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Do Health Insurance Companies Act Rationally? Part I

One definition of rationality might be: “Rational behavior refers to a decision-making process that is based on making choices that result in the optimal level of benefit or utility for an individual, be it monetary or non-monetary.” If we substitute the word “business” or “corporation,” we could imagine such institutions make decisions either to improve the bottom line (profit) or their public relations image (reputation) or both.

So, do health insurance companies act rationally? In certain ways they must do so, otherwise they would no longer make a profit or attract a large enough membership to maintain their profits. Therefore both profits and public relations are in play in their decision-making. But, inside the workings of these businesses, it should be obvious that select territories of operations appear more rational than others.

Take the serious example of heart disease. How likely is an insurance company to deprive access to its consumers for a reasonable, if not great level of quality of care in matters of the heart?  The answer is highly unlikely. Heart disease is one of the most visible health conditions as evidenced by the emergence of the “heart hospital” concept. Moreover, it’s a life and death disease process, making it one of the most dramatic of all health conditions, which thus garners it an enormous amount of attention among individuals choosing their insurance plans. As you would expect, then, an insurance plan like Medicare would cover many aspects of heart disease, otherwise there would be a huge outcry against this government-run carrier.

Not all health conditions are viewed with the same levels of intensity or interest. In fact, health conditions are best understood economically as a zero-sum game, which means there is only so much money to go around, or said another way, there will always be winners and losers just like a group of people sitting around a poker table. Heart disease is always a winner because of what’s at stake, whereas sleep medicine is often a loser because it’s commonly unclear what’s at stake.

In the big picture, then, insurance companies must determine what’s rational in managing their coverage determinations for sleep apnea and any other sleep disorders that might require sleep tests (polysomnography). Based on my observations in a quarter century of clinical practice, my sense has been most insurance policy directives toward sleep lean closer to irrational judgments much of the time, and we will proceed to discuss this problem in depth.

Let’s start with a specific clinical care problem, one I have frequently described on this site, the issue of nocturia or trips to the bathroom at night.  We know three important facts about nocturia. First, nocturia is one of the largest single factors in elderly patients falling at night, injuring themselves and then requiring expensive care in follow-up, such as repairing a fractured hip. Second, nocturia is a frequent complaint among middle-aged or elderly insomniacs, because the length of stay in the bathroom often lasts more than one to two minutes, which can bring the afflicted individual to a state of nearly full wakefulness, after which returning to sleep requires a new solution, such as sleeping pills.  Third, and finally, we know OSA/UARS causes nocturia (nocturiacures), and we further know treatment of OSA/UARS markedly decreases the number of bathroom trips during the night with as many as 50% of successful PAP users describing elimination of any further awakenings from nocturia urges. Even among patients who do not completely eliminate nocturia episodes, it is quite common for them to decrease trips from 3 to 4 per night down to 1 to 2 per night, a huge drop-off.

What would a rational insurance company directive dictate based on the above knowledge? The obvious response would be to find every conceivable way to aggressively treat OSA/UARS to save money caused by the nocturia episodes that lead to falls, hips fractures, and greater use of sleeping pills.

Now, how can we determine what insurance companies are contemplating regarding this issue. Surely some person or persons in these agencies has the job of reading the most up to date scientific  information. Surely, someone could do a relatively straightforward cost-benefit analysis to determine what’s in the company’s best interests. Surely, someone could look at the current mess in the field of sleep medicine where so many people drop out of CPAP treatment. In sum, it would be so obvious and easy to gather all this information and come to a rational decision on what to do next.

What would the rational decision be? Undoubtedly, it would be a targeted set of solutions to increase use of a PAP machine so that more patients attained their compliant status, which based on the suppositions described above would lead to less falls, hip fractures and use of sleeping pills, all three of which cost the insurance company more money.

Yet, we know for certain that none of these steps are currently pushed by insurance companies to promote greater PAP use in their patients. In fact, the opposite or reverse stance is taken. The predominant theme of an insurance company as best we are all able to discern is that on a daily basis they focus on ways for patients to perceive a threat of losing the CPAP machine if it is not used.

Pause and ask yourself what might the intentions be of an insurer who holds an ax over the patient’s head versus an insurer offering incentives to motivate use of PAP therapy? I don’t think it’s a stretch to presume the intention is “sh*t or get off the pot.” Thus, the bean counters at insurance companies are playing with a timetable measured in weeks or months. They are imagining they will achieve user status quickly and gain whatever benefits they can derive from this cohort; whereas, the difficult cases are going to prove too costly, because the insurer might keeping paying to cover the costs of the devices, but no benefits accrue as these folks just can’t get on board to maintain use.

What’s wrong with this thinking? Why is it financially unsound? And, how can we prove that it reflects an irrational cost-benefit analysis.

To answer these questions, let’s go back to nocturia and expand on a larger subset of conditions and symptoms to show how to properly drive the analysis of costs and benefits related to treated or untreated OSA/UARS.

To begin, let’s consider all the most obvious conditions currently recognized at least by sleep medicine specialists as directly linked to untreated or poorly treated sleep-disordered breathing:

•    Poorly controlled blood pressure
•    Poorly controlled congestive heart failure
•    Increased risks for myocardial heart disease
•    Increased risks for cardiac arrhythmias.
•    Increased risk of cerebrovascular accidents (strokes)
•    Frequent bouts of insomnia leading to daytime fatigue and sleepiness
•    Sleepiness-related car accidents and workplace accidents
•    Fatigue and sleepiness related loss of productivity
•    Chronic immune dysfunction of nasal and oral airways, resulting in chronic rhinosinusitis
•    Aggravation of chronic depression
•    Long-term cognitive decline due to chronic sleep fragmentation
•    And, we’ll round out this dirty dozen with an overall sharp and steady decline in the quality of life in a person who simply can no longer muster the energy to engage in a host of daily routines that lead to a satisfying and health lifestyle.

When you think about this list, it should be readily apparent we are talking about a bunch of extremely common conditions, and you probably know some friends and family members who are suffering from these problems. This information would be called anecdotal evidence, because you probably know of some individuals who have benefited from using PAP therapy and by doing so, their blood pressure was lowered, or their arrhythmias eliminated or their productivity suddenly picked up, not to mention all the other changes for the additional conditions listed. These stories are compelling and would encourage you as well as most of us to try to persuade insurance carriers to be more supportive of OSA/UARS patients to engage them to regularly use PAP therapy.

However, the best way to gather evidence typically involves actuarial statistics, where the statistician goes through each item on the list above to determine how much money an insurance company saves by not paying for a PAP device the patient was not using versus how much money the insurer loses by the patient not using the device and suffering worse health outcomes?  Another version of these data would be how much future healthcare costs are lowered by a patient using the device compared to the costs of engaging the patient to use the device?

Here’s how the first aspects of the math might look like if we scrutinized our original example of nocturia:

“ In 2013, 2.5 million nonfatal falls among older adults were treated in emergency departments and more than 734,000 of these patients required hospitalization. In 2012, the direct medical costs of falls in the United States were $30 billion when adjusted for inflation.” (1) “Published reports have suggested urgency, frequency, nocturia, and urinary incontinence are associated with an increased likelihood of falls in older adults. The inference is that these symptoms may force unexpected alterations of daily physical routines…, such as arising several times a night to urinate. Thus, urinary symptoms may be a potential target for preventive interventions to reduce fall risk in community-dwelling men and women.” (1) “In older adults, nocturia is the norm rather than the exception. Studies done between 1990 and 2009 found 68.9% to 93% of men age 70 and older get up at least once a night to void. The prevalence in women is somewhat lower, at 74.1% to 77.1%. (2) Clinically significant nocturia [2 or more times per night] is present in a majority of the elderly: more than 60% of both men and women.”(2)

In both of the articles cited above as well as a recent mission statement commentary from the CDC, (3) there are multiple references to trips to the bathroom as a major cause of falls in the elderly and yet not a single reference to the impact of sleep apnea on trips to the bathroom.

I presume you see where we’re headed. We know from other actuarial data that when an elderly person falls and fractures a hip, the costs involved in hospitalization, surgery, and recovery could amount to as low as $30,000 to a high of $60,000. So, if we take the average and stick with $45,000, the statistical question would be how many of these falls occur in a population of elderly patients with or without underlying and undiagnosed problem of OSA? Since we already know that the proportion of elderly patients suffering nocturia is extremely high, the next question would be whether or not we know the percentage of elderly patients with undiagnosed sleep apnea? Although this number is also likely to be high, we can only guesstimate, because such research is surprisingly limited.

In the course of thorough investigations, eventually someone working at a health insurance agency, a government institution like the CDC, or a sleep researcher would be able to piece together all the parts to this puzzle and make various declarations that might go something like the following bullet points:

•    For each case of nocturia-related falls and subsequent hip fractures, it appears that XX% (XX% because we don’t know yet) are related to patients with previously undiagnosed sleep apnea.
•    As research shows more trips to the bathroom increase the risk of falls, and that the 2nd or 3rd trips to the bathroom have a much higher risk than the 1st trip to the bathroom, it would appear that effective treatment of OSA could reduce nocturia and thus decrease falls and hip fractures.
•    The cost to treat the OSA manifesting in every patient over 70 years of age turns out to range between $2,000 and $10,000 in the first year of treatment, depending upon the approach to care and the type of PAP mode prescribed as well as how effectively the sleep center and DME work together to maximize the patient’s response to PAP therapy .
•    Thus, if you use the top amount of $10,000 per patient, it would cost insurers $900,000 to treat 90 patients for OSA. As each fall and hip fracture averages $45,000, you would need to prove you could prevent more than 20 falls in these 90 patients to at least break even. To be clear, 20 hip fractures would cost $900,000.

Now, the problem inherent in the above analysis is that no one suspects that the rate of falls resulting in hip fractures would be as much as 20 out of 90 patients, although no one at this point probably knows whether the number is 1 of 90 or 19 of 90. Moreover, there are numerous other variables that must be taken into account: how much do you need to decrease nocturia to see a change in the proportion of falls; to what extent will successful treatment of OSA yield the right amount of decrease to yield the results we are hoping for; and, what if elderly patients cannot obtain good care at sleep centers, because there is a bias that they cannot use PAP and a further bias that their nocturia is just an aging process?

Notwithstanding all the above, it’s clear we probably can’t come out and directly proclaim all these great savings with nocturia; however, remember nocturia is just one of the symptoms or conditions in our sample in the above list. The same analysis needs to be done to examine the prevention of damaging downstream effects for motor vehicle accidents, heart attacks, and uncontrolled hypertension and strokes and so on. Now, when you sum up the data on all these possible health incidents, then you would have a much clearer picture to what extent the insurance company is losing out by not aggressively pushing for PAP use in its members, or whether it is better off ignoring the problem, because the cost differential is not so great.

Coming up we’ll look at a few insurer approaches that mostly seem counter-productive to encourage PAP use in their patients.


  1. Med Reviews
  2. MD Edge
  3. CBS News