|
|
|
HOME ABOUT US NEWS BLOG SERVICES LINKS CONTACT US CAREERS |
|
|
|
The Ted Almon BlogArticles on Healthcare ReformSaturday, December 9, 2006Why health care consumerism is a tough sell
I was in the audience at Brown University recently for the 2006 edition of their outstanding Levinger Lecture Series. The speaker this year was Karen Davis, now president of The Commonwealth Fund and a former health policy adviser to several administrations. [See related article in PBN's Dec. 4 edition.] On her topic, of improving America's health care system, she is an expert of peerless credentials and experience.
The very next morning's newspaper contained an op-ed by Paul Grimes, lame-duck director of administration in Cranston Mayor Stephen P. Laffey's administration. Mr. Grimes was espousing "consumer choice" - specifically, health savings accounts and other consumer-directed high-deductible health plans - and bemoaning that paper's editorial stance against them. I was struck by the stark contrast between the two views. No wonder the business community remains so confused when it comes to the health care cost puzzle. In her fact-packed presentation, Dr. Davis quickly focused on the insurance industry as the source of the low-hanging fruit in controlling health care costs. She explained the role of the "medical loss ratio" - the portion of revenue that insurers pay out to health care providers. Typically, she noted, it is "between 70 and 80 percent," indicating far too high an administrative burden, in her view, especially compared with the federal Medicare program, which boasts administrative costs of approximately 3 percent. Dr. Davis pointed out that if this gap were closed, the cost difference in dollars would be enough to provide coverage for all the nation's uninsured! As a diligent businessman, I checked her point, going to the latest SEC filings for UnitedHealthcare, the nation's largest health insurer. I confirmed that in the current year to date, United paid only 74.6 percent of revenue for "medical costs." This means that of every dollar that clients paid it, more than a quarter provided no health care. Low-hanging fruit indeed, especially when one considers that this amount does not even include the considerable administrative costs incurred by health care providers in negotiating the convoluted reimbursement process. Mr. Grimes, on the other hand, agrees with the insurance industry that we should rely upon consumerism and the free market to cure the cost ills of the present system. For most businesspeople and other fiscal conservatives, this argument strikes a sympathetic chord - less regulation. The problem, unfortunately, is that it simply won't work. For one thing, the high deductibles and co-pays that consumer-directed plans require add enormously to the complexity of administration, something already identified as a core problem. In fact, it is likely that the savings to which Mr. Grimes vaguely alludes consist largely of co-pays and deductibles the providers have been unable to collect. The burgeoning bad-debt problem in our hospitals, which has tracked roughly with the growth of such plans, is hardly coincidental. Such "savings" are unsustainable. In another mismatch between theory and reality, it has proven difficult to superimpose free enterprise on the health care system. The reason is simple - health care in our country is essentially a social program, not a business, and this fact is unlikely to change. For consumerism to take hold in health care would require certain essential elements of a marketplace that simply don't exist - price transparency and quality measures - so consumers could have at least a chance at making decisions based on value. The consumer-directed advocates insist that such information could be developed and made available, and admittedly, such efforts are underway, though nascent. Still, there is little to suggest that individual consumers will be comfortable with such complex choices. Some current research indicates most people would prefer that the government figure it out for them, even if that meant higher taxes. There will always be a degree of emotionalism surrounding serious health care decisions, to make the rational process of analytical consumerism difficult. Purchasing health care will never be like buying a toaster. Perhaps an even more powerful argument against trying to impose functional consumerism through the use of insurance is, the market for coverage is itself dysfunctional. Competition in health insurance does not focus on rates, as has become plain to employers purchasing coverage for their workers, but on insuring the healthiest groups and individuals. What better way to segregate and identify those premium risks than to offer a plan only they are likely to select? Given that these are the same folks who led us on the "managed care" wild-goose chase for well over a decade, at the end of which we were older and poorer but very little wiser, there is little to suggest that "consumer-directed health care" is anything but their latest ploy to preserve their profitable place at the health care trough. Ted Almon is president and CEO of The Claflin Co., a medical equipment supplier, and is an active participant in the health care reform debate in Rhode Island. Published 12/09/2006Issue 21-35 ArchivesNovember 2005 February 2006 October 2006 December 2006 February 2007 July 2007
|
|
|
|
HOME ABOUT US NEWS BLOG SERVICES LINKS EMPLOYEE LOGIN CONTACT US CAREERS |
|
|
|
Copyright © 2007 Claflin | Designed and Developed by Brave River Solutions |
|