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The numbers on health care are not good. By 2011, experts forecast that health-care spending will devour as much as 18 percent of the U.S. GDP. Administrative costs for self-insured American employers reached the 14.5 percent range in 2006. The country as a whole spends more on health care than any other nation, yet Nigeria scores higher in outcomes in some categories, according to Lawrence Thompson, executive vice president for health-care solutions provider Healthaxis.

"We're spending all this money, and we're not getting the results," Thompson said at the annual educational conference of the Self Insurance Institute of America in October, where health-care issues dominated the agenda. "There's something wrong with that picture."

Thompson and other speakers at the SIIA event offered a litany of reasons for the failure of the health-care system: from the "friction" of administrative costs in the self-insured market to the expanding dominance of major health-care insurers, from the billing practices of providers and PPO plans to the attitudes and health status of employees.

Brent J. Estes, president and CEO of Chicago-based provider network Rush Health Associates, suggested, for instance, that the American public has an "insatiable appetite" for the latest technology. To feed this appetite and stay on technology's cutting edge, he said, hospitals have to maintain margins, in the range of 6 to 8 percent.

"When we incur losses in our business, somebody's got to make it up," he said. Estes added that employers should not expect cost drops in health care for the coming years, though wellness programs could be one way to cut utilization costs.

Joseph M. Zerega, president of the PPO Preferred Network Access Inc., said that pricing in health care is also affected by a counterintuitive relationship between cost and quality--oftentimes, the highest-priced provider offers lower-grade quality of service. Nine out of 10 times, he said, the best provider could be the cheaper, more cost-effective one.

"You can get quality outcomes without paying more for it," Zerega said.

PPOs cannot accept all of the blame for pricing, he added. PPOs have to act as an advocate of their clients to protect them from cost-shifting.

Though speakers at the health-care sessions at SIIA shared gloomy outlooks, they also offered solutions for the self-insured market, such as compromise and cooperation among stakeholders and greater price transparency.

Thompson also suggested that consumer-driven health plans could be a solution to pricing. They could serve to educate consumers about the true (and high) costs of technology and providers.

As it is now, he said, an entire generation of Americans has grown up believing that health care only costs the $20 copay for a visit to the doctor.

December 1, 2006

Copyright 2006© LRP Publications