Greg Scandlen is among the country's leading advocates for "consumer-directed" insurance plans, in which there is a high deductible and patients pay for routine care from tax-sheltered health accounts. He's president and chief executive officer of Consumers for Health Care Choices, a Hagerstown-based nonprofit that advocates nationwide for free-market solutions to health system problems.
President Bush and other supporters say such plans would turn patients into smarter consumers of health services and lead them to look aggressively for cost-effective treatments. The results, they say, would be price moderation through competition and a reduction in unnecessary treatments.
Critics say the plans might work well for the healthy and wealthy but would shift more cost to patients. The result, they say, could be patients avoiding needed treatments because of the out-of-pocket costs.
CHCC supports changes in the health system that would facilitate consumer-directed plans. For example, employers could provide a fixed sum to workers rather than selecting one or a few health insurance plans; workers would then choose their own health insurance. CCHC also wants hospitals and doctors to post prices so patients can make cost-benefit decisions.
Scandlen has worked for several Washington think tanks and advocacy groups. He's also worked for Blue Cross plans and was director of state research at the national Blue Cross and Blue Shield Association. How did you get into advocacy?
I left the association in 1991 after a big internal debate about what is the added value we bring to health care. I argued we should be supporting the patient in dealing with a complex health care system, but I lost the argument to the people who said in effect, "Yeah, that's fine, but it is the employer who signs our checks, so the hell with the patient." That resulted in the horrible detour into managed care in the 1990s and convinced me that third-party payers cannot be relied on to manage health care. It seems that every candidate this year has a health care reform plan, and many of them set universal health insurance as a goal. What do you see in the plans that you like? What do you see that really scares you?
People with low incomes or high expenses need to be subsidized. That much is clear, and all the candidates have ideas about how to do it. But requiring people to buy health insurance before they put food on the table, pay the rent or get transportation to the job makes no sense at all. Having insurance is not the same as having health care. Making insurance "universal" does little good if the insurance doesn't provide value. Some candidates want to create a government "connector" to help consumers shop for health coverage. Isn't the idea of a "connector" similar to what Maryland already has in the small-employer market, where the state sets ground rules for policies for employers with up to 50 workers?
I don't think so. Maryland's small group market is a disaster. There is little competition or innovation and very high prices. The non-group market in Maryland is working a whole lot better. A connector approach might work if it doesn't try to micromanage the benefits and carriers and simply acts as a shopping mall, but it is awfully hard for regulators to restrain themselves. Maryland is the only state that has a regulatory board to set hospital rates. The board says it has kept the rate of increase in Maryland hospital bills below the national average and has allowed hospitals to absorb the cost of treating the uninsured. Why do you think a free market in hospital rates would work better?
The rate-setting system has been helpful because it reveals exactly what the prices of hospital services will be. But it also discourages competition and innovation and guarantees that hospitals will not fail no matter how badly run and inefficient they might be. In general, can the system best be reformed by changes at the federal level or the state level?
We are working on reforming the system independent of any state or federal action. There is already plenty of money in the system; it just isn't allocated properly because the wrong people control the money.
Every penny spent on health care comes from us as citizens. It is simply passed through to insurance companies in the form of premiums, employers in the form of lost wages and government in the form of taxes.
We were willing to let them control our money because we thought they would do a good job of managing it. But they haven't. They have all created a system that is bureaucratic, inefficient, inconvenient, of questionable quality and way too expensive. It is time to take our money back and control it directly. When that happens, health care will become as responsive, efficient, convenient and affordable as the rest of the economy. Can consumers really negotiate price with doctors or hospitals? Can't insurers bargain much more effectively, since they're buying care for millions of members?
Insurers don't negotiate; they dictate. And they don't understand or don't care what is important to us as consumers. They end up underpaying primary care doctors and overpaying for spinal fusions. So we get family doctors who can only spend five minutes with us and surgeons who are all too eager to cut us up. Can the collective impact of individual health purchasing decisions result in controlling costs?
You bet, and we're already seeing that in the market. According to Mercer [a benefits consulting company], costs for consumer-driven plans went up just 3.5 percent from 2006 to 2007, while HMOs went up 7.6 percent and PPOs went up 6.1 percent. This is consistent with all the other reports we're getting from the field. Is the country ready to get rid of the system where most people who have health insurance get it from their employers?
No, and I don't expect that to happen in my lifetime. Employers have a real interest in seeing that their workers are covered. But employers are likely to offer employees a much wider range of choices of their coverage. Plus, workers whose employers do not provide coverage should not be disadvantaged on the tax treatment of their coverage. The same tax policy should apply regardless of how the worker secures coverage. Consumer-directed health insurance seems to be growing more slowly than many had predicted. Why?
I don't think that is true at all. [The plans] are growing faster than I or anyone I know expected. Harvard Professor Regina Herzlinger says the adoption rate is faster than any other benefit innovation of our lifetimes - faster than HMOs, faster than IRAs, faster than 401(k)s. They've been around for only four years and already have something like 15 percent of the market. CCHC seems like the type of organization you'd expect to find in Washington. Why do you choose to operate from Hagerstown?
Because I hate Washington. I lived and worked there for 15 years and found it full of self-important egotists who have far more power than their talents deserve. Other than that, it's swell.
bill.salganik@baltsun.com