has been building in the private sector, where most innovation takes place.
Private payers are saying, “Enough already!” It’s time to take charge.
They are the parties demanding what I call real health care reform. For decades they have faced stiff premium increases, year in and year out. A 10 percent increase on a low base cost in the old days was bad enough, but a 10 percent increase on premiums on a higher base, as high as $20,000 per employee, is untenable.
There are two major ironies in all this. First, the high costs caused the access issue that ObamaCare tries to address. If costs were low, access wouldn’t be an issue. Second, because of decades of hyperinflation of health costs, because costs are so bloated, huge savings await companies that manage health care costs aggressively.
ENTERING THE GAME: WHAT BUSINESSES ARE DOING NOW
The long-AWOL executives of corporations have come belatedly, but decisively, to the challenge of managing the chaos on the economic side of American health care. No other vendor would get away with double-digit increases for decades.
CEOs, CFOs, and COOs in front-running companies are doing radical surgery on an unsustainable system. They are bringing management concepts and marketplace principles to bear. They are tackling what they see as an undermanaged supply chain.
That means:
■ Elevating their employees from passive, entitled recipients to engaged consumers
■ Insisting on transparent prices and quality
■ Creating incentives and disincentives and a culture of smart consumerism
■ Moving business to the highest-value providers.
■ Treating health care vendors with respect, but demanding performance
■ Creating a culture of fitness and health at their companies
■ Making workforce health and health costs a strategic priority
In the process of making health care a top-of-mind issue, they are inventing a far better business model for the delivery of health care for the whole nation. In that sense, it is patriotic work.
Before they got fully engaged, it was common practice for managers to use the one-time tactic of shifting costs to employees. But there is only so much mileage there. Employees can only afford so much for care, especially since wage increases have generally been anemic for more than a decade.
The executives have learned that health costs can be managed, and they have discovered they are in the business of behavior change. They have calculated that a well-managed health plan can be a competitive advantage.
Consider the fundamental health care dynamics today: insurance companies have a short-term, transaction-based, impersonal relationship with the insured’s employees.
The same short-term mentality is true of large corporations that run hospitals and clinics; they excel at reacting to, not preventing, medical problems. In the existing model, primary care office visits last six to eight minutes. Frontline doctors oversee 2,500 to 3,000 patients each, forcing them to act only as gatekeepers to more expensive and profitable specialists. They are paid by volumes of procedures. Theirs is a production-centered business model, not a patient-centered model.
In stark contrast, most, though not all, employers foster a mutually beneficial, long-term relationship with their employees. Assuming a career of 25 to 40 years and an average of $16,000 in annual health costs per employee, the mutual bill for health care over a long career can easily exceed a half million dollars.
Conclusion? Employers and employees are the only health care players with a deep mutual interest in a long-term game plan. They are in a health care compact for many years.
Employers and employees are the only health care players with a deep mutual interest in a long-term game plan.
Good health profits them both—not just in workplace productivity and happiness but also in their respective budgets. Remember: the average split in the country on health care expenses for a family plan is 72 percent employer and 28 percent employee. (Some experts put the employee share higher.)
What better team for fixing the broken business model than employers and employees? This is the tandem of payers to ride for real reform. And that is exactly what’s happening.
THE STEPS COMPANIES ARE TAKING
Exasperated private payers, led by large and medium employers, are staging a revolt. Defenseless small companies, who face the stiffest premium increases year in and year out, are joining the march. Companies with workforces as small as ten people are racing toward self-insurance as a first step, thereby assuming the risks, responsibilities, and rewards of keeping costs in check.
Their second step has been to roll out consumer-driven plans that engage employees in becoming responsible users and buyers of medical services.
That, in turn, requires data sleuths, known as transparency and analytics vendors, who collect and slice and dice the medical charges and outcomes from many health care transactions to shine a light on prices and quality. They offer clear comparisons of costs and quality. It is a new lens that allows consumers to make sound decisions on where to get care.
The payers’ fourth step is to contract for rigorous on-site providers to manage health. Their health teams tackle chronic diseases, believed to cause 80 percent of health costs.
Chronic diseases [are] believed to cause 80 percent of health costs.
The sum of these kinds of structural changes in health care delivery constitutes a better model, a disruptive model. They spell real reform. And they create a virtuous linkage of improved workforce health and lower costs.
REFORM TAKES A VILLAGE
Bending the cost curve doesn’t come easy. It takes effective management. It requires culture change. It means difficult behavior change at the personal and organizational level. It entails business risks. But as innovative corporations are proving, it can be accomplished.
Major change doesn’t happen in a corporation without leadership from the C-suite, from the CEO on down through the management team. And it requires engaging the troops. It is simultaneously a top-down and bottom-up revolution. That sounds paradoxical, but it decidedly is not. The success of any major corporate initiative depends on that vital interaction.
Relying on human resource managers and benefit specialists to manage something as large and strategic as workforce health just doesn’t work. People who choose that profession tend to be caregivers, not change agents.
The reason the revolt is accelerating is that the top managers have come to two realizations: health costs could take their enterprises down and they can be managed. They have learned they can turn a negative to a positive.
Joel
