Associates for Health Care president Richard Blomquist is concerned about skyrocketing health-care costs — but is convinced that putting more control in the hands of the end-user of health services will help.
"About 5% is the national average," Blomquist said of health-care cost increases. "But then when you factor in the impacts of things like government underpayment, we are in the 11% range — but Milwaukee is in the 20% range. It is a sign of an out-of-control cost element."
Coming from a preferred-provider background, it is not surprising that Blomquist’s proposed solution comes from a market-based perspective.
"One solution that has been discussed by a number of people is limiting the number of health-care professionals an individual has available to go to," Blomquist said. "You would identify the more costly providers and limit employees’ ability to utilize those practitioners or hospitals."
But contractual wrangling between providers and insurance carriers is not a good way to control those costs, according to Blomquist.
"I think, unfortunately, if you look at our area’s statistics, no single organization owns 100% of the liability for increased cost," Blomquist said. "Some people point to Aurora as a more expensive alternative. In some contexts they are — but in some others, the Froedtert-Community Memorial group is very high. On other things Covenant is high. A solution that points to elimination of a system is not going to solve the problem."
Blomquist added that in Waukesha County, hospitals were more successful in keeping rates reasonable.
"My preference is to look at a scheduled-benefit plan," Blomquist said. "You develop a schedule to identify a reasonable cost, and tie to that schedule providers that charge that much or less. That way, we are not limiting employees’ options; if they want to go somewhere that costs $1,000 more than will be reimbursed, they can do that."
The successful solution, according to Blomquist, would involve elements of employee benefit design and managed care, including "a combination of elements developed over the years, like stop-loss insurance, administration by a third-party administrator, and scheduled limits that would require the employee to use information in the marketplace. We need to start bringing in more consumerism and arming consumers with information they had not previously been privy to. Laproscopic knee surgery varies from $2,000 to $6,000 with no perceptible difference in quality. We need to give people $3,000 for that surgery and then let them go where they want."
Existing public disclosure of hospital charges are inadequate, according to Blomquist, as they do not reflect the actual cost of services, including discounts to insurance carriers. Data for many diagnosis-related groups (DRGs) are not accurate as they do not account for complicating conditions and other factors that affect cost.
Hospital regulation may help
Blomquist was reluctant to support regulation of the industry but, in the instance of hospitals, said some additional regulation may be necessary.
"I have always been very conservative in my politics and economic business life," Blomquist said. "But I think there is room for an element of control in this arena. Health care does not function the same way as other elements in the economy.
"Former Surgeon General C. Everett Koop once said something to the effect of ‘Put two gas stations across the street from each other, and they will compete on price until, eventually, both their prices are as low as they can get. But take two MRI units and put them across the street — and the price goes up until they are both able to cover their costs.’"
Blomquist said that a process implemented by former Gov. Tommy Thompson to force health-care entities to seek prior approval for new facilities was flawed. The state’s Certificate of Need program was put in place when Medicare stopped requiring prior approval of new facilities, switching to a system restricting the level of reimbursement for various diagnoses.
But the state gave hospitals advance notice of the regulation, and hospitals queued up a number of projects, according to Blomquist. Upon implementation of the Certificate of Need requirements on the state level, many projects were grandfathered in, which glutted the market with unnecessary capacity, according to Blomquist.
Because of the grandfather clause, "the hospitals were able to get whatever they thought they needed," Blomquist said. "Two years after introduction, the government said ‘We haven’t seen any results — let’s pull the plug on it.’"
Without some type of regulation, "it will be very difficult for the open marketplace to effectively control in the short term the availability of different services and the cost for those services," Blomquist said. "There is an opportunity for the state to require that the hospital get some approval or at least publish their costs."
Blomquist identifies key health-care points
Associates for Health Care President Richard Blomquist thinks the cost of health care and the associated increase in health coverage costs are significant for a number of reasons
Jan. 18, 2002 Small Business Times, Milwaukee
