Solve health-care challenge by reducing costs, not shifting more costs to workers
Too much of the debate about health-care costs is about who pays for the increases, including shifting more costs to beneficiaries. Guest columnist Cynthia M. Cole argues the focus should be on reining in costs overall.
Special to The Times
THERE is much discussion today regarding the high cost of health-care benefits. All of the proposed solutions involve some sort of cost-shifting to the recipients of these benefits. Companies and governments (and, ultimately, taxpayers) are tired of paying this high cost.
Yet shifting the cost does nothing to rein in the overall cost of these benefits. The best solution is one where the cost is decreased without sacrificing quality or access.
According to the Centers for Disease Control and Prevention, 75 percent of health-care costs come from chronic disease. Furthermore, independent audits conducted by health-care data analytics companies reveal similar findings. For example, Med-Vision's database of employer-sponsored plans shows that just 5 percent of members (the sickest) account for 60 to 70 percent of all employer health expenses. Also, take note that 50 percent of members account for virtually zero expenses.
Continuing to "solve" the high cost of medical benefits by cost-shifting to employees will only deter budget-minded members from seeking care during the earliest, least expensive stages of chronic-disease development. The conversation should be about dialing back the cost of the benefits and providing a multifaceted approach to reclaiming and reinvesting the wasted dollars spent month after month. The cost-shifting solution is about maintaining the norm, which is to contain health-plan inflation at the national trend of about 10 percent a year.
The genuine solution begins by looking at the expense-distribution concept. In this example, an employer covering 12,000 members has an expense distribution showing that 70 percent of members spend an average of only $328 per year, or a mere 8.4 percent of the total annual plan expense. Put simply, at an average health-plan expense of $328 per year, 70 percent of members don't even have plan expenses equal to the plan's total administrative service fees. In contrast, members in the top 5 percent category spent a whopping 59 percent of the total annual claims.
If plan claims are increasing 10 percent annually, which segment is impacting the plan the greatest? By basic math, it must be the top 5 percent, as this category pushes the greatest percentage of plan cost. The truth is that the clinical conditions of a few members have great financial impact on the whole.
What has been the standard reaction to increasing health-care cost trends? It has been to increase deductibles, copays and member contributions.
Referring to the expense-distribution concept forces us to ask which segment is impacted the greatest by a deductible or copay increase? Is it: (A) the member battling cancer with annual claims approaching $200,000, or (B) the member battling to control diabetes, struggling to support a family in today's economic climate, and spending $300 annually of employer-funded benefits after meeting the deductible on health and prescription drug claims? The correct answer is "B."
It is time for our state to gain control over health-care costs. Although to solve a problem, policymakers must understand the cause of the problem. Washington must first have access to independent plan data.
Further, our state must undertake solutions to prevent the members who are not incurring large costs from "falling off the cliff" into serious states of chronic disease. Initially, an easy and universal solution lies in expanding access to low- or no-cost primary care community health centers. Wise employers are following this course with employer-sponsored and on-site clinics to provide easier access to affordable health care for employees.
With the right approach for reducing risks, it could be relatively easy to reduce health-care expenses by 10 percent given the current state of health-care fragmentation and dysfunction.
Let's open up this discussion to include improving health care while simultaneously decreasing costs.Cynthia M. Cole is vice president of operations in the Western United States for Med-Vision LLC. She lives in Bellevue.