Facing Higher Health Costs

In the health care reform debate, the escalating cost of health care is cited as one of the primary reasons for reform. And the rapid rise in the cost of health care is often attributed to the reimbursement model and that people who receive health insurance through an employer or through the state are insulated from the actual price tag for the care they receive. Many contend that if more consumers were directly responsible for a larger portion of the cost of care, then they would influence the marketplace and costs would go down. However, some consumer advocates insist that if employees shoulder a greater share of cost, then they will avoid preventive care and drive costs up, in addition to being unable to afford the care they need.

An article titled “Employees face 'shockingly higher' health costs” by Parija Kavilanz posted today on CNNMoney.com examines the growing trend of employers shifting the cost of health coverage to employees.

It's open enrollment time at work. Prepare yourself. Starting in 2010, your employer is making sure that when it comes to paying for your health care, you're going to be sharing much more of the burden.

"The headline is greater cost sharing," said Tom Billet, senior consultant with human resources consultancy Watson Wyatt. "That means higher [employee] contributions, higher deductibles, or both," he said.

In 2010, employers are "putting everything on the table," implementing benefit changes aimed at making workers more aware of the actual cost of services," said Paul Fronstin, director of the health research program at the Employee Benefit Research Institute (EBRI), a public policy research group.

Barry Schilmeister, health care consultant with Mercer, a global firm specializing in employee benefits, agrees.

"Most people are shielded from the true cost of care because all they pay when they go to the doctor is a $15 to $20 co-pay," he said. "To me the catch phrase in 2010 will be 'Taking responsibility.' "

Consumer advocates, however, aren't thrilled with these declarations.

"We recognize that this is a hard economy," said Cheryl Fish-Parcham, deputy director of health policy with Families USA, a health care consumer advocacy group.

"We know that medical debt is growing. We know that [employer-based] coverage is thinning," said Fish-Parcham. "This is a really difficult environment for everyone. That's why we're all looking forward to health reform."

…

Higher out-of-pocket costs
"Employers and employees will face shockingly higher [health care] costs," warned Helen Darling, president of the National Business Group on Health, whose members include Fortune 500 companies such as American Express, Coca-Cola and IBM.

Companies are raising deductibles, co-payments and employee out-of-pocket limits. "In better economic times, employers are better able to shoulder the [health care cost] burden. Not as much now," said Billet, who estimates that costs could increase between 10 to 20% for insured workers.

Besides the economy, Billet said other underlying factors driving up health care costs include aging of the population, greater use of technology in health care and government cost-shifting.

"Medicare and Medicaid typically pays providers less than the actual cost of care," he said, adding that providers make up the difference by raising their rates to their insured clients.

Co-pay to co-insurance
Darling said companies have been shifting over the past five years from a co-pay, a flat dollar fee ranging between $10 and $35 that employees pay at each doctor visit, to a to co-insurance model.

With co-insurance, employees pay a percentage of the total medical expense. Experts say co-insurance rates are typically split 80-20 or 70-30 between the health plan and the insured worker.

"By changing to co-insurance, people are more aware of costs and the hope is that they'll be more careful about how they spend their [health care] dollars," said Schilmeister.

Billet, whose corporate clients include Time Warner, the parent company of CNNMoney.com, said co-insurance used to be the norm prior to the advent of health management organizations (HMO). "So it's almost like a back to the future," he said. Time Warner is shifting from a co-pay to a co-insurance model next year.

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Consumer-directed health plans
About 20% of large employers offer consumer-directed health plans (CDHP), up sharply from 14% last year, according to Mercer.

These plans, which couple catastrophic illness coverage with employee-funded health savings accounts (HSA) or health reimbursement accounts (HRA), are 20% less expensive than traditional preferred provider organizations (PPOs) and HMOs, said Schilmeister. CDHPs usually have much lower premiums, although the deductibles are higher than other options. Some employers do help workers with the high deductibles by contributing money into their HSAs.

Still, Schilmeister said CDHPs probably make more sense for a healthy worker who doesn't utilize medical care frequently. Otherwise they can be expensive for employees.

"Be careful with these," said Fish-Parcham. "If employers aren't funding your HSA, it can become a huge problem especially for lower-income workers."

If employers increasingly shift health coverage costs to their employees, as those quoted in this article predict, what will be the impact on the cost and quality of health care in this country and the reform efforts in play in Washington?

Dare to Imagine Better, Cheaper Care

by Lloyd Dean, President/CEO, Catholic Healthcare West

The debate over health care reform continues to heat up across the country. But the heat isn’t shedding much light. Instead of continuing to stir up fear and anxiety, let’s take a breath and reflect on why reform is needed: so that the quality of the health care you receive will get better, cost less, and be there when you need it.

Picture this scenario a few years in the future following reform: Despite having improved your health by losing weight and increasing your exercise (which you’ve accomplished through programs entirely paid by your health insurance), you are admitted to your local hospital because you’re experiencing the symptoms of a heart attack. 

Thanks to the expanded use of electronic medical records, the hospital knows you are on your way, who your doctor is, what drugs you are taking, which ones you are allergic to, and what types of diagnoses and treatments you’ve had.

Because of reform measures promoting use of the best methods of care, the physicians at the hospital are aware of the most recent studies about your condition and they have an individual care plan developed for you. Your care plan at your local community hospital is as up to date as it would have been at a research hospital. 

After you leave the hospital, you participate in a months-long integrated recovery and rehabilitation program under supervision of your primary care doctor. The program keeps you from having to be readmitted because you have followed the regimen of exercise and proper medication. 

As a result of these efficiencies, your health insurance costs are affordable. You feel better about the care you receive, your family is thrilled about your recovery, and your physician and hospital are pleased about the care they provided.

And, on top of all of this, you aren’t worried about taking that new job you are considering, because health insurance companies can’t deny you coverage based on this pre-existing condition.

A dream scenario? It doesn’t have to be if Congress achieves the reforms that can result in truly improved care for you and your family.

Today, our health care delivery system is too fragmented to achieve optimum results. Handwritten records, cryptic insurance forms, confusion about primary or specialist coverage, and a stifling layer of laws and regulations make it virtually impossible to provide integrated medical care.

That can change for the better. The health reform proposals being considered in Congress contain a number of vital measures that can give us the health care future we all want:

• A focus on quality by establishing best care protocols and sponsoring research programs to spur treatment innovations;
• Incentives that reward improved care rather than redundant procedures;
• The use of electronic medical records, by a greater investment in information technology;
• Coordinated care among providers;
• A focus on preventive care that provides the right care at the right time in the best setting;
• Evidence-based care that reduces health disparities; and
• Health insurance portability so that changing jobs or moving to a new city or state doesn’t jeopardize an individual’s continuity of care.

Of course, the health care debate encompasses broader issues of program funding, cost reduction initiatives, and expanding coverage to the uninsured. These issues have provoked a heated battle in Washington, DC precisely because of their scope and impact on the federal budget and everyone in the United States.

We may be weary of watching the political maneuvering associated with reform. But all of us have a deep and vested interest in policies that ultimately affect our own health, as well as the health of our country’s economy.

At Catholic Healthcare West, we hope that everyone will take a break to look beyond the headlines and bickering. Think about how health reform can dramatically improve the lives of you and your family. We think that after a closer look, and a renewed focus on the objective, people will breathe easier about the idea of reforming our health care system.

Are We Ready for Health 3.0?

The realization of change in the U.S. health care system has, in many ways, been centralized in the Health 2.0 movement (see the always excellent The Health Care Blog for the full scoop on all Health 2.0 happenings).

Health 1.0 was characterized by disenfranchised patients and a "Dr. Knows Best" approach. This model has effectively given way to the Health 2.0 model, which is more interested in giving consumers the information they need to make more informed choices about their health care. The empowered consumer, the argument goes, will make the system more efficient and individuals healthier.

The individual responsibility prized in the Health 2.0 model may soon give way to Health 3.0. In this model, personal responsibility becomes part of the social contract we all have with one another. Not only will consumers be given the tools and information they need to make better choices -- they'll be expected to do so. And there will be consequences for not doing so.

Just as the government and some private insurers are moving to a "pay for performance" model with physicians and hospitals, so too are employers now beginning to require their employees maintain a certain level of physical health in order to receive the benefits of the company's health plan. This is Health 3.0. It is the completion of the movement from disempowerment to empowerment to expectation, and we anticipate that it will be an important part of the health care reform solution.  

Understanding the Health Reform Debate

The focus is back on health care reform following President Barack Obama's Health Care Summit in Washington D.C. this week.

A number of sites have posted great information to help people understand where we are in the debate process and what to expect. The very excellent The Daily Beast visually summarizes the current state of the health reform debate, and the New York Times' Eric Etheridge tallies up the blogosphere's reaction to the Summit.

Our President/CEO Lloyd H. Dean spent time earlier this week in the nation's capital meeting with members of Congress on the importance of health care reform. We expect much of the coming debate to focus on costs - both how to reign them in and how to pay for universal coverage. We're committed to working with our nation's leaders on a solution that delivers compassionate care to all in need.

Put Patients First

The health care reform debate continues even as the economy continues to falter. We will bring you the best of the commentary and our own take on some of the more pressing issues as this important dialogue continues.

Here, a physician from Fort Collins weighs in:

I am a board-certified family physician who has been practicing medicine in Fort Collins for the past 16 years. I have recently been solicited by a private for-profit company to turn my practice into a concierge model (where a select "rich" group pays an additional fee - in addition to insurance - to be my patients).

What they didn't say is that 90 percent to 95 percent of my current patients would not qualify/afford/choose this "elite practice."

In the new practice I would have to "dedicate" my services to the new select group of patients and reduce the number of patients I care for to approximately one-third of my current enrollment.

The truth is that this for-profit concierge model will increase my revenue and reduce my workload. However, despite having more money and time, I would not be able to live with the "new" Carroll since, to me, being a physician is more than just a way to make money. I have never compromised my professionalism to make more money.

Don't get me wrong, I do feel underpaid as a primary care physician, but I will never be able to replace the feeling I get in helping my patients (especially those who need my care the most - the poor and under/uninsured). I get so much more from my work than a paycheck, and I will not compromise that process, even if I lose money. Compassion is what defines us as human beings.

Our current health-care system is highly discriminatory. If you are old, you get Medicare; the severely impoverished get Medicaid; rich or lucky to have a job with benefits get private insurance and the rest - 47 million - get nothing.

This discrimination is in the same country with a world respected Bill of Rights and Constitution. How can we allow so many of our neighbors to suffer when the resources are there to provide the best care to all our citizens?

What angers me the most is that the money we spend in our current system is more than enough to cover all our citizens. Financing of health care in America doesn't need a bailout, just a redistribution of the money.

I am convinced that our health-care system can be the best in the world - for all our citizens - if we comprehensively reform our financing system. The solution is not more for-profit companies and a race to the bank. We need to put patients above profit and reform our system to be one that truly delivers health rather than taking advantage of disease.

My practice delivers the best medicine that I know and I feel strongly that my practice delivers "concierge" service to all my patients despite their lack of a "membership card." I am the one that thanks them for their confidence and for allowing me to be a part of their and their families' lives.

The World Health Organization currently ranks the U.S. as 37th. We're not even in the Top 10. This is unconscionable. How would we react if the United States was 37th in the Olympics?

The time is now for us to reform our health-care system by removing discrimination and allow all of our citizens' access to medical care and move the U.S. from 37th to first in the world ranking of health care.

Health CEOs Unite for Health Reform

The San Francisco Chronicle includes an open forum op-ed today co-written by Lloyd H. Dean, president/chief executive officer of Catholic Healthcare West, and Bruce Bodaken, chairman and chief executive officer of Blue Shield of California.

In the piece, Dean and Bodaken say that there is renewed hope for healthcare reform in the U.S. because President-elect Barack Obama, congressional leaders and a growing number of business and provider groups continue to acknowledge the urgency and importance of providing health coverage to everyone, despite the alarming economic problems facing the country.

The two CEOs announced that they have joined the New America Foundation in launching a coalition of health care CEOs who recognize that business as usual is not sustainable, and who are willing to take risks to achieve universal coverage with lower long-term costs.

“We do not underestimate the size of the challenge that transforming our health care system requires,” they write. “There are many competing interests at the table, and the economic crisis is too severe to believe this will be an easy task.” They note that the national momentum for health-care reform can succeed, but it will require the key players in the health care system to take risks and make compromises to be part of the solution.

The full press release on the formation of the group is here. Check out their goals and principles:

Principles
Members of Health CEOs for Healthcare Reform (HC4HR) believe in the following three principles:

1. Health reform is an urgent priority for our nation and should not be postponed. 
2. Meaningful health reform entails quality, affordable health coverage for all and delivery system reform. This will require all stakeholders to move away from “business as usual.” 
3. A more sustainable health system will require all health care stakeholders to offer and accept changes to their business models as part of a catalytic package that will better serve everyone.

Goals and Mission
HC4HR will demonstrate to the policy community and the American people that health industry CEOs and physicians are willing to be proactive leaders in calling for transformative reforms of our health system. These reforms include quality, affordable coverage for all and significant restructuring of our health care delivery system. 

HC4HR will not protect outdated business models. Instead, it will work with lawmakers to identify policy solutions that meet the long-term goals of comprehensive health reform in a way that is operational and practical for health care leaders.   

HC4HR will capitalize on its relationships with affinity organizations to nurture physician and stakeholder leadership. HC4HR’s members will lead through example and encourage like-minded health care visionaries to join in their cause.

Obama Seeks Your Input

President-elect Barack Obama has repeatedly said that we cannot hope to fix our nation's economic crisis without addressing healthcare reform. In choosing former Sen. Tom Daschle to head the health reform effort Obama has signaled that he still intends to make this issue an important part of his term.

And according to the Los Angeles Times, he's now asking for your input:

The plan -- asking Americans to host meetings to talk about reform -- appears designed to avoid the appearance that the new administration is developing a sweeping agenda behind closed doors.

Some 10,000 people, many of them already involved in grass-roots efforts to push healthcare reform, have submitted comments on the website, according to Daschle.

The Obama team's maneuver builds on organizing techniques pioneered by liberal grass-roots groups like MoveOn.org and deployed by Obama during the presidential campaign.

It also reinforces the message that Obama has delivered since his election, that he intends to take aggressive steps to tackle the issue despite the worsening economic situation.

Making Coverage More Affordable?

In the drive to lower health care premiums, many are looking at insurance plans that offer fewer benefits at a reduced cost. But are plans like this really part of the solution to escalating health care costs? The Salt Lake City Tribune examines this issue as it reports on the work of the Utah Legislature's Health System Reform Task Force. According to the Tribune:

Utah lawmakers want to allow your employer to put pre-tax cash in your pocket and let you shop for your own health insurance plan.

Rather than pay a portion of your premium each month, your employer would make a deposit into your health savings account - money you could use to buy any plan you want.

By the time that would happen next year, lawmakers hope to have in place an Internet portal - a kind of Travelocity.com for health insurance - to help Utahns compare insurers' rates, coverage and histories of honoring claims.

With just one meeting left before the Legislature's Health System Reform Task Force disbands, lawmakers unveiled a five-page blueprint for a slew of bills to be drafted and debated this session.

The thrust of it gives Utahns more options to buy coverage - including the chance to get plans that are mostly free of benefits now mandated by the state and therefore are less expensive. Lawmakers, in turn, hope the private insurance market will capture a greater number of the state's 287,000 uninsured…

While the task force is focused on tearing down barriers to affordable health insurance, Rep. David Litvack, D-Salt Lake City, wondered if some of the proposals sacrifice comprehensive coverage for the sake of lower premiums.

NetCare, for instance, is a proposed insurance plan that would be free of most state-mandated benefits. It would be offered at a third of the price of the average large-group premium, but would not cover many conditions - which have not yet been specified.

"If something like mental health parity is not included," Litvack said, "where does someone go?"
Rep. David Clark, R-Santa Clara, said helping get more Utahns insured is a delicate balancing act between affordability and coverage. "Rather than us try to determine where that exact fine point is, let individuals in the market figure that out," he said.

Lloyd H. Dean on Health Reform

The San Francisco Chronicle features an in-depth interview with Catholic Healthcare West President/CEO, Lloyd H. Dean. In the interview Dean discusses the potential of healthcare reform in light of the presidential election and current economic crisis, and other issues affecting the health industry and not-for-profit health systems.

According to the feature, Dean, 58, is not the most likely person to run a Catholic health organization. The first African American and non-Catholic chairman of the Catholic Health Association of the United States, Dean was raised as a Baptist, was one of nine children and didn't see a doctor until high school. He was recently included in a list of the nation's top 25 minority health care executives by Modern Healthcare magazine.

A few salient excerpts from the interview:

Q: Given the state of the economy, is health care still at top of the list of domestic concerns, and what are the chances of reform?

A: There's no question that the current economic environment has probably trumped everything. Folks like ourselves, and all across this nation, are really focused on their own financial viability.

But I think a very, very close second is health care and health reform. There was a Gallup poll that came out last week that said, other than getting some stability in the current financial crisis, that health care is still the prevailing issue. It has even trumped some of the issues around Iraq and Afghanistan.

There will be some stabilization - I can't tell you how long it will take - of this fiscal crisis we're in, and health care will jump right back to the top of the agenda. The fact that there are 46 million people who do not have access to care and use the most inefficient way of receiving health care - through our ERs. That's not sustainable.

Q: If you had power to resolve the problem of the uninsured what would you do?

A: I would and will continue to advocate some kind of universal health care in this country. I think that health care is a right. I don't think that it's a privilege. It is a shame that a country of our means has 46 million individuals who do not have access or have no way of paying for their health care.

Many individuals I see and talk to - and even in my own family - have to choose whether they are going to spend money on medicine or spend money on food. Am I going to split my pill in half so that I can buy oil to heat my home through the whole winter?

I have advocated forming coalitions at any level - at the federal level like we do with the Catholic Health Association of the United States, here with the Healthy San Francisco program - I believe it is in the best interest of the country that everyone has access to a minimal level of health services.

I know what it's like to not have health care. I grew up in an environment where the first physician I ever saw was in the high school physical. My father was, we like to say, the surgeon and my mother was the nurse. I come from a family of nine kids. The only time I ever visited the doctor was to join my mother one time when one of my brothers was being born.

As provider of health care, we are compelled to be as efficient as possible and we have to be part of the solution. Health care in this country is way too expensive. If we don't stop this, we won't be able to afford to pay, and that 46 million will be 75 million, and wouldn't that be a shame?

Worst to First? Play Ball!

An op-ed in today's New York Times describes what the healthcare industry can learn from baseball. And it's written by Billy Beane, Newt Gingrich, and John Kerry:

Remarkably, a doctor today can get more data on the starting third baseman on his fantasy baseball team than on the effectiveness of life-and-death medical procedures. Studies have shown that most health care is not based on clinical studies of what works best and what does not — be it a test, treatment, drug or technology. Instead, most care is based on informed opinion, personal observation or tradition.

It is no surprise then that the United States spends more than twice as much per capita on health care compared to almost every other country in the world — and with worse health quality than most industrialized nations. Health premiums for a family of four have nearly doubled since 2001. Starbucks pays more for health care than it does for coffee. Nearly 100,000 Americans are killed every year by preventable medical errors. We can do better if doctors have better access to concise, evidence-based medical information.

Look at what’s happened in baseball. For decades, executives, managers and scouts built their teams and managed games based on their personal experiences and a handful of dubious statistics. This romantic approach has been replaced with a statistics-based creed called sabermetrics.

These are not the stats we studied as children on the backs of baseball cards. Sabermetrics relies on obscure statistics like WHIP (walks and hits per inning pitched), VORP (value over replacement player) or runs created — a number derived from the formula [(hits + walks) x total bases]/(at bats + walks). Franchises have used this data to answer some of the key questions in baseball: When is an attempted steal worth the risk? Whom should we draft, and in what order? Should we re-sign an aging star player and run the risk of paying for past performance rather than future results?

Similarly, a health care system that is driven by robust comparative clinical evidence will save lives and money. One success story is Cochrane Collaboration, a nonprofit group that evaluates medical research. Cochrane performs systematic, evidence-based reviews of medical literature. In 1992, a Cochrane review found that many women at risk of premature delivery were not getting corticosteroids, which improve the lung function of premature babies.

Based on this evidence, the use of corticosteroids tripled. The result? A nearly 10 percentage point drop in the deaths of low-birth-weight babies and millions of dollars in savings by avoiding the costs of treating complications.

CHW is an advocate of evidence-based medicine. We've been working for the last several years on reducing variance in treatment so that the treatments we know to be the most effective are the ones that are used the most often. We encourage others to join us in this effort and make care safe and cost effective.