By Brian Klepper and Tom Emerick
Independent of whether the Patient Protection and Affordable Care Act remains, public and private purchasers are unlikely to see meaningful health care cost reductions from policy in the near future. Our national policy paralysis undermines our ability to address serious problems, especially when it involves changes to the flow of money to influential organizations.
But that’s a dysfunction of our legislative process. Why has it extended to the commercial health care marketplace? Why have employers failed to manage health care and its cost as aggressively as they oversee every other aspect of their businesses? Why haven’t they worked together and, as the largest purchasers of health care other than government, used their market leverage to drive better care at lower cost?
It’s no secret that American health care is excessive. In 2008, the consulting firm PricewaterhouseCoopers estimated that 54.5 percent of all health care expenditures—almost $1.5 trillion annually in 2012—provides no value. Still, most businesses acquiesce to consultants and vendors who suggest minor tweaks but mostly protect the status quo.
Nearly every part of the health care industry has developed mechanisms to increase cost and block transparency and accountability. Ask a health plan for claims data and it will likely respond with a contractual prohibition against using the information to make doctor and hospital performance comparisons.
Often there is no clear understanding of what works, or rigor about efficacy. Wellness and prevention services are the rage now with employers, and there is no question that they can help patients learn healthier lifestyles and stave off becoming sicker. But there is scant data showing that these programs save money, especially with any immediacy.
The approaches with the greatest savings potential remain underutilized. Perhaps most important is using established centers of excellence to ensure the appropriateness of the care for the sickest patients, who can consume immense resources and are often mismanaged.
The impacts of employers’ malaise on health care are far reaching, seriously threatening America’s economic security. A recent Rand study calculated that almost 80 percent of all household income growth is now siphoned off by health care, leaving only one new dollar in five for other needs, such as infrastructure replacement or education.
Fixing America’s health care cost crisis will require payment reform, greater transparency of cost, quality and safety performance, and re-empowering primary care. But those reforms cannot occur so long as policy is driven by the special rather than the public interest.
Bringing health care’s excesses back into balance will require the focus of America’s business leaders, in policy and in the marketplace. In policy, we need a concerted effort that can be a counterweight to the health industry’s campaigning.
In the marketplace, employers’ relationship with health care must be guided not only by the compassion of human resources but by the hard-headedness of finance and risk management. Poor performing and unaccountable physicians, pharmacy benefits managers, hospital services and health plans should be dismissed and replaced with vendors who demonstrate that they enhance patient well-being while protecting purchasers’ financial interests. Collaboration with like-minded employers is the quickest path to changing how health care works in a community or the nation.
Because America’s health policy and market environments have become so dysfunctional, it falls to the nation’s business leaders to help us achieve health care change that works for all patients and purchasers.
(Tom Emerick is a medical management adviser to business and the former vice president of global health benefits for Walmart. Click here to read his earlier Forum article about how businesses can utilize second medical opinions to help pare down their medical care costs. Brian Klepper is a health care policy analyst. This article was provided to the Public Policy Foundation by the authors after it was originally published in Workforce online magazine.)