What both sides are missing is the fact that none of the reform measures under consideration will achieve the goals of driving down costs and expanding coverage. Nor will they lead to the increased competition among carriers that is imperative to keeping premium costs down.
This is because reform measures, as they are currently written, fail to address the core problems with the nation’s health care system: 1) the growing prevalence and severity of chronic conditions that consume the majority of health care dollars, and 2) carrier monopolies that have stifled free-market competition.
Indeed, health care reform may ultimately have the opposite effect. By removing any incentives for individuals to take control of their health and wellness, chronic conditions will soar in both prevalence and severity. Further, by failing to include mandates that would level the playing field and allow insurers, third-party administrators and self-insured employers to compete equitably for providers and patients, there is no incentive for dominant carriers to keep premium costs down and expand the scope of coverage.
Effective wellness and disease management
Let’s start with chronic conditions. According to the Centers for Disease Control and Prevention, chronic diseases, such as heart disease, cancer and diabetes, account for seven out of every 10 deaths each year. They also cause major limitations in activity for 25 million people.
Approximately 133 million people—almost half of all Americans—suffer from at least one chronic condition. By 2030, that number will rise to 171 million. Perhaps most distressing is the fact that the percentage of U.S. children and adolescents with a chronic health condition has increased from 1.8 percent in the 1960s to more than 7 percent today.
The health care system is breaking under burden of treating chronic diseases, which consume 75 percent of the nation’s $2 trillion in medical costs. Diabetes alone carries direct and indirect annual costs of $174 billion, while heart disease and stroke carry costs of $448 billion.
But the problem is not just the ailments themselves. Four common behaviors are responsible for much of the illness, disability and deaths associated with chronic conditions. These include smoking, lack of physical activity, poor dietary habits and excessive alcohol use. Yet despite a constant barrage of educational messages designed to warn people of the risks of these behaviors, they remain a significant problem:
• More than 43 million U.S. adults and one in five high school students smoke, the direct and indirect medical costs for which exceed $193 billion annually.
• Since 1980, obesity rates for adults have doubled to more than 72 million and tripled for children, carrying estimated annual medical costs in excess of $117 billion.
• More than one-third of all U.S. adults fail to meet minimum recommendations for aerobic physical activity and only one in three high school students participate in daily physical education classes.
• More than 60 percent of children and adolescents eat more than the recommended daily amounts of saturated fat, while just 24 percent of adults and 20 percent of high school students eat five or more servings of fruits and vegetables per day.
• Approximately one in six Americans age 18 and older engaged in binge drinking in the past 30 days, and nearly 45 percent of high school students report having had at least one drink of alcohol in the past 30 days.
Health care isn’t the only industry breaking under the weight of this preventable epidemic. Business is also affected. An analysis by PricewaterhouseCoopers found that productivity losses associated with workers who have chronic conditions are as much as 400 percent more than the cost of treating those diseases, and individuals with chronic diseases account for approximately 40 percent of total lost work time. Clearly, the majority of current disease management and wellness programs are not working.
The skyrocketing costs of care cannot be addressed unless something is first done about the rising prevalence and severity of chronic diseases and the behaviors that contribute to them. However, nothing in current reform proposals address this problem.
In fact, by subsidizing coverage for everyone and eliminating any differentiation based on pre-existing conditions, the situation will only worsen. There will be no penalties for those who choose to lead unhealthy lifestyles that exacerbate their chronic conditions, and no rewards for those who take the steps necessary to prevent or control them.
What’s more, some proposals designed to finance reform efforts, such as capping annual flexible spending account contributions at $2,000 and scaling back eligible expenses, are likely to affect consumers’ ability to afford medications and other prescribed therapies to control their chronic conditions.
The end result of health care reform that excludes any support for disease management will be medical costs that continue to increase in conjunction with the rate of chronic conditions. That is a core problem that no amount of insurance coverage can correct.
The only “fix” is one that facilitates widespread participation in wellness and disease management programs that are effective at driving necessary change in consumer behavior. While it is true that 90 percent of private insurance carriers and 88 percent of large employers already offer these programs, the smoking, obesity and drinking statistics cited above provide ample evidence that most of these plans simply are not working.
I am not proposing that the government dictate how much people weigh or the number of minutes they exercise. Rather, reform legislation should fund initiatives that support widespread availability of wellness and disease management programs that are based on models that have demonstrated their efficacy in altering unhealthy behaviors. These typically utilize predictive modeling, early intervention and personalized education and support, as well as incentives that maximize individuals’ engagement in health care and the management of their chronic diseases.
For example, wellness programs available from my own company, and others, utilize predictive modeling to analyze employee populations and identify excessive health care costs and their drivers. Best-of-class risk management tools and cost containment strategies are then used to reduce a client’s overall health care spending. Health risk assessments and personalized wellness communications are also provided to motivate employees and promote healthier lifestyles. The results are improved compliance with recommended follow-up and clinical tests, delivering a measurable decline in emergency room visits and in-patient admissions, as well as significant savings in prescription medication expenses and costs associated with provider networks.
Another example of this model’s effectiveness can be found with the success of Verisk Health Inc., which provides care management interventions and individual health risk assessments that have achieved significant savings in health care costs for employer groups.
Verisk clients, which include FSAI as well as benefits management companies and employer groups, use the company’s Web-based D2Explorer analytics software solution to analyze medical and pharmacy data to identify, educate and coach individuals in need of care management interventions. The clinical intelligence and predictive modeling within D2Explorer has achieved such notable results as an 18 percent drop in the number of diabetics/pre-diabetics over three years, a decreased number of emergency room visits and in-patient admissions, lower per-member/per-year cost trends for certain diseases and a 12 percent reduction in total health care costs.
Thus, for health care reform to truly reverse the decades-long trend of increasing medical costs related to chronic conditions, it must establish funding for initiatives that will foster the widespread creation of proven wellness and disease management programs and facilitate enrollment in them. These could include:
• Funding the establishment of national or regional clearinghouses of non-identifiable patient and claims data for population-based risk assessments and predictive modeling
• Providing financial assistance to such groups as employers, providers and communities for the establishment of wellness programs
• Establishing an outcomes-based incentive program to reward providers for wellness care
• Providing tax credits or subsidies to consumers to offset the costs of such preventive measures as smoking-cessation programs, weight-loss plans and fitness club memberships.
Investing just a fraction of the $1 trillion that health care reform is expected to cost into wellness and disease management initiatives will do more than bring down the overall costs of care.; it will also save a significant portion of the $1.5 trillion currently consumed by chronic conditions. This savings represents hard dollars that could be reinvested to offset the other costs associated with reform efforts.
The second core problem that health care reform has thus far failed to address is carrier monopolies that have all but eliminated free-market competition. Consider this: The insurance market is controlled by a single carrier in 56 percent of the nation’s urban areas, while one or two carriers control 90 percent of the insurance markets in most states.
Without competition to keep them in check, premiums have risen 120 percent over the past 10 years. That is nearly triple the growth of inflation and quadruple wage growth.
Unfortunately, the inclusion of a public option will not change this. Nor will the proposed insurance cooperatives. The reason is simple: As these options are currently written, an estimated 85 percent of the population will not be eligible to choose them over private coverage. As such, they are unlikely to have a significant effect on competition. With nothing to threaten their current lock on individual markets, there is no impetus for private carriers to change their practices.
To succeed, health care reform must address the root cause of rising premiums and declining coverage: networks that hamstring the ability of regional insurers, third-party administrators and self-insured employers to contract with enough quality providers to attract a suitable volume of patients to make serving an individual market financially feasible.
When a single carrier dominates a market, health care providers are forced to accept unfavorable contract terms, most notably “most favored nation” clauses, if they hope to build a sufficient patient base to survive financially. These clauses require providers to extend to current insurers the same discounts they may give to new insurers to join their networks, without the promise of additional patients.
For providers, the cost of expanding their patient base is simply too high to bear. The big player keeps its hold on the provider and the competitor goes away, along with any incentive to keep premiums down.
Instead of introducing the government as yet another dominant carrier, reform efforts should focus on restoring free-market competition through mandates designed to level the playing field. These include outlawing the use of most-favored-nation clauses and creating a federal “any willing provider” mandate. Precedents for both of these can be found at the state level. Both will reduce the chokehold dominant players have on individual markets by giving providers greater flexibility to join additional networks to increase their patient base.
At the very least, reform legislation should address the need for transparency in both price and quality. This serves a dual purpose. First, it places private carriers, third-party administrators, self-insured employers and providers on equal footing in contract negotiations. Second, it provides consumers with valid information on procedure outcomes and costs, allowing for the kind of comparison “shopping” that will drive a renewed emphasis on the delivery of high-quality care that is also affordable.
If health care reform measures were to restore free-market competition, they would go far beyond simply eliminating the monopolies that have allowed carriers to focus more on profits and market share than on ensuring that their networks deliver quality care. It would also pave the way for empowering consumers to make decisions about their health care that are based on quality and preference rather than solely on price.