Recently the President convened a group of insurance executives and business owners to the White House to discuss the current state of healthcare and to reinforce his desire to provide healthcare to more Americans. In a recent post on June 22
nd by Inside Health Reform stated:
"All sides in Monday's meeting involving President Barack Obama, health insurance executives and state regulators agreed that more needs to be done to confront rising health care costs, including addressing pharmaceutical costs, but the conversation did not produce concrete plans, participants said. One participant said the president balanced promises to hold insurers accountable for their rates with acknowledgments that some cost drivers are outside of their control."
Now reality is starting to hit. Renewal rates for 2010 are starting to surface, and again we will be facing double-digit increases. We can yell and scream at the insurance companies for increasing their rates but if we step back and see the big picture the insurance companies are in a no win situation. If providers continue to increase their billing rates the insurance companies have to increase rates to cover the increase in billing costs. When this happens guess who gets the blame - the insurance company, not the healthcare provider.
If we are going to truly have health reform we need to have the employer, payer AND provider at the table to discuss what a RATIONAL reimbursement should look like. Until we establish a rational reimbursement approach, we will never "bend the curve" in healthcare. We will continue to view insurance companies as the evil empire while increases in healthcare charges go unchecked.
As NCN we believe you must have a rational reimbursement that is fully transparent to the provider, patient and payer. Until this is fully adopted there will be more meetings with the president at the White House scolding the insurance carriers who have little control on cost drivers.
In the June 3
rd issue of the Wall Street Journal, there appeared an
op ed piece by Karl Rove. He had an interesting perspective on the shape of health reform now that it has passed. As he stated in his piece, the Rasmussen poll reported the
week after health reform's passage in March that 55% of likely voters supported its repeal while 42% did not. A Rasmussen poll last month showed that 56% backed repeal; 39% did not. It seems that as time has passed since its passage the American public is starting to lose support for the bill.
In the employee benefit world between 70%-80% of all employer groups renew their employee benefits in January. We will start seeing renewals hitting the streets for these groups around the July to August time period. All indications show employers will be hit with another double digit increase in premiums. In this economy employers will be hard pressed to absorb these increases. They cannot raise their prices to offset the cost of healthcare. They will be unable to pass along the increases to their employees since they are already stretched to the max. Hard choices will have to be made. As the renewal season is just around the corner look for public support to continue to erode as more details start to surface on the implications of implementing PPACA.
We as Americans have a short attention span and desire a quick fix to everything. Just look at how we want a quick fix to the recent oil spill off the Gulf. Unfortunately, there is no quick fix to the Gulf crisis or the healthcare crisis. With double digit increases about to take place and so many unanswered questions on how PPACA will be implemented, the need for aggressive cost measurements are necessary. If cost containment controls are not implemented aggressively, employers have no other choice than to drop coverage for employees and 2014 (when majority of PPACA measures go into effect) will be a distant dream.
When I was in graduate school I had a professor who would always say "always remember, the big print giveth and the small print taketh away." He was referring to reviewing financial reports and how important it was to review the small print (footnotes) at the end of the spreadsheets (always in small print). The long, hard-fought battle over-health care legislation is quickly turning into a battle over health-care regulations.
Three key things to remember:
- The longer key parts of the bill remain unclear; renewal rates for plans will assume the worst-case scenario.
- Since most employer plans renew in January, brokers and consultants will need to develop their renewal story as meetings start occurring in July and August to discuss January renewals.
- What will be their "story"?
Most employer plans received double-digit increases for 2010. With the health reform act providing more access with no cost controls in place, you can expect double digit increases in 2011. Raising deductibles and coinsurance and adjusting network access is no longer an acceptable renewal story. Brokers and consultants will need to share a completely different way to manage the escalating costs of healthcare. What's in place today is not working and will not work in the future.
We at NCN believe you must address healthcare like any other business and that is to manage from what it "cost" to deliver care not from what is "charged" to deliver care.
The ultimate impact of the law President Obama signed depends on fine print that has yet to be written. As my professor said, "the big print giveth and the small print taketh away." Let's watch carefully over the next few months the small print that is being written in Washington.
The cameras, press conferences, town hall meetings, picketing, etc. have come to a screeching halt since the health bill was signed into law. It has been moved aside in the 24-hour news cycle with outrage and disgust at the recent oil disaster in the gulf and overhauling financial institutions and the "to big to fail" mentality.
Healthcare reform is now left in the hands of staffers, special interest groups and a team of bureaucrats who have to now write the specific regulations and details around the spirit of the health reform bill. Leading the charge will be the Department of Health and Human Services (HHS). In response to the recent law being passed, HHS has established a new office charged with implementing the health insurance provision in the new law. On April 19th the Office of Consumer Information and Oversight became operational. This office is responsible for ensuring compliance with the new insurance market rules (which still have not been written). It will also be responsible for providing oversight and guidance for the state-based insurance exchanges and temporary high-risk pool programs. They will be using temporary staff drawn from the existing ranks of HHS employees but are aggressively hiring people to fill roles to achieve the goals before them. With this in mind, here are a few observations:
- Confusion and frustration will be a common theme with employers, payers and consumers. Employers will begin (if they have not already) reviewing their health plans for 2011 in the next few weeks and it is hard to know what to do when the specific timing of mandates and language around mandates are unknown.
- Consultants and brokers will be looked upon as experts and telling employers what to do. They have always been viewed this way but their role in the upcoming renewals will be different. They will have to present new and different approaches if they are going to maintain their relationships with their clients.
- We are at a tipping point. New ideas have to be presented and implemented. We all know healthcare costs will NOT come down. They will increase and increase substantially so employers will have to see "game changing" ideas if they want to maintain their coverage for their employees.
We live in interesting times and over the next few months we will see a growing sense of frustration. NCN is prepared to handle these trying times with proven innovative approaches that dramatically reduce the healthcare spend by replacing traditional methods of managed care (no longer effective) with a rational, transparent and defensible approach to healthcare payment.
This question is asked by millions of people each day. Whether getting their car repaired, home repaired or getting a simple haircut. This basic question allows the consumer to sort out a number of options before them. Are this person's services going to fit within my budget or what I have in my bank account? If not, I need to check around and see if someone who performs like services is able to offer those services more cost effectively. It is the way we do business today...except for healthcare. There is an exception to this rule and it is for procedures that typical not covered by health insurance plans such as plastic surgery. I was driving into work and listening to the radio when an ad came on for LASIK surgery. This facility is located in Dallas, TX and is a leader in this type of procedure. What was interesting about this ad was this statement, "We will beat any price in the metroplex." Hmm...I wasn't listening to an ad for an electronics store or a big box retailer. I was listening to an ad for a very sophisticated procedure on the eyes.
Let's think about this for a minute, do you hear ads for maternity care based on cost...come to our hospital to deliver your baby and we will beat any prices in the metroplex. We will even throw in 12 months of free baby check-ups and a lifetime supply of portrait sittings at any Sears photo studio. No we don't hear these ads because most people aren't paying for this care out of their own pocket. In these examples of LASIK or plastic surgery the consumer is paying for the procedure themselves. Price competition occurs and a decision about whether a procedure is truly necessary happens. It's interesting to note that in 2009, Americans received 18 percent fewer plastic-surgeries. The recession is likely to blame but all indications are the cost of surgeries have come down as well. In one report, I read that LASIK surgery charges have come down nearly 50% (refer to my comment about the radio ad). Competition entered the market along with consumers having "skin in the game" AND an understanding before the procedure is performed what the charge will be. Transparency is a beautiful thing.
Yes most people have a deductible and coinsurance to pay but the consumer has no idea what the provider is going to charge. Why, because there is no reason to ask. Once the consumer signs the paper work of the provider allowing surgery to take place, a copy of your insurance card and driver's license is taken and you are told what you owe for your deductible or coinsurance. Outside of this, you are completely removed from the interaction of the provider with your insurance company. You have no idea what the total charges will be for the procedure because someone else is paying the majority of the charges. It's like going to restaurant and paying $10 to enter the establishment. Once seated, you are given a menu with a listing of all the entrees and dessert but with no prices listed. Someone else is picking up the tab so you just order off the menu or select what the waiter suggests (not asking of course what the selection costs) and enjoy.
NCN believes that consumers need to know and understand what the charges are for procedures and more importantly what the true costs are for procedures. We must start working from a "cost plus acceptable margin" verses just reviewing what people charge. Even though just getting a handle on what people charge is a good first step. "Well beat any price" will become more in more prevalent as consumers take greater control of their healthcare dollars. Until then, costs will continue to go up, premiums will continue to rise and more and more people will wish they asked "What will this cost?"
I recently had the opportunity to visit with old friends and enjoy dinner together. During our time, we were reflecting on each of our life's journeys and how we experienced different life events that helped shape us as individuals. As I listened to their stories, I gained a greater appreciation for the unique personalities that had been molded over the years based on these experiences. By understanding their stories of life, I may not agree with how their situations or problems are handled but I have a better understanding of their "context."
With passage of the healthcare reform bill, and as the dust starts to settle on what is actually is in the bill, it will require many entities that in the past were viewed as potential "enemies" to now sit down and dine together and understand how we will work in the new normal. As Stephen Covey wrote in his bestselling book, "one must first understand to be understood" and for healthcare to move in the right direction, we are going to need a whole lot of understanding.
Judy Miller, editor-in-chief of Managed Healthcare Executive commented in its April, 2010 issue that "of all the players seated around the healthcare reform table, payers are the only ones challenging the cost of care, and yet, they're the ones getting the beating. They know $20 for two aspirin is a rip-off, but no one is listening."
She is right. The payers are taking a beating in the press, and yet very few people are addressing the irrational charges being passed on to the payers and consumers of healthcare. Payers AND providers must "sit down at the table" and understand that a rational approach to controlling the cost of healthcare is the elephant in the room.
Both sides need to better understand the pressure points driving this irrational behavior. As Karen Ignagni, President of AHIP recently said, "To suggest that cost containment can be achieved by singling out health plans ignores the very inconvenient truth that premium increases reflect increase in the underlying cost of medical services. Regulating premiums won't do anything to reduce the soaring costs of medical care. This would be like capping the prices automakers can charge consumers, but letting the steel, rubber and technology manufacturers charge the automakers whatever they want."
Since 1994, NCN's mission has been to provide a rational, defensible and transparent payment methodology that strives bring the payer, provider and, at times the consumer, to the table to discuss openly what is a rational payment for care.
Over the last few posts I have shared concerns about the recent healthcare bill that was passed. Since the recent passage of the healthcare bill we are hearing additional "unintended consequences" of the bill. People from both sides of the political aisle are scrambling to pinpoint specific sections of the bill to support their position on why this is a "good" bill or "evil" bill.
With all the daily commentary on the potential impact of the bill (pro and con) it has made me step back from the debate and ask the question, "what if they got this right?" For many, just asking that question triggers emotions. I believe there are a considerable amount of problems with this bill that have or will come to light over the coming months but here are a few "positives" I see with the bill passing.
- We now have an American public fully engaged in the discussion of healthcare and the costs of our health system.
- There will be 24/7 news coverage on the impact of this bill on a consistent basis.
- We can no longer complain about "something needs to be done." It's done. Now what?
- With the economy still struggling and job creation challenges, innovative ideas will be forced to the forefront. We can no longer have paralysis through analysis.
One of my favorite authors, Charles Swindoll, once stated "we are all faced with a series of great opportunities brilliantly disguised as impossible situations." Yes healthcare is a mess but I believe this will force a new kind of thinking requiring new ideas that the market will desperately need to solve the problems within our current system of healthcare and future structure. What if they got this right? Time will tell.
Sunday night was a watershed event for healthcare. For over a year, the hotly contested subject of healthcare came to a final vote. We are now left with sorting out what the actual bill will mean to individuals, employers and insurance companies.
Some of the specific details of the law are starting to come out. For some, this bill brings hope, security and a brighter future. For others, this bill represents another unfunded entitlement program that will continue to send the American economy down the road of economic disaster. Whatever side you represent, a few things are certain to happen:
- Costs will continue to go up - No matter what bill was passed, costs will continue to go up. As Dr. Delos Cosgrove, CEO of the Cleveland Clinic recently said in the March 1, 2010 FORTUNE issue, "There's a dirty little secret and I might as well tell you to start with. The secret is that regardless of what happens with health-care reform legislation, the costs are going to go up. We have more elderly people, and we can do more for them. So regardless of what happens, we can really only try to contain the rate of inflation. The cost is going to go up over time." Let's make no mistake, just because this bill or any bill that was being debated is passed, it does not decrease the cost curve. It "may" slow it (that has yet to be determined. We will see) but the curve will continue to go up.
- History is a great indicator of the future - Whenever a piece of legislation is passed in Washington or at a state level, it is difficult to almost impossible to quickly correct problems with the legislation. Some would argue the recent healthcare bill passed can be viewed as an entitlement. With that said, lets fast forward two to five years. If we find we can't effectively cover the additional population either due to costs, access or other means, how are we going to put this in reverse? History shows once program put in place it is difficult for our representatives to "cut" or eliminate programs. It is political suicide. We have seen this with Medicare cuts and other programs.
- Access to primary care will be stretched even further - One of the reasons our healthcare cost curve has grown quickly is those without insurance utilizing the emergency room as the primary care provider. As we all know this is the most expensive care one can receive. Adding the 30 or so million people into the insurance market one has to ask the questions:
a. How fast will those who have used the ER for care move to a primary care provider relationship?
b. Currently, we are already stretched for quality primary care providers. How will an already stretched primary care system be able to handle another 30 million people?
Some statistics show less than 5% of today's medical students are going into primary care. In a recent article that appeared in National Review (online) by Michael Tanner from the CATO Institute, he shared that In Massachusetts, after the passage of Romneycare, the wait to see a primary-care physician increased from 33 to 52 days.
We all know the healthcare system is in need of an overhaul. We will see if this particular overhaul was the right one. For our children and grandchildren's sake, let's hope so. However, hope is not a strategy.
Yesterday, we began a bipartisan discussion to revamp nearly 1/5 of the US economy. We heard arguments for and against certain parts of the proposed bill. There was a lot of posturing during the discussions and strong arguments made by both sides. However, there are certain nonnegotiable that I believe need to be agreed to.
For any change to truly impact the rising costs of healthcare, we must have transparency. What does transparency mean as it relates to healthcare? Simple. All providers must publish their pricing for services. A simple idea but a key element to in taking the first step to saving money. We must get transparency into the discussion and from that, allow consumers to take a more active role in their healthcare purchasing.
Healthcare is one of the few remaining areas of purchasing where a consumer enters the system with little to no knowledge of what the charges will be. To truly get costs under control, the consumer will have to play a more active role in what the charges will be.
Over the last few months we have been bombarded by numbers. We can't escape numbers being quoted in the 24-hour news cycles. If you are like me, after a certain amount of "number discussion" I start to get immune to the enormity of the numbers. A quote that was originally attributed to the late Illinois Senator, Everett Dirksen (1896-1969) which he denied saying, "A billion here, a billion there, and pretty soon you're talking real money." This phrase about government expenditures has been resurrected as we debate the validity of government bailouts and proposed healthcare reform.
As I was reading the January 2010 issue of "Managed Healthcare Executive" there was an article by Julie Miller titled, "Healthcare's big numbers difficult to put in perspective"
The phrase attributed to the late Senator Dirksen echoed in my mind. Ms. Miller quoted the following statistics in her article:
- Healthcare accounts for a dramatic portion of the national economy - 16% of GDP
- U.S. Census Bureau, 2008 revenue totals for healthcare services, not including pharmaceuticals, reached $1.75 trillion, up from $1.66 trillion in 2007. That's a 5.7% gain.
- Physicians' offices earned $185 billion from private insurance, $74 billion from Medicare and $18 billion from Medicaid.
- Hospitals earned $307 billion from private insurance, $184 billion from Medicare, and $70 billion from Medicaid.
- In 2008, the American Hospital Assn. reported that Medicare and Medicaid underpaid hospitals and physicians by $88.8 billion.
- In the insured population, 14.3% were enrolled in Medicare, and 14.1% were enrolled in Medicaid.
- Based on these numbers, roughly one-third of the insurance payment received by providers in 2008 came from sources that underpay.
So what happens to the $88.8 billion that is underpaid to providers? (Remember it's BILLION, not million). You're right, it gets shifted to employers and private pay patients. Think of it as a hidden tax.
As our elected officials continue to discuss how to provide access to all Americans, (remember a key funding element for this access is through cuts to Medicare and Medicaid) deductibles and coinsurance continue to rise for individuals.
A billion here, a billion there and pretty soon there is no money left.