2016 Pre-Mortem - Another Election And Here We Are Again

2016 Pre-Mortem - Another Election And Here We Are Again

It has been several years since I posted to this blog, a little less than 3 to be precise.

So have we advanced in terms of our society's knowledge about insurance, health care financing and quality control and improvement? Sadly not.

Our two major candidates still don't embrace a single payer, national health insurer as I have shown (See "Standard Errors: Our Failing Health Care (Finance) Systems And How To Fix Them"). Donald Trump used to embrace a single payer because he understood that it would lower, not increase, the operating costs for his business enterprise.

Hillary Clinton never had it right, failing abysmally at health care finance reform in 1992-1993.

One of the most prestigious journals in the area of health care (finance) systems analysis and public policy (Health Affairs) still doesn't grasp how insurance actually works so they continue to publish articles that assume that transferring health insurance riks to health care providers can reduce costs and improve quality of care.

So, here again is the essence of the situation:

We do not buy insurance products underwritten by our neighbors - we buy them from large, hopefully well capitalized, responsibly managed, and efficient insurers.

We avoid smaller, under-capitalized, poorly managed, and inefficient insurers because we understand that they are unlikely to be able to make good on their policies when claims run significantly higher than expected.

Small, inefficient and inadequately capitalized insurers fail all the time. Hundreds of insurers fail every year and their losses are socialized to other insurers and us taxpayers. The Mutual Benefit, Executive Life Insurance Company<, Metropolitan, CIGNA, AIG and Reliance Insurance Group's insurer insolvencies and financial failures added billions to the cost of insurance for policyholders who had no role in the failures of those insurers.

Hundreds of thousands of policyholders and beneficiaries were deprived of their benefits, and taxpayers contributed significantly to the socialized costs of these insurers' failures. The Society of Actuaries published an article describing the pitfalls of health and life insurer insolvencies for policyholders, claimants, the insurance regulatory system, the insurance industry and society at large. The original article started on page 1 and continued on Page 20 but this link has just the pages relevant to the article.

A variety of "innovative" health care finance mechanisms transfer patient insurance risks to health care providers: Capitation, Risk/Profit sharing, Bundled and Episodic Payment schemes, Block Grants and Pay for Performance. These insurance risks are transferred from large, financially capable entities such as insurers, Medicare, State Medicaid programs, Managed Care Organizations, and Employer self-insurance programs.

When patient insurance risks are transferred from large from large, financially capable entities to smaller, less capable entities, the risks of financial ruin increase dramatically. Providers, qua small, inefficient insurers, are far more likely to fail financially.

Efficient health care providers can only reduce their risks of financial ruin by cutting the level of care they provide. Cutting care below the levels assumed in their insurance risk transferring payments is necessary because they are inefficient insurers. Even when they perform exactly as anticipated, the variability in health care needs of their patients leads about half of the insurance risk assuming health care providers to have lower than expected costs and about half of the insurance risk assuming health care providers to have higher than expected costs.

The only way to improve quality, reduce costs, and improve the health care status of patients is to remove disincentives to care for providers. Instead, the next four years is likely to entail yet more transfers of insurance risks to health care providers and patients while insurers, managed care organizations, and third party intermediaries share of health insurace dollars continue to rise.

CARPE DIEM: Profit Margin: Health Insurance Industry Ranks #86

Standard Errors: Our Failing Health Care (Finance) Systems And How To Fix Them"


Just how much profit is appropriate for an essentially risk-free insurance operation.

Yes, individuals and small insurers, the sort John McCain would like to encourage, are vulnerable to extreme fluctuations due to small portfolio sizes. But large insurers make very high profits with virtually no risk.

Large insurers can offer higher benefits, at lower premiums, with far lower probabilities of operating losses and insolvencies. They need far less idled surplus  because there is much smaller year to year fluctuation in their loss ratios.

Small insurers provide much lower benefits, at higher premiums, with far higher probabilities of operating losses and insolvencies. They need far more idled surplus  because there is much greater year to year fluctuation in their loss ratios.

Any insurance company that meets state incorporation standards can initiate operations in any state they choose. What is stopping them from doing so?

Professional Caregiver Insurance Risk and Emily Rosa's article on Therapeutic Touch

I posted the following message to the Martha E. Rogers listserver today in commemoration of the 15th anniversary of the publishing of one of the worst articles to ever appear in the Journal of the American Medical Association...

"Today marks the 15th anniversary of the publication of Emily Rosa's JAMA article:

"A Close Look at Therapeutic Touch " Linda Rosa, BSN, RN; Emily Rosa; Larry Sarner; Stephen Barrett, MD JAMA. 1998;279(13):1005-1010. doi:10.1001/jama.279.13.1005

It seems a fitting day to reflect on praxis in nursing.

Despite the fact that it has been 15 years since the article was published and since I offered my first critique of it the next day, the sad truth is that JAMA still has not rescinded the article.

The why behind that is, I think, pause for reflection.

JAMA hasn't rescinded the article for one very good reason. Most of its readers, and apparently the TT community, still do not understand what is wrong with the article and why it ought to be rescinded.

The article should have been rescinded because it made no sense. The authors claimed that the Therapeutic Touch Practitioners failed to perform well in what they thought of as a simple matter of guessing whether or not a hand was present when the probability of a correct answer was 0.5000.

But random guessing, when the probability of a success is 0.5000 does not produce low scores - it produces scores close to 50% correct. The JAMA group were so intent on discrediting their test subjects' skills that they fudged the data to so great a degree that the subjects' combined test scores were inconsistent with random guessing.

In addition, as I described in my articles, the authors presented two different numbers for the number of correct responses in 280 trials. That, from a purely logical and mathematical perspective, is known as self-contradiction.

Between the fact that their two reported count of correct answers were inconsistent and their own statistical tests produced answers inconsistent with their conclusions, those who should be most invested in compelling JAMA to rescind the article and take it out of circulation have failed to do so.

Why is that?

As it turns out, and certainly not what I was thinking back on April 2, 1998, the answer to that question is critically important. The Therapeutic Touch article, my two major articles about it [Cox, T. 2004). Transgressing the boundaries of science: Glazer, scepticism, and Emily's experiment , Nursing Philosophy, 5: 75-78. and Cox, T. (2003). A nurse-statistician reanalyzes data from the Rosa therapeutic touch study , Journal of Alternative Therapies in Health and Medicine, 9(1): 58-64.) and my work on Professional Caregiver Insurance Risk, and my book: Standard Errors: Our Failing Health Care (Finance) Systems And How To Fix Them" (http://www.standarderrors.org ) describe exactly the same flaw in reasoning that is destroying the nursing profession and our health care (finance) systems.

The core problem with the Rosa article was that the average number of correct responses was lower than one would expect to see when random guessers simply guess between two equally likely answers.

The problem with our health care finance system is that people confuse the advantage insurers have - that their average claim size (or loss ratio) is close to the average claim size (or loss ratio) for the population from which their policyholders were selected - with the advantage that a competing business has when it can reduce the costs of the products/services it markets.

A perfectly efficient, infinitely large insurer has an average claim size (or loss ratio) that is exactly equal to the the average claim size (or loss ratio) for the population from which their policyholders were selected. No insurer can consistently pay all the legitimate claims of its policyholders AND consistently produce loss ratios lower than average.

Despite this, the ongoing dialogue on health care (finance) system reform assumes that capitation can achieve exactly this goal: Reducing costs and maintaining service quality and quantity. Well known advocates of this thinking include Sen. John McCain and Rep. Paul Ryan but there are tons of others of both major political parties.

Despite the same absurdity involved in the failure to compel JAMA to rescind approval for "A Close Look at Therapeutic Touch" nurses continue to labor in health care facilities that are trying to do the impossible: Manage the health insurance risks of their patients and maintain the quality of nursing care.

Which brings to mind the question: If the largest professional group in the health care sector does not understand the impossibility of what we are being asked to accomplish on a daily basis, are we doing enough to understand the true context of contemporary nursing care?

I think not, but then I am just a "Bear"."

I am not sure how the Profile Introduction is indexed by search engines so I figured I would repeat the keywords I listed in my profile here and on other sites/blogs. These are some keywords that are particularly relevant to my work on health care (finance) system reform:

Average Cost Based Reimbursement Systems

Professional Caregiver Insurance Risk

Standard Errors

Efficient Statistics

Parameter Estimation

Unbiased Statistics

Health Care

Health Care Finance

Probability Theory

Actuary

Actuarial

Ratemaking

Reserving

Surplus

Policyholder Benefits

Maximum Sustainable Benefits

Insurance

Insurer

Risk Assuming Health Care Provider

Capitation

Prospective Payment Systems

Diagnosis Related Groups

Diagnosis Related Group

DRG

DRGs

PCIR

ACBRP

Mathematics

Risk Theory

Solvency

Insolvency

Bankruptcy

Policyholder Surplus

Stockholder Surplus

Ethics

Law

Ethical

Denial of Service

Delayed Diagnosis

Deferred Diagnosis

Denial of Care

Risk Management

Risk Theory

Health Care Risk Management

Enterprise Risk Management

Consultant

Social Worker

Registered Nurse

Mathematician

Statistician

Chartered Property Casualty Underwriter

Reinsurance

Reinsurer

Insurer Efficiency

Standard Errors: Our Failing Health Care (Finance) Systems And How To Fix Them


There is a new version of my book on health care finance reform.
Well actually it has been available for a while but I have neglected this blog. So not only is there a new version of the book, as of September, 2012, but there was also a brand new website...

To go directly to purchase a copy of Standard Errors: Our Failing Health Care (Finance) Systems And How To Fix Them you can use this link:

Buy Standard Errors/

If you want to visit the site, you can go to:
http://www.standarderrors.org/


If you would like a copy of my dissertation, you can get it at:
Risk induced professional caregiver despair: A unitary appreciative inquiry/

My working papers, well those that have found their way to the website, can be reached through:
http://www.standarderrors.org/pcir_working_papers

If you think that capitation, the Medicare/Medicaid Prospective Payment Systems for hospitals, physicians, nursing homes and home health agencies are bad, but do not wuite understand how bad, or why they are bad,

Standard Errors: Our Failing Health Care (Finance) Systems And How To Fix Them 

has the answers you are seeking.

Insurance works best when a great many policyholders all buy insurance. Insurance does not work at all if we all buy our insurance from the person living next door. Insurers need a lot of policyholders to benefit from the Central Limit Theorem.

As insurers issue more and more policies, assuming the premiums are correct for the risks being insured, the insurer's ratio of losses to premiums will more closely approximate the population loss ratio.

As it turns out this is a really good thing because a loss ratio close to the population loss ratio means the insurer can plan for its economic liabilities and will know exactly what its losses will be before it writes the policies.

Rather than having a great deal of risk, a very, very large insurer has virtually no risk at all.

Risk - The real Butterfly Effect

I posted this to the NURSE-PHILOSOPHY@JISCMAIL.AC.UK listserver in the middle (well I hope it is not still going on) of the Japanese nuclear facility catastrophe in 2011.

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I have resisted the impulse to comment on Japan. But there are only a few "Teachable moments" as profound as this one.

45+ years ago somebody thought it would be a great idea to build a nuclear reactor along the pacific ocean coastline in a country with high seismic activity and high risks of tsunamis.

That day, a butterfly emerged from its chrysalis and flapped its wings. The gentle flapping of its wings reverberated over the years and the cumulative effect became stronger and stronger each and every day.

Nobody really noticed the effect of the butterfly's wings. Life went on as usual. In fact, the people who decided to build one reactor took heart from the fact that things were going very well, there were no gale force winds, so they built a second, third, fourth, fifth and sixth reactor at the same site.

And the long term effect of the butterfly just kept growing stronger and stronger. But the people felt only the subtlest of breezes.

Since things were going so well the plant's owners, the government of Japan and
the people just went about life. Repairs to the reactors were deferred, employees who balked at such practices were malcontents, and anyone who questioned these practices was maligned.

And the cumulative effect of the butterfly's wings just kept growing. The people felt only the gentlest of breezes. In the summer they felt cooler and in the winter, only the slightest nip in the air.

More and more problems developed. They too were ignored. The gentlest breezes
turned into strong winds. In the summer it blew sand into people's eyes and in the winter it felt like ice against their faces. They closed their eyes and covered their faces. It worked out just fine.

And the cumulative effect of the butterfly's wings grew stronger.

Then one day, the entire universe shifted and all those years of ignoring risks
came together.

Why would nurses care about such things? Because the butterfly's wings for our health care (finance) systems, the decision to transfer insurance risks to health care providers, have been developing for the same last 4 decades and we are seeing and will see more in the future of the full force and effect of those decisions and their cumulative effects.

Ignored risk doesn't just go away, it builds and builds until one day, like a hurricane, earthquake, tsunami, the collapse of your economy, or of more concern in this email, the collapse of your health care (finance) system, just overwhelms you.

We nurses ought not "...just go gentle into that good night" of our demise, of the loss of all we trained for, struggle to protect, and say we want.

The consequences of compelling health care providers to accept insurance risks, the fact that nurses, doctors, hospitals, nursing homes, and home health agencies are all asked to meet the needs of their patients while inefficiently and ineptly managing insurance portfolios are coming to their full fruition: health care providers leaving their practices, shuttering their facilities, reducing patient services, and abandoning patients.

The loss of health care facilities, health care workers, equipment and supplies in affected areas in Japan has been horrific. But all those facilities, their staff, their equipment and their supplies were barely adequate to meet the needs of people before they were lost. Now the entire health care system in Japan is reeling. The remaining hospitals, physicians, nurses, equipment and supplies are clearly proving inadequate for the new demands being put on them.

Just as the risks of operating nuclear plants on a wing and a prayer, and being relatively unprepared for a health care crisis have come home to roost in Japan, so is there days of reckoning ahead for all of us.

The plight here (the USA) and elsewhere is as clearly in focus at this moment in history as the problems at the nuclear plants and the health care system in Japan should have been a year ago. The question for those plants, that health care system and for our health care (finance) systems was/is WHEN, not IF.

And yet nursing and we nurses close our eyes and cover our faces. We ignore the risks that abound all around us and it only hurts a little bit...

We just keep cutting back on Medicaid, Medicare, VA facilities in the
USA. We "Transform" the NHS by foisting insurance risks on local trusts. We are systematically ignoring the consequences for public health services, eviscerating safety net programs, sacrificing emergency preparedness, ordering equipment and
supplies only when they have failed to work or as they are running out. And the distance between health care workers and those replenished pieces of equipment and supplies are growing, relying more and more on remote supply lines.

We in the US continue to staff health facilities by compelling health care workers to work mandatory overtime on what are regular "emergency" bases as our only solution to maintaining staffing on a regular basis.

It only hurts a little bit more every day...

But, in those dark hours of the night, when the monsters and ogres keep
pushing open the closet door, don't you have to ask:

"Is that a butterfly, a breeze, a wind, or a tornado I am feeling?"

bear

Latest paper

My latest published paper on PCIR came out about a week ago.

Cox, T. (2010). Legal and Ethical Implications of Health Care Provider Insurance Risk Assumption. JONA's Healthcare Law, Ethics, & Regulation: 12(4); 106-116.


http://journals.lww.com/jonalaw/Abstract/2010/10000/Legal_and_Ethical_Implications_of_Health_Care.5.aspx

Highlights:

Assuming the risk assuming providers are smaller than the risk transferring MCOs, Insurers, and Medicare/Medicaid programs:

1. Risk assuming health care provider's probabilities of modest, sustainable profits are lower than the probabilities of modest, sustainable profits for entities transferring risks, when they retain their insurance risks.

2. Risk assuming health care provider's probabilities of operating losses are higher than the probabilities of operating losses for entities transferring risks, when they retain their insurance risks.

3. Risk assuming health care provider's probabilities of severe, solvency threatening operating losses are far higher than the probabilities of severe, solvency threatening operating losses for entities transferring risks, when they retain their insurance risks.

4. Risk assuming health care provider's abilities to provide services at, or above, the level assumed in the risk transferring entities’ premiums are significantly lower than entities transferring risks, when they retain their insurance risks. Efficient providers ‘must’ reduce services to patients solely because they accept insurance risks.

5. Risk assuming health care provider's aggregate surplus requirements, assuming modest protection from their exposure to solvency threatening losses, are far higher than the aggregate surplus requirements for larger, risk retaining entities managing the same patient portfolios. Trillions of dollars compared to millions (or less) for large, risk retaining insurers.