Consumer-driven cost solution

Consumer-driven cost solution

Great Article. . .Full text follows:

Consumer-Driven Cost Solution

By Benefits Selling staff | Published October 1, 2009 From the October 2009 Issue

President Barack Obama outlined a plan to cut $313 billion in government health care spending, which would be used to help pay for the administration’s new plan of offering coverage to the uninsured. Obama “found” these extra dollars by reducing payments to providers and hospitals, making cuts in both Medicare and Medicaid, and extending the payment of outstanding reimbursements.

But the $313 billion pales in comparison to the estimated $1 trillion to $1.9 trillion that will be required to actually bring this new plan to fruition. Not to mention, the plan may also completely miss the point when it comes to addressing the core problem.

The biggest reason behind the rising cost of health care is a misalignment of stakeholder incentives. As it stands, each stakeholder (from consumers to providers to payers) is incentivized to deliver solutions that are counterproductive to others in the system – and no amount of cash that we can throw at this problem will deliver a viable and sustainable solution if the stakeholders are not operating on a common foundation upon which incentives are properly aligned.

How did we get here?
Since World War II, nearly 170 million people in the United States have obtained health care benefits through their employers. Employer-offered health benefits became the standard during the war as a means to attract and retain employees when wage hikes were frozen; since then, tax benefits for employers who offer health insurance coverage to employees have done the job of preserving the employer-based health care coverage system.

The problem with this arrangement? For the most part, employers are not experts in the delivery of health benefits. Yet as health care costs continue to rise, employers have been forced to seek out different plan options in a futile attempt to maintain rich and competitive benefit offerings that don’t destroy their bottom line.

The clear incentive for employers to offer health benefits is market-driven: rich benefits make an employer more competitive and favorable tax treatment provides an important financial benefit. These incentives must remain in place in order for employers to continue offering health benefits. If overregulation and/or misalignment of other stakeholders’ incentives make it financially unreasonable for an employer to offer health benefits, the employer will be left with no choice but to eliminate these offerings. So, in order for the employer-based model to work, there must continue to be inherent and real value for the employer as a stakeholder, which can be fostered through favorable tax policy that encourages benefit offerings, and benefit plan options that effectively curtail the rising cost of health insurance.

Why rising health care costs?
Anyone who has followed the health care debate, however, knows that curtailing the rising cost of health insurance is no easy task. But what is the real cause of rising health care costs? Misalignment of incentives, as previously discussed, which has negatively influenced the behaviors of all stakeholders in the system: patients, providers and insurance carriers. Patients in the traditional (non-consumer driven) health plans that make up the majority of health plans offered today have little to no incentive to be smart medical “consumers.” Their cost remains the same regardless of their usage, and there is no financial reward back to the consumer for cost-conscious behavior. This situation has created a population of consumers who are incentivized to be heavy users because they are removed from the payment system and blind to the true cost of care.

Providers, for their part, are forced to deal with the burden of extended account receivables arising from a cumbersome reimbursement process. The overhead for providers and hospitals should be focused on delivering patient care, but instead, physicians have been pushed into a position where they must allocate ever-greater time and resources toward submitting claims and managing account receivables. Providers are motivated (whether consciously or not) to focus on cash flow. And let’s not forget the prevalence of malpractice lawsuits, which has given providers an even greater incentive to order unnecessary services and procedures (both as a means to reduce the threat of litigation and as a way to recoup additional income).

Carriers, which are extremely effective at managing insurance for low-probability, catastrophic events (such as open heart surgery), struggle with the efficiency of insuring below-deductible, high-probability medical events. Further complicating management of these smaller medical events for the insurance carrier is the fact that, as a third party, the carrier is removed from the doctor-patient relationship but still forced to make decisions related to the payment of these claims. The inefficiency of handling smaller claims has greatly increased overhead costs for insurance carriers, which in turn feeds into the payments dilemma whereby carriers have a financial incentive to delay payment to providers for as long as legally possible in order to maximize cash on hand.

If we attempt to make sense of this tangled web of opposing interests and misaligned incentives, the core problem underlying our health care system becomes obvious. Consumers pay into a plan that encourages heavy health care usage and doesn’t reward efficient consumer behavior.

Providers are motivated to support the pattern of heavy usage and have no incentive to encourage patients to be smart health care consumers. Carriers keep raising costs to offset the inefficiency of handling the growing number of small claims that arise from increased health care consumption. It’s easy to see why heavy and expensive usage has become the norm within our health care system, reinforced by misaligned incentives (or lack of incentives) for patients, providers and carriers. In short, we’ve created a system where the “buyers” and the “sellers” are motivated to make wasteful and inefficient decisions.

Where to begin
Identifying the problem is only one small part of the equation. The question now becomes, how do we realign incentives for all players in order to modify inefficient behaviors and reduce health care costs? To begin with, let’s make one thing clear: it’s not about spending more money.

Employers should still play an integral role in the delivery of health care benefits. Removing the employer’s role from the health care system would eliminate an important competitive advantage that employers have used for decades to enhance their position within the marketplace. To ensure that employers are motivated to continue providing these benefits to their employees, they should have access to creative coverage solutions that reduce their costs and maximize their tax savings. Consumer-driven plans (high-deductible insurance coverage combined with a tax-advantaged account like an FSA or HRA) are a good way for employers to provide the same caliber of benefits to their employees while also reducing premiums and involving employees in the cost of coverage.

Why CDHC makes sense
Involving consumers is key when it comes to modifying behaviors and reducing inefficiency.

Right now, patients do not think about health care until something happens to them because they pay into a plan without having any clue as to how much their care may cost. At the same time, no one wants to have to worry about comparing costs when they experience a major medical event that puts their life on the line. For that reason, the best way to give consumers a financial incentive to be smart health care users is to focus on below-deductible items. This could be accomplished by providing catastrophic coverage for complicated, expensive and unexpected medical events, while rewarding patients for making responsible decisions on below-deductible expenditures through a tax-advantaged, consumer-driven plan.

Encouraging the use of consumer-driven plans will have a positive effect on providers as well. If patients pay for health care services in “cash” (using pre-tax funds in an FSA or HRA, for instance), providers will not be subject to the same lengthy, burdensome payments cycle – overhead will decrease and the accounts receivable problem will be substantially reduced. As is the case within any market-driven system, providers will eventually have an incentive to compete for these cash-paying customers, which in turn will drive down costs, improve delivery of care, and offer greater benefits back to the patient.

Insurance carriers should focus on what they do best: managing claims for large, catastrophic events. Carriers would no longer have to expend resources toward the inefficient management of small claims, their operational costs would go down, and therefore insurance premiums would stabilize.

Of course, behaviors can’t be changed overnight. And there will inevitably be segments of the population that, for a variety of reasons, will not fit within the structure of a market-driven health care system. But, considering that the majority of Americans are already capable of making informed, cost-conscious decisions in other areas of their life (when provided with the appropriate tools and incentives to do so), can we afford to ignore the possibility that this same principle may provide the cure to our nation’s ailing health care system?

by William C. Short

Sidebar: CDHPs grew at a rate of 33.9% this past year

CDHPs grew at a rate of 33.9% this past year

CDHPs cover more employees than HMO plans (15.4% versus 13.6%)

The average cost increase for all CDHPs at 6.3 % was slightly lower than that of the average of all plan types, which increased 7.3 % this year.

Source: 2009 UBA Health Plan Survey

Who Writes This Junk?

Here it is. The full 1,018 page text of the House Health Care Reform Bill:

http://www.benefitssellingmag.com/vendorContent/bsMag/AAHCA-BillText-071409.pdf?adcID=497835a2eab7a046291edf00309fe060

Just scroll down a bit and you'll see how confusing this plan truly is.

-Josh Spitz

President Obama Spotlights Health Care Reform

President Barack Obama held a primetime news conference focused primarily on health care reform. He reiterated his objective that the final solution must lower costs, promote choice and provide coverage for all. He stressed the urgency of reform as skyrocketing health care costs will continue to cripple our national deficit and burden individuals and employers with increasing premiums and out-of-pocket expenses.

While Congress continues to debate health care reform, the President indicated several areas where consensus is emerging and used this opportunity to answer the question many Americans are asking, “What’s in it for me?”

For those with insurance, the President asserted that:

• Reform will provide more security and stability – those who lose their jobs, move or change jobs will not lose access to coverage
• Government will not be part of health care decisions – individuals who are happy with their insurance will have the option to keep it
• Insurance plans will not drop coverage for individuals who are sick
• There will be limits on out-of-pocket expenses
• There will be coverage for preventive care and a focus on wellness
  

For those without insurance, he said that:

• Individuals and small employers will be able to obtain competitive, quality, affordable coverage through a Health Insurance Exchange, which will include a public plan option
• Health coverage will not be denied due to pre-existing conditions
  

President Obama stressed that acceptable health care reform must be paid for and must not add to the national deficit. He believes that two-thirds of the cost can be paid for by eliminating waste in the Medicare system. It is coming up with the remaining one-third that has been the subject of much debate. The President’s own recommendation for financing reform, limiting the itemized deductions for the wealthiest Americans, has not been included in any of the proposals. The President indicated he is not opposed to the other financing mechanisms suggested by Congress, including the early proposals of the Senate Finance Committee (although no draft bill has been issued) and the House proposal to apply a tax on wealthy individuals (those with joint income of $1 million). The President was very clear that the financial burden for health care reform must not be placed “on the backs of middle income families.” He indicated he will oppose any bill that is primarily funded through middle-class tax increases.

The President expressed his determination to have a health care reform bill passed and signed this year. Notably he focused more on having Congress develop the “right bill” to address the health care issue, and was less concerned about his own August deadline for a vote by Congress. Clearly this August timetable will not be met in the Senate. The day following the President’s press conference, Majority Leader Harry Reid (D-NV) stated the reform package will not be voted on until the fall. The President commented the delay is acceptable so long as Congress continues to work on this issue.

As indicated in previous reform updates, there are many committees currently working through their respective proposals. Once out of committee, the House and Senate will each need to vote on a bill. Then the respective bills will be re-negotiated, merged together and will require one more vote by Congress before a final reform bill makes its way to the President’s desk for signature.

I expect that while some aspects of the proposed health care reform bills are beginning to solidify, there will still be significant discussion and negotiation in the weeks ahead, most notably on the role of a public plan option and the sources of financing health care reform.

Widget

Interesting Widget on Health Care Developments

Universal Coverage: The Cure For the Ailing Inurance Companies

Industry pundits agree that perhaps the largest contributing factor to the defeat of Clinton’s Health care reform efforts in the 1990s was due to the mighty lobbying effort on the part of the private insurance companies.

Billions of dollars were spent by the insurance companies, both on the health and property/casualty sides, to thwart reform efforts. And ultimately, it worked and reform was defeated. This was also the case when health care reform was shot down under Carter, Johnson, and even Truman’s terms in office. Although Medicare did make it through despite the same type of lobbying efforts simply because there was enough of an aging population to support it.

This is also the single biggest reason why health care reform will ultimately happen under Obama: because private insurers will support it this time.

I get some pretty wild reactions from people when I make this statement. Everyone in my industry seems convinced that any governmental reform will push the private insurers out of business.

That simply isn’t true. For one, the government just spent billions bailing them out this year. Why would they make an investment in a business that they ultimately intend to bankrupt?

But the real reason why the insurers will support reform this time around is because of the membership they stand to gain, and need. In fact, it can be argued that the industry needs universal coverage, and the new membership it will bring, in order to survive. The only way the insurance companies will close their doors is if a single-payer system is adopted. Individual or a universal coverage mandate is however, necessary. (More on the disadvantages of a single-payer system later. . .)

One of the main provisions that exists in every major reform measure is the requirement for universal coverage, or an individual mandate. Once that provision is adopted, the private insurers will see their membership grow exponentially, almost overnight.

Since 2000, the number of private insureds has eroded tremendously. The payers lost nearly 9 million customers over the last 7 years. This erosion only exacerbates the problem as the rest of the industry (providers, hospitals, insurers, and even the government) must subsidize their care. The law prohibits the denial of treatment for emergency care. As a result, the insurance companies must raise their rates to keep pace with medical trend. And the uninsured place a heavy burden on the system, which drives up the trend. This in turn, forces more people out of the system. It’s estimated that there are nearly 50 million uninsured individuals right now.

And the recession has only made it worse.

Another big hit to membership will come in the next few years when the baby boomers begin to transition into Medicare. It’s estimated that 80 million people will turn 65 in 2011. Over the next two decades, private insurers stand to loose nearly 200 million members to Medicare.

How are they going to make up for this loss?

Now let’s go back to the Universal or, Individual Mandate. The 50 Million uninsured? They represent future customers. That would certainly help repair the membership erosion the private insurers have experienced. It might also mean that new companies will sprout to accommodate the market growth and capacity. That would breed more competition and could drive prices down for the first time since the early 1990s (when there were far more health insurance companies and HMO enrollment was prevalent).

The insurers finally possess the understanding of how to control medical inflation, and that’s through prevention. That’s another reason why medical tend was negative in the early 90s. It was due to high enrollment into the HMO model, which placed an emphasis on preventative care. Simply tossing the entire population into a single pool- with the idea that spreading the risk around will be sufficient to cover the costs- has failed time and time again. PERS is nearly bankrupt, Medicare will drown, eventually, and most of the Union Trusts are crippled. It can be argued that the cost to provide health benefits brought down the auto makers.

A Single Payer System will only reinforce this concept. In fact, a single-payer system will completely undue any reforms that any interest, be it the insurers or the government are trying to accomplish.

My next entry will focus on how a Single Payer System will bring about this downfall.

In the meantime, the industry should at least acquiesce to the idea of Universal Coverage, and work from there.

-Josh Spitz

Five Years On: Successes and Challenges of US-VISIT

Saw this article on SHRM. Would be interesting to see how US-VISIT will be expanded in the future: technically and politically.

2/18/2009 Since becoming operational in 2004, more than 130 million people have been screened biometrically upon entering the United States, netting the capture of thousands of criminals and the elimination of scores of fraudulent travel documents, according to the U.S. Department of Homeland Security (DHS).

“When US-VISIT was created, our primary emphasis was to roll out biometric technology to the air, land and sea ports of entry, all across the United States and consular offices abroad,” said Steve Yonkers, deputy assistant director, Business Policy and Planning, DHS. “Our challenge was to get information into the hands of decision-makers immediately … to verify who [the visa applicant] is, are they wanted for something, is there some reason this person should not receive a visa, and not become admissible to the U.S.,” he said.

The DHS’ US-VISIT (U.S. Visitor and Immigrant Status Indicator Technology) program is an immigration and identity management system used at visa-issuing posts and ports of entry to verify entrants’ identities when visiting the United States. The system involves collecting and analyzing travelers’ biometric data—digital fingerprints and photograph—usually at an overseas visa-issuing post, and checking the data against a watch list of wanted criminals and suspected terrorists. Upon arrival in the United States, the traveler’s biometric data is collected again, to ensure that the entrant is the same individual that received the visa.

Since Jan. 18, 2009, virtually all non-U.S. citizens are required to provide biometric data through US-VISIT, including lawful permanent residents of the United States, refugees and asylees seeking admission, persons paroled into the United States, persons applying for admission under the Guam Visa Waiver Program, and Canadian citizens currently required to obtain a Form I-94.

“US-VISIT has been a success,” Yonkers told those in attendance at the 2nd Annual Biometrics for National Security and Defense conference sponsored by the Institute for Defense and Government Advancement in suburban Washington, D.C., Feb. 11, 2009. “It has enabled us to more or less eliminate the fraudulent use of travel documents and literally catch thousands of criminals seeking to enter the United States, while facilitating travel and trade, [protecting] privacy, and [making] sure information is properly used and safeguarded,” he said.

Criticisms of the program include its cost, effectiveness and the potential for invasion of privacy.

‘Two-to-10’

“Going from ‘two-to-10’ [the fingerprinting of only the index fingers to fingerprinting all 10 digits] has been a major upgrade to the system,” Yonkers said. The upgrade has increased efficiency-of-use of the massive 100 million fingerprint database and increased interoperability with the FBI and other security agencies, by being able to identify latent prints from crime scenes and battle sites better. The two-to-10 upgrade has been implemented at all major U.S. ports of entry.

Exit Collection

US-VISIT is not just about entering the United States. Exit data collection and the ability to identify persons overstaying their visas have always been a part of its aim. An exit data collection system is currently being devised, with information being gathered from pilot programs and with the assistance of the airline industry and the Department of Commerce in order to embed exit collection as naturally as possible into routine exit procedures.

“We’re also looking beyond air and sea, to land exits,” said Yonkers. This presents special difficulties as most people exiting by land travel “at-speed,”—not stopping as they leave—and “we don’t want to disrupt travel and trade,” he said.

Future Tech

The future of biometric identification is mobile and multimodal.

“Obviously fingerprints are the cornerstone of our program, but we realize that in terms of moving forward, we have to become multimodal—that means iris and facial,” Yonkers said. The obstacles to this upgrade are technological and practical in nature, with database storage, system speed and operability, and agency necessity among issues to be worked out.

Yonkers cited the U.S. Coast Guard’s use of mobile biometric readers patched in to the DHS database when confronting people from the Dominican Republic attempting to reach Puerto Rico by ship illegally as an upgrade that has “resulted in a dramatic uptick in prosecutions and served as a real deterrent to an illegal and dangerous action.” DHS will continue to use mobile biometric technology to “bring the tech to where the mission is being done.”

Challenges

Challenges to the continued operation of US-VISIT include concerns over data privacy protection, enhanced interoperability with other agencies, the development of common standards, cracking down on the “spoofing of the system,” and the need to complete the exit collection function. A major future initiative of the program is to be the biometrics identification service provider for all DHS agencies, including the U.S. Coast Guard, the Federal Emergency Management Agency and the U.S. Secret Service, Yonkers said.

-J|S

Daschle Out. (Ugh. And I Bought His Book Already)

Breaking News- February 3, 2009. Tom Daschle has officially withdrawn his name from nomination for the post of Health and Human Services secretary.

Follow the Developing Story at CNN.

Tom Daschle has withdrawn his name from nomination for the post of Health and Human Services secretary. That word comes directly from Daschle himself, via a statement the White House just released.

In that statement, the Democrat and former senate majority leader says he does not want to be "a distraction. The focus of Congress should be on the urgent business of moving the president's economic agenda forward."

Daschle's nomination ran into trouble over the weekend when it was revealed that he had failed to pay taxes on the value of a car and driver he used for several years -- errors that led to him paying about $140,000 in back taxes and interest.

More to Follow. . .

Btw, I was always leary of those red glasses of his.

Concierge Medicine: A Natural Outgrowth of Consumerism in Health Care

January 28, 2009 – There was an interesting article posted on the World at Work Site today about concierge medicine.

There are several names for this practice; some call it “retainer medicine” or “boutique medicine,” while others call it “concierge medicine”. Whatever the name, it appears to be increasing in prevalence. Virtually unknown 10 years ago, it is a growing niche business.

For a fixed annual fee, medical practitioners offer a limited number of patients the opportunity to pay a fixed annual fee in exchange for "premium services and amenities." These services may include priority/same-day/guaranteed next-day appointments; extended or Saturday appointments; access to the doctor 24/7, with access to the physician's pager, cell phone, and home phone numbers; house calls; telephone and e-mail consultations; and other services.

The growth of concierge medicine has really come from two things: One is a revenue stream for physicians whose income is being reduced in many ways from lower third-party reimbursements, higher costs and the like, while others would like to return to the past when medical care was more personalized.

Some doctors who have gone this way have decided to no longer contract with Medicare and other private insurers, and the main selling point to potential patients is that they supposedly get better and more immediate access to, and more undivided attention from, their doctor.

The cost for such memberships can run as low as $1,000 per year on up to $20,000 or more per year. The most recent ones I have come across have been in the $1,500 to $2,000 per year range. It all depends on a variety of factors, including what services are actually provided.

Some fear that concierge care will result in a two-tiered medical system based upon economics. Concierge physicians would not be satisfying their ethical duties to provide some indigent care.

David R. Donnersberger, MD, JD offers an interesting perspective about Concierge Medicine on the Health Care Blog.

January 24, 2009 – Concierge Medicine From A Doctor’s Perspective - Call it boutique medicine. Retainer medicine. Platinum care. Evoking the pastoral image of a sturdy black doctor’s bag and spectacles, concierge medicine is a small but growing trend among over-worked and over-booked physicians. The practice essentially offers a limited number of patients the opportunity to pay a fixed annual fee in exchange for premium services and attention. Fees can range anywhere from $1,000 to $20,000. Concierge medicine has been dubiously received while transition necessitates limiting a physician’s patient base significantly. Imagine receiving a letter from your doctor of 30 years demanding an annual fee on top of the cost of your normal visits. Hurry your check, and you may be one of the lucky ten percent the practice will keep. Thousands of patients have been outraged to receive just this kind of letter from their family doctor.

I believe concierge medicine can indeed offer significant advantages if mixed with a dose of good, old-fashioned business practice. There exists a happy medium that allows physicians to spend increased time with patients without alienating long-term clients. In our practice, we demand no annual fee. We ask that Medicare patients pay out of pocket for their wellness visit; such payment is only covered when the patient turns 65. The patient can in turn be reimbursed on the insurance provider’s schedule.

If the patient is unable to pay, we will still provide the visit. In considering a concierge practice, physicians should continue to accept patients with Medicare or other third-party payers, but may ask for payment directly before the patient files their own claim. The benefits of a direct payment structure to physicians means a less bureaucratic or “quota”-driven practice. The benefits to patients include same-day appointments, complete and continuous physician access via cell phone, on-site laboratories in clinics, and no anonymous hospitalists in the event of a stay.

Increased attention for patients leads to a much higher rate of satisfaction and comfort.
Concierge medicine, from a doctor’s perspective, is a more gratifying and fulfilling way to practice medicine. Today’s doctors take on patient loads of up to 2,500 to 3,500 patients annually. Longer appointments with concierge physicians means a thorough discussion of patient questions and concerns. More time also translates into a real ability to monitor wellness screens such as mammograms and colonoscopies.

There exists the fear that concierge care will result in a two-tiered medical system based upon economics. In the beginning, this may have in fact been true. But as the practice has evolved over the past decade, so have individualized billing plans. Ideally, physicians should maintain long-standing relationships with patients regardless of their ability to pay out of pocket. About 250 concierge physicians exist in the United States today. Participating physicians report more time to devote to patient care and advocacy, as well as continuing medical education and family life. The result is a revolution in preventative care and a return to a more personal relationship between doctor and patient.

---
In keeping with the theme of Consumerism, the emergence of concierge medicine is a natural outgrowth of health care economics. It’s also echoed in Obama’s “you can keep what you have” Health care policy stance. For the very wealthy, perhaps the extra expense is not cost-prohibitive. For the rest of the economic classes, a cost-benefit analysis must be performed to determine it’s true value.

-JS

The Sad Truth. And Who Reads, "Yachting" Anyway?

JS

Card is from Jessica's Indexed site.

Health Insurance Reform in 2009: The Raison D'tere for Insurance Scoop

I refuse to be the next person to wax philosophical about how Obama's inauguration promises America the hope of change. Rather, I'd like to focus on one particular issue he has promised to address: Health Care Reform.

I was listening to the radio this morning and one of the news outlets (NYT, I believe) counted the number of campaign promises Obama made during his campaign. As a reference point, in the 2004 election Bush was quoted as making upwards of 198 different campaign promises. Obama came in at 515. But again, let's just concentrate on the one that matters to me personally, and also the impetus for this blog.

Health Care reform promises to take center stage as one of the most important issues of Obama's Presidency. To keep pace, the focus of this blog will compare and contrast every idea, proposal, white paper, and policy that offers an idea on how to reform the system. Once I've assimilated the information, I will strive to contribute my own ideas to the discussion taking shape. And why not? It's my blog ;)

Two recent posts of mine deal with various proposals to reform the HC System:

• Perhaps, a Ray of "Sunshine?" Health Insurance Policy Paper from the CBO Released Today (january 8, 2009)
• The Stage is Set for Health Care Reform (january 15, 2009)

I also recently cited the release of Tom Daschle's Book: Critical: What We Can Do About the Health-Care Crisis.

In the coming months I will be piecing together a policy paper of my own that deals with the competing proposals, from the establishment of a Federal Health Exchange to the proposed Employer HC Subsidy. The paper will be published here and be written in lay terms.

In the meantime, I wanted to share another reference source with you. The Rand Corporation publicly released it's Health Care Policy Reform comparison tool, aptly entitled: COMPARE.

According to the site, "The RAND Corporation's COMPARE (they love CAPS) initiative provides information and tools to help policymakers, the media, and other interested parties understand, design, and evaluate health policies."

Here are the four basic objectives of COMPARE:

• Synthesize what is known about the current health care system.
  
• Describe policy options that have been proposed to address one or more existing challenges.
• Analyze the effects of different health care policy options on multiple dimensions of health system performance.
• Identify gaps in our knowledge about the effects of policy changes.

Rather than constructing specific policy proposals, COMPARE offers objective analyses of policy options currently being used, considered, or discussed by public and private policymaker. Goodie.

Truth be told, I haven't had time to fully explore the site and their metrics, but on the surface it looks great. Lucky for you, I will sift though all the data and analysis and translate it all for you here. Ideally, I would like separate entries here to deal with each competing idea.

Many different policymakers, including President Clinton have tried to reform the system. All of them have failed.

But, things have changed.

The recession has placed downward pressure on HC GDP. Consumerism is now creating economies of scale that are finally starting to enact price constraints. New technology avails more data at both the provider and subscriber levels. That same technology now allows systems of managed competition amongst insurers to flourish where none previously existed. Disease management and wellness have become more sophisticated. Patents on top 100 drugs are beginning to expire in scores. And public and social awareness of the problem has never been higher. In 1998, when the average family was paying around $6,200 for annual coverage, there were bigger issue with which to deal. In 2009, that figure has doubled, and then some. It's now at the top of everyone's list.

The ideas are out there. We need only to make sense of them. And in order for any one idea to work, it must be unilaterally accepted as viable for all socioeconomic strata.

We all welcome the hope for change. But what kind of change, is not up to Obama. It's up to us.

-J|S

Yes, Another Study Demonstrating That HC Costs are Still on the Rise

Towers Perrin, an HR consulting Firm just released their annual HC Cost Survey for 2009. And while it seems that there is a similar study released every week, all of them telling us what we already know, the Towers HC Cost Report is widely used and respected in the industry.





The new data suggests that employers will pay, on average, $9,552 per employee for health benefits in 2009, a jump of 6% from 2008. Yet some employers will buck the trend because they proactively manage their benefit programs.

One interesting nugget of data reveals that "high-performing companies," or those organizations that rigorously track their health benefit objectives, will spend on average, 12% less in annual health care premiums in 2009, compared to low-performing companies. For example, high-performing firms report health benefits costs $8,904 per employee, compared to $10,104 for low-performing companies. The cost fell even lower (to $7,032) at high-performing companies utilizing consumer-driven health plans with health savings accounts. (Still not convinced about CDHP?)

The survey defined high performers as companies that not only had a strong commitment to improving employee health and engagement, but also aggressively managed their health plans and the delivery process.

Other Findings Within The Study:

• Large employers are experiencing health care cost increases of 6% on average, or $532 per employee per year. Although this year's average percentage increase is similar to last year's, employers are paying 29% more today than they spent five years ago for health care.


• In flat dollar terms, the employee share in 2009 will average $80 per month ($960 annually) for employee-only coverage and $273 per month ($3,276 annually) for family coverage - a significant cost for many employees.


• Pre-65 retirees will contribute approximately 51% of the premium for retiree-only coverage, and 54% for family coverage.


• Retirees age 65 and older will pay an average of $148 per month (or $1,776 annually) for retiree-only coverage and $309 per month (or $3,708 annually) to add coverage for one dependent.

Follow the link above to read the study for yourself.

-JS

What is "Trend?" And How Much of It is Price Margin?

One of the major components of premium or rates that insurers use on commercial accounts is called Medical Trend. Loosely defined, Annual Medical Trend is the historical or projected average change per year in an insurers medical, capitation, and pharmacy costs. In the last quarter of 2008, average HMO and PPO annual trends ran between 10-12%. On different cases that I've brokered I've seen trend as high as 17%.

Certainly there is justification for trend increases year over year. New technology and infrastructure in the HC system, pharmacy costs, aging workforce, Medicare reimbursement rates, so on and so forth. But new data shows that the Medical CPI is actually leveling off, and in some cases, declining.

I really have to learn how to upload better graphs from Excel sheets, but the graph below displays the Medical CPI for the last ten years. (Trust me, the data is in there.) Year Over Year (YOY) Medical CPI appears to be flat or declining. I have the rest of the data that shows that this is relevant across inpatient, outpatient and medical services. However, the Producer Price Index ( PPI ) which is the carrier's premium pricing in aggregate is going up 7bps over November and close to 3/4% YOY. It suggests that while the insurance carriers affordability efforts are containing trend, the increased trends that groups are receiving are more an effort for the carrier's margin expansion than it is a legitimate effort to price to a rising trend.

Admittedly, less than a percent is not a lot, but compounded YOY it can be.

-JS

A New Stage Is Set for Health Care Reform

It's long, but there's a great article from by Bill Leonard on SHRM's website that explicates some of Senator Daschle's key points from his new book, "Critical: What We Can Do About the Health-Care Crisis." Scroll down to the section Fundamental Shift for the meat of the article. . .

Here's the transcript:

A New Stage Is Set for Health Care Reform
By Bill Leonard

What kind of health care system will President Obama and congressional Democrats pursue?

While both promise to bring new thinking and ideas to the debate, indications are that the administration wants to find ways to “strengthen” the current employer-based system rather than work to phase out that connection, which forms the basis of the health care system most Americans have known for generations. And while the idea of a federal health board has been floated by former Senator Tom Daschle, Obama’s nominee for secretary of Health and Human Services, that could be a tough sell given the specter of big government that doomed a health care reform package during the Clinton administration.

In a new book, Daschle envisions a panel similar to the Federal Reserve Board that would create a single standard of health care for the nation and exert influence on prices and health care costs for health care providers and insurance vendors.

Obama and his transition team have praised Daschle for bringing new ideas to the debate, but they haven’t completely endorsed the federal health board idea, sources say. The incoming administration’s approach has been measured and moderate.

Another potentially dramatic shift in national health care policy being discussed could resemble the “pay or play” systems passed in states such as Massachusetts and Vermont, where employers offer health benefits to their workers or pay a tax to fund a state-run insurance pool that provides low-cost health benefits to the uninsured.

While some other states, including California, have considered similar proposals, the push to move the ideas has stalled as the economy has faltered. The recession’s impact could be good news for employers with locations in multiple states who fear such laws and should apply more pressure at the federal level to seek a nationwide solution rather than a patchwork of reform initiatives enacted at the state level.

And “pay or play” proposals at the national level could set off a firestorm. During the presidential campaign, Republican nominee John McCain hammered Obama for supporting expensive employer mandates and a “socialist” philosophy to government.

No Quick Fixes
While reform of the U.S. health care system was one of the hottest issues of the 2008 campaign and has been the topic of discussion in dozens of articles, press briefings and business group summits, the actual debate and forging of a reform package by Congress will take time.

“As the U.S. economy continues to deteriorate, Congress will be compelled to take up any economic stimulus and recovery package before addressing a comprehensive health care reform package,” said Jeffrey C. Bauer, Ph.D., a partner in the management consulting practice of ACS Healthcare Solutions in Dearborn, Mich. “So business leaders and HR executives shouldn’t be holding their breaths waiting for an immediate or quick fix from the federal government.”

Still, health care reform promises to be a hot topic throughout 2009 and possibly for the next two to three years, as the Obama administration settles into office. Obama has held consistently to the message that health care reform should be considered an essential element of the nation’s economic recovery.

“Some may ask how, at this moment of economic challenge, we can afford to invest in reforming our health care system? Well, I ask a different question—I ask how we can afford not to?” Obama said during a recent news briefing.

Some observers say that Obama’s choice of Daschle for Health and Human Services gives a clear signal that the president-elect wants to move the health care reform debate forward. In addition to nominating Daschle to the cabinet post, Obama named the former Senate majority leader director of a new White House office on health care reform.

According to the Obama transition web site, the new office will “coordinate efforts within the administration, the Congress and throughout the country to pass health care reform.” Daschle’s primary role will be to lead the administration’s reform initiative on Capitol Hill and work with congressional leaders to build consensus and forge a reform package that can pass both houses of Congress.

“Tom Daschle understands the legislative process very well and as a former Senate majority leader he knows how to get bills passed,” said Lisa Horn, manager of health care for the Society for Human Resource Management’s government affairs department. “For these reasons, it’s pretty clear that Obama picked him to lead the reform effort.”

Avoiding Past Mistakes
Obama and his advisers are well aware of the pitfalls of taking on a massive reform initiative and are determined not to repeat the mistakes of the past two presidents, who attempted major reform efforts during their terms, only to see them fail.

Obama’s team has taken several key steps to ensure that his health care reform plan won’t meet the same fate as Clinton’s failed attempt to reform health care in 1993. The Clinton White House created a health care policy team with more 500 members who spent months secretly developing a 1,342-page proposal with minimal input from Congress. Lack of support from congressional leaders helped to doom Clinton’s proposal, and Daschle, who was elected to the Senate from South Dakota in 1986, is well aware of that failure and has been taking steps to prevent a similar legislative debacle.

After being nominated by Obama, Daschle began organizing a nationwide grassroots campaign through a series of local and community health care reform meetings. The Obama transition teams asked for volunteers throughout the country to organize health care community discussions. Throughout December 2008, more than 8,500 of these discussions or what many called “health care parties” were held.

Daschle attended several of the meetings, while the Obama transition team asked the thousands of discussion leaders to submit reports via the Internet. The effort is similar to the campaign efforts of Obama, who used the Internet to bolster support and receive a record amount of campaign donations. According to Obama’s transition team, more than 10,000 comments on health reform were submitted to the team’s web site (www.change.gov) during December.

A Fundamental Shift
The health care discussions and online grassroots effort marks a fundamental shift in the way the Obama administration will approach the health care reform debate, said Jeffrey Bauer.

“The Obama team is looking to include everyone in the debate and spread this debate beyond the confines of Capitol Hill,” Bauer said. “While it’s a good idea to build your support from the ground up, which the Clintons failed to do in 1993, it also means that there are going to be a lot of stakeholders in this process, and it will be a massive and daunting undertaking.”

After losing his bid for re-election in 2004, Daschle became a special policy adviser in the legislative and public policy group for the law firm of Alston & Bird. The law firm’s public policy group offers lobbying services and has several high profile health care clients including CVS Caremark, the National Association for Home Care and Hospice, Abbott Laboratories and HealthSouth.

Daschle said repeatedly that he was not a lobbyist and, as a former Senate majority leader, he was prohibited from registering as a lobbyist with Congress. He still remained active in working for health care reform in Washington and presented his vision for the reform effort in the book Critical: What We Can Do About the Health-Care Crisis (St. Martin’s Press, 2008).

In the book, Daschle proposes the idea of creating a Federal Health Care Board, which would be modeled on the financial system’s Federal Reserve Board and would offer a public framework in which the health care system can operate more effectively and efficiently and insulated from political pressures—yet remain accountable to Congress.

Daschle argues that the board would create a single standard of health care for the nation and exert influence on prices and health care costs for health care providers and insurance vendors.

“One of the key barriers to health care reform has been the notion that too much power and oversight could be given to the government,” said Bauer. “A federal health care board would raise those fears and would most likely face some stiff opposition.”

Bauer added that the federal board also would raise questions about the efficiency of the system and could create problems as the board attempted to keep up with the rapidly changing field of health care.

“Technology, research and new health procedures are rapidly changing the way doctors treat patients,” Bauer said. “I don’t know if it would be possible for a federal health board or government entity to keep pace with those changes. It should raise some serious questions about how efficient and effective the board could be, I believe.”

The Key Players
Some congressional leaders believe they have been presented an opportunity to shape the health care reform debate. Sen. Max Baucus, D-Mont., and Sen. Edward Kennedy, D-Mass., should be the key players in the U.S. Senate, and Reps. Pete Stark, D-Calif., George Miller, D-Calif., and House Majority Leader Rep. Steny Hoyer, D-Mass., will play prominent roles in the House.

Baucus, who chairs the influential Senate Finance Committee, took the lead in the health care debate in Congress when in late November 2008 he released an outline for reform. His 98-page “Call to Action” lays groundwork for the debate but doesn’t dwell on details.

Many of the ideas provided in the Baucus outline resemble proposals supported by Obama and Daschle, but Baucus does not endorse the idea of a federal health board. He supports the idea of a national health exchange that would offer lower-cost health benefits to uninsured Americans, and Obama made a similar proposal during his presidential campaign.

Baucus has stated that his plan is just a framework to begin the debate, and he is working to create bipartisan support for his reform efforts. He has already met with leaders from the Finance and Senate Health, Education, Labor and Pensions (HELP) Committee, including Kennedy, its chairman, and Sen. Charles Grassley, R-Iowa, ranking minority member of the Finance Committee, and Sen. Mike Enzi, R-Wyo, ranking minority member of the HELP Committee

Baucus stated during a recent speech at the Brookings Institution in Washington, D.C., that the reform effort must remain bipartisan to succeed.

“We want to make health reform a total bipartisan effort, and we’re working hard to make that a reality,” he said.

Baucus also told the audience, “We are working with the CBO [Congressional Budget Office] to get the numbers and cost estimates now,” he said. “Before we even begin to work out specific details on a comprehensive health reform bill, we need to have a good idea what it will cost.”

Health Information Technology
A comprehensive reform package will take time to develop, Baucus concedes. And as Congress turns its attention to a massive economic stimulus package and the confirmation of dozens of Obama administration appointees, many sources believe the earliest that a reform bill might pass would be late 2009 or sometime in 2010.

However some health care changes could be passed quickly once Obama takes office. The Obama transition team and leaders in Congress are working on a massive economic stimulus package that could include at least $40 billion in health care spending over two years.

Some of the money would go to help prop up faltering state Medicaid programs, and at least $25 billion could be made available for electronic medical records. Other proposals to promote a nationwide health information network have faltered in Congress before. The Senate HELP Committee did approve the Wired for Health Quality Act (S. 1693) in August 2008, but the bill never made it to the Senate floor for a full vote.

The chief stumbling block to passage of a health IT proposal has been the cost, sources say. Independent studies from Harvard, Rand Corp. and the Commonwealth Fund have estimated that establishing a nationwide health care information system could cost between $75 billion and $100 billion over the 10 years it will take hospitals and health providers to develop and implement a viable system.

The payback, however, could be huge. Researchers with the Rand Corp. estimated that an electronic health information system could save up to $77 billion per year by reducing hospital stays, eliminating duplicate and unnecessary tests and cutting drug prescription costs.

“This will cut waste and eliminate red tape,” Obama said in news conference announcing the proposal. “It just won’t save billions of dollars and thousands of jobs—it will save lives by reducing the deadly but preventable medical errors that pervade our health care system.”

Bauer, who has studied and written about health care economics for more than 20 years, agrees with Obama’s assessment.

“Improving the nation’s health care information system could be one of the most immediate and effective steps that the Congress could make to reducing health care costs,” he said.

He added that the health reform efforts on Capitol Hill present an opportunity to employers and their human resource staffs to get involved and make a difference.

“As the debate moves forward, I believe HR professionals need to seize the opportunity to work with their health insurance vendors and plan administrators and explore ways to cut costs and create health benefit plans that work for their organizations,” Bauer said.

Bill Leonard is senior writer for SHRM Online.

Related Articles:
Health Care Costs, Reform Are Top Small Business Concerns, Compensation and Benefits News, December 2008
McCain, Obama Offer Contrasting Health Care Platforms, HR News, Oct. 15, 2008
Poll Finds Wages and Health Care Are Top Issues for U.S. Workers, HR News, April 22, 2008
States Respond to Rising Health Care Costs, Workplace Law Library, Aug. 9, 2007
Employer Obligations Under Mass. Health Care Reform Law Come Due, Workplace Law Library, June 18, 2007.

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News You Can Use: You're Damned if you Do and Damned if you Don't on Health Reform, CBO Reports

News You Can Use: You're Damned if you Do and Damned if you Don't on Health Reform, CBO Reports

Coverage From Employee Benefits News:

A new report from the Congressional Budget Office explores the various proposals on the table for reforming the nation's health care system and concludes there aren't many options that will overwhelmingly benefit both employers and employees.

Although most surveys find employers in favor of health reform, among the proposed options to increasing the number of Americans with health coverage -- essentially, premium subsidies and/or individual or employer mandates to obtain/provide coverage -- most would increase costs, CBO finds. And higher costs for employers likely would ultimately mean lower pay for workers (and less taxable income for the government).

Perhaps, a Ray of "Sunshine?" Health Insurance Policy Paper from the CBO Released Today

Sift through this deliciously written 196-page policy paper from the Congressional Budget Office (CBO) entitled, "Key Issues in Analyzing Major Health Insurance Proposals."

It's edited by Robert Sunshine, Acting Director of the CBO, but about the only ray of sunshine emanating from the report is that there could be be a solution, but there's no Silver Bullet.

The problem of the nonelderly uninsured is a somewhat easy problem to mend. An expansion of SCHIP programs through state funding with federal subsidies would certainly be a step in the right direction. Surprisingly, Federal subsidies to employers offering coverage might also avail more Americans actively at-work affordable coverage as well.

Put your economics hat on for a moment and entertain the CBOs proposition of federally-based subsidies for employers offering health insurance to their employees:

Changes in Subsidies for Employment-Based Insurance.
For several reasons, large employers are more likely than small employers to offer health insurance. Reflecting that fact, the response of firms to changes in the subsidies for employment-based insurance would depend not only on the impact of those changes on the net price of insurance but also on the size of their workforce. To estimate the likelihood that firms would offer (or drop) health insurance in response to a change in price, CBO multiplies the
average change in price for a firm’s employees by an “elasticity of offer”—a factor that measures how employers’ offers of insurance respond to changes in price. The elasticity of offer varies with the size of the firm and is based on estimates from several studies

For example, for firms with between 25 and 99 employees, CBO estimates the elasticity of offer to be -0.38; thus, a 10 percent increase in the premiums for firms of that size would cause a 4 percent decline in the number of employees offered coverage. Consistent with the available
evidence, the relevant “price” in that calculation is the total cost of insurance to the employer and employee combined—net of any federal (or state) subsidies
—not just the portion that the employer pays directly.

Consider, for example, how firms of different sizes would
respond to a subsidy proposal that reduced the net price of
employment-based insurance by 20 percent. CBO
anticipates that such a subsidy would increase the availability
of health insurance at very small firms (those with
fewer than 25 employees) by about 23 percent (the
20 percent reduction in price multiplied by -1.14, the
elasticity of offer). The share of employees at such firms
that are currently offered insurance is estimated to be
48 percent, so the proposal would be expected to increase

that share by 23 percent, to 59 percent, or a gain of
3.4 million workers. Larger firms would be less responsive
to the subsidy, and analogous calculations for all
firms would yield an overall increase in the offer rate of
about 6 percent (an average elasticity of offer of -0.28
times -20 percent); that translates into an increase of about
6 million in the number of workers offered coverage,
roughly half of whom would have been uninsured
before receiving the new offer.

At the employee level, the report also discuss some "sticks" that can be used to incent employees to make more informed choices when selecting a health plan:

Some proposals would make consumers bear the cost of their health insurance more directly, either by paying the full cost themselves or by paying the added cost of more expensive policies. Proposals could achieve that goal by:

• Reducing or eliminating the current tax subsidy for employment-based insurance, perhaps replacing it with a tax credit or some other fixed-dollar subsidy (discussed above); or
  

• Establishing a managed competition system, in which a range of plans is offered and the employer’s or the government’s contribution to the premium is a fixed amount—for example, the premium of the average plan or the least expensive plan available—thus requiring consumers to pay the additional cost of more expensive plans.
  

Those approaches—taken separately or in combination— would provide stronger incentives for enrollees to weigh the expected benefits and costs of policies when making their decisions about purchasing insurance.

There's more meat in the report, but it does reveal the government's ability to influence change. The real commentary then, is whether or not the political parties on Capitol Hill can coalesce on a finding a solution together.

See, there is a ray of hope after all, but it will take all parties, Federal Government, State Government, Employers and employees to band together to make it work.

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Why Single-Payer Health Reform is Not Viable

From the Health Insurance Blog:

When it comes to health care reform in America, there is a relatively simple solution that will cover everyone's basic health care, control costs and save businesses, most people and the country a lot of money.

It's called a single-payer health plan, where the government collects taxes to finance national health insurance. The government, which is the "single payer," covers all citizens and pays the bills when they visit private (or public) doctors, hospitals and other facilities for medical care.

All would have basic coverage, regardless of whether they have a job, or where they work. Nobody gets billed for basic care. No-body goes broke because of medical bills.

Yet this option has been declared "off the table" by Sen. Max Baucus, D-Mont., who's among those leading the charge for health care reform in America.

Top Democrats who will be deciding policy in America in 2009, including Baucus and President-elect Barack Obama, say single-payer is "not politically feasible," because the public won't strongly support it.

What they really mean is that when it comes to health care reform, they don't want a political fight with some of the nation's most powerful financial interests, which have the resources and the motivation to turn public opinion against meaningful reforms.

These interests include the health insurance industry, pharmaceutical drug companies, some hospitals, highly paid medical specialists, medical suppliers and others who now profit handsomely from our current system - and who could no longer command those profits under a single-payer system or an alternative form of a national health plan.

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Don't necessarily agree or disagree, but like it or not, lobbyists are here to stay.

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Today's Axiom: Healthy Habits = Healthy Premiums

The simple message is:

Healthy Habits = Healthy Individuals, and Healthy Individuals = Lower Premiums

We all know that health insurance premiums are out of step with wage increases:

And it has been proven through multiple studies, that employee behavior is the single largest determinant in health care decision-making:

But chew on this new study. It quantifies that employers who, "Aggressively support improvement in employee’s health and healthy behavior" have on average, 16% lower premiums than companies with, "Consistently less support for employee health and healthy behaviors."

3 Charts, 1 message. Engaging your employees when it comes to their health care does make a difference.

Spread the Health in 2009.

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