As insurers, patients and employers demand more information, health care costs show signs of easing
Imagine this scenario: You go to the grocery store and shop for the things you need. There are no prices on any of the shelves, and while you do check out, no payment is required. You take your groceries home and consume them. Long after the groceries are eaten, and when you least expect it, the bill for your purchases arrives in the mail.
“It’s then when you might just realize that the food that you really liked was quite inexpensive, and the worst tasting food was actually the most expensive,” says Dianne Kiehl, executive director for Business Health Care Group. “In any event, you have to pay the bill.”
No one would buy groceries in a store like this, yet the analogy comes quite close to describing the American health care system. But that delivery method is starting to change in our country, and a number of initiatives and approaches are starting to have a real effect on the way health care is purchased and utilized in our country as well as the overall cost of health care.
In the case of the BHCG, a membership organization of more than 500 large and small employers in southeastern Wisconsin, 15 self-funded member companies were able to do just that – lower costs. From 2005 to 2006, these companies were able to realize a 13.7% drop in medical costs per plan member in 2006 thanks to a number of initiatives designed to make consumers better informed purchasers of health care.
“These first-year savings represent significant progress and demonstrate that a market-driven strategy can succeed in helping Southeastern Wisconsin solve the dilemma of affordable health care,” says Kiehl. “But while we are beginning to move the market, there is still much to do.”
She says that businesses need to continue to work collaboratively with the medical community, while engaging employers, consumers and payers to control runaway health-care costs, which Kiehl says remains one of the largest common threats to the region’s vitality.
“We’re fortunate that Wisconsin leads the way in health care quality,” she said. “But unfortunately, we’re also the cost leader as well. Right now, we pay a significant price for that quality, and we do not believe that there has to be a link between high costs and quality of care.”
The approach that the BHCG has been using seeks to establish a system where educated consumers would make choices using reliable information about the efficiency and effectiveness of the health care they select. Providers would compete to meet patient needs by delivering care with the best outcomes at the best cost. One of the BHCG’s goals is to bring Southeastern Wisconsin’s health care costs in line with Midwest averages.
Improved provider pricing, physician efficiency, a focus on evidence-based medicine and the use of transparency tools and educational materials have all contributed to the cost savings shown by the 15 BHCG’s member companies.
“We’ve worked very closely with Humana, which is one of the providers of health-care services to our members,” says Kiehl. “Humana has done a very good job of improving information delivery to its members. I think that’s the key – as more consumers start using those tools and getting engaged, they’re going to drive the market even more.”
Stars are aligning for change
She characterizes the current environment as one where the proverbial stars are aligning.
“Everybody is engaged in the process right now, which is good,” she explains. “There’s an environment where everyone has an interest in managing health-care costs.”
In addition to consumers taking a more active role and companies continuing to do what they can to contain plan costs, providers also have a vested interest in making the system work better.
“Consumers are starting to absorb more of the financial responsibility of paying for their health care,” says Kiehl. “In return, providers are finding that it’s more difficult to collect directly from consumers than it is to collect from a plan in which there is a contract and a relationship in place. Collectively, there is a high degree of motivation in this environment, which is good for everybody.”
The momentum behind this paradigm shift is fueled in part by information exchange and improved transparency for consumers. Two state companies are doing their part in helping fuel this trend with innovative products that bridge the information gap for consumers.
Patient Care, a national advocacy company headquartered in Milwaukee, began by studying the successful health-care communication strategies of its national clients.
“A company that has a well-designed and executed open enrollment process – a process that includes targeted communication – will have employees who are better health care purchasers,” says Patient Care President and CEO Jane Cooper. “The right communication, directed at the right employees and delivered effectively, will result in a lower health-care trend.”
Patient Care has also noted that many employees are addressing their health-care costs by placing more of the responsibility on their employees’ shoulders through consumer-driven health-care plans. Cooper works with her clients to not only introduce this concept to their employees but also to maintain strategies that help the members make informed health-care decisions once the plan is in place.
“A consumer-driven health-care plan increases the complexity of the plan and the choices that employees and their families must make,” says Cooper. “If the plan is not communicated effectively when it is introduced, the company will not be successful in controlling health-care costs over the long term. The best results emerge when all employees understand the plan and their role in controlling costs.”
One of the tools that Patient Care offers is the Call First program. It’s essentially a cost estimate and written summary of the employee’s financial responsibility for a medical treatment or procedure.
Arming patients with data
“Call First actually works on a case-by-case basis, and it focuses on the costs the actual providers would charge,” explains Cooper. “We call each provider the employee would potentially use and request cost information based on the medical code for each procedure. Then we’re able to calculate the cost, apply any discount, add any deductibles and co-payments and come up with a true cost for care.”
Cooper admits that it has, at times, been challenging to get this information from providers. The problem isn’t necessarily an unwillingness to share. Instead, it’s more of question of explaining and understanding why the information is relevant in the decision making process.
“Nobody has really asked for this information in the past,” she says. “But we’re finding that, at least in the Milwaukee area, providers are becoming accustomed to it.”
Cost transparency can go a long way in helping to bring the cost of health care down, Cooper notes.
“First of all, it helps the consumer to make a better decision,” she says. “When they’re spending their dollars, all other things being equal, they need to know if one physician is charging more for the same procedure than another physician. With that information in hand, that consumer may not want to go to the one that’s charging more.”
More importantly, transparency is a huge tool in forcing the cost of health care to become more consistent from provider to provider.
“If a hospital can get away with charging $75,000 for a low back procedure and the other hospitals only charge $60,000 – and nobody knows that information – why not continue to charge $75,000?” she poses. “Transparency stops that from happening.”
Bowers and Associates, a national health-care data analysis firm based in New Berlin, has also created a product that emphasizes each employee’s personal stake in their health care.
Tools far evaluation
The Health Plan Evaluator is the first of its kind to use an employee’s actual claims information to help select his or her health plan, regardless of claims administrator.
According to Scott Weltz, senior vice president of analytics and tools for Bower and Associates, this approach not only makes the analysis more relevant, but also more understandable for consumers.
“With the push toward consumer-driven health-care plans, we believe it is important to provide consumers with digestible information to help in their decision making process,” he says.
The Health Plan Evaluator actually has its genesis in a similar program that Bowers and Associates uses to provide aggregate data analysis to client executives. In turn, the executives would use it to plug in plan and premium options for their health-care programs.
“We were approached by Wauwatosabased Childrens Hospital and Health-Care system to see if we could use that same approach for their members,” he says, noting that the product was beta tested during Childrens’ open-enrollment period last November.
“These types of programs often have very low participation levels,” he notes. “But because we were providing personal information, participants used a private log-in and we were able to track usage. More than 40% of those who logged in to the program used it to evaluate the different plans available to them. It drove a lot of the migration into leaner options.”
Employees access the Health Plan Evaluator through a web portal. From there, they are able to evaluate multiple plan options using their own medical and drug costs, utilization, out-of-pocket expenses, premium, any wellness credits and other incentive programs. Information from previous plan years is used to assist with the prediction of future costs; actual claims information is then evaluated to see which plan option makes the most sense for each employee.
The program can also accommodate “what if” testing so employees can plug in different options for increasing or decreasing utilization of certain services.
“With so much confusion surrounding the new consumer driven plan designs, we felt it was our job to determine what employees needed in a tool like this to make it easy to use,” says Weltz, who notes that companies can use the program on a stand-alone basis or integrate it with their existing health-care programs. “This included everything from using employer identification and passwords that matched what the employer currently had in place to making the site clean and navigable to the average employee who only looks at his or her plan design options once a year.”
More companies understand that these plans and products are one way to help hold the costs of providing and using health-care programs. According to the United Benefits Advisors’ 2007 Employer Survey, between 30% and 50% of all surveyed employees had the same basic wish list for the future: Employee decision support tools; formal wellness and disease management programs; cost and quality information for hospitals, physicians and prescription drugs; early warning tools to identify chronic conditions and potentially serious claims; and online enrollment/employee self-service.
“The adoption of personal health-management strategies by employers of all sizes continues to increase,” says Don Higgins, a partner at Madison’s Higgins Hemb Insurance Group LLC, the local member of United Benefit Advisors.
Surveyed employers are also placing a greater emphasis on educating employees on the reasons for plan changes, how they can improve their health and reduce the costs of their health-care plans. Nearly three-quarters of respondents agreed that employees could become better health-care consumers if given the tools to do so.
“In the past, the system has been set up so that consumers of health care really didn’t need to have an interest in cost,” notes Higgins. “Someone provided the health care to them, someone else paid for it, and they didn’t really need to worry about it. There really was a broad disconnect.”
Higgins added that providing these tools to employees really helps employers, who have an obvious and clearly vested interest in improving health care utilization.
“Of course, it helps manage costs,” he says, also noting that making this type of commitment to your employees is a longterm process with long-term results. “Secondly, employees really are the lifeblood of your company. If you can improve the tools and climate that you offer to your employees, not only are they likely to become healthier people, but you may just find that your overall productivity improves as part of the process.”
Is Healthy Wisconsin a healthy idea?
Healthy Wisconsin universal health-care plan is the solution to the health-care crisis in Wisconsin. Is it also simply the largest state tax increase in the history of the United States?
Those statements – among many others – are the fightin’ words in the showdown in Madison between state Democrats and Republicans over the proposed plan.
“Wisconsin is consistently in the top 10 in terms of tax burden,” says Sen. Ted Kanavas (R-Brookfield). “Adding to that burden gives taxpayers and businesses more reason to leave our state while encouraging those who want free, government-run health care to move to Wisconsin.”
Yet, supporters of the bill say that residents and businesses can benefit from the proposal.
“Insurance and drug companies grab record profits, while you pay more and more. Enough is enough,” said Sen. Jon Erpenbach (D-Middleton) Senate Health and Human Services Committee Chair and architect of the “Healthy Wisconsin” plan. “‘Healthy Wisconsin'” guarantees you get affordable and quality health care you have paid for and have earned.”
“An overwhelming majority of the feedback I have received has been in opposition to Healthy Wisconsin,” counters Kanavas. “People understand that this is a job killer and a business killer. The last thing that Wisconsin needs now is something to make us less competitive in the market nationally and globally. The only positive feedback I have received on this plan has been from people who did not understand what it did.”
Universal coverage for (almost) all
As proposed, Healthy Wisconsin would provide health care coverage to Wisconsin residents younger than 65 and who have lived in the state for at least 12 months. There are some exceptions to this rule. Pregnant women and children receive immediate coverage regardless of their residency. New residents who are gainfully employed- as well as their family members – are also eligible to participate in the plan even if the residency requirement is not yet met.
A small number of residents are not eligible for the plan: Those aged 65 or older, those eligible for health-care coverage from the federal government or a foreign government, inmates, patients living in institutions for the mentally ill or developmentally disabled and those who already qualify for Medical Assistance or BadgerCare.
In addition, those residents eligible to participate in Healthy Wisconsin and receive health-care coverage under a collective bargaining agreement that is in effect on Jan. 1, 2009 are not eligible for plan participation until the day on which the collective bargaining agreement expires, is extended, modified or renewed. Under specific conditions, health-care provider groups that have been in existence before Dec. 31,2007, such as the WEA Trust, can limit enrollee participation to its specific affinity group.
According to information extrapolated from census and population data, there were over one-half million Wisconsin residents who were uninsured at any given point during 2007. More than 65% of these residents are also employed. Supporters of Healthy Wisconsin point to the fact that this creates an uneven playing field for Wisconsin businesses – those businesses that do not insure their workers are subsidizing those businesses that are not paving their share for health care.
Kanavas sees the problem from a different perspective.
“Wisconsin is already providing the best health care in the nation,” he says. “More than 93% of the people in our state already have health coverage. The problem is not quality or accessibility, it is cost. Healthy Wisconsin does nothing to reduce the cost of health care in our state. On the contrary, Healthy Wisconsin eliminates the free market in the health-care industry.”
Funding of Healthy Wisconsin
The plan is funded by assessments on employers, employees and self-employed persons. All Wisconsin employers will pay 9 to 12 percent of wages of their employees, up to the limit of taxable Social security wages. In addition, employees will pay 2 to 4% of their Social security wages. Coverage will be paid for by a payroll deduction similar to Social security of $370 a month for the average employer and $140 for the average employee.
“Wisconsin businesses are forecast to see an additional 10.5% increase in health insurance premiums this year,” notes Senate Majority Leader Judy Robson (D-Beloit). “If we’re going to keep growing our economy and help our businesses build strong bottom lines, we need to lower the cost of health care. The status quo is no longer cutting it.”
These payments replace those premiums currently being paid to private health insurers. The Healthy Wisconsin board also has the right to increase or decrease the assessments on an annual basis. If the increase exceeds the annual percentage increase for medical inflation, legislative approval is required.
Unlike the existing system, all employers including those who do not currently provide health-care coverage to their employees would participate in the plan. As proposed, there is no grace period or assistance for those businesses that cannot afford the premiums.
Governance, administration and funding of the plan
As a statewide plan, the Healthy Wisconsin authority would be governed by a 17-member board comprised of 12 appointed representatives of various employment sectors and five additional nonvoting members.
The board is charged with initially establishing a statewide plan that provides the same benefits that were in effect for the existing state employee health plan as of Jan. 1,2007. As proposed, the state itself would not administer the plan benefits. Instead, it will establish areas in the state – from counties to regions – in order to receive bids from health care networks to provide care under Healthy Wisconsin.
“The Senate Democrats claim there is competition in Healthy Wisconsin because more than one company is bidding on the job,” says Kanavas. “The reality is that there is no competition at all; the companies figure out what price they want to charge for the required coverage and then quibble over 1 or 2 percentage points of savings. None of this leads to comprehensive health-care reform; it just funnels the same large sums of money to a different vendor for the same or lower-quality health care.”
The Healthy Wisconsin proposal passed in the Senate on June 26. The Assembly has passed its own version of the budget, which eliminated the Healthy Wisconsin proposal. As of mid-August, the Assembly and Senate versions of the budget were being considered by Conference Committee, which is attempting to resolve the differences and come up with a budget for both houses of the legislature to vote on.
“It is unlikely that Healthy Wisconsin will make it into the final version of the budget,” says Kanavas. “That does not mean this is the last we have heard of this plan. Including it in the budget was a shot across the taxpayers’ bow, and we should all be worried.”
– By Laurie Arendt
Copyright Trails Media Group Sep 2007
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