[Ip-health] NYT: (US) A Rip-Off by Health Insurers?

[Riaz K Tayob]

A Rip-Off by Health Insurers?
    The New York Times | Editorial

    Monday 18 February 2008

    Have health insurers been systematically cheating patients and
doctors of fair reimbursement for medical services? That is the
disturbing possibility raised by an investigation of the industry's
arcane procedures for calculating "reasonable and customary" rates.

    The investigation, by the New York State attorney general, Andrew
Cuomo, and his staff, suggests that these procedures - used by major
insurance companies to determine what they will pay when patients visit
a doctor who is not in the company's network - may be rigged to
shortchange the beneficiaries.

    When patients visit an out-of-network doctor, insurers typically
agree to pay 80 percent of the reasonable and customary rate charged by
doctors in the same geographic area. The patient is stuck with the rest,
and as any patient knows, that rate always seems to fall short of what
their own doctor is charging. If the attorney general's investigators
are right, we can understand why.

    The numbers are mainly compiled by an obscure company known as
Ingenix, which - as it turns out - is owned by UnitedHealth Group, one
of the nation's largest health insurers. Ingenix collects billing
information from UnitedHealth and other health care payers to compile a
database that is then used by the insurers to determine out-of-network
reimbursement rates.

    This system is an invitation for abuse. UnitedHealth owns the
company whose database will affect its costs and profitability, so both
have a strong financial interest in keeping reimbursement rates low.
Even Ingenix seems unwilling to stand behind its numbers. In licensing
its database to insurers, it stresses that the data is "for
informational purposes only" and does not imply anything about
"reasonable and customary" charges. Yet that is precisely what the
health insurers use the data for, as Ingenix knows, according to
investigators.

    Mr. Cuomo and the American Medical Association, which has a
long-standing suit filed against Ingenix and various UnitedHealth
companies, claim that the data is manipulated. They claim that health
insurers and Ingenix disproportionately eliminate high charges, thus
skewing the numbers for customary charges downward.

    Mr. Cuomo also says that Ingenix pools the charges for services
performed by low-paid nurses and physician assistants with those
performed by high-paid doctors. And he says the company fails to account
for the patient's condition and type of facility where the service was
provided - factors that can drive up costs. He also contends that
Ingenix uses outdated information, which would guarantee that
reimbursement rates will always lag behind medical inflation.

    The A.M.A.'s more detailed legal complaint also charges that the
database dilutes prices in high-cost locations by combining them with
low-cost areas, and includes prices that reflect in-network discounts.

    The attorney general's investigators did their own survey and
concluded that $200 is the fair market rate in New York City and Nassau
County for a 15-minute consultation with a doctor for an illness of low
to moderate severity. Ingenix, the investigators said, calculated the
rate as $77, of which United would pay $62, leaving the patient to pay
$138. UnitedHealth disputes those numbers, so the attorney general will
need to offer a fuller explanation of how they were derived.

    Mr. Cuomo has announced his intention to sue UnitedHealth, Ingenix
and three other subsidiaries, and has subpoenaed data from 16 other
health insurers. Whatever that investigation unearths, it is already
clear that the system for calculating "reasonable and customary" charges
ought to be reformed by making it truly independent and objective. No
consumer can reasonably trust numbers generated by a company whose
loyalties and financial interests lie with the health insurers.