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Saturday, February 16th 2008

The California Blues

Blue Cross of California had been sending out letters asking physicians to disclose any medical history that patients hadn’t disclose when applying for health insurance with Blue Cross. They were searching for expensive pre-existing conditions, so they could cancel (or modify) those patient’s policies.

The state’s largest for-profit health insurer is sending physicians copies of health insurance applications filled out by new patients, along with a letter advising them that the company has a right to drop members who fail to disclose “material medical history,” the Los Angeles Times reported on its Web site.

“Any condition not listed on the application that is discovered to be pre-existing should be reported to Blue Cross immediately.”

And although the program was far from new apparently, once it broke out into the media it naturally drew an outcry. Now BC has agreed to stop the practice but there is one thing to note,

After getting slammed yesterday by everybody from Arnold Schwarzenegger to Hillary Clinton, Blue Cross of California said it would stop sending letters to doctors asking them to help find patients who had failed to report pre-existing medical conditions to the insurance company.

The company said it had been sending out the letters — which include a copy of the patient’s insurance application — for years, and hadn’t received any complaints.

The emphasis is my own, and I put it there because as The Covert Rationing Blog spells out, there is something even shadier about Blue Cross’ letters.

These letters were sent out only to physicians who were participating in a capitated reimbursement model. That is, these doctors were receiving a fixed amount of money per patient per month, and the less money they spent taking care of those patients, the more money they got to keep. In other words, the Blues sent these letters only to doctors who might be as interested as Blue Cross, from a financial standpoint, in ridding the system of expensive patients. As in every good business model, the incentives of the parties (i.e., Blue Cross and the physicians) lined up perfectly. We don’t know for sure from publicly available information whether doctors actually complied with the requests made in these letters, but from Ms. Troughton’s [Blue Cross spokeswoman] comments it certainly sounds as if this happened.

Seriously, I know patients have conceded sharing of their medical records in most cases but the physicians who answered these letters must have violated some generic ethical standard which could endanger their licenses with the state board. Right? Physicians benefiting from this shouldn’t get away with such.

Here’s the actual letter the physicians received.