Saving the system: Mickey Herbert views market-based system as America's way to go

September 1, 2008

As far back as 1971, Mickey Herbert has believed that a market-based system of healthcare delivery is the only option for America. Now president and CEO of ConnectiCare, a commercial and Medicare Advantage insurer, Herbert still believes in the market-based system.

Now the president and CEO of ConnectiCare, a commercial and Medicare Advantage insurer based in Farmington, Conn., Herbert still believes the market-based system is right for America. In fact, ConnectiCare is organized in such a way to allow Herbert time to hit the streets to educate policy-makers, entrepreneurs and big business on the need for maintaining a healthcare delivery system that allows for innovation, competition and market forces.

Herbert says his earliest mentor and philosophical influence was Paul Ellwood, MD, a researcher who is credited with creating the phrase "health maintenance organization." Dr. Ellwood was a pediatric neurologist who founded a national policy research institute that later became InterStudy. Herbert was the institute's vice president, and there he helped create the "Health Maintenance Strategy"-a proposal for a new U.S. healthcare system, in which private plans would compete to deliver higher and higher quality at increasingly affordable prices. That proposal became embedded into the groundbreaking HMO Act of 1973.

For two decades, Herbert built PHS market share and eventually converted it to a for-profit company, following the conversion trend of the industry at large. During that time in the 1980s, many plans began going to Wall Street to raise capital because the government had stopped funding HMOs.

"[Healthcare economist] Uwe Reinhardt used to say back in the 1980s that we created a class of robber barons in healthcare, and I was one of them," he says. "But he meant it in a complimentary way. It was just like when we built the railroads in America. We needed folks to do this. They made themselves a lot of money, but they turned the industry on its head."

After 22 years of running PHS, Herbert eventually sold it to Health Net in 1998 for $271 million.

Certainly today, with medical inflation spiraling out of control, health plans aren't viewed as the cost-savers they once were. Many things are contributing to the healthcare cost crisis, he says, and shutting down the market in favor of a single-payer system isn't the answer. The aging of America, unhealthy lifestyles, treatments with uncertain cost effectiveness, and a host of other factors contribute to the crisis. Instituting a single-payer system would only transfer those same concerns to the government, he says.

While a government-run system could offer universal coverage, Herbert believes it still would be unable to control the root of the problem, which stems from runaway costs. Next year offers a rare opportunity-one he says only comes along every 40 years or so-to substantially reform U.S. healthcare policy, addressing cost, quality and access comprehensively.

"There are many practical solutions being prepared to help improve the healthcare system," he says. "A government-run, single-payer system is neither practical nor financially rational."

Herbert estimates the cost of creating a single-payer system just in his own state of Connecticut with 3.6 million residents would top $17 billion.