When rationality exits the room

If you believe "Bizarro World" is limited to comic books, guess again. It's beginning to bump and nudge its way into the usually rational world of healthcare finance.

For the unversed, Bizarro World serves as comic relief for the "Superman" franchise: a cube-shaped planet where opposites prevail--love is hate, stupidity is genius, etc.

Consider recent events in my domicile of California, for example. The state's three largest health plans--Anthem Blue Cross, Blue Shield of California and Health Net--have recently announced premium increases averaging more than 16 percent for its individual policyholders. Some policy holders will see increases approaching 30 percent.

The health plans' rationale for this bump is that medical costs continue to skyrocket and they have no choice but to keep pace.

The situation is little different outside the Golden State. Tune into any NPR station, and it seems officials with America's Health Insurance Plans repeat this cost mantra virtually without pause.

But are costs truly ungovernable? USA Today reported earlier this month that when adjusted for inflation, healthcare costs in the first half of this year actually went down--for the first time in 51 years since the federal government has been tracking data. Hospital costs were down 1.1 percent, according to the American Hospital Association.

This makes perfect sense; acute care facilities have been slammed by the recession. Patients have put off elective procedures or are unable to undergo them because they lost their job-based insurance coverage or can't afford co-payments. Despite the dizzying array of codes that govern healthcare reimbursement, the law of supply and demand still trumps all.

Of course, the recession won't last forever. Economists at the Centers for Medicare and Medicaid Services project that healthcare spending will grow at a rate of 6.3 percent per year for the next decade. That's still triple the overall rate of inflation, but an improvement over the 7 percent to 9 percent annual growth rates of a few years ago.

Some analysts have warned that the health plans are trying to lock in rate increases before federal healthcare reform begins to take hold in 2014. But their rhetoric on healthcare costs could prove more damaging than the premiums.

If consumers think their caregivers are manifestly unable to keep fiscal homes in order, they may be more reluctant to visit a doctor when they get sick, completely convinced they will be overcharged for care. Or, when the key provisions of the Affordable Care Act are phased in later in this decade, many Americans may decide to pay the tax penalty rather than buy insurance, thinking it is not worth the trouble.

This could lead to a self-fulfilling prophecy: more deferred care, and therefore, more costly treatments when care is finally sought. Footing much of this potentially larger bill would be hospitals and other providers. Meanwhile, the health plans would assume an "I-told-you-so" stance.

Not only would this damage providers' bottom line, but their attempts at damage control on the issue could also be squelched.

Health and Human Services Secretary Kathleen Sebelius seems to be aware of this issue, having just warned health plans to tone down their rhetoric on rate increases, particularly when linking them to healthcare reform. She's even threatening to keep some plans out of the exchanges if they persist.

It's a good start, but the providers should be looking for their own voice on this issue. If there was ever a time for the AHA to launch a campaign touting the current finance trends and some of the cost-containment programs established by its members in recent years, this is it.

After all, Bizarro World functions only as an occasional interlude, its creators knowing full well that its constant presence would detract from actual storytelling. If that's the case for a comic book, just imagine how damaging its ongoing presence would be in the real world. - Ron