Unleash the consumer

The high cost of health care continues to be a “top-of-mind subject for almost everyone,” according to Mike McCallister, president and chief executive officer of Louisville, Ky.-based Humana Inc. “Everyone has an opinion on health care,” McCallister says.

McCallister became the company’s CEO in 2000. He was recently in Milwaukee to speak to the Downtown Rotary Club about the nation’s broken health care system and what must be done to fix it.

“I would argue that right now we have no system at all,” McCallister says. To take control over the rising cost of health care, consumers need to be more directly involved in the process of consuming, of actually shopping for the best deal or bargain when it comes to choosing and using their own insurance coverage, he said.

During his recent Milwaukee visit, McCallister talked with Small Business Times reporter Alysha Schertz about the state of health care across the nation, and the roles that Humana and others need to take to cut rising costs. The following are excerpts from that interview.

SBT: Health care costs are a major concern for businesses. What is the key to keeping those costs down or at least minimizing the rate at which costs increase?

McCallister: “Well, first off, it’s not going to go down. I think the best we can hope for is for some control over growth. If we can get health care costs rising closer to the (consumer price index), I think we are largely where we need to be. Mostly, it’s about getting control of things going forward. We, as current users of health care, really aren’t all that connected to how we are spending money or what we’re spending it for. 

“Consumers are going to have to be in a position where they actually act like consumers, while they are being patients. The good news is that a huge percentage of health care can actually be planned for and thought out. At the end of the day, it is clear that health care is not connected, it is not organized and it is not designed to produce value in efficiency and productivity. So the question is, how do you design it in order to drive it, and one of the principles is that the consumer has to be at the core of that. Then you start working out from there. People are different. You can’t treat everyone and their coverage the same.”

SBT: Historically, Humana was one of the first companies to really focus on the consumer. What were some of the initial steps and efforts to take the market in that direction?

McCallister: “Well first of all, we have been all over health care for a very long time. In 1993, we exited from the hospital industry completely and focused on health benefits.  We have a real history of being around health care and seeing the evolution of various things. All that background led to the company in 2000 stepping back and saying, ‘Alright, we are going to win here if we can figure out how to help people rationalize this.’ We can see that the old model isn’t working and inflation is roaring back.

“So we looked at everything that had been attempted and realized the only thing that no one else had ever tried was to actually have the patient/consumer be powerful. So that’s how we put our stake in the ground. We were really fortunate though, because in the year 2000, we really started seeing the blossoming of the power of the internet, which is real-time, ubiquitous and basically free communication. If the consumer is going to be powerful, what they are going to need is information, and the capability to actually communicate with them was right there on our door step, so it was the perfect synergy of timing.”

Any thoughts on why costs in Milwaukee are so high in comparison with other cities? Does the consolidation of health care providers have any effect on the cost of health care?

McCallister: “Well, I would think it would be naive to think it wouldn’t, but I think it’s a combination of different factors. I said today in my presentation that 50 percent of all health care costs are driven by some form of behavior in people. Now, I don’t know what that means locally here, but I think it’s a combination of the system itself, probably some geographic implications, there may even be some demographic implications.”

SBT: The Business Health Care Group started here in Milwaukee in response to the high health care costs. Has that group seen some success since its formation?

McCallister: “From the previous two years, we have actually seen a decrease in costs among the groups that have joined the coalition. That decrease is probably going to be hard to sustain, but the point is that this group works. I haven’t run into another group that has had this kind of impact on its marketplace. Now you can go back many years. Business coalitions are not new. Most are pretty ineffective, but this group was pretty intent on making a change in the marketplace and successfully made it happen.”

SBT: What steps or tools has Humana taken or developed in order to alleviate some of the confusion for consumers when it comes to choosing and using their health care plans? How has the feedback been? Are the tools working?

McCallister: “Well some of it is process-driven. We have the electronic enrollment capabilities so people can log on and very elegantly sign up for their plans. There are tools built into that process to help them choose and pick things sometimes called the wizard. There are also tools around rolling into health savings accounts and other options as well as the Family Health Budget tool that can help people think through how they spend money. We have really made a lot available on the website that anybody can get to relative to their situations, what they have spent, where their claims are, a tool to keep broad context about what is happening.

“A good measure of how well it is working is to look at our retention rates. The consumers that have the smart suite tools available to them and use them to the greatest extent have the greatest retention rates. They don’t want to get out of it. It’s a nice measure of what a practical difference these tools make in a person’s life.”

SBT: What is Humana’s solution to addressing the increasing number of uninsured people in the United States?

McCallister: “Humana is not going to have a solution, and it’s not going to come from the payers’ sector directly. We are likely going to be a part of whatever that solution is, but it’s going to require a combination of public and private sector work to deal with the uninsured. A lot of it is going to have to be public policy type of things. The best thing we can do is have flexibility and be nimble around individual product offerings and have the ability to work with the government to figure out how they might fit into an overall solution, but that will not be enough. There are a number of things that are going to have to be thought through relative to the uninsured population.

“I’ll give you one of those things right from the start. A number, somewhere between 10 million and 12 million of those people, are illegal immigrants. We haven’t even addressed immigration policy, and somehow we are going to try to cover them for health insurance? That’s going to be interesting. Some of the uninsured are young people who have had the opportunity to purchase plans but they don’t think they need it, they don’t want to spend the money on it so they choose not to take it.

“Then you have people who do fall through the cracks, they’ve been laid off or they have pre-existing conditions, these are the people most of the horror stories are written about. So, it’s not a homogeneous group and the idea that you are going to pick up all these segments and somehow easily deal with that is not reasonable. So, it’s going to require some combination of public policy and the marketplace being able to respond to whatever these broader answers are. We will be prepared to do that no matter what decisions are made.”

SBT: Humana has begun to take a lot of preventative measures with health care. What are some of those incentives and programs?

McCallister: “Well, we use both carrots and sticks. The sticks are, for example smoking. For our own employees, if you are a smoker, you do not get the discount for being a non-smoker, meaning you pay more for your health care. That particular out-of-pocket cost keeps rising dramatically; we are trying to get people to basically knock it off with the program. So that’s the stick side of things.

“On the other side, we are implementing wellness incentive and reward programs, like the Virgin pedometer program where employees can wear a pedometer and earn points towards gift cards and other rewards. We are working pretty hard, and the innovation center is part of that, and our human resources people are constantly trying to figure out how you get people motivated to change their behavior. The bigger question is – is it working for us? I use my own company as an example. We have been at this for a very long time, this is what we do and we have been able to keep our own cost trends in our company well under check for quite a while.”

SBT: What do you see for the future of health care nationwide, as well as for Milwaukee?

McCallister: “I think everything I have described is going to come true. That’s what the marketplace is going to do. It is going to implement and execute on these ideas because they are the smart way to go about what has to happen. Now, having said that, there is going to be this overlay, because of what this industry is all about, of political noise and regulatory mis-adventures. It is just going to be a wild environment because everyone has an opinion on health care. I think in the public there is going to be a constant cacophony of conversation and debate about this. Maybe there is going to be some other really good ideas pop up, and that’d be great, but while we are looking for those and while all that noise is out there, I think the marketplace is going to march ahead with exactly these sorts of techniques and tools. We’re going to get progressively better at identifying what works and what doesn’t; therefore being in a continuous process improvement environment using all these new technologies and the new capabilities that are literally transforming the rest of the global economy. I think it’s going to be a real interesting future. It’s going to be very exciting.”

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