The 80/20 Rule: Why Medical Insurers Are Not Interested in Cost Cutting (or Integrative Health) … plus more

The 80/20 Rule: Why Medical Insurers Are Not Interested in Cost Cutting (or Integrative Health)

In the United States, medical insurance providers operate with a general agreement that insurers can take approximately 20% of the premium dollar. It’s called the “80/20 Rule.” Here is the way it is defined at HealthCare.gov: “The 80/20 Rule generally requires insurance companies to spend at least 80% of the money they take in from premiums on health care costs and quality improvement activities. The other 20% can go toward administrative, overhead, and marketing costs.”1

Comment: As this analysis will show, the 80/20 Rule has massive ramifications for integrative health and medicine. Let’s break this down. First, the writers at HealthCare.gov are being exceedingly friendly with the insurance companies. They indicate that the 20% “goes toward administrative, overhead, and marketing costs.” The writers fail to mention something that is of significant importance for all huge, durable, growing, capitalist enterprises: “profit.” Why this is not mentioned is testament to the infiltration of the government brain by the industry lobbyists. Not mentioning “profit” is protection against a government option or single payer, where “profit”—and marketing for that matter—are not in the mix. Why else not mention the profit-taking to the US consumer? Now keep this in mind while doing some simple, comparative mathematics:

• In 1983, the average family premium was $3500. At 20%, the insurer’s split for overhead and profit is $700.2

• In 1999, the family premium was (from the same study) $5700. At 20%, the insurer’s split is $1140.

• In 2013, the family premium was $16 000. At 20%, the insurer’s take for overhead and profit is $3200.3

Imagine you are the owner, or the person responsible for maximizing profits for your shareholders. Would you rather play with $700 or with $3200? Are you, the insurer, better off when family premiums are at $3500 or at $16 000? The latter, of course. But—some might venture—wouldn’t insurers be gung-ho to examine the potential for savings? If the insurer received the $16 000 for a family’s premium, and they spent less than that, wouldn’t that mean higher profits for the company?

When the integration era began 20 years ago, many of us in the integrative health and medicine space thought insurers would be our new best friends. We believed we would save these businesses money. We anticipated a ready willingness to partner and engage pilot projects to discover whether services were add-on or replacement, what the net would be, and thus how to implement the new service offerings. Insurers would be the stakeholder to propel the uptake of integrative options. A growing number of studies aggregated by the Project for Integrative Health and the Triple Aim Web site of the Academic Collaborative for Integrative Health support these assumptions of cost savings.4

Do you know the line about what to “assume” means? Makes an ass of u and me. This comes to mind. We were wrong. In a given premium year, that logic holds. But in the arc of multiple years, the insurer’s interests are not aligned, as the mathematical exercise shows. Insurers are essentially cost-plus operators.5 The dance of insurers on cost saving inside a given premium year is, for them, the lesser of their 2 orbits. Think of a moon around a planet. The big game—the sun around which the insurer’s business prospects revolve—is the year-to-year cycling upward of premium increases. In that orbit, these corporations are perversely incentivized.6

The higher the cost, the greater the take. A bit of delayed gratification may be required until premiums rise in a year or two. Bottom line: They benefit off the increase of disease. They will jack up rates and continue to benefit from the overproduction of high cost and even unnecessary medical procedures. The more that medical services cost, the greater the dollars in their cut, long term. Insurers are not now, and will not ever be, major buddies of implementing designs for cost savings based on integrative health approaches. If cost savings are part of an integrative strategy, think of these stakeholders as potential friends: employers, government agencies, and consumers. They have self-interest in lowering overall per capita costs.

ShortTakes.

• ▶ Here’s a unique opportunity for the right for-cause entrepreneur who wants to have maximum impact on the integrative health field: The Integrative Health Policy Consortium is seeking a new executive director.7

• ▶ The American Association of Naturopathic Physicians and the Academy of Integrative Health and Medicine are supporting partners of the “Integrative Wisdom” project sponsored by Integrative Therapeutics. The initiative aggregates 1- to 2-minute videos of commentary from multiple leaders of the integrative care movement.8

• ▶ The supplement industry is on high alert as the US Food and Drug Administration (FDA) opened its comment period on its long-awaited New Dietary Ingredient guideline.9

• ▶ The nation’s licensed acupuncturists have succeeded in a multiyear effort to gain a unique occupational code via the US Bureau of Labor Statistics. This foundational recognition campaign was led by Kory Ward-Cook, phd, and the National Certification Commission for Acupuncture and Oriental Medicine.10

• ▶ An organization that, by its name at least, is taking on the opioid bias in pain management, is the Alliance for Balanced Pain Management.11

• ▶ The US Senate Judiciary Committee held a hearing12 on the potential medical benefits of marijuana—just before Obama’s FDA lowered the boom.13

• ▶ The Olympics proved a major boon for the traditional medicine practice of cupping as spectators witnessed the welts on the torsos of US gold medalists Michael Phelps and others. The National Institutes of Health National Center for Complementary and Integrative Health was provoked by the fury of media attention to comment on the issue.14

• ▶ Joseph Jones, a former aide to retired US Senator Tom Harkin, will be the founding director of the Harkin Institute for Public Policy and Citizen Engagement. Harkin plans to continue a focus on advancing integrative medicine, for which he was the undisputed congressional champion for 25 years prior to his 2014 retirement.15

• ▶ This review article shares 7 separate initiatives in mainstream academic medicine to begin to incorporate more respect for self-care, well-being, and resilience in health professional education.16

Your Help Needed: Integrative and Naturopathic Organizations to Petition US Food and Drug Administration to Protect Access to Compounding Pharmacy

The US Food and Drug Administration (FDA) is engaged in a multiyear regulatory process that will restrict the ability of integrative doctors to individualize their natural medicine prescriptions via the services of compounding pharmacies. In late 2015, “the FDA released a list of nominations to its ‘Demonstrably Difficult to Compound’ (DDC) list … of drugs that [they believe] cannot safely be compounded because of their complexity.”17 Among those at risk are methylsulfonylmethane, curcumin, Boswellia, germanium, acetyl-l-carnitine, and Aloe vera. The FDA is moving to put these on a “do not compound” list. The fate of many more remains “undecided.” These are agents that, according to American Association of Naturopathic Physicians (AANP) in a message to their members, “have been used safely for decades.”

Under the leadership of Michael Cronin, nd, the Integrative Medicine Consortium (IMC)—with the AANP in a lead role—has sought in the past year and a half to communicate on a scientific basis with the FDA on the issue. (Cronin chairs the IMC and is a past president and cofounder of the AANP. The IMC consists of a half dozen organizations including the American College for the Advancement of Medicine and the American Academy of Environmental Medicine.) The effort has had limited success. After extensive submission of scientific materials on safety in public comment period, and expert testimony from Paul Anderson, nd, at a hearing of a relevant FDA advisory committee, the effort successfully saved access to just one compounding agent.18

In a late July webinar, the AANP made clear that it is dismayed by what it believes is deep bias in the FDA’s response. Anderson, whose testimony swayed the FDA panel on the one agent, noted that the agency’s advisory committee has one compounding pharmacist. And this individual, Anderson added, is merely a nonvoting member. Then he opened up to the webinar audience: “If you think the deck is stacked, this is just one element. What the process is not—it is not a fair fight. It is not logical. It is not in service to patient care. It is not reasonable from the point of view of integrative medicine.” Anderson questioned the entire process: “Data is not the issue. [The panel] is not reasonable. The FDA does not understand the value or the need for safely compounded medications. They view them as a public health threat.”

IMC and the AANP are responding with a major campaign on which they are calling for support from all interested parties. They will lodge a petition to the FDA. They plan to coordinate with industry action to build congressional support. In conjunction, campaign leaders anticipate initiating a Freedom of Information Act request. Long-time integrative health and policy attorney Alan Dumoff has been retained. Cronin shared that the AANP has “pulled the trigger” on an aggressive fundraising campaign involving by providing an initial $10 000. An additional $4500 was raised from individuals on the AANP’s webinar. An estimated $100 000 is likely to be needed, depending on the fate of the petition and the need for filing a lawsuit in Federal court. Said Cronin: “This is about owning our medicine.”

Comment: The campaign is a front-line for integrative physicians. Anyone who uses the services of compounding pharmacies, or believes that the agents prepared through them can be beneficial to human health, needs to stand up and contribute. If interested in getting involved or supporting the cause, contact the AANP’s director of government affairs at mike.jawer@naturopathic.org.

Vermont Funds Acupuncture Chronic Pain Medicaid Pilot Project

On July 1, 2016, Oregon officially rolled out a previously reported integrative pilot including licensed acupuncturists for back and neck pain for a Medicaid community. On the same date, due to work led by acupuncturist Josh Singer, lac, and the Vermont Acupuncture Association (VAA), that state officially opened the gates for a $437 000 project to examine acupuncture for Medicaid recipients. Robert Davis, lac, the cochair of the Society for Acupuncture Research (SAR), is heading up the team that is developing the project. The exploration was forged by Singer’s successful work with the VAA to include the initiative in the state’s opiate bill, S.243, which came into effect in Vermont. The law granted $200 000 to engage “a pilot project to offer acupuncture services to Medicaid-eligible Vermonters with a diagnosis of chronic pain.” A federal match brought the program budget to $437 828.19

Davis, a Vermont-based acupuncturist, shared in an interview that he is on a team with the medical director of Vermont Medicaid and a University of Vermont researcher to develop a design for the pilot. His desire is to create a “pragmatic trial design which is suitable for answering policy-type questions.” He anticipates that some of his SAR colleagues with expertise in this area will assist him. The advisory team’s charge was to “offer acupuncture services for a defined period of time as an alternative or adjunctive to prescribing opioids” with a goal if “assess[ing] the benefits of acupuncture treatment in returning individuals to social, occupational, and psychological function.” In addition, the Vermont Department of Health and Department of Health Access is to explore and recommend to the legislature future roles for acupuncture in “treating Medicaid beneficiaries with substance use disorder.”

Comment: The news is terrific. These kinds of pilots—in Oregon and Vermont—can make a huge difference in changing the landscape in public policy related to integrative health—and the services of licensed acupuncturists. All the better that each is focused on this underserved population. Credit Davis for using his top-flight SAR network. Looking forward (with fingers crossed!) to the outcomes!