Can 'Sicko' Debate Be The Right Tonic For Health System?

Michael Moore's new film, "Sicko," has raised hurrahs in some quarters and hackles in others.

The film, which opened nationally Friday, examines the U.S. health care system and calls for its replacement with the kind of tax-funded, universal plan used in Europe and Canada. Supporters of that idea share little common ground with opponents, experts say.

"Moore argues for a system of national health care, tax supported, single payer, government run, without private insurance," said Paul Keckley, executive director of the Deloitte Center for Health Solutions. "The private sector argues for more individual responsibility for health care costs."

Where do the twain meet? Perhaps on a fundamental issue: transparency, or full disclosure of what's going on behind the scenes.

But the two sides differ on the meaning of transparency.

Moore's film advocates that pricing and discount deals made by insurers with physicians, hospitals, drug firms and benefit managers be made public.

Insurers want consumers to know the prices of all medical services so they'll use them less.

As for the consumers themselves, they face complexity in trying to figure out the health care system, says Paula Fryland, executive vice president of PNC Financial Services Group PNC and head of its health care group.

That complexity also gives them a choice of customized health plans.

In June, PNC released results of a national survey on health care that found consumers and other health care stakeholders in agreement. It found that the information available to consumers is inadequate.

Last August, President Bush ordered the four federal agencies that provide health care services -- and their suppliers -- to develop plans for price transparency.

Comparison Shopping

While consumers might want price transparency, they've shown little enthusiasm for the plans insurers are coupling with transparency. Known as consumer-directed health plans (CDHPs), they come with low premiums but high deductibles. An individual can have an annual deductible of $1,000 or more.

Some employers have been trying to shift the cost of health insurance to workers by offering them CDHPs. Folks who don't get insurance through work buy their own.

To give consumers comparative pricing, health insurers have created online tools that provide comparative prices and, in some cases, performance records of doctors, clinics and hospitals for specific services.

Because those consumers call the shots on how their health dollars are spent, the theory goes, they'll be more frugal. They'll demand more competition from providers and thus restrain the rising cost of health care.

One firm that provides online tools is HealthMarkets. It specializes in health insurance for those without employer-paid plans. Its research found huge disparities in consumer health costs. For example, a CT scan of the abdomen can cost as little as $300 to almost $3,000. A knee replacement can range from $22,000 to more than $77,000.

HealthMarkets' online tools let customers with high-deductible policies research the rates charged by doctors, hospitals and clinics for many services and procedures. Subscribers pay deductibles ranging from $1,000 for an individual to $3,000 for a family.

The company has online data for two-thirds of medical providers in all 50 states. It offers guidance only on price, not quality of care.

'More Stable Costs'

Customers are taking to the system "because they have skin in the game," said Peter Gaillard, HealthMarkets' senior vice president of product development. The company gets 90% of claims from the 6% of providers who charge the least.

That's good for the insurance company as well as the consumer, Gaillard says. "It allows us to have a much more stable cost than we otherwise might have had."

While transparency is great for those who are willing to pay more out of their own pocket, most folks with traditional, employer-subsidized plans avoid high-deductible plans. Employer-backed plans remain the popular option, according to industry data.

The Kaiser Family Foundation found that in 2005 and 2006, only 4% of workers opted for CDHPs where their employers offered a choice of high-deductible or traditional insurance plans. Also, only 4% of firms said they'd offer CDHPs.

Transparency must include more than prices, Keckley says. It also must include administrative costs of the present system.

Of every health dollar, 30 cents goes to administration, Keckley says. "The most efficient health plan in terms of percentage of administrative cost is Medicare at 9% to 12%."

Billings present another problem. PNC's survey found that one-third of consumers had to contact their health insurer at least once last year to resolve a claim, while 26% had to call two to three times.

"Despite their interest in more transparency, many consumers struggle to understand the details of their medical bills and the payment process," PNC's report said.

Then there's transparency at the corporate level. California regulators are investigating a $950 million dividend paid by Blue Cross of California to its Indiana-based owner, WellPoint WLP.

California approved WellPoint's takeover of Blue Cross on the condition that money would stay in the state to keep premiums down and health benefits up.

Add to that issues of transparency in pharmaceutical costs. Drugs account for 16% of health spending, Fryland says.

On June 22, U.S. District Court Judge Patti Saris ordered AstraZeneca AZN, Bristol-Myers Squibb BMY and Schering-Plough SGP to pay damages for overcharging on drugs paid for by Medicare.

The companies "unfairly took advantage of the system by setting sky-high prices with no relation to the marketplace," Saris wrote.

Keckley maintains that transparency in consumer medical costs alone is of limited benefit, saying it "doesn't solve the cost-spiral problem of the system." He said Moore raises an important question: "What kind of health system do we need, and do we want to tweak what we have or make systemic reforms?"