Here is a conversation between an insurance agent and a business owner that I’d love to hear:
“Well, Mrs. Jones, you’ve had a bad year, health-wise. The actuaries have looked at the medical history of your employees, they’ve looked at the age of your work force and other factors. What with medical cost inflation and all, we’re going to have to offer you a 12 percent price increase.”
“I don’t care about that.”
“Now, we can try to get more people to use generic drugs and maybe raise the co-pay, maybe charge a higher premium to family members of employees, but any way you look at it, it will cost 12 percent more for the same coverage.”
“I said I don’t care about that.”
“You don’t care about the premium?”
“I don’t want to talk about the premium.”
“Uh. Well. That’s a first. What do you want to talk about, Mrs. Jones?”
“I want to talk about why it is that I paid your company thousands of dollars over the past year and in return I got a bunch of employees with out-of-control diabetes, employees who were admitted to the hospital two and three times for the same condition, employees who are constantly taking sick leave, employees who are working at less than their productive capacity because their health is not as good as it should be.”
“I don’t think that Goliath Insurance is really equipped to have that conversation. You pay us to take the risk that someone in your work force will become sick or injured. We pay the health care providers to deliver the care.”
“What I need is productive workers. Unhealthy workers, workers who don’t get adequate care are not productive. I can tell you exactly how much an improvement in productivity will improve my company’s profitability. You show me how you will help create a more healthy, more productive work force, and I’ll tell you what that’s worth to me. Then we’ll talk price.”
“I’ll get back to you.”
Employers pay about 60 percent of the nation’s more than $2 trillion annual health care bill. The Robert Wood Johnson Foundation says that 30 percent of that money goes to “services that may not improve people’s health.” Adults get recommended care only about 55 percent of the time. Children get recommended care 46.5 percent of the time. Nearly half of medical tests ordered are unnecessary or produce no useful information.
There are many reasons for such waste, including inadequate sharing of information among providers, uncooperative patients and an absence of scientific knowledge about what works. One of the biggest reasons is that the way most health care providers are paid provides few incentives to improve quality and many incentives to provide as many services as possible.
Hence my fantasy conversation. When the people who pay the bills demand a really good product for the money, health care quality will improve and costs will go down. Instead, most employers talk premiums and benefit design with insurance people.
Most employers and insurance companies are locked into their annual wrestling match, but not all, said Harold D. Miller, executive director of the Center for Healthcare Quality and Payment Reform and president of the Network for Regional Healthcare Improvement. Miller was in Albuquerque last week to talk about how businesses can help improve health care quality. He was hosted by Aligning Forces for Quality, a Robert Wood Johnson Foundation-funded program that is managed locally by the New Mexico Medical Review Association.
Blue Cross and Blue Shield of Massachusetts is helping employers set up five-year agreements with providers offering payments that are adjusted for the health care risks a patient is running and includes bonuses for improving quality. The Blue system in Michigan is helping providers set up systems of practice designed to improve quality. CareFirst, an insurance company in Maryland, calculates how much money improved care reduces costs, then shares the savings with providers. A coalition of Minnesota employers has tried contracting with providers to lower costs and improve care, although the effort ran aground on insurance company opposition.
At the national level politicians have argued over how the health care bill is paid. People like Miller contend the better idea is to define what constitutes good health care, then pay a fair price to get it.
Miller suggests that if employers are to get a quality product they have to stop having an annual conversation with their insurance companies and start executing five-year agreements with flexible pricing. That gives health care providers enough time to change what they do and the assurance of a revenue stream that will pay for investments in technology that better quality care will require.
Miller identifies a number of obstacles. Large businesses and coalitions of small businesses have to lead the way since a small or mid-sized company doesn’t have the clout to attract an insurer’s or provider’s attention. Business managers have been “acculturated to the notion that their job is to pick a health plan and that the way to lower cost is competition among health plans.”
Pricing schemes must also properly allocate risk, he said. Insurance companies should be paid adequately for taking the risk that an employee will become catastrophically ill. Providers have to take the risk that the care they deliver will be appropriate.