An interesting podcast from Sarah Varney of KQED’s The California Report, on why Kaiser’s premiums have risen in recent years to levels often on a par with traditional health insurance rates. Among others, she interviews KP CEO George Halvorson, who as usual would like his customers to disbelieve their own experiences in favor of his PRBS™ spin. Also note the customary lack of transparency.
You may be surprised to learn that we have never thought the idea behind Kaiser Permanente is a bad one. We believe the problems are in the execution, and are mostly due to issues inherent in its corrupt corporate culture. We can only hope that the more direct competition that is spoken of in this report might someday put pressure on KP to clean itself up, as well as keep prices lower in the future.
Our transcription for the hearing impaired and folks without audio is below the embedded player.
Announcer: As I just mentioned, the federal health law now under review by the US Supreme Court tries to tackle the problem of high health care costs with financial rewards to providers who do a better job coordinating patient care. And in that regard, Kaiser Permanente, here in California, is often touted as the nation’s best hope for bringing health care costs more in line with other developed nations. But, if that’s the case, asked The California Report’s health reporter, Sarah Varney, why isn’t Kaiser less expensive?
Sarah Varney: Kaiser Permanente rose out of a utopian industrialist’s dream. During the 1930s and 40s Henry J. Kaiser wanted to make sure the workers at his Richmond shipyard were steady and strong.
Cut to vintage promotional recording: A medical dream comes true under the drive of industrialist Henry Kaiser, who holds the plans of the ultra modern hospital, designed by…
George Halvorson: When Henry built things he tended to assemble an entire team to build all of the parts.
SV: George Halvorson is KP’s current CEO.
GH: So when he started providing health care to his workers he used that model, which was to have a Kaiser hospital, Kaiser clinics…
SV: KP opened its doors to the public in 1945 and offered health coverage that was considerably less expensive than conventional insurers like Blue Cross. The strategy worked because it owned and operated its own hospitals and clinics, and directly employed physicians. But Mark Smith, head of the California Health Care Foundation, says KP is no longer the bargain it used to be.
Mark Smith: They got where they are in part by being the cost leader in the market, and they no longer are.
SV: Indeed, health care researchers and Kaiser’s biggest customers say the price gap between Kaiser and other insurance companies has narrowed or closed all together. CalPERS, the state agency that manages benefits for retired public employees, negotiated premiums with Blue Shield that are less expensive than Kaiser. That was unheard of just a few years ago. Smith, of the California Health Care Foundation, says because Kaiser is both the insurer and the health care provider the company hasn’t faced much competition.
MS: They’re not really pressed to be that much cheaper; they’re kind of shadow pricing, is what economists would say. So if your competitor takes $4 to make a banana and it only takes you $2 to make a banana, you price your banana at $3.95 and you kind of pocket the rest.
SV: That’s a charge Kaiser’s CEO George Halvorson vigorously denies.
GH: We’re at least 10% better everywhere, um, sometimes we’re 15 or 20% less expensive.
SV: Kaiser sets its rates, says Halvorson, based on how much it spends on patient care. It has nothing to do, he says, with what other insurers are charging. And, he adds, Kaiser offers richer benefits than other plans.
GH: Everybody else is stripping their benefit packages down, so they’re putting in higher and higher deductibles, and that’s just shifting the cost to the employee.
SV: Since negotiations between health plans and employers are largely confidential, and each insurance plan offers different services, it’s difficult to discern just how Kaiser fairs against other companies. In documents filed with state regulators, Kaiser Permanente says the cost of running its entire operation increases by about 5% each year. But some of Kaiser’s biggest customers — companies that are household names in California — say their premiums have jumped much higher. In some cases 20%. David Lansky heads the San Francisco based Pacific Business Group on Health, which represents large employers.
David Lansky: Kaiser seems to have a difficulty of explaining why their price is what it is. So they can’t explain it very well to the benefits manager of a large company, who then can’t explain it to his or her boss. Why should we keep Kaiser? Why is this price legitimate? If Kaiser can’t document their internal cost structure and pricing, then there’s a whole chain of mistrust that gets generated because of a lack of transparency and clarity.
SV: The frustration seems to stem in part from the very trait that makes Kaiser so good at taking care of patients. It doesn’t price out procedures, tests and doctors’ visits on a menu of fees. These so called fee schedules are often arbitrary. A procedure can cost a thousand dollars at one hospital and ten thousand elsewhere.
GH: Fee schedules are a very primitive way to buy care.
SV: Kaiser’s CEO Halvorson says his company’s focus on patient outcomes is what matters.
GH: We have cut the rate of broken bones for, um, for our seniors, by about 40%, and we do nine things for the seniors to cut the broken bones. Six of the nine things do not show up on the Medicare fee schedule.
SV: Still, large employers say that because Kaiser doesn’t price out its services, it’s difficult to know why premiums rise every year. One large employer, who is not authorized to speak publicly because negotiations are confidential, told me Kaiser’s rate increases don’t seem to reflect changes in the use of Kaiser services. David Lansky says Kaiser is much more efficient than other insurers and providers. For example, patients can avoid unnecessary office visits by talking with doctors over email, but Lansky says employers, who pay the bills, aren’t yet seeing the savings.
DL: I told you what we all went through with the banks when they went to ATMs and stopped having tellers in the retail points of service. You’d think that would actually lower costs; instead we started paying fees at the ATMs.
Bob Kocher: A lot of us in health policy land have scratched our heads at that and said well, you know, why can’t Kaiser be a heck of a lot cheaper.
SV: Bob Kocher, now a partner at the venture capital firm Venrock, served as a health care adviser to President Obama. Kocher is a big fan of Kaiser’s highly coordinated system, saying that its model was at the back of many policy makers’ minds when they pushed to include in the federal health law financial enticements for hospitals and doctors to essentially form Kaiser lookalikes. Still, Kocher says he would hope the Kaiser model would deliver steeper savings.
BK: How do we unleash that sort of pressure on price to have them not be compelled to raise their prices by 8, 9, 10% a year?
SV: Kocher and other policy experts suspect that pressure to compete might come when, and if, those Kaiser mini-mes get off the ground. For the California Report, I’m Sarah Varney.
Thank you for transcribing this as my computer can’t play the podcast. It must have taken forever.
At my company Kaiser’s premium is only barely lower than Blue Cross. I have tried both, and although Kaiser does have some good points, I have to say I prefer Blue Cross. You have no real choices at Kaiser. They only offer the procedures and medications they cover. You can’t get a real second opinion because all of their doctors will always tell you the same thing. The wait times for appointments are absurd and it always feels like they are herding cattle in that place.
There was a time I would keep Kaiser for the cost savings because I’m a fairly healthy person and I didn’t have to use them very often. However, now that Blue Cross is only a few dollars more expensive I would rather have more choices of doctors and treatments.
Does Halvorson always mumble like that? I couldn’t understand half of what he said.
I don’t know if he usually mumbles because I don’t like listening to him weave his BS, but I did have a hard time figuring out what he was saying in a few parts. I must have listened to the thing about seniors and broken bones 10 times before I could understand what he was saying. I’m too embarrassed to say what I thought it was, but I kept replaying it because it didn’t make sense with the original words I was hearing.
I type fast but it still took awhile just because it’s more difficult to keep up with people speaking. It was worth it, because I want everyone who visits this website to have access to this information, whether they can hear it or not, so they stop thinking of KP as a better value. It’s not anymore. And considering the harm that can be done, and the way they roll over their victims after the fact, you could be losing a lot more than money.
“Kaiser sets its rates, says Halvorson, based on how much it spends on patient care. ” This is key, because the less they spend, the more money goes to the corporation and it’s for profit, physicians group. If the costs are closing between Blue Cross and Kaiser,and yet Kaiser manages it’s hospitals and clinics, one has to wonder why. Kaiser, let us see your price structuring. You should have nothing to hide.
Why isn’t Kaiser less expensive?
I think I have a very simple answer to this…
Because they are greedy pigs trying to make a quick buck off of YOUR life.
They are still convinced that they are fooling the public in to thinking that they are a good health care provider and that they actually care about you. The reality is, is that they suck, and they are as greedy as they come, pure and simple.
I can’t even bother to listen to that sloppy pig, George Halvorson. He grosses me out.
How’s that for a clear and simple answer?
Don’t hold back, LM. Tell us how you really feel. 😉
Alrighty, thanks for letting me vent!
Have a good day Admin!
I am trying to figure out why Southern California Kaiser coverage is so much cheaper than Northern California in the Federal Employees Health Benefits program. Without a lot of numbers…if a S CA member went to their primary care Physician once a day for every day of the year (M-Fri) the cost of co-pays and premiums would be cheaper than N CA premiums alone without ever going to a doctor at Kaiser. That is an UN-defenceable disparity of costs. Let me repeat: go to your PCP in Southern California EVERY DAY Mon-FRI over 250 days of co-pays. Add that amount, over $2,500 of copays to the premiums of Southern CA FEHB plan; then compare that to Northern CA FEHB premiums – without ever having to go to your PCP you pay more total! How can premiums be set so high if patient care drives it up with-out ever seeing a patient?!?
I can see having one premium for “self” and another at a higher cost for “self & family.” My question is, why isn’t there a in between premium for “self & spouse?”
Two people should’ve have to pay the same premium as a family of six or even a family of three.
I agree. Some plans do have an option for two – self and spouse or self and 1 child – but not all do. As a family of 3, we have always had to pay the same as a family of 10 – currently over $1300/mo. for insurance we rarely even use. It’s a racket.
If the intent of Obama Care was to reduce health costs, how come the 2013 premiums for Northern California
Federal Employees (self and family) ane going from $399 to $515 a month? On top of that Kaiser is adding a $400 co-pay.
Contrary to what Kaiser would have us believe, in my travels to Southern California, I see no difference in the cost of living that can justify such a vast difference in insurance premiums.
The simple answer is because they are different regions, with different medical groups and patient groups. The medical groups that employ the doctors are separate for profit entities, not non-profits like the health plan and hospitals. The rates are going to be based on the specific group of patients each medical group services, and the costs involved. They won’t divulge the formula, but it would be a combination of overhead and actual dollars spent on medical care. Then 50% of the profits go into the doctors’ pockets, which is why they are always skimping on tests and procedures. The less care they give, the more they make.
Everyone should pay the same for insurance (with subsidies for the low income), but the only way that is ever going to happen is if we have universal single-payer health care. Obama supports single payer but with roughly half of the nation willing to vote against their own self interests, what we got was so much less for the people, and more for the corporate greedsters. God bless America!
Kaiser has but 2 family groupings, self and self with family.
What about self and spouse? Why should a husband and wife with no children have to pay the same premium as a family of say, 3, 4 or 5?
I have been a long time Kaiser customer..nearly 10 years with this “care-provider.” I have always had an individual plan, paying anywhere from $313-$394. Whatever they seem to be charging that month. Tonight I just recieved a letter saying that this month ( yesterday) they will be withdrawing from my checking account an entirely different amount. My new premium is $1122. I have no choice but to cancel my insurance.
I have to assume there is far better care out there, because it can’t get much worse.
One reason, from what my niece, who works for Kaiser says, is the fact the government allows the foundation to self administrate, which allows them to set premiums at whatever they want. There is no other valid reason for USPS employees or other federal employees should be paying the outrageous premiums they are required to pay with the number of participants.
I was a Kaiser member until this year. I joined in Northern CA – San Rafael and then in Southern CA at West LA and Woodland Hills. There were a few questionable services but I quickly changed physicians and my medical care was smooth. Then I moved to Portland, OR and could not believe how dirty the facility was, the attitude of the pharmacy employees was terrible. Seemed as if everyone was just CYA their ways through the days. Then I moved to Boulder CO expecting good service but first doctor I had was big on vitamins and minerals for treatments and she misdiagnosed a lip cancer as Boulder bike path which didn’t seem to need any immediate care – just a bruise. But after about a week or two I noticed an old implant was starting to move down my face. After enormous difficulty I finally was able to connect with Plastic Surgery. I was only allowed to talk to a whole crew of women – never knew their jobs. The doctor would not speak to me (the women explained ‘They doctor does not talk to patients’). Wow, I thought this sounds like the 1940s. I never met or spoke with this doctor, head of PS department, Dr. Brad McDowell. He said I could make an appointment which would cost me $50.00 but he would do nothing. Amazing I thought. The doctor can diagnose without seeing or talking to the patient – that was a read flag. He wanted me to go to an outside Plastic Surgery Center which was a long way from my home. I chose instead to fight for my medical rights. As I fear the implant was pushing through my cheek and eventualy broke through. It was protruding from my cheek for months. I didn’t know what to do> I didn’t have the money for an outside surgeon so I decided to go to the ER at another hospital but ended up with a Kaiser Plastic Surgeon. He was shocked at the mess on my cheek and promised me miracles in fixing my cheek but when I went to he follow up appointment he withdrew his help and said on this will be find. (It’s over a year later and my cheek is still a big mess.I talk to a many people as I could at Kaiser and never got a returned call. When one of the doctor threatened me with calling Risk Management I said, YES, that’s great. He did not so I did call them and they did nothing. I have a horrible scar on my cheek. It has healed without infection but ugly, ugly. I finally left Boulder to find a better plan and did. In the meantime my lip cancer got worse. 2 Kaiser doctors treated it for over a year as a cold sore. I became very depressed when moving to the San Diego area. I joined the local Kaiser for a short time and once again not questionable care so I switched to a better plan with another excellent health care system. I want to warn people about Kaiser. I realized the only reason I went so long with no problems was I never got sick while a member of Kaiser until I went to Colorado. They denied me care claiming I had had cosmetic surgery 25 years previously but Medicare says incase of malfunction or accident care must be given. Kaiser has their own ideas and denying care is one of their favorite tricks. There is no record of me seeing this doctor who denied me care but he also contacted my other doctors and evidently told him not to help me. I was so shocked. There is plenty of documentation of Kaiser’s bad service and denial of care on record with courts. You can’t sue Kaiser (clever of them) but there is an arbitration system that almost always rules for Kaiser and not the patient. I couldn’t afford it so I left the area.
I fear for Kaiser patients. Every day care is not bad. They seemed to treat CAncer patients well but then they do get paid more for cancer patients. They profit well over billions a year by denying care to patients. THey are rated a 5 Star rating but that is mostly self rated and a lie. They send out useless patient surveys that do not cover care and treatments only time and how nice the employee was – nothing about medical care It is all bogus
Kaiser Southern California is both (1) cheaper, and (2) provides better service (shorter wait times, more helpful doctors, faster appointments, etc).
Kaiser Northern California is so bad, it makes me want to move back to West LA. As of right this second, I’ve been on hold for over 30m to order a Rx refill. I had first called the So.Cal. pharmacy hoping they could handle it for me because their service is so much better. I was talking to a representative within 2m.
Come on Kaiser Nor.Cal. Get your act together. It’s obvious part of your organization knows how to do it. Have them teach you.
Not only is Kaiser permanente expensive [ way higher than UHC but their doctors are either afraid to prescribe useful medications or just don’t know what they are doing. Little over a month ago I sat and watched my roommate die in pain and agony because the doctors [ notice I said doctors ] at Kaiser Permanente said ” absolutely no pain medications. He called the day he died and wanted help, they said we can’t see you until your next appointment. He died that night and I couldn’t help him. I asked him want an ambulance and he said it won’t help they will refuse to help me. And he died in front of me. Kaiser Permanente doctors you didn’t like him and you finally killed him are you cellebrating your victory you killed him and got rid of the pain in your neck.How do you sleep at night?
Southern California is not where you want to have kaiser. My son has many difficulties because kp provided my wife with seizure medications which they said were safe for pregnancies. Our third baby so we didn’t see the doctor right away. Then they ordered us to kill our baby, not so as we do not kill babies. After our son was born with open spine, Cerebral Palsy, Grand mal seizures, close to non-existent motor control, and a lot of his brain was missing. We love him and we have taught him a lot, as he has taught us. Kp at first took care of his issues. Now his doctor did not want to treat his high blood pressure util it was higher than 180/100. He then asked me if I expected them to use extraordinary means when he had his stroke. I used the doctors words and his blood pressure is now normal.
I have COPD, pre-diabetes, high blood pressure, large & small joint arthritis, bone spurs neck & back and a few other issues. The doctor said he would not treat me because of my condition. He told me that I should stay at home unless I was going to the doctor or pharmacy to relieve my chronic moderate to severe pain. He had me get 4 blood works, a CT scan and an xray as CT scans don’t have any detail. Hogwash, I have shrapnel in my brain since ’74 and I know the detail. He has not spoken to me at all. I am just an elderly disabled man out $1000.00 or so.
One of my medicines, usually $30 jumped this month to $300.
Avoid kaiser if you can.I am going to start seeing a local doctor so that I may be treated.