Over the Next Five (5) Years, What Will Be the Top Issues Facing Health Care?

Select opinion Leader's views on the industry's main challenges, Dec., 2001. Summarized from the American Association of Health Plans' website (http://www.aahp.org/). Pub. 3.15.02

1) Charlie D. Baker, President and CEO, Harvard Pilgrim Health Care
a) The rise in health care costs
i) New technologies (including devices, procedures, pharmacy)
ii) An aging population
iii) A more demanding patient population
iv) Provider financial stress
v) Retreat from full scale "managed care"
b) Practice variation and information fragmentation, failure to implement best practices.
c) Administrative complexity. We spend far too much time and money on administration, and not enough on service and care delivery.
d) Cures:
i) Do a better job generating information that can target support and service toward at-risk, high-cost members and their care providers.
ii) Clean up our act administratively with online tools, standard data definitions, and cleaner business processes, projected to save 5-10% of total health care spending
iii) Make more understandable information and better decision-support tools available to key constituents. More informed decision making by everyone will lead to much better health care at a much more competitive price.

2) Michael Cascone, Jr., President/CEO, Blue Cross and Blue Shield of Florida
a) "The forces of change include: the economic slowdown, rising medical costs, public policy issues, empowered consumers, E-business, and the financial services modernization act."
b) "Health care products with less active intervention as evidenced by the fact that HMOs are losing market share to PPOs."
c) In the recent past cost increases were absorbed "through strong profits and the tight labor market. In the next few years, this may change with lower profits and the need for fewer employees. Therefore, premium increases could result in reduced benefits including higher deductibles or alternatives such as defined contribution programs."
d) Finally, privacy also will be a major issue for the health industry to address.
e) Cures: "The evolving health industry demands new business models to bring break-through solutions. These new models will provide a different approach to medical care financing and will be shaped by further public policy actions."

3) Harvey Sigelbaum, President and Co-CEO, MultiPlan, Inc.
a) A major challenge facing the nation is "Significantly reducing the numbers of uninsured Americans… . and health plans must … . must be perceived as part of the solution and not part of the problem."
b) A second challenge … . is "to assure that consumers' interests are of paramount concern as emerging technologies become integral parts of our operations. "
c) Technology also is solving red tape and claims-related problems among insurers, providers, and patients.

4) Frank Colantuono, President and CEO, Independent Health
a) "Cost containment will remain the most important challenge facing health plans in the next five years. .. . This challenge will present … .significant opportunities to continually improve the quality of care."
b) "As employers push a greater share of their costs onto workers, I believe there will be a surge in… . consumerism,… . [which] would then give rise to an increase in technology and e-health, as more Americans search for on-line medical information and data."
c) "Americans will likely … .become more actively engaged in making important treatment decisions… . and Plans will have to … . step up their efforts to keep members informed and educated…. . [and] pay more attention to members' individual needs by customizing benefits, personalizing care, improving their responsiveness and problem-solving capabilities and implementing specialized information delivery systems."
d) "Given the similarity of products among plans, it will be the plans that provide superior customer service that gain the competitive edge."
e) "Disease management will evolve, with predictive modeling, care enhancement, and holistic healing all coming to the forefront."
f) "Electronic initiatives will create efficiencies in administration, improve access to care, reduce medical errors and accelerate medical research."
g) Health plans will also increasingly partner with physicians and providers to design a system that responds more quickly to patients' needs and provides incentives for those who embrace quality improvement efforts, prevention, and early intervention to achieve better health care.

5) Cheryl Scott, President and CEO, Group Health Cooperative
a) Critical Issues: Increased consumerism, affordability, and labor shortages.
b) "I believe that there will be a shift in the way health care is financed, driven in part by escalating costs and increasing fragmentation of our systems. The current financing structure takes the financing equation out of the hands of health care consumers and disconnects them from the cost of care."
c) "The latest IOM report highlights the fact that health care leaders and policy makers should make changes to focus on the 80 to 85 percent of total costs which relate directly to health care delivery. But ironically, the managed care backlash has made health plans extremely reluctant … .in part, because they don't want to be perceived as getting between the patient and provider. Unfortunately, for the next three to five years, we will live in parallel universes between what is possible and what is desirable.

6) Robert C. Hudson, President and CEO, AvMed Health Plan
a) "[F]actions in the health care delivery system have reached gridlock, with each interest group-health plans, doctors, hospitals, the pharmaceutical industry-attending primarily to its own financial interest. In terms of the process of social change, this is not necessarily a negative: … . in extremely complex systems, gridlock often is needed to force difficult decisions and effective action."

7) Gus Gamache, President, CEO, ConnectiCare
a) "balancing the issue of affordability of health care premiums while maintaining a high quality product."
b) "effective management of chronic disease in our member population."
c) "consumer and physician satisfaction and loyalty; and competition in a dynamic market economy.
d) "opportunities for us to differentiate ourselves-particularly through our approach to disease management, customer intimacy and physician relations."
e) "listening to our customers, and responding quickly to the market are key strategies to address these issues."

8) Maura Bluestone, President and CEO, Affinity Health Plan
a) "Can we achieve real improvements in health and health care for so-called "vulnerable" populations [public programs, namely, Medicaid, SCHIP and other initiatives that provide affordable coverage for the uninsured], given the political, regulatory, and programmatic environment in which public programs operate?"
b) "Our "system" of public coverage is a patchwork of programs, with varying eligibility criteria, benefit packages, rules, and sponsoring agencies. As a consequence, these programs are fraught with enrollment churning, discontinuity of enrollment, and fragmentation of coverage within families.
c) "What human and financial resources do we need to effectively respond to the needs of [ethnocentrically diverse] populations?
d) And, given political and economic realities, how likely is it that such resources will be available to us?"

9) Jane Rollinson, President and CEO, Medica
a) "The big issue we are grappling with today is: What should health plans indemnify? … .[W]e have better ways to care for people and an appetite … . that is insatiable. With advancements in the discipline of genetics brought about by stem cell research, does anyone really believe that either the options or the appetite will become more manageable?
b) Medical spending accounts and defined contribution products promote the segregation of risk. For employers, who are ambivalent today about their role as funders of health care, this allows them to attract healthy employees. Under these forces, is the employer likely to remain the primary funder of health care for working people and their families?
c) I don't think we can expect third parties to continue to pay for unlimited choice.
d) [W]e need to be far more innovative in making sure that our members and customers have access to the kind of information that helps them make good decisions for themselves, including funding decisions. We also need to equip them to participate in broader public discussion of these questions."

10) John W. Rowe, MD, Chairman, President, and CEO, Aetna
a) "The average increase in [health care costs in] 2001 was 12.7%, with an even higher jump expected in 2002. Employers … . will inevitably seek ways to share much of the responsibility with employees.
b) As consumers share more financial responsibility, they … . will be more informed, more knowledgeable, and more empowered about medical care and treatments, due in large part to the accessibility of easy to understand health information on the Internet. And, as they learn, they will demand more from the health care system.
c) In response, the industry is seeing a trend toward more consumer-directed health plans-such as defined-contribution models-that offer greater control regarding where and how their health care dollars are spent.
d) All of us involved in the purchase, access, and delivery of health care want to serve our customers well and eliminate hassles, restrictions, and frustrations. But quality of care presents more difficult questions-how to define it, measure it, and pay for it. Progress in this area will require consensus among providers, employers, health plans, and members."

11) Leonard D. Schaeffer, Chairman and CEO, WellPoint Health Networks
a) Health plans also have to find a way to improve business and professional relationships with physicians, hospitals, and other health care professionals, and in doing so, create mutual competitive advantages. The current animosity between those who finance and deliver health care is undermining the credibility and effectiveness of both.
b) Electronic claims processes and enhanced connectivity would lower administrative costs while improving efficiency.
c) [I]mprovements in online and e-based information systems will help members become better, more knowledgeable consumers of health care.
d) Finally, the industry continues to consolidate as a means of improving efficiency, increasing the diversity of products and maintaining the financial strength needed to pay claims on a timely basis.
e) However, we all recognize that health care is locally delivered and locally consumed. Day-to-day decision making must be focused in the communities in which the customer resides.

12) Personal View on Defined Contribution v. Defined Benefit Health Plans

DC will emerge and it will limit the pool of resources available to a predefined amount, it will make people more aware of the costs of health care and therefore reduce some discretionary care (like unnecessary ER visits), and it will work so long as people do not have catastrophic or chronic disease-types of costs.

a) DB: the employer or insured ‘buys’ coverage for a defined set of health related conditions. The average cost per person covered (ref.: Aetna’s Annual Report) in revenue per covered member is $130 (rounded) per month or $1560 annually. As an example, a family of four would cost more than $6,000 annually. To this, add that each taxpayer contributes a varying amount based upon their total earnings to the Medi tax, which in principle, is designated to provide coverage when one qualifies for Medicare.

A healthy person costs the system little for such things as minor or transient medical problems or eye exams). In a ‘community-rating’ sort of way, the actuaries have set the premium or charge rate so the revenue from the total pool of insured exceeds the expenses even for a person with a chronic disease or a major accident

b) DC: the employer pays to the employee a fixed amount for their health coverage each year. The amount paid over time will not be anchored on what the current insurance costs are in future years, but rather the employer’s budget (financial planning). Thus, the employers limit their expenditures and end up having their employees and their families share costs by shifting to larger co-pays and deductibles.

The amount paid to the individual employee goes to a personal savings account (so the person can’t just use the money for non-health care related expenses) and this account is tax preferred. The individual is able to make withdraws for qualified health expenses (sometimes covering other people), and invest the excess from any one year, the account can be rolled over, year to year and it will benefit from any financial gains from interest gained, etc.. A person who is healthy for 30 years could well build a nest egg of tens and perhaps hundreds of thousands of dollars. In concept, the law will allow these funds to be redirected to other qualified uses after a person is retired. Any surplus at the time of death becomes part of the person’s estate and goes to one’s heirs.

This sounds great for the young and healthy and it forces people to be involved in health care decision-making (managing their own health, so to speak). DC falls apart when costs are extraordinary. Should health insurance work for some and not others?

People in DB who currently fund the higher cost health plan participants will ‘bail out’ and leave those folks in a significantly differently defined insurance benefit pool. Costs for the traditionally insured, based on that new actuarial pool, will necessarily increase. Will employers elect to subsidize the exceptional, high cost cases? How does government respond to the people caught in the middle?

I have the impression that employers do not cover employees 70% of the time when they are retired at the age of 55 or 60. . Nor does our “system” for the 65 and older and ill pay currently for prescription costs in 80% of the dwindling number of Medicare-choice Plus plans around the country. Also, in our society, we do not tax or discriminate against those who make adverse lifestyle choices such as-smoking, sedentary behavior, high caloric or high fat diets, etc. In the final analysis, one cannot fairly ascertain if a given illness or condition was or was not avoidable. For example, genetics and luck may play a far greater role than choice in many cases. From the scientific point of view what is the cause and what is the effect? Epidemiology—the branch of medical science that deals with the incidence, distribution, and control of disease in a population—only approximates the contribution of risk factors. In other words, there is a huge gap between the epidemiologic assessment of risk on a population basis and the individual determination of causation of a heart attack or case of cancer, for instance

So, for these and other reasons, I am not sanguine about either choice – DB or DC.