There are innumerable alleged reasons for the out of control cost of health care ranging from over paid physicians and specialists to the simple concept of “with innovation comes cost”. According to the Centers for Medicare and Medicaid National Health Expenditure Projections 2011-2021, total health care spending in the U.S. is expected to reach $4.8 trillion in 2021, up from $2.6 trillion in 2010 and $75 billion in 1970. By the way, that is 20% of the GDP.
Where We Have Been
Rewind a few years. When we first heard the term “The Affordable Care Act”, we couldn’t help but feel a sense of excitement and premature relief. Finally, we might get a fix for the healthcare cost issue and for those of us optimists, we had the warm and fuzzies… but for most of us it didn’t last long. Fast forward to today, where there is an overwhelming sense that the Affordable Care Act has been nothing short of unaffordable. Though the legislation did its job and rightfully made coverage available to millions who were previously unable to obtain it, employers and employees are seeing premium increases higher than ever parallel with the increase in deductibles and coinsurance percentages.
Where We Are Today
Imagine a life where the Affordable Care Act was no longer up for debate, because that is in essence where we are today. According to the Milliman Medical Index, consumers with health coverage experienced a 7.2 percent increase in their share of health care costs between 2011 and 2012. The rate of health care cost increase continues to outpace inflation significantly. We have tried pushing the financial burden into the lap of the employee and as published in Forum for Health Economics and Policy a study conducted by RAND Corporation shows that it has led to health maintenance avoidance and a troubling reduction in cancer screening and childhood immunizations. So what now?
Let’s address the mentality of today’s consumers. When the time comes to purchase a car or replace a roof, we scour the internet and perform countless hours of research and review before coming to a decision about what to buy or who to hire. When it is time for a knee replacement, we take down the provider information our general practitioner recommends and there isn’t much research conducted beyond making sure they are in network (sometimes it doesn’t even get that far). It is likely not realized that depending on the provider and facility they choose, the bill could range from $11,000 to $69,000 for the exact same procedure. You aren’t actually buying a car here, higher price doesn’t mean better quality. See for yourself in “The Relationship Between Cost and Quality: No Free Lunch,” by the Journal of the American Medical Association or A Study of Cost Variance by Blue Cross Blue Shield. Regardless of which end of the equation is picking up the tab(employer, employee or insurance carrier), the cost variance raises question to the healthcare industry as a whole.
Until recently, conducting a price based comparison on a medical procedure was a futile effort because the comparison data just wasn’t available. Making matters more difficult are the contracts between payers and providers which sometimes require non-disclosure. Thankfully, legislators in more than 30 states have proposed or are pursuing legislation to promote price transparency, with most efforts focused around publishing average or median prices for hospital services. Likewise, companies like Castlight Health and the Healthcare Blue Book are beginning to shine some light on the once unexplored world of healthcare consumerism by putting user friendly price and quality comparison tools in the hands of employees and individuals who need it. As these kinds of tools evolve, we are faced with a few challenges to overcome. Make the tools available to the people who need them and achieve widespread usage.
Employers are going to find themselves leading the way by investing in the education people need to make informed decisions around their health care. Beyond providing all employees with the before mentioned resources, some employers are even adopting creative plan designs to encourage employees compare providers by price and quality to drive employees to high value providers. Using these strategies (i.e. value-based provider networks, referenced based pricing) will help pressure overly expensive providers to lower their prices. So, hopefully, we will all recognize the shift that occurs from the top down.
Written and by Krystal Clarkson, Director of Strategic Initiatives at P&B Live
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