The Real Way to Reduce the Healthcare Benefits Burden: Utilization or Cost?
By MATTHEW BRODSKY, senior editor/Web editor of Risk & Insurance®
If you want to play the blame game for the annual double-digit U.S. healthcare inflation, you can point your finger at two parties: our employees or our healthcare providers. "Blame" could be too strong for some people, and others could argue that blame should be smeared all around to far more than those two groups. But when it comes to employers, and the brokers and other vendors who help them administer their healthcare benefits plans, this blame game seems to be the way to go.
And depending on who you blame, there's a healthcare benefits solution for you, promising to lower costs and generally save an employer's day, by tackling either providers or employees, supply or demand, cost or utilization.
Let's start with blaming the doctors, hospitals and other healthcare providers of the country.
"The biggest part of the problem are the people providing the service," said Bill McKelvey, a veteran of the benefits industry and currently president of underwriter AMF Risk Management Solutions.
One proposed solution to the cost side of the equation (read: squeeze the providers) is medical travel. Firms like AMF Risk Management Solutions and Medical Connections and trade groups like the Medical Tourism Association are popping up to provide services and consultation.
"We're going to see a tremendous growth in this area over the next five years," said Bob Repke, founder of Medical Connections, as well as head of IC-WEST Insurance Services, a reinsurer and stop-loss underwriter. "We're just in the beginning stages of what I call a global medical revolution."
Medical travel works this way: Employers offer workers a lower premium or other incentives to pick a healthcare plan that includes the option of traveling to, say, Costa Rica or Singapore for some serious but "mid-range" procedures, as Repke put it--operations that would cost $50,000 to $150,000 in the United States but could be as much as 60 percent cheaper abroad.
"Even just offering the option to travel will have a substantial effect on any given employer's aggregate claims dollars and even their specific claims," said Repke.
Over the longer term, bringing international providers into the mix could create competition and downward price pressure on fat-cat U.S. hospital systems.
"By having the comparison-based health plan ... it introduces true competition for the first time in health plans," McKelvey said, referring not just to international medical travel but also health plans that allow employees to travel cross-country for cheaper surgery (which his company designs).
Another cost-cutting idea involves scrapping PPOs and having employers set up their own provider networks. This task can be facilitated with such technology solutions as provided by National Care Network LLC, whose tool can help self-insured employers and their third-party administrators set up a network of providers that agree to charge based on--get this--their true costs.
That's not a "preferred rate" (like those gotten by PPOs, brokers and health insurers). It's not what the provider wants to charge to make up the money lost to Medicare patients. Nope, we're talking a reimbursement plan based on the actual cost of delivering services and procedures, with room for some profit of course--but not the 200 percent to 700 percent markup that most providers charge employers, according to the data from National Care Network.
Those sound like two good ideas, right? Both ways to get those Mercedes-driving doctors to stop charging double-digit inflation each year. But it's not so easy, say many other benefits experts. For them, the real problem is not providers but the masses of overweight and ill Americans out there.
"Some of the people don't want to deal with the cold, hard facts," said Rob O'Byrne, senior vice president, benefits & insurance services, at CBIZ. The facts he's citing include that 75 percent of our healthcare expenditure goes to people with chronic or prechronic conditions, or that two-thirds of Americans are overweight or obese.
Getting employers to band together to negotiate with providers is not going to solve these cold, hard facts.
"You're dealing with the unit-cost side, rather than demand and frequency," O'Byrne said. "The frequency is what really is driving this."
And as for medical travel, it is also not "dealing with the essence of the problem either," but instead is just propagating a system where people can stay unhealthy, he said.
"At some point, as an employer, you have to help employees stay on top of these things--they're paying for it," O'Byrne said.
Though he sees some value in employers forming their own provider networks and medical travel, Rick Krause, vice president of benefits for Las Vegas-based broker Kaercher Campbell and Associates, sees them both as "individual" types of scenarios that could have value to existing regional benefits programs--but not for all regions or all employer programs.
William Sharon, senior vice president of Aon Consulting, agreed that "the action is on the demand side of the curve." Part of the reason, according to Sharon, is that the cost side is a bush that's been beaten silly.
"I would say that, over the last 25 years of managed care, that a lot of that activity was on the cost side, on discounted services with docs and hospitals," he explained. "I would say there's not a lot of room on the cost side of the equation."
Instead, Sharon works with his midsize and large clients to fashion consumer-directed healthcare plans, with little or no costs pushed to employees and a price tag equivalent in value to old managed-care plans. The trick is to build in incentives to reduce employee consumption of healthcare.
CBIZ' O'Byrne is right there with him on CDHC, mentioning other tactics we're all probably familiar with at this point: health management (or wellness) initiatives, electronic health records, telemedicine and on-site clinics, etc.
Yet even these solutions are no panacea.
Krause sees the value in the current wave of employer benefits programs--with all their acronyms of HRAs, HSAs, CDHC--basically all designed to put the financial responsibility back on the hands of employees to control demand and teach them the true costs of healthcare.
"I think there's a lot of merit to that, but it's not an overnight fix," he said. "I don't know if we can wait that long."
And says McKelvey, those CDHC plans are geared really to work with smaller claims. Sure, they are great for controlling overutilization for them, but what about costs for those larger sized claims? Why can't medical travel help with those as a complement to CDHPs?
"Brokers are reluctant to try anything new. Because it disturbs the status quo, it disturbs commissions," the medical travel advocate said. "It leaves opportunity for brokers that are willing to go in with a new idea."
THE SIMPLEST SOLUTION?
Yet for all this talk about who to blame, and what solutions are best to solve the healthcare crisis, many employers aren't pointing fingers anymore. They're just washing their hands of the whole mess.
Cost-shifting is more a strategy than ever, according to the latest Employers Health Benefits Annual Survey from the Kaiser Family Foundation. The average family premium reached nearly $13,000 in 2008, and employees paid a quarter of that--about 5 percent more than they paid in 2007.
Cost-sharing has always been a "slow creep," according to Bianca DiJulio, a senior policy analyst at the foundation. It's been something you need to look over 10 years of data to see. Not now. In this case, should we blame the employers?
June 1, 2009
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