[December 04, 2008]

Health Insurers Call on Congress to Take on Health Care Costs

(BestWire Services Via Acquire Media NewsEdge) America's Health Insurance Plans, the trade association representing most health insurers and managed care organizations, is challenging Congress to set a 30% reduction target for future growth of costs in the U.S. health care system, proposing that without cost-containment, the goal of universal coverage would be impossible.

Unveiled as a next step in the group's comprehensive health reform plan, the proposal includes creation of an independent body to target ways to promote more effective and efficient health care delivery. The group suggested the public-private advisory group could prompt changes that would reduce cost projections by $500 billion over the next five years.

"We recognize that the process of setting a target and developing a proposal for achieving that target is perhaps the most difficult challenge the nation faces," AHIP President Karen Ignagni said. "We only need to look to the literature on the wide variation in practice habits that occur across the country, which has been written about again and again...and there's yet no plan to address that variation."

The challenge to Congress coincided with release of an AHIP-commissioner report by PricewaterhouseCoopers finding that, while growth in health insurance premiums fell to 6.1% from 2006 to 2007 -- compared with 8.8% and 13.7% growth in the 2004 to 2005 and 2000 to 2001 periods, respectively -- other cost drivers continue to impact the health care delivery system. While general inflation accounted for 46% of the growth in health insurance premiums, price increases that exceed inflation accounted for 30% and increased utilization another 25%, PwC reported.

The report identified growth in outpatient diagnostic testing as one of the most significant drivers in the most recent period of increase, with 15 cents of every premium dollar devoted to outpatient spending, a growth rate of 8.2%. Ignagni attributed part of this growth to the practice of so-called "defensive medicine," suggesting the combined cost of medical liability and testing taken to avoid it accounted for 10% of the cost of health insurance.

While conceding that caps on pain-and-suffering awards were unlikely to gain support from either the Democratic Congress or the incoming Obama administration, Ignagni suggested that "a more thoughtful approach" to encouraging sound medical practices that would appeal to both sides of the aisle.

The group last month announced it would support guaranteed issue laws that prohibited discrimination based on age, income or health status, so long as they were coupled with a mandate that all Americans procure coverage. Ignagni said the group expects to unveil the next part of their project -- on reducing paperwork and administrative burdens on doctors -- early next year.

Health reform has been identified as a priority by President-elect Barack Obama, as well as by several key congressional leaders. Senate Finance Committee Chairman Max Baucus, D-Mont., has reached out to Obama with a detailed plan to reform the U.S. health care system, including an individual mandate to purchase coverage, something Obama opposed on the campaign trail. Senate Health Education Labor and Pensions Committee Chairman Edward M. Kennedy, D-Mass., Kennedy, who chairs the Senate Health, Education, Labor and Pensions Committee, also has indicated he is interested in pushing through comprehensive reform.

"There's a spirit of optimism about our work to ensure quality, affordable health care for all Americans -- and today's announcement adds to that optimism," Kennedy spokesman Anthony Coley said of AHIP's plan. "The insurance industry has advanced serious proposals that deserve serious analysis and consideration."

However, the plan also drew detractors, including the California Nurses Association, which labeled it a "Marshall Plan for the health insurance industry."

"Rather than subsidizing these industries through laws mandating Americans purchase their products, we would be better off either letting them fail, or simply taking them over, as we have been forced to do with other obsolete sectors," CNA Executive Director Rose Ann DeMoro said in a statement.

(By R.J. Lehmann, Washington bureau manager: raymond.lehmann@ambest.com)

Copyright ? 2008 A.M. Best Company, Inc.

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