Managed Care - December 2008 - (Page 26)

new devices, variations in physician practice behavior, high rates of imaging and diagnostic studies, advances in technology, and a host of other types of medical interventions all contribute to health care cost inflation. It is beyond the scope of this article to address all of those causes, but it is vital to bear in mind that they exist and will continue to pressure the entire system. The effect of all of this is an increase in the number of uninsured Americans. As reported in the annual Kaiser Family Foundation/HRET report, health insurance costs have increased more than three times as fast as workers’ earnings over the past 10 years, while private coverage has decreased from 72 percent in 1999 to 67 percent. Health care costs are almost 16 percent of GDP and rising, and if the GDP itself begins to fall, it could quickly become 17 percent or more. Job losses will mount as companies downsize or even go out of business. Unemployment in November was up to 10 million, a rate of 6.5 percent, up from 6.1 percent the month prior. Small companies that offered health coverage will stop doing so because of the cost, accelerating an existing trend. And even when employers offer health insurance, the higher the amount of wage deductions, the lower the percentage of employees who enroll in the employer’s health plan. Workers who decline coverage are healthier on average than those who take it up, meaning that they will not be contributing to the pool of funds used to pay for those whose illness costs far more than what they pay in premiums. These forces all lead to a rapidly shrinking, increasingly expensive, and increasingly competitive market for commercial health insurance as it exists today. Pressures on growth, already high, will increase far beyond what we’ve been experiencing over the past two years. Most insurers have pushed heavily into the individual market, and must continue to experiment with benefit designs that will appeal to those who are most likely to forgo coverage. In some cases, this will also mean having to work with state legislatures to be able to create products that are not encumbered by expensive mandated benefits, but still meet coverage needs for that population. Because investment income will be less able to absorb shortfalls in underwriting gains, health insurers will need to pay scrupulous attention to their actuarial and underwriting policies and practices. Even so, a return of premium-cost compression is likely to occur, causing a renewed focus on cost controls. Companies should begin developing contingency plans for additional cost reductions if they have not already done so. All parts of the health sector must develop a new level of creativity if they are to not only survive, but thrive. “Cooptition,” the concept of competitors working together for their mutual benefit while avoiding anti-competitive actions, is one pathway. Existing examples include single sign-on portals allowing providers to use one portal to access online information and transactions for multiple payers, or the use of pooled data in pay-for-performance programs in California. But examples like these are not common, though they should be. It may also be a good time to dust off a few older ideas and modernize them. For example, while only a combination of market forces and governmental policy can fully address the problem of a shrinking base of primary care, perhaps a collaboration between hospital systems, physicians, and managed care plans can revive the concept of good comprehensive care provided by a closed panel of employed physicians, similar but not identical to existing group-model HMOs. Free of hassles Hospitals and integrated delivery systems are already finding themselves hiring primary care physicians who are seeking a safe, hassle-free place to practice. And hospitals are always seeking to (safely!) improve cash flow. A return to a modified form of capitation may be a way to address both of those dynamics as long as we take pains to avoid the debacles of past full-risk HMO capitation contracts. Would such a product be for everyone? Of course not, but it could well appeal to those most at risk of simply going without coverage while also improving providers’ cash flow. Finally, these forces are already increasing public and corporate agitation for reform of the system, and that agitation can only mount, meaning reform is likely to occur sooner than lawmakers or the new administration might like. But this pressure, combined with existing efforts to bail out entire industry sectors, may be the catalyst for true reform of the system. This can only occur if health reform is understood as economic reform more than social reform. But that’s a topic for another day. MC 26 MANAGED CARE / DECEMBER 2008

Table of Contents Feed for the Digital Edition of Managed Care - December 2008

Managed Care - December 2008 Editor's Memo Contents Legislation & Regulation News and Commentary Medication Management Compensation Monitor ICD-10 Offers Huge Opportunity, Challenge Part D at a Crossroads Plans Can Weather the Financial Crisis DM vs. Medical Home? Tackle Prediabetes Reasonable Approach to Morning Sickness Formulary Files Tomorrow's Medicine Outlook

Managed Care - December 2008

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