AIM (Associated Industries of Massachusetts) and National Federation of Independent Business (NFIB), and the Retailers Association of Massachusetts (RAM) recently released a study of Health Care Costs in Massachusetts. The report is based on a review by Freedman HealthCare (FHC) of nine recent studies of the Massachusetts health-care marketplace.
So it’s serious, well-documented stuff and it paints an uncomfortable picture.
They boiled it down to 14 points, but they split them – in my opinion unnecessarily – to make the report seem more voluminous. I’ve combined them into a fewer number of thoughts … and added my comments and suggestions.
Point numbers 1, 2, 3, 4, 6, 8 and 9 are really all part of one interconnected problem that can be summarized by the old saw, “the rich get richer and the poor get poorer.”
This is occurring despite the fact that the “highly thought of” institutions don’t necessarily deliver the best care. Jim Roosevelt, former CEO of Tufts, once told me that when comparing 1) “the premiere Boston Hospital” with 2) another large Boston university-affiliated hospital and 3) a local community hospital in Cambridge, the results were surprising.
There are six areas where hospitals report outcomes to the Federal Government. Having outcomes that exceed the 75th percentile gets a “gold star.” At that time, the “premier hospital” got FOUR gold stars … pretty good.
Interestingly, the other “university affiliated Boston proper hospital” got only THREE stars.
The cheesy little community based hospital in Cambridge? They got SIX stars. (That reflects Point #4 in the AIM list.)
To put this in perspective, recent maternity data showed that a normal delivery pregnancy at this same Cambridge hospital cost $5,800 vs about $20,000 at the Boston “name brand, world famous” institution that specializes in children.
A normal delivery. A $14,200 difference. Do you see a trend here folks? That supports point #8.
The Illogic of the Health Care Consumer
So here we have Federal data, not exactly secret, about quality of care – which includes outcomes, complications, readmission rates, etc. – that clearly says, “If you’re sick, you’re better off in Cambridge that you are at that world famous downtown hospital.”
We have cost data that says you’ll pay more than THREE TIMES AS MUCH to go to the world famous institution as you will at the community hospital.
Do consumers listen? Hell no. They parade in droves to the “name” hospital because “everyone knows it’s the best.” (Point #3 in the AIM list) Sorry folks, it’s not — at least not necessarily.
This is sorta like choosing to have a big butt because Kim Kardashian does. “It must be a good idea.” I call it “People Magazine consumer guidance,” and it runs rampant among the low information crowd.
Don’t get me wrong – I respect the name hospitals, most of which are academic, i.e. teaching hospitals (Point #6 in the AIM list). I just don’t respect them for the routine stuff that most of us are likely to get. I respect them for their ability to address the infrequent, highly unusual maladies that befall folks every now and then.
By their very nature, teaching hospitals start heavy breathing at the sight of an unusual disease. Heart attack because you have a clogged artery? Not so much. Med students can learn about bypasses and stents at any old hospital.
So if you have a disease that only seven other people have gotten this year, haul yourself to the teaching hospital. But if you need a stent or a repair for a shoulder separation, get over to your local community hospital. At least there the nurse will come to your room when you push the buzzer.
Points 2, 3 and 8 show the result of this “low-information-buy-on-the-reputation-not-the-facts” mentality. Reputation leads to higher market share, which leads to greater utilization, which leads to more pricing power, which leads to higher prices, which leads to higher premiums.
And the Consumer Gets the Shaft
I don’t like that subtitle. It makes it sound as if I commiserate with the consumer who makes that lousy decision. I don’t. Not at all.
Dummies get what they deserve … in this case higher premiums and higher deductibles, higher copays and even (almost non-existent until the last year or so) coinsurance (point #7 in the AIM list).
Employers may be required by the ACA to provide health insurance, but they aren’t required to go broke because of it. Businesses have a social responsibility to make a profit. That’s how they stay in business. That’s how they provide jobs. That’s how all of us live – by the continued success of our employer.
So as costs go up businesses – necessarily – pass more of the cost on to their employees. They don’t like it, but it’s a necessity of survival
But Businesses Aren’t Without Fault, Either
The small business isn’t blameless here, though. That’s you, dear reader. Most employers simply roll with the punches delivered by the health care system. (And you won’t find me reaching into the politicians’ bag of convenient lies, either – this ISN’T the fault of the carriers. It’s the fault of the system – which includes all of us: providers, consumers, insurers.
- FACT – Providers don’t care about controlling costs; they care about maximizing their income, which is as it should be in a free enterprise system. But it does add to the cost of health care.
- FACT – Carriers don’t care about “controlling health care costs.” At least not beyond a 12-month period. In that 12 months they want to control them because they have a contractually-projected income stream, and they want to be sure that claims are lower than premiums. Again, that’s as it should be … but it does add to the cost of health care.
- FACT – MA required that transparency be improved. That was back in, I believe, 2012. But where can you find info on relative costs? It ain’t easy. So our “guardians” in government have failed us (again) … it does add to the cost of health care.
- FACT – Employees, like most consumers, are lazy and spoiled. They’re also intimidated by doctors, hospitals and insurance. So they blindly accept the status quo, pay what they have to pay, and listen to demagogues trashing the system and suggesting “solutions” that won’t work as well as the current method … but will help them get elected. And it does add to the cost of health care.
- FACT – Today, employers have more opportunities than ever to be proactive in benefits cost control. But they take the easy way out … pass the costs on to employees via cheesier plans with larger deductibles, copays and coinsurance. Most are just plain afraid to “take a risk.” And it does add to the cost of health care.
You can’t directly control providers, carriers and employees, and you certainly can’t control government (our new masters). But you can control YOUR reaction, YOUR decisions, YOUR plan design.
BBI offers guidelines – we set up our first employer-controlled health plan in 1982, and we’ve been doing it since. Self-funded or fully insured, there are ways for you to take control of your own costs. Email OCare@bbibenefits.com to get your own copy of End Run Around Obamacare. It’s free and it has concrete ideas that will help you do your part to control your costs. Don’t be a wimp! Take charge of and responsibility for your costs!
Don’t Be A Wimp!
Take control of your health care costs. Studies show that you can — over a reasonable period — knock 4-10% off your health care costs.
What’s more, you can also lower the rate of growth – by HALF in one study – if you take charge of your destiny.
Email OCare@bbibenefits.com to get you’re your copy of “End Run Around Obamacare”.
Or call Jim at 978-474-4730. We’ll shoot it off to you right away.
The Fourteen Points
- Providers’ (Doctors, Hospitals and other care givers) price, not utilization of services, is the biggest cost driver in MA.
- Big gap between highest and lowest paid providers.
- Health care is mostly delivered in higher priced settings.
- High prices don’t correlate with high quality of care – i.e. highest paid providers don’t necessarily provide the highest quality care.
- Providers with the most public payer case mix get the lowest reimbursement, i.e. the government underpays.
- Academic medical centers charge more.
- Increasing provider prices have driven increased consumer cost sharing.
- Market share affects price, utilization, and available resources.
- Some feel that provider consolidation leads to higher, not lower prices, despite “promised” savings via integration and “efficiency.”
- Despite fanfare widespread adoption of global payments faces significant challenges, and there is little evidence suggesting global payments produce cost savings.
- Performance against the cost growth benchmark is mixed.
- Pharmaceutical costs have increased and will continue.
- MA is increasingly focused on behavioral health – high cost of behavioral conditions, clinical and administrative integration of care, and lack of good data.
- Price variations have widened and MA is recommends policies to reduce excessive price variation.
Posted in Health Insurance Cost