10 ideas to stop the bleeding
Nothing is going up faster in today’s economy than the cost of health care. Although experts may argue over whose fault that is, there are myriad reasons for the problem.
Among the cost drivers: an aging US population is requiring more medical care; advancing science and expensive technology are changing how we receive care; drug companies are developing new wonder drugs but at a higher price; publicly traded health companies’ shareholders are demanding larger profit margins; and government budgets are stretched too thin to pick up the full tab for public programs such as Medicare and Medicaid.
Perhaps the biggest factor of all is that the American appetite for health care services remains insatiable. And as long as most Americans remain in the dark about how much health care really costs, the power of consumerism won’t apply to health care economics.
Recent reports have suggested that Milwaukee-area health care costs are among the highest in the nation. According to Hewitt & Associates, a Lincolnshire, Ill.-based human resources firm, the average cost of health care in Milwaukee this year was $6,389 per employee, more than any other major metropolitan area in the country.
Although employers of all size are grappling with those costs, the situation has become a crisis for small businesses, self-employed firms and the unemployed.
And, because there’s no single cause, there’s no quick-and-easy fix.
As Jon Rauser, owner of The Rauser Agency in Milwaukee, puts it, health care is a giant puzzle requiring many pieces to complete its picture.
To identify possible solutions, the Small Business Times asked 10 experts representing a cross section of the health care and insurance industries to offer their ideas on what can or should be done to contain health care costs. The answers came from a central city clinic operator, an insurance agent, a physician, a pharmacist, a nursing home executive, the chief executive officer of a large health provider system, a nursing school dean, a union president, an insurance company executive and a health care consultant.
Some directed their ideas to society in general, others to their own institutions. Some also offered advice to small employers.
Not everyone will agree with what they have to say. But all suggested thoughtful, viable options that add substance to the health care debate.
Idea No. 1:
Manage chronic diseases; follow more healthful lifestyles.
Dr. Nick Turkal believes the key to solving the health care cost crisis is to improve the quality of health care.
"One of the things that has become increasingly clear is that virtually every time we improve on the quality of health care, we also reduce costs," says Turkal, a family practice physician in Milwaukee and senior clinical vice president for academic and medical affairs at Aurora Health Care.
The quality-lowers-cost solution is based on reducing the variation in the way physicians practice medicine, particularly for managing chronic and catastrophic diseases.
"Care management is about focusing on the areas where the most costs exist, and getting the patient to be a shared decision-maker with the physician," Turkal says. "Those things, if nothing else, would dramatically reduce the cost of care."
In any given year, 5% of the population suffers from chronic diseases and 1% from catastrophic illnesses, yet combined, this same group uses about 57% of the health care dollar, according to Turkal.
In addition to direct health care costs, there is an additional $234 billion cost for employees with chronic diseases when their absenteeism and lost productivity are factored into the equation.
When managing patients’ chronic diseases, it’s imperative that the patients themselves be active participants in making decisions with their physicians, Turkal says. If they aren’t involved, chances are, they won’t follow their care plans.
Wisconsin residents’ poor health habits contribute significantly to the state’s higher-than-average health care costs, Turkal says. Wisconsin ranks near the top of the list of states with obese residents.
"Employers, health care organizations, labor and community leaders must encourage our citizens to adopt more healthful lifestyles," Turkal says. "The alarming increase in obesity in Wisconsin and nationwide is resulting in a concomitant increase in diabetes and other chronic diseases. Without attention to diet and exercise, this problem will only worsen. Health care costs are significantly higher for inactive adults in the US."
Idea No. 2:
Turn to universal health care.
The health insurance crisis for small businesses is a clear indication that it’s time for Wisconsin to adopt a statewide universal health care plan, says David Newby, president of the Wisconsin AFL-CIO.
In October, the union unveiled its proposal for an "employer-based unified system," which would have all Wisconsin workers and their dependents enroll in a single statewide health plan funded by assessments charged to businesses. The amount of the employer tax would depend on the number of employees at each business.
A state labor-management commission would decide the plan’s covered benefits and determine the employer assessments. Self-employed individuals and their dependents could buy into the plan.
Although many business owners might cringe at the idea of a health care tax, Newby points out that businesses already are challenged annually to pay for skyrocketing premium increases of 20% or more. Under the current system, each year health care eats up a larger portion of the company budget, leaving less money to invest in higher wages or the business itself.
Newby says the union plan would save money in three general areas. First, it would reduce administrative costs now spent to administer the existing fragmented system of public and private insurance plans.
"About 25 cents of every dollar spent on health care goes to administration," Newby explains. "That cost includes the cost of advertisements and promotions, but most of it is spent maneuvering through the insurance and HMO maze, trying to figure out who’s owed what and how much. If you have one comprehensive standard plan, it would simplify the system so much that you would dramatically reduce administrative costs."
Second, the union plan would save on prescription drugs, now one of the primary causes of rising health insurance costs. Under the union plan, the health plan’s membership (estimated at 4 million) would be organized into a prescription drug buying pool that would negotiate discounts from pharmaceutical companies.
Third, the plan would save money by adopting health care quality measures, including a system to encourage wellness and preventive care, as well as manage costly chronic diseases such as diabetes, asthma, hypertension and congestive heart failure.
"Generally speaking, with any sizable group, about 15% of the people in that group are responsible for about 75% of the costs for health care," Newby says. Why? Those 15% have chronic diseases that, when left untreated, lead to more serious illnesses requiring expensive hospital care.
Idea No. 3:
Consider the unthinkable: Raise wages; drop health coverage.
James Mueller suggests three strategies to small businesses struggling to pay for health care. The first uses a tough-love approach.
"Get out of the insurance business," says Mueller, president of Frank F. Haack & Associates, a Wauwatosa insurance brokerage.
"A business can strategically escape health care altogether by raising wages high enough to attract and retain quality employees," Mueller explains. "Strategically, that’s the most predictable way to budget. You can budget for wage increases, but you cannot always budget for health care cost increases."
Dropping the company health plan is a dramatic idea that many employers won’t consider, Mueller acknowledges. But it’s probably a realistic option, if not a necessity, for small firms struggling in today’s economy.
In 2003, some small employers can expect their health insurance premiums to increase 30% to 50%.
If dropping the health plan won’t work, Mueller recommends small firms look for an insurer that will offer more than one plan, each with varying amounts of coverage, a range of deductibles and premium prices.
The business owner can offer to pay a defined amount toward the employees’ coverage, with employees choosing their plans and making up the difference in cost.
Younger, healthier employees who don’t need a lot of medical attention will likely opt for a high-deductible plan with catastrophic medical coverage at a lower premium. An older, less healthy worker might choose a plan with better benefits but at a higher price, with the worker making up the difference in price.
Employers can help employees with their out-of-pocket expenses by offering a savings plan with tax advantages, such as a medical savings account (MSA).
Finally, there’s a traditional way for employers to save on their health insurance: Shop the plan around every year, Mueller says.
"Make decisions annually. Ask the insurance industry, ‘Who can give me the best deal?’" advises Mueller. That method works only for companies with healthy employees, however.
If a business has an employee with a serious illness, any insurance proposal will be pricey, he adds.
"We are advising our clients: If they really want to control their health care costs, consider options One and Two," Mueller says. "And really admit to your employees what you can and can’t afford in terms of health care."
Idea No. 4:
Spend less on hospital construction, more on patient education.
Cordelia Taylor believes the health care system could save money by spending less on new hospital construction and more on medical care and education for the patients she sees at the Family House Medical Clinic.
Taylor is administrator of the clinic, which opened in Milwaukee’s central city a few years ago with support from the Medical College of Wisconsin. About 200 patients visit the clinic every month, and a majority lack any form of health insurance.
The number of uninsured patients is growing, as is the serious nature of their health conditions, Taylor says. Many suffer from chronic diseases that go untreated, either because the patients don’t know they should seek medical attention or they can’t afford to pay for a doctor’s visit.
As a result, the patients’ conditions worsen until they require emergency care at a hospital. If they lack insurance and resources to pay, the hospital ends up with the tab.
In the meantime, Taylor looks at the numerous hospital construction projects across the state and, while she won’t say those projects are unnecessary, she does think those health providers need to prioritize where the financial resources are going in these slow economic times.
"Before we do a lot of building and beautification of the hospitals, let’s look first at the needs of the people we are trying to serve," Taylor says. "Once we’re past this (economic) crisis, then we can add on to those projects that look good on paper."
Rather than invest in bricks and mortar, Taylor suggests more dollars be invested in preventive medicine, especially for uninsured patients with chronic diseases.
Family House Medical Clinic is trying to do its part. The clinic, which receives most of its funding through grants from major foundations, corporations and other private donors, recently received a large grant from Fortis Health to expand the clinic’s health education services.
With the funding from Fortis, the clinic hired a registered nurse educator who teaches patients things such as how to follow a proper diet and why it’s important to undergo health screenings.
"Let education be one of the main components of our health care system, so that we can teach people how to take better care of themselves," Taylor says.
Idea No. 5:
End the nursing shortage crisis.
Sally Lundeen’s No. 1 recommendation for lowering health care costs is to put more resources into resolving the nurse shortage.
"The short supply of nurses in this area is clearly a part of what is driving up costs," says Lundeen, dean of the School of Nursing at the University of Wisconsin-Milwaukee. "I’ve seen a number of astronomical estimates that suggest (tens of millions of dollars) were spent in the Milwaukee area last year on nurse staffing agencies to get workers into hospitals to meet the need. Every time we find ourselves in a position where employers are paying very high recruiting bonuses and very high expenses for pool nurses, we are driving up costs."
Lundeen suggests some of that money would be better spent if it went toward expanding the capacity of nursing schools and colleges to recruit, educate and train more nurses.
Her second recommendation centers on good health and wellness, so that serious illnesses can be prevented whenever possible.
"In our current delivery of health care, we focus a huge majority of resources on acute care. That’s a very expensive place to intervene in health care issues," Lundeen says. "There have been hundreds of studies that would support the notion that for each dollar invested in prevention, we are going to save multiple dollars at the other end of the system in terms of care or intervention."
More opportunities for health education, community-based nursing in schools and churches, workplaces that promote more healthful lifestyles and earlier screenings for health problems – "those are the sorts of things that will reduce the total cost of care in Wisconsin, both in the short term and in the long run," Lundeen says.
Idea No. 6:
Cut rich benefit packages.
What can a small business do to tackle health care costs?
It’s a question asked daily of Jon Rauser, owner of The Rauser Agency, a Milwaukee-based insurance agency that concentrates on the small-group market.
No wonder his advice is in constant demand. The latest trends suggest small companies in the Milwaukee area will face a minimum increase in health insurance premiums of 18% to 22% in 2003.
However, small-business owners have more options than they realize. As Rauser sees it, the largest obstacle many businesses face in finding affordable insurance is a reluctance to cut back on their "rich" benefit packages.
"Even with the premium increases and all the complaining, some 60% of the groups we talk to are still offering very rich health plans with $10 co-pays," Rauser says.
That reluctance to cut benefits, require employees to pick up more of the cost and limit provider choices is partly to blame for a spike in the demand for health care services, he says. And that increased demand is a reason why health care has become unaffordable for so many, Rauser says.
A recent report by the Wisconsin Hospital Association (WHA) suggested something similar, that the impact patients have had on rising insurance premiums "cannot be underestimated."
According to the WHA, the number of prescriptions used per person per year increased 94% between 1995 and 2000; doctor visits – including outpatient surgeries, lab and radiology – jumped by an average rate of 9% between 1995 to 2001; and hospital services in total have increased an average of 2 % per year since 1995.
All have been factors in rising insurance costs, the WHA report said.
Employers serious about lowering their health care costs must consider cutting back on benefits. Offer employees a health plan, but one that requires employees to pay more of the premium themselves, as well as higher deductibles and co-pays, Rauser recommends.
"I don’t mean to sound flip about it, but if you want your insurance costs to go down, then buy less insurance."
Idea No. 7:
Buy generic drugs.
As a pharmacist, John Jankowski sees many ways consumers can lower their out-of-pocket health care expenses.
Jankowski is co-owner of Ye Olde Pharmacy and Wellness Center, an independent pharmacy in Cedarburg. He bucked the trend by opening an independent pharmacy four years ago at a time when many independent pharmacies are closing their doors or selling out to big national drugstore chains.
One thing Jankowski appreciates about being independent is the range of health and wellness services he can offer in addition to traditional prescription filling.
He likes to think his independence gives him more freedom to spend adequate time answering his customers’ health-related concerns.
When patients ask how they can lower their health bills, Jankowski first advises to buy generic whenever possible.
Many patients insist on expensive brand name drugs because they’ve seen those drugs advertised on television or in magazines. While there are cases in which the brand name is the most appropriate treatment, many more patients could be served just as well with a less-expensive generic drug if their physician agrees.
In addition, some physicians will prescribe medications in higher strength tablets, then advise patients to cut the pills in half to get the proper dosage and save on prescription costs.
Patients should ask their physicians whether that is a good idea for them. While that can save money, Jankowski cautions patients never do so without their doctor’s advice. Not all pills are made to be cut in two. Also, patients who divide a pill without the doctor’s permission may not be get the proper dosage.
Maintaining good health clearly saves money, which is why Jankowski advises patients to use pharmacies that emphasize pharmacy care management, wellness services and free or inexpensive health screenings for high blood pressure, cholesterol and diabetes.
Pharmacy care management programs help patients monitor their health regimen: their medications, health screenings, diet and exercise programs. For a nominal fee, the pharmacy will help the patient maintain a computerized health care profile that is shared with the patient’s physician.
Idea No. 8:
Run health care systems more efficiently.
Paul Dell Uomo, president and chief executive officer of Covenant Healthcare System in Milwaukee, shares some examples of how Covenant is reducing costs internally as well as in the greater community.
First and foremost, the "grand slam solution" to lowering Wisconsin health providers’ costs is to persuade Congress and the state Legislature to change Wisconsin’s low reimbursement rate under Medicare, Medicaid and other government-funded health care programs, says Dell Uomo, echoing the concerns of other Milwaukee-area health care executives.
That gap in reimbursement results in hospitals shifting more costs onto patients covered by private insurance.
Dell Uomo says Covenant’s own cost-cutting strategies run the gamut, starting with a fiscal accountability program implemented at each Covenant hospital. The hospital’s financial officer reviews the plan for efficiency each month.
In addition, the system is developing a "strategic alliance" with Waukesha-based GE Medical Systems to help the project and lower Covenant’s high-tech equipment expenses.
As one of Wisconsin’s larger employers, Covenant also is lowering the health care bills of its own workforce of 9,200 employees. As an example, the system recently changed its benefits plan to save on employees’ prescription drugs, which have gone up 47% over the last five years.
In jest, Dell Uomo says the fastest way to lower health care costs in Wisconsin is to convince its residents to "run five miles a day and stop eating brats."
Although he makes the recommendation in fun, his suggestion is based on the fact that Wisconsin residents are some of the most obese people in the country, and all that excess weight is driving up the costs of medical care here.
Covenant offers to work directly with individual employers to assess the health of their workforces and address any problem areas. For instance, Covenant can help an employer set up a weightloss program for workers interested in slimming down, Dell Uomo says.
On a grander scale, the Covenant system enters into direct contracts with employers for hospital care.
However, the system also will contract directly with employers interested in managing employees’ chronic diseases, such as congestive heart failure or diabetes. When chronic diseases are properly managed, costs are lowered by preventing or minimizing hospitalization, an expensive form of care.
Idea No. 9:
Use MSAs to get patients thinking like consumers.
Employers can help control their health care bills by motivating their employees to think like consumers, suggests Mike Kellen.
The idea may sound like common sense, but the power of consumerism remains untested in health care.
"Employers of all sizes should get more responsibility into the hands of the end customer, the patient or employee," advises Kellen, senior vice president and chief actuary for small group products at Fortis Health, the Milwaukee-based health insurance company.
Fortis concentrates on small group and individual health insurance products.
As percentage of annual premium increases for traditional health insurance continue to soar in the double-digits, more employers are requiring employees to pay more of the company’s health costs.
If done in the right way, that cost-sharing can encourage employees to ask about price when they seek medical attention, Kellen says. Cost-sharing products also discourage unnecessary trips to medical providers.
Kellen suggests employers look at options such as medical savings accounts (MSAs) and health reimbursement accounts (HRAs).
Through the use of MSAs or HRAs, a typical group can expect premium savings of 30% to 40%. Both plans offer flexibility in plan design, as well as tax advantages.
In November, Fortis, a leader in the sale of MSA products, announced the availability of a new MSA product designed specifically for groups of three to 50 employees. The plan is offered through the John Alden Life Insurance Co., a Fortis subsidiary.
MSAs involve two components: a high-deductible medical insurance plan and a tax-favored savings account, which is set up to pay qualified medical expenses. Either the employer or the employee can contribute to the account.
Employees can use the MSA funds to pay deductibles and qualified medical expenses, including those not covered by the major medical insurance plan. Savings roll over from year to year and eventually can be used after age 65 to supplement retirement income.
Unlike HRAs or flexible spending accounts, the MSA is portable, meaning the employee can take the fund with him if he leaves the company.
Kellen acknowledges that the consumer-driven model in health care has its limitations, because patients don’t have easy access to comparative quality and cost information.
However, as consumers become more responsible for paying more of their health insurance and medical bills, they will demand health care providers to give them cost and quality data.
"Health care is very expensive, and the plans I’ve talked about will help consumers to be concerned about the cost in a way they haven’t in the past. And that will have an impact on the marketplace," Kellen says.
Idea No. 10:
Increase Medicare/Medicaid pay to Wisconsin providers.
Dick Rau’s blueprint for health-care cost containment starts with the government.
As chief executive officer of the Mount Carmel Nursing Home, Greenfield, the largest nursing home in southeastern Wisconsin, Rau sees every day how the current funding formula for Medicaid and Medicare results in cost shifting to the private sector.
"One of the reasons health care costs are going up for the general public in long-term care is the fact that the government doesn’t pay its fair share for individuals in the Medicare and Medicaid programs," Rau says. "The medical costs not covered by the governmental programs are picked up by others, whether that’s the private insurance companies or people who pay out of their own pocket."
That cost shifting is a hidden subsidy, and that’s the real problem, as Rau sees it.
"As state budgets continue to deteriorate, the situation will only worsen, which will artificially inflate the cost of non-governmental health care costs," Rau says.
Medicare is the federal health insurance program for people 65 years of age and older. The program helps pay for hospital stays, some physician charges and limited stays in nursing homes for rehabilitation purposes.
Medicaid is the federal-state program that helps pay for health care for the needy, the aged, the blind and the disabled and for low-income families with children. The state determines eligibility; the federal government reimburses a percentage of the state’s expenditures.
About 70% of the 43,000 people living in Wisconsin nursing homes are covered by Medicaid, according to the Wisconsin Association of Homes and Services for the Aging.
In 1999-2000, nursing homes’ Medicaid losses averaged $11 per day per resident, which translated to an annual loss per nursing home of $250,000 per year. The state’s Medicaid payment ceilings in 2000-2001, measured as a percentage of costs paid, were the lowest in the United States, according to the association.
The federal reimbursement to Wisconsin nursing homes for Medicare, which pays a smaller portion of nursing home residents’ costs, also is among the lowest in the nation.
Rau encourages private citizens to try to persuade their federal and state lawmakers to try to obtain a more competitive funding formula for Wisconsin. He also says the state should close loopholes in its laws that allow people to divest their financial resources to qualify for Medicaid funding when they move into nursing homes.
"What this does is inflate the Medicaid rolls," further contributing to the state’s overall budget woes, Rau says. "A lot of people look at Medicaid as an entitlement, rather than the welfare program that it really is."
Dec. 20, 2002 Small Business Times, Milwaukee
