4 Fixes For Health Care

More Competition, Transparent Pricing And Improved Habits Can Reduce Costs

August 20, 2009|By Samuel H. Fleet

The fever for health care reform is running high in Washington, D.C., and politicians are lining up on different sides to offer treatment plans. However, no one is addressing the true driver of health care costs, or any other factors that contribute to the health care crisis.

Based on my 20 years of experience in health insurance administration, here are four ways to fix the health care crisis:

1. Restore competition in the market

We need to break up the BUCA monopoly (Blue Cross/Blue Shield, United Healthcare, CIGNA, and Aetna). In most states, the top carrier has a 60 percent to 70 percent market share. In any other industry, this would raise antitrust concerns, but for health care no one seems worried.

Why is this oligopoly a problem? These carriers get discounts from health care providers that are significantly better than other payers can get. Historically, this grew out of the preferred provider organization (PPO) movement, which promised to steer patients to providers in exchange for lower prices. But today, the oligopoly has nearly 99 percent of providers in the network. They are not steering patients to providers - rather providers could be faced with bankruptcy if they don't accept their rates.

Insurance carriers and managed care organizations charge two to three times more for network access and administration fees than the amounts charged by local third-party health administrators and PPOs. They leverage their better discounts from providers, which often drives up fees for customers considerably. Thus, the lower provider prices don't lead to significantly lower consumer prices, just higher profits for the carriers.

2. Enable the American consumer to become an astute buyer of quality health care

A California patient who needs a chest X-ray is charged anywhere from $120 to $1,519; in fact, within a few blocks in Sacramento, the price climbs from $451 to $790 from one hospital to the next. A simple blood count ranges from $47 to $547.

The answer: Bring transparency to pricing. Every provider must disclose the net prices that they charge. No back-end kickbacks, either. Once providers are mandated to disclose to the patient that they charge Customer X $100 and Customer Y $200, pressure will mount to bring prices into realistic order.

In addition, consumers need to know how to find high-quality care. This can be achieved by forcing all providers to provide outcome data. Give each provider a quality grade once a year and make them display their grade for all to see. This solution may highlight some of the 7,000 patients that die from drug errors each year or the 90,000 people that die of hospital-acquired infections annually. Not many people want to talk about these issues, yet it's estimated that because of poor quality of care, $2,000 per insured worker is added to the cost of health care.

3. Eliminate hidden revenue streams

Fragmentation in the health care delivery system results in many middlemen making exorbitant profits. Pharmacy benefit managers (PBMs) make money off spread pricing and rebates (kickbacks), which are rarely disclosed to clients. Drug companies bribe doctors to prescribe their pills. Insurance companies charge hidden network access fees. There are a lot of firms getting fat off of the sick system. Some solutions:

* Require PBMs to fully disclose all sources of revenue and profit.

* Block doctors from owning the diagnostic machines they refer their patients to.

* Ban trips, money, etc. from drug companies to doctors.

* Require insurance companies to fully disclose all administrative sources of revenue.

* Force hospitals to disclose profitability and markup on implant devices.

4. Our Health - not health care - crisis

It's no secret that our nation is sick. Our behavioral norms include no exercise, terrible eating habits and excessive drinking. The nation is hysterical over 18,000 cases of the swine flu, yet we have 100 million obese people in this country. The nation needs public policies that address this head-on.

* Create an aggressive public campaign to encourage good health.

* Restore funding for physical education in schools.

* Advertise about the health risks of diabetes and obesity to the same degree that commercials spread the word about the "little blue pill."

* Engage the food industry in a public-private partnership to offer healthier foods. If it won't, we need to use tax policy to shape the discussion.

* Facilitate the use of prevention-based health care, with regular health risk assessments that stop diseases before they become chronic.

* Allow health plans to offer aggressive financial incentives to encourage health and require disease management.

No one is arguing that reform is unnecessary. We can all be pleased that the administration and congressional leaders are taking on this important issue, and there are many worthwhile and far-reaching reforms that should be achievable this year. The much-discussed public health insurance plan is all too likely to create an uneven system, undermine what works in the existing employer-provided group health insurance marketplace, and cost future generations trillions of dollars. But a series of reforms to our existing system can reduce costs and improve outcomes for millions.

Samuel H. Fleet is president and chief executive officer of Rhode Island-based AmWINS Group Benefits, a wholesale provider of retiree and employee health benefits. His e-mail is sam.fleet@amwins.com.

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