sick around america

Sam Nussbaum

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He is the executive vice president and chief medical officer for WellPoint, Inc., the leading U.S. health benefits plan, with 35 million members. This is the edited transcript of an interview conducted on Jan. 6, 2009.

“When you look at those claims rejected, each one probably has its own story. Each is based, I'd hope, on the merits of science, not on a health plan limiting or denying care.”

... The Blue Shield and Blue Cross plans, they were sort of the beginning of health insurance in the United States. ... They started out as nonprofit operations?

All of the Blue Cross Blue Shield plans were initially not-for-profit plans. ... The switch came in the mid-90s, I believe. ...

Do you know today how many Blue Cross and Blue Shields are still nonprofit and how many are for-profit?

... We represent 14 plans coming together as WellPoint. There are approximately, let's say, 30 not-for-profit plans. ... Of all the Blue Cross Blue Shield plans, today, just about 30 percent are represented by WellPoint, and therefore for-profit plans, and about 70 percent are represented by not-for-profit plans.

And do you see any difference in operations, in quality, in prices between for-profit and the nonprofit?

That's a very key question. ... First, we have to compete in markets against for-profit and not-for-profit plans, so we're competing on price, on value, on the quality of service and programs that we deliver. And generally in our markets we have between 25 and 50 percent market share, so I think the markets and our members and corporations and employers that work with us have spoken positively.

Fundamentally to your question, when you look at the quality of services that health plans deliver, in general, those that are for-profit may deliver slightly higher-quality services, in part because they have taken those profits and reinvested in infrastructure, in health IT, in programs that invest in the future, that improve health outcomes, chronic care, condition and disease management. Ultimately, if you look at the operating results of for-profit and not-for-profit plans, they're pretty comparable.

[In our reporting] we found many countries had health insurance companies, but no country other than America lets them make a profit. ... They said that makes a huge difference, that making a profit and covering people's health are incompatible.

I don't think that's true. Let's look at our country. First of all, what are the profit margins for the industry in general? For for-profit plans, those have generally run mid-single digits after tax profits. Operating margins over the last decade for the not-for-profit plans run to comparable levels. So I think when you look at the for-profit plans, we have to look at: How do they rank in NCQA [National Committee for Quality Assurance] ratings? How do they rank in scores that look at the quality of care that's delivered? And you'll find that there is no difference, or if there is, the nod goes to the for-profit plans for investment.

In the last three years, we have invested at WellPoint over a billion dollars ... in companies that identify best outcomes of care, that can look at our claims, look at our pharmacy data, laboratory data that we receive, and provide that information to our members and their doctors to make sure that Americans and our members are getting the very best care available. We have invested in not only information technology but technology that makes e-prescribing available to many of the physicians of America. That's what we've been able to do with our operating margins.

I've got to challenge you here, because you've said you spent a lot of money improving health care and controlling costs. But I'd say the American insurance industry have failed on both. Costs in medicine are going up at twice the rate of inflation, the highest costs in the world. Would you say the insurance industry has helped keep costs down?

I think the American health care system has not delivered to the American people high-quality, affordable care. That's accurate. However, we need to understand the fundamental issues of why we do not have the high-quality care that all Americans deserve. ...

This is the best of times and the worst of times, the best of times because we have breathtaking scientific advancements -- we understand the human genome; we can understand the basis of disease, and we have new technologies and medications to treat that disease -- however, the worst of times: Forty-six million Americans don't have access to health insurance. We have medical errors that should not take place. We have almost 50 percent of the care that any of us receive when we go to doctors or hospitals is not meeting the standard of the best scientific evidence, the best care that we can receive. ...

We really need to look at where the health care dollar goes. Eighty-five percent or more goes to the provision of health care services. So when we look at our health care versus the other developed nations', the OECD [Organisation for Economic Co-operation and Development] nations, what we find out is that we spend far more on technology ... and we spend far more on the unit cost of services for advanced imaging or hospitalization or even specialty care.

We spend more, and are we getting our money's worth?

We are not. We rank 37th among nations in terms of World Health Organization statistics: life expectancy, infant mortality, all of those high-level measurements. ...

As you pointed out, 46 million Americans can't get health insurance. I'd say that's an indictment of your industry. What do you think?

That's a tragedy for America. Our company is committed to the path for universal coverage. We need to cover those 46 million Americans.

But let's look at those 46 million Americans. Between nine and 12 million of the uncovered are children or other Americans that are available for state insurance health programs or other public assistance programs. So that's about 12 million. There are a small number, maybe eight million, that actually have incomes that exceed $50,000 to $75,000 a year and can afford insurance but choose ... [to] go without. So we have to find a way of covering that group of approximately 20 to 30 million Americans who are below 300 percent of the federal poverty level and who need public subsidy to get insurance.

So is it [an] indictment against the health insurance industry? I think we have some accountability. However, let's look at those states that have said everyone who comes needs to be insured. And there are five states that have what's termed guaranteed issue. And if we look at the average premium for those states, in the individual market, that premium is three times higher, on average -- maybe $600 to $700 in some cases -- versus a premium where the insurance market has allowed what we call medical underwriting.

So in a way, if we were just to say everyone needs to be covered, we would create an insurance product that would be unaffordable for those that are less than 300 percent of the federal poverty level. But more seriously, and the unintended consequence would be that we would also create an insurance product that most Americans who buy their insurance in the individual market couldn't afford. What's so important to recognize is, the vast majority of Americans that are insured have insurance through their employers. And in that model, we accept, as an industry, all individuals ... independent of what their medical needs are, pre-existing conditions.

... You do underwriting. And I think that means if some individual comes in for coverage, you give them a medical exam, and if they're sick, you won't cover them.

In the individual market, if someone has an existing significant medical illness, for example, existing heart disease or complications of diabetes, they would have what's termed a pre-existing condition. And in many instances, today, they would not be covered. ...

We want to provide coverage for every American. We do not want to exclude people for pre-existing conditions. But to get there, the path to get there requires, most likely, a mandate in the individual market to allow healthy people to modify the pool. ... Americans should have health care as a right. I deeply believe that. But I think if we had a market that people would only buy in when they become ill, their costs would be extraordinary and not affordable for those that are part of that system. ...

For our 35 million members, 1 percent of our membership accounts for almost 25 percent of all health care costs. Five percent accounts for 50 percent. Imagine if you only issued policies to that 1 or 5 percent as they became ill. We would create a model that was not sustainable. So we have to use wise public policy to bring everyone into that individual market so that health care can be affordable for all.

So you're saying, in order for the insurance companies to accept everybody, everybody has to be required to buy insurance.

That would be one path forward to achieve an affordable product in the individual market, yes.

[So you agree with two-thirds of the president's proposed health care plan -- guaranteed issue and an individual mandate, where everyone has to buy insurance.] But the third leg is this public program: If people can't find a private plan they like, they can buy into Medicare. Would you go along with all three of those?

I certainly agree with the first two. It's my belief that the private sector can create innovative programs that are affordable, that would preclude the requirement for that public program.

To which I'd answer, you've had 25 years to do it and you haven't done it. There's still 45 million people uninsured.

Agreed. And that's why many of us have actually developed programs that have made a dent, have worked to make a dent in the uninsured. ...

But to your point, if you are not employed, or don't have an employer that has health insurance, and you're at 300 percent or less of the federal poverty level, a family of 300 percent or less, that represents about 80 percent of all the uninsured. So the issue is, there has to be some subsidy to enable people to afford those programs. ...

[In 2007, WellPoint spent 82 percent of its money on medical costs.] That is, 18 cents of every dollar doesn't go to pay for people's health care. In Britain it was 5 percent; in Canada, it's 6 percent. Medicare says 3 percent. How come the private insurance industry has such higher administrative costs than everybody else?

It's so important to look at what components fit into administrative cost. Generally, if we look at our industry, the administrative costs have been in the low teens. So if we look at administrative costs of low teens, profits that I mentioned are mid-single digit, then you have, as you've referred to, 82 to 85 percent of health care dollars going to provide care.

But let's dissect those administrative costs for a moment. We have over 4,000 health professionals in our company -- nurses, doctors, pharmacists, social workers, behavioral health professionals -- that are helping coordinate and guide the care for individuals with chronic illness. That's a resource that Medicare doesn't have. We have invested in infrastructure, in health IT, in programs that look at the care that our members receive and guide people to more effective care.

That's not a capability that CMS [Centers for Medicare & Medicaid Services] has. ... CMS dollars are largely paying claims. And certainly, if you look at our associates -- we have 45,000 associates -- more than half are devoted to customer service and paying claims. Those services, [to] work with a health plan to guide people to care, to find physicians, to build networks for quality, to build these programs, are all in our administrative costs. ...

We have a pharmacy benefits company. We have a disease management company. We have a company that looks and works with health professionals to make sure that the radiology services are the best that can be delivered to our members. All of those represent administrative costs. None of those services generally are in Medicare. ...

I think it's very important to recognize that our members have their care coordinated. They have better opportunities to use generic therapies. We have programs that make care more affordable by driving higher use of generic therapies when the generic therapies are proven to be highly effective. We have information that we take and provide to our members on better care. These are all of the very positive elements that reduce health care costs. ...

Today in Medicare, in Medicare dollars, 50 percent are spent in hospital for inpatient care, about 50 percent. Today, if you're admitted to the hospital as a senior, you have a 20 percent likelihood of being re-admitted within 30 days. Now, when people have looked at Medicare claims, they have found that about half of those individuals have had no care coordination, follow-up care with their doctors.

Programs that we have in place address those deficiencies. They identify our members; they work with our members after hospitalization; they involve them in care management programs. We have nurses who call them and coordinate care. So in many ways, those administrative costs are reducing total health care spending. In fact, our disease management programs, we've shown that for every dollar that we spend in administrative costs -- and I would argue, a very positive administrative cost -- for every dollar we spend, we save our members $2. And most importantly, they get far better health care and better health outcomes.

So you're saying a lot of this administrative cost is doing stuff to improve people's health that Medicare doesn't do.

Absolutely.

So then you shouldn't worry if the new health care reform plan includes the fact that you would have to compete with Medicare. You could do better.

I believe that we can do better, and we always believe that we can compete in a market, as we do today. ...

People have talked about the Federal Employees Health Benefits Program as a model, right? Well, WellPoint is the biggest manager, provider of FEHBP services. So even when there's a federal program that everyone, all of the senators and leaders in the incoming administration, talk to as a model, those programs, those services, the care management is provided by companies like WellPoint. ... States that have moved to managed Medicaid, demonstrating significant cost savings and health care improvement, every one of those states, to my knowledge, has used a private-sector health company, health services company, to deliver those services. ... Why add a whole complex infrastructure when today the government looks to companies like WellPoint to provide those services? And we do, I believe, a very fine job of it. ...

... I'm reading the speech by your company's vice president of Investor Relations, and he says the company's medical loss ratio is about 18 percent. What is a medical loss ratio?

Insurance terms are not consumer-friendly terms, are they? We refer to it as the medical benefit ratio. Of the total health care premium we receive, what portion of that premium is spent on the provision of health care services? ...

But your vice president of this company is still talking about anytime they pay a medical bill, he calls it a medical loss.

The industry calls it a medical benefit ratio, so I think that's a preferred term. And it's an important consideration, because I think many people don't realize that the majority, the vast majority, of the health care dollar goes to provide and pay for medical services. And that's an important consideration for our industry.

Why is it that you have to pay more than Medicare does for the same procedure?

There's been a recent study (PDF) by Milliman [actuarial and consulting firm] that actually has looked at what you're referring to, which is the cost shift from the public payers -- Medicare and Medicaid -- to the private sector. And it's basically a hidden tax that employers pay.

The study done by Milliman, and just released in December of 2008, has demonstrated that if that cost shift didn't occur, health care premiums would be reduced by 15 percent for the private sector. In addition, their study didn't look at those individuals who have no coverage and go to hospitals and doctors and don't have any means of payment. Many have estimated that if that group was included, we could see health care premiums, without any other change, come down for the private sector by 20 to 25 percent.

Now, you ask, the fundamental question is, how did this occur, with all of the market strength that companies like Anthem and WellPoint have? And it's historically been true that Medicare reimburses hospitals at or near their cost of providing services. So hospitals file Medicare cost reports, and it's a very complex model of how doctors and hospitals get paid. But because hospitals have traditionally been underpaid for their services by Medicare and Medicaid -- and that gap is widening; today that gap is the widest it's ever been -- that the difference has to be made up.

And we believe deeply in our hospital collaborative partnerships. So if you're an academic medical center, we want to be sure that you have invested in the right technology and can provide special services. If you're a safety-net hospital, caring for the underserved, we believe that it has become a responsibility to make sure that hospitals are well financed, can invest in new infrastructure, can invest in the technologies that will improve care. One could look at what if there was a national payment model, and that could level the playing field.

I saw that in other countries. There's one price schedule for everything.

And certainly that would bring down costs for the private sector. ... We also take those health care dollars and build networks of higher-quality, higher-performing hospitals and doctors. So we do pay more, and we are proud of some of the work we've done in building preferred networks for care. And I believe, as you have a higher-quality network, your unit cost may be higher, so we'll grant that; it's in many cases 15 percent higher. But if the outcomes are better because we've built better centers of excellence, better places to go for care, there may be greater value in the long run. So some of that cost shift may, in fact, be valid and bring value. Other elements will not. ...

So I think what you're saying is, Medicare has the economic clout to force lower prices on hospitals, but WellPoint doesn't have that much clout?

We do not have the clout to say this will be your rate; that you must take this rate.

So I don't get that. You have 35 million insured. Medicare has 40 million people. Sounds about the same. How come they're able to do it and you aren't?

First we have to look at how the federal government makes decisions. CMS makes payment decisions to hospitals. They look at cost reports, they look at access issues, and make decisions on what hospital reimbursements should be. Historically, with the exception of the rare state, Maryland, that still has cost controls, the private sector negotiates for services. We use certainly all of the ability to channel our members to high-quality institutions as part of that negotiation. But we generally aren't in a situation to say, "You must take the rate that we're providing or you're not in the network."

We also have to serve our members. And if there was a hospital system that was a dominant hospital system in a community, a hospital system where our members wanted to go for their care, it's not easy nor responsible to say that you're out. Think of what that would mean for disruption of care, for continuity of care. ... So we're always balancing unit payment versus access and service.

We believe that the reason that we can deliver -- even by paying higher rates to hospitals, and in many cases to doctors -- that we can deliver a more cost-effective product [than] the federal government does, is because we are decreasing those units of unnecessary care, of care that is of poor quality, of care that is a result of poor coordination of care. ...

Let me give an example. We know that the fastest growing medical cost areas are in advanced imaging: ... MRIs, CAT scans, PET scans. So these are medical technologies that can diagnose cancer earlier, that make a true difference in care. However, it's been recognized by radiology professionals, the American College of Radiology, that as much as 30 to 40 to 50 percent of these services are not in keeping with our scientific knowledge of when they're valuable. ...

So we're paying for them and they're not providing value?

We're paying for services that are being done that have no strong medical indication or medical value. And this is not Anthem WellPoint saying this. These are health professionals. These are experts in clinical decision making and clinical outcomes. These are the leading radiologists in the country. ...

[I]f we feel that the procedure is inappropriate, we actually will guide the doctor to the better procedure. So often doctors do a CT scan, then an MRI, then maybe a PET scan, whereas the PET scan or the MRI might be the best initial procedure. We'll guide them in that direction. So while we may pay more, then, for the imaging procedure, we are reducing the total number of imaging procedures.

In Medicare today, if your doctor wishes an imaging procedure, there is no surveillance. There's no review of the appropriateness of those imaging procedures. In fact, one could argue that you could get the same procedure from many doctors at many different institutions. That's an example of waste, inefficiency, poor-quality care, radiation exposure, which no one wants. So there's an example not only of how our administrative costs are used, but how we can balance perhaps increased unit costs with decreased units of service. And we're not limiting care; we're actually guiding people to better care.

... In a lot of countries that use private insurance companies, the law is that they have to pay every claim. You told us you spend a lot of your administrative costs underwriting, denying claims. What if you just paid every claim?

We do not deny claims. What we do is we help guide --

Well, I've had claims denied.

We help guide people to exceptional care. Let me start by giving a framework for this.

Well, no. [You come] back and say, "We're not paying for that procedure."

The only time we don't pay for procedures is if our Medical Technology and Policy Assessment says that those procedures are of no value in clinical care. And those determinations are made by outside experts, by academic leaders, by medical specialty societies. We work with them to determine what works in health care.

There are two reasons why we may not pay a claim. One is because it's a program or a clinical service that is of no proven benefit, scientific benefit. The other is if your policy doesn't provide coverage for that benefit. For example, some large employers have asked us to write in their policies to not provide coverage for bariatric surgery, which is surgery for severe obesity. So while other programs cover it, unless you have a special rider, that would be a rejected claim. But if you look at those services that are not covered, they're because they are of unproven clinical value. And I would argue that in many if not most of those instances, we're actually protecting our members from medical services that won't lead to better health outcomes.

I bet you everybody watching this show knows somebody who had an operation, it was covered by insurance, then they get a bill from the radiologist or the this-ologist or the that-ologist who says it's not covered by insurance. You turn them down.

I think each of these circumstances, we would have to look at them and review them and see what the special issues or considerations are. It could be that a doctor is not in our contracted network. That might be a consideration. But by and large, these are for services that are unproven.

Now, the other important issue I think here is to recognize that each state has built very formal appeals and grievances procedures, so that there is an absolute opportunity to review, to have outside people, the company and then outside reviewers, including physicians, review those services and make a decision. ...

And there have been controversial issues. Let's be absolutely clear. There are controversial issues. Should CT scans, CAT scans, be done to screen for lung cancer? And there's an example where the science isn't there. There's some additional technologies. One is called CT angiography. Is that a best test for early definition and prevention of coronary disease? The medical field, it's a very controversial test. Those are the types of things that we discuss. ...

So I think when you look at those claims that are rejected, each one probably has its own story. Each one is based, I would hope, on the merits of science, not on a health plan limiting or denying care.

Let me be very clear about this. Our goal is to improve the health of our members, to provide medical services, to work with doctors and hospitals and other health professionals to make sure that we can optimize our health, from health prevention programs all the way to the best management if we have a chronic illness. We have built centers of excellence around the country; that if you have a cancer, if you have malignancy, if you have a rare cancer, if you need a transplant, if you need cardiac surgery, we have actually built networks that produce better results, working with doctors and hospitals that get you better care. We pay for people to go to these institutions, including the travel, with families, so that they can get access to the very best care America has to offer. So those situations that you describe, I believe, are unfortunate, I believe have given our industry a black eye. ...

... You know, a lot of people really don't like health insurance companies, and a lot of it is because you submit a claim and they turn it down.

When we survey our members in terms of their satisfaction with our Anthem and WellPoint companies, we actually see satisfaction levels that are in the 80 percent-plus. So your statement is true for the industry. The industry has low public esteem. However, individual members who use their health benefits, who have been [involved] in our care management programs, have seen what their health plan can do to help facilitate care, to provide medical security, actually have very high opinions of us. ...

So there's a contradiction in what you're saying here, because you said Medicare pays a lot less than you're able to pay ... and then you tell me you're doing a better job of controlling doctors' costs than Medicare. Those two don't go together.

I think we're referring to the two components of health care: unit cost -- how much does each service cost? -- and the numbers of services that are provided. And our strength, I believe, and will be borne by lots of scientific study, is that health plans look at units and provide more effective units of service. So when we look at the 30 percent or so of health care services that are of limited value, I would argue that we have less of those low-value units being provided than Medicare. And that's why we can balance higher payment, higher unit payment, but less units of service. ...

If we look at the average cost for a Medicare beneficiary, it's over $9,000. Now remember, we have low administrative costs; people are just paying claims, but that's a cost that far exceeds that of any of the OECD nations.

Right. That's because in those other countries they have a fairly firm cost-control mechanism coming down from the top.

Correct, as does Medicare -- has a firm cost-control mechanism for unit cost. We've just talked about how Medicare underfunds doctors; it underfunds hospitals in terms of their cost. There's this cost shift. If you want to segment what we have, which is a government system with limited management and very few controls, you have Medicare. And you can see, independent of what the private sector does, you can see that the Medicare health care costs far exceed that of other nations. ...

If you're in the U.K. and what's called NICE, the National Institute for Clinical Excellence, if you look at the work that NICE has done, there may be certain cancer therapies that you will not get because they have not been proven to be of benefit. We don't have that situation generally in the United States' health care.

Should a country have that kind of cost-checking mechanism?

I believe the most effective way to get there -- and I'm so delighted that this has been part of [Montana's Democratic] Sen. [Max] Baucus' proposals and President Obama's proposals -- is to invest in an institute for comparative effectiveness research, to look at outcomes research, to be sure that those services we provide are of clinical value. In fact, we have a subsidiary company called HealthCorps which actually does outcomes and comparative effectiveness research. ...

That's what NICE does in the U.K. And NICE had to do it because the total health care dollars in the U.K., the amount spent on health care, is not 16 to 17 percent of the GDP [gross domestic product], but a far lesser number. So the European nations have moved in this direction because they have capped their health care expenditures, and in so doing had to both rationalize how care should be delivered and develop a set of priorities for the nation.

We have not done that yet. ... But I believe that as a key component of health care reform, we're going to see this type of appropriate, vital investment, so we can remove that 20 to 30 percent of health care that produces no health benefit. That will leave us the headroom for innovation. ... So we can invest in the future in new technology, so as we enter the era of personalized medicine, and we know by assessing our DNA what services can work better for each of us, we have the ability to pay for these new technologies and drugs not by limiting care, which is what happens in most of the other OECD nations, but by limiting ineffective care and promoting that care which makes a difference.

Well, it is limiting care, but you say you're just going to limit care only to things that work?

Absolutely agree with you. The goal is to limit health services to those that are [of] more proven value. Now, we cannot be in a situation where we can't have, I think, some flexibility about what works. But I think we have to do the best we can to advance knowledge. I think we have to do the best we can in America to support clinical research efforts; that if we don't know what works, to understand what works. That's one of the beauties of our academic system of collecting data.

... So you're talking about evidence-based medicine. That means medicine where there's evidence that it makes people better?

Yes, absolutely. The idea is --

Then you're saying American doctors do stuff that we know doesn't make people better?

Absolutely.

And we pay for it.

And we pay for it. Our goal is to work with medical professionals, and I think we have developed a track record, and I think the medical organizations are increasingly recognizing that one of their responsibilities is to be truly part of determining the scientific and clinical merits of a new device, a new procedure, a new drug. And if it has merits, then absolutely we want to deploy it. But if it doesn't, we have to be sure these services are not given. And that really requires a strong commitment for American specialty medicine, for academic institutions, but also for companies like ours. A company like WellPoint is sitting on a wealth of clinical information and clinical data.

We have been able to use this data in very exciting ways. For example, we are now working with the CDC [Centers for Disease Control] to look at vaccines, and do some of these vaccines cause health problems in children. That's an ability that we have because we're sitting with 35 million members and their data. We are working with the FDA [Food and Drug Administration] to develop a national Safety Sentinel System, because any one doctor giving drugs to his or her patients can't determine whether there's an increased risk of cardiovascular disease or kidney or liver toxicity. We have that ability. ...

So what we're saying is, if it's not picked up during the approval process, which is a rigorous process by the FDA, then we can be there to identify what may be an unsafe therapy. We tested this, actually. We tested this in Vioxx. We went back, and while it was almost five years before the cardiovascular consequences and the side effects of Vioxx were recognized, we went back into our claims data for our members treated with Vioxx, and within six months we would have recognized a signal of increased cardiovascular risk. That's a way that we can positively improve health care by using our data in a very thoughtful and informed process.

We met a customer of yours in California, a woman who filled out an application with Blue Cross, your company, and they sent her a letter and said: "Congratulations! You're covered. You've bought peace of mind and good insurance." And she paid her premium, and months later she got a cancer, and she got a letter from your company saying: "You're not covered anymore. We're canceling you." What's going on there?

You're referring to a process that has been very much in the media in California called rescission.

Rescission. That's what they called it, yes.

Now, again, I don't know the circumstances that are described here. But ... remember, we talked about pre-existing conditions. If someone has a cancer, has a malignancy, and do[es] not let us know on an application, so therefore they've created an application with misinformation, then we, by law, have the right to rescind or reverse that policy. And I believe that's the situation that you're referring to. Now --

What I'd say is, if you're not going to cover them because they had a health problem, you should do it at the start. In this case you took the premiums from this woman for months as long as she was healthy, and as soon as you had to pay any money, you cancelled her.

Again, I don't know the specific circumstance. ... The idea behind rescission is that someone should not commit and provide erroneous information on [an] application. My understanding [is] most of the people that had rescissions provided information where there was a pre-existing serious medical condition, and that was learned later in review of medical records.

But you didn't review until you had to pay the money. As long as she was paying the premium and staying healthy, your company didn't care.

Yeah. And I can't speak to that circumstance, but what I can speak to is, first, no one ever likes to see a situation like this. People are buying health security. So this is an example of why many of us believe that there should be guaranteed issue, but with full disclosure of what the medical needs are and appropriate pricing for what those medical needs are.

Well, what do you think about this concept? Once you accept somebody and start accepting her premium, you ought to pay her claims.

For the vast majority of our members, 99 percent-plus, the individual market, that's exactly what happens. These several circumstances that arose in California arose because the information that someone provided was inaccurate.

They said they were, for example, entirely healthy, didn't have a medical condition, and then on review, it was found that they had knowledge of having cancer. Now, I believe that people should get care for their cancer; I believe people should get care for their heart disease. But I don't believe people should misrepresent, if that was the situation, on an application what wasn't true.

There are circumstances -- and let's be, again, very clear about this -- there are circumstances which occur where someone maybe doesn't have the medical sophistication, and therefore in filling out the application didn't know that their symptoms or their care could have been the underlying illness that later developed. And that's where we have built safeguards to prevent that from happening in the future. We agree. We don't want to see -- no one wants to see these situations arise.

You have 35 million customers. How many people are rescinded every year by your company?

I believe that would be under 1,000. ... That's a segment of our business. My understanding [is] that it was an extremely small number of people that were in that market. ... I don't have that number, but I believe it would be under 1,000. ...

Sam, it looks like the elements of a reform plan that are coalescing in Washington have three parts: Everybody has to buy insurance, and the insurance companies have to sell a policy to everybody, and the third element is, if people can't find an affordable private policy, they can buy a government plan like Medicare. Those elements look good to you?

We're very excited about the prospect of health care reform. We are committed to make high-quality, affordable health care available to every American. I think as we look at how this will come about, how can we pay for this, there need to be a series of public and private programs to achieve those goals.

Some have advocated, cover everyone and then work to reform the delivery system to make care more affordable. I believe that we have to do them in concert. I believe, and we've discussed, based on the cost of covering a Medicare beneficiary, that if we don't look to reform the delivery system, find more effective ways of delivering care, use health information technology wisely, identify what works in health care through comparative effectiveness research, coordinate care, if we don't do those things in concert with covering everyone, we will have a health care system that remains unaffordable.

And so I believe that fundamental to the success of health reform is universal coverage, is a strong commitment to preventive services, is improving the public's health through public health programs -- we have epidemics of diabetes and coronary disease and obesity that are coming attractions for illness a decade or a generation from now -- those are all of the elements that need to be in the health reform proposal. And I believe that we're seeing many of those elements play out. We're seeing support for health IT as one of the earliest opportunities to reinvest in our nation's infrastructure. We're seeing support for improving quality and determining what works in health care through comparative effectiveness. We're seeing opportunities to expand and improve upon preventive health programs and public health programs. All of those are essential elements to health care reform. But I believe that over the next year we will see some very exciting proposals that will make American health care access, quality and affordability take its rightful place along with the high-quality science in our nation and in the world. ...

When we traveled the world, ... these people said, well, first you have to cover everybody, and if everybody's in the system, then you have the political will to make tough decisions to control cost. Does that make sense to you?

That makes sense, but I would argue, why not build the health care system that we want at the same time? Why not take all the investment that we've made in hospital infrastructure, in the best-trained specialists in the world, and take that energy, take our information, our knowledge of care, and advance it at the very same time? I think that would be what I would see in the health care reform of the future.

Take on coverage and cost at once?

At the very same time. The seeds that we sow today need to be harvested in the future. Comparative effectiveness research, outcomes research, care coordination, preventive health services -- those are investments today that will have lasting impact on improving not only the health but the productivity of the American people.

Fifty percent of Americans shouldn't be getting health care that does not meet the very best quality standards. And that's what's happening today. How can we not reform our delivery system when people seeing their doctor are not getting state-of-the-art care, when children are not getting the right treatment for asthma, when individuals with diabetes are developing complications that can be prevented? We need to look where the money is being spent -- it's being spent in the delivery of health services -- and reform those services to create the optimal value. That's how we will create the headroom for the new technology advances that are occurring as we enter the biological age. ...

Do you think America is ready now to embrace health care reform and cover everybody?

Yes. There's a commitment by Congress, there's a commitment by President Obama, and there's a commitment -- and I see it in the hospital industry, among physicians and among health plans, not to oppose each other but to come together and to find a workable solution to quality and affordability. I'm excited about the future.

How soon do you think it will happen?

I think it will happen in the first year of the Obama administration.

posted march 31, 2009

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