Health insurers have failed in their promise to deliver quality and value to the taxpayers, providers, employers, and their subscribers.
If you find a wasteful government program, isn’t there an obligation to foster a public discussion about it? Physicians for a National Health Plan (PNHP) has developed an analysis that reveals the waste in allowing private health plans to manage Medicaid medical services. According to PNHP, returning management of medical services to state control by eliminating the middleman could result in savings of over $77 billion nationally.
In response, health care advocates in many states have initiated efforts to de-privatize Medicaid. These proposals are based on publicly available financial statements, and they are persuasive from a business perspective, but I feel compelled to add some detail on the level of redundancy and waste in the current funding process. My perspective is based on two decades of experience as a medical director and Chief Medical Officer at several national for-profit and New York-based not-for-profit health insurance companies.
The illusion of competition
Few people feel warmly towards health insurance companies, yet we are often told that competition among insurers creates value for taxpayers and customers by lowering costs. The evidence suggests otherwise. Competition has not reduced overall health care spending; instead, rising medical expenses are routinely passed on to consumers and taxpayers. Insurers invest heavily in brand identity, emphasizing quality and customer service. In reality, performance on standard quality and service measures clusters within a narrow range of acceptability.
Since 1998, I have worked for Fidelis, Emblem, HIP Health Plan, Healthfirst, Coventry, Aetna, and UnitedHealth across commercial, ACA marketplace, Medicare, and Medicaid lines of business. Based on that experience, I can state unequivocally that there is little meaningful difference among health insurance companies. They perform the same functions, using the same processes, in largely the same way. Eliminating the extensive redundancies across insurers would be the single most effective step toward reducing waste in health insurance.
The burden of redundancy: contracting and credentialing
Let’s look at each of the redundant functions in greater detail, using New York State as an example.
There are 78,000 physicians with close to 97 percent participation in Medicare. Medicaid has substantially lower fees and, as a result, only 70 percent of doctors accept patients with Medicaid. Many providers accept Medicaid as part of broader contract arrangements with the major health insurers. This broad contracting approach allows health insurers to market more robust networks which include almost all the hospitals.
Each health plan contracts with each of the provider groups which include doctors, physical therapists, social workers, and other professionals as well as hospitals, nursing homes, and other health care facilities. Each provider must negotiate and contract with the several plans that operate in its region every year. This is duplicate work by health plans as well as by the providers. Why not have one contract per provider with a single state agency?
Health plans also limit payment to providers that are contracted and credentialed. Each plan maintains peer review committees that involve practicing clinicians to determine who is in network, and more importantly who is not. The process involves detailed reviewing of the credentials of new applicants and all the contracted providers on a three-year cycle. When I changed jobs from one health plan to another, I reviewed the same malpractice cases again and again.
Why not have one credentialing program for the entire state? We could eliminate the wasteful redundancy by merging the contracting and credentialing functions into a single administrative services contract. All clinicians who are qualified and who accept Medicare rates should be able to participate in Medicaid.
Marketing, enrollment, and claims
Health plans compete to persuade eligible residents to change from one plan to another. The benefits for each type of insurance are mandated by law and do not differ. The networks are entirely the same except in instances when the insurance company has leveraged its commercial contracts to allow Medicaid participation. Enrollees are choosing the best marketing program.
The only useful function performed by the marketing department is encouraging potential enrollees to submit their documentation to establish eligibility. Ensuring Medicaid eligibility could be accomplished by other means. Under Medicaid, health plans are paid a base rate for every person they enroll and thus they have an incentive to enroll people who may not be eligible. That is an invitation to fraudulent enrollment that enriches the health plans. If the state ran the enrollment program, there would be no need for the redundant marketing and enrollment teams at the various health plans.
Regarding claims, systems are engineered to pay clean claims automatically. I continue to be surprised by the variation between insurers’ approaches to the handling of claims that are not clean. These differences infuriate providers who want nothing more than to submit clean claims and be paid timely. Much of that waste would be eliminated if the Medicare claims rules were universally adopted. Doctors would be very appreciative if all claims were submitted to a single system with a uniform set of rules.
The friction of utilization management
All health plans employ utilization management to control medical expenses. What they seek to avoid is paying for services that are of unproven value. About 95 percent of services requested are medically necessary and ultimately approved. Most doctors consistently request only services that are medically necessary, while a small number of doctors frequently abuse their privilege. What has emerged is a system for punishing the entire class for the behavior of a few.
The consequences of this process, especially when prior authorization is involved, can lead to dangerous delays in diagnosis or treatment. Most initial denials are overturned when the information required to meet criteria is provided on appeal.
I have long proposed a gold card system that would allow providers with good track records instant approvals. The data necessary to support such a program would be easily available if the utilization management function were controlled by a single entity. In my opinion, almost all utilization management could be accomplished by retrospective review. Pool the data to identify the outliers and subject them to prior authorization and financial penalties.
Quality, coordination, and profit
Health insurers will point to their work in quality improvement as a major reason for them to remain in business. Yet, if you examine the QARR ratings available online, there is not a lot of difference between the plans on the clinical indicators reported. It would be substantially easier and less costly to have a unified quality management program interacting with the doctor on behalf of all the patients in their practice. Most quality improvement initiatives by health plans are based on contacting the patient and encouraging them to follow the doctors’ recommendations. Studies show that messages from a person’s primary care physician are four times more effective in nudging adherence to quality measures than messages from the health plan.
Furthermore, all health insurance plans operate each of their insurance offerings on a for-profit basis. The Affordable Care Act mandates that at least 85 percent of premium revenue be spent on medical expenses. At the end of the year, that leaves 15 percent for the administrative expenses outlined above and profit. Profits translate into returns for shareholders and bonuses for executives. There is no incentive to hold down the cost of health care.
According to the PNHP proposals, removing redundant services and profit would create a pool of funding that would allow for an increase of the Medicaid fee schedule to the level of Medicare and the elimination of copayments and deductibles. Health insurers have failed in their promise to deliver quality and value to the taxpayers, providers, employers, and their subscribers. Eliminating the middleman, first in Medicaid, and then in other types of insurance, is a relatively simple step to developing a more equitable and reasonably priced health care system.
Edward Anselm is a board-certified internist with a long-standing focus on public health, tobacco control, and preventive care. He earned his medical degree from the Chicago Medical School at Rosalind Franklin University and completed his internal medicine residency at Montefiore Medical Center in New York. Over the past three decades, Dr. Anselm has served in senior leadership roles across clinical, corporate, and managed-care settings, including chief medical officer positions at HIP Health Plan of New York, FidelisCare, and Health Republic Insurance of New York.
Recently retired from his role as medical director at Aetna, Dr. Anselm continues to teach at the Icahn School of Medicine at Mount Sinai as a clinical assistant professor. His current work focuses on strengthening reimbursement pathways for tobacco cessation and preventive services, helping clinicians integrate evidence-based care that improves patient outcomes while supporting practice sustainability. His research has been published in the American Journal of Accountable Care, the American Journal of Preventive Medicine, AJPM Focus, and Health Affairs Forefront, including articles on tobacco control in accountable care, underbilling of cessation services, and the financial and quality benefits of treating tobacco use as a clinical priority.
Dr. Anselm’s educational and policy work is shared through EdwardAnselmMD.com and The Anselm Nicotine Prescription, with professional updates available on LinkedIn.
