Whenever I describe the managed care industry's profit-bloated role as the middleman in American healthcare, my listeners' common response is, "Wow, what a racket!"
People express real incredulity when they hear how Blue Cross, United Healthcare, Cigna, and Aetna are becoming increasingly monopolistic in their control of employer-sponsored health care plans by controlling the financing, administration, and delivery of employee benefits to tens of millions of employees and their dependents.
As the nearly "perfect" middlemen, these managed care behemoths have done an incredible job of keeping buyer and seller of health care completely isolated from each other. If you think that's an exaggeration, just ask any major employer to list the ways to access a network of medical providers. Or ask a major physician group to list the ways to access patients who are the employees and dependents of a local employer. In both cases, you'll get the same answer: Managed care company's PPO network.
After years of being held hostage by their insurance companies, employers have forgotten that they can go directly to doctors and hospitals for reasonable (and discounted) pricing on medical services. Without the middleman's cut to support enormous profit margins, that pricing can translate into additional savings for the employer and lower overall health plan costs.
By the same token, medical providers, who've been under the thumb of the commercial managed care industry for the past 20 years, have forgotten that they can go directly to local employers as the doctors and hospitals that can provide care to health plan participants. Without the middleman's continual "hammering-down" of reimbursement levels to maintain their profit margins, providers can obtain fair and reasonable reimbursements, while still saving those employers enough money to make it a good deal for everyone.
The notion that the managed care industry's involvement as middleman is a "racket" is supported by the stark disregard the industry demonstrates for employers and medical providers alike. The billions in profits inflating year after year are a real slap in the face to employers who are struggling with rising health plan costs and providers who are equally struggling with dwindling reimbursements.
To be fair, there was a time (maybe back in the 1980's) when managed care companies served a useful, necessary purpose as facilitators of managed care for employers. During those years, these same companies would develop ready-made networks of preferred providers who agreed to discounted reimbursements in exchange for "preferred" access to patients who were the employees and dependents. This saved the employer the time and cost of contracting with medical providers. At the time, there were reasonable "access fees" charged by managed care companies for "leasing" the PPO networks to the employer and most of the negotiated discounts actually showed up as savings in the employer's health plan bottom line.
Somewhere along the way, however, managed care companies and the insurance carriers that were starting to dominate the industry, realized they could skim a larger and larger portion of the difference between what they were paying doctors and hospitals, and the amounts they were ultimately charging employers. Even as they continued to whittle away at provider reimbursements, managed care companies were raising the insurance premiums and/or administrative fees charged to their employer clients. Mergers and acquisitions in the health insurance industry (and the resultant increasing monopolization) exacerbated the situation as employers had fewer and fewer choices for change. In the end, employers were left with few options except to cut benefits or mitigate increases by cost-shifting onto employees.
Ironically, but perhaps not unexpectedly, the very programs used most by employers for shifting more health care costs onto employees, such as consumer-driven health and high-deductible plans, showed up as insurance company products. The "double-dip" in that scenario is that the insurance industry has enjoyed huge profits from selling those products to their employer-clients, too.
I've said it before: It takes a special kind of employer to stand up to the managed care giants of American health care and say, "Enough!" It means leaving the comfort zone of having someone else largely run your health benefits program, albeit at a huge and ever-increasing cost. It means being willing to take back control of your health plan dollars and spend them as wisely as you would on any raw materials, processes, or services you would buy for your company. It's not hard to do and I provide plenty of information on my website about it.
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