal threshold", substituting a monetary trigger for one defined by set of written, or verbal, criteria. This had proved successful in holding down costs in Michigan, the state considered to be the model of the verbal threshold.

Again, a fierce political confrontation followed, eventually resulting in a compromise verbal threshold being passed by the New Jersey Legislature. In addition, a set of "medical pathways" was codified to provide some guidance as to what types of treatment were permissible by providers, in an effort to limit medical treatment for minor injuries.

The insurance industry realized at this point that efforts to limit access to the courts in liability cases was easier accomplished by efforts at limiting medical treatment, taking on the medical profession rather than fighting the powerful and influential trial lawyers lobby, especially in a heavily Democratic state laden with attorney legislators.

Still, despite all of this, the amount of lawsuits and the cost of medical care continued to rise, though at a slightly lesser rate. New Jersey's per capita insurance rates continued among the top two in the country.

Of all, the strategy of the insurance industry to reduce litigation that worked the best was to, once again, appeal to the public on the basis of cost savings. This was done by offering two options to the consumer, a "no threshold" policy whereupon a lawsuit could be initiated for virtually any injury, versus a strict verbal "lawsuit threshold" whereupon only more serious injuries could be litigated. The difference in cost between the two was intentionally maximized.

The results were impressive. Ninety-two percent of New Jersey drivers chose to save money rather than preserve their right to sue. This (finally!) is where an application to health insurance applies.

What if, for instance, a health insurance carrier or HMO offered a similar trade off- a reduction in premiums tied to a reduction in the ability to sue, or even a package of better prescription benefits.

What would be the response of a senior citizen if asked whether they would prefer more comprehensive prescription benefits in exchange for a limitation of the ability to sue their doctor for malpractice? The answer is obvious.

How would medical costs be reduced? Ask any physician about how much extra testing is ordered to practice "defensive medicine". No-fault medical insurance is essentially already in place in military and certain governmental plans with a provable reduction in litigation and cost savings.

All of this is heresy to the legal profession, who would oppose any effort to "reduce patient rights" to their last breath. Their immense power can be seen in their success in excluding any discussion of tort-reform in the Obama administration's recent efforts at health care reform.

These are unique times that require innovative and radical problem solving. No-fault health insurance may not be the entire answer, but it could be an important piece of the puzzle, one that has yet to be adequately considered.

No comments:

Post a Comment