I’ve written previously about the blight of complacency that has descended upon employer-sponsored health insurance. Much of the growth of the unsustainable cost-curve experienced by employers and their employees arises from the complacency of benefit advisors, employers, and their employees.
Employee benefit costs—namely, healthcare—appear as the second largest expense item for many employers. Yet benefit brokers do not offer different plan options that are available to their clients during pre-renewal discussions, and, instead, proceed with the status quo. HR leaders, although not directly responsible for the bottom line, allow for premium rates to rise by double-digits, year after year, without consulting their CFO counterparts. And CFOs, instead of introducing new benefits to their employees, indicate that the changes would be too disruptive.
I realize these examples of complacency may sound accusatory. And it might be better to label the examples as passivity. Either way, exploitation soon follows.
Passivity is the acceptance of what happens, without active response or resistance. Most employees who utilize healthcare services or procedures are, by nature, passive. They visit healthcare providers and then blindly accept and adhere. It’s passive healthcare consumerism. And this approach, of blindly accepting, has proven costly.
In a study published by JAMA at the end of 2019, Dr. William Shrank conducted a meta-analysis and concluded that the estimated cost of waste in the US health care system ranged from $769 billion to $935 billion, approximately 25% of total health care spending. There were six categories of waste outlined within the study, including
- Failure of care delivery –
- Ineffective care EX: when an adverse event happens within a hospital
- Lack of adoption of preventive care
- $102 – $165 billion in waste, potential savings $44 – $93 billion
- Failure of care coordination –
- Unnecessary admissions and avoidable complications
- $27-78 billion in waste, $30 – $38 billion in potential savings
- Over-treatment or low-value care –
- Low-value medication usage, i.e. brand vs generic
- Low value screening, treatment, radiographic, end of life care
- $75 – $100 billion in waste, $13 – $29 billion in potential savings
- Pricing failure –
- Uwe Reinhardt: ” It’s the prices, stupid.”
- $230-$240 billion in waste, $81-91$ billion in savings potential
- Fraud and abuse –
- $50-$80 billion in waste, $20-$30 billion in savings
- Administrative complexities –
- Close to $250 billion
The above indicates that there is a range between $191 – $282 billion in savings potential, with $300-$400 billion in savings potential inclusive of administrative complexities. By addressing this waste above, there is potential to capture anywhere from 5% to 8% of total US healthcare costs.
Up to one third of the waste identified above– $257 billion to $340 billion–could be mitigated through patient engagement (which is the precise opposite of passivity). That includes over-treatment or low-value care and pricing failure. To help rid the US healthcare system of some of this waste, the American Board of Internal Medicine Foundation published the “Choosing Wisely” initiative that promotes patient-physician conversations about unnecessary, ineffective, and inefficient medical tests and procedures. The initiative advocates patients ask five key questions. Those questions are as follows:
- Do I really need this test or procedure?
- What are the risks and side effects?
- Are there simpler, safer options?
- What happens if I don’t do anything?
- How much does it cost, and will my insurance pay for it?
The above requires action—active engagement of patients and physicians. The healthcare system is one of the few systems in the country where consumers wantonly accept being forced into services or procedures, instead of pushing back and questioning the value of the decisions. I’m not advocating patients go against the medical advice of knowledgeable experts. The shared aim for all US health system stakeholders is to receive high-quality, low-cost care when it’s needed.
If patients, as healthcare consumers, do not change their passive approach, we can expect much of the same. Medical cost trends will increase by 5% to 7% per year, with no end in sight. Deductibles and out-of-pocket exposure will increase, while a larger and larger chunk of employee’s wages will be eaten by premiums. And notably, insurance carriers will record banner quarter after banner quarter. That is the definition of exploitation.
If patients can, however, adjust their behavior, remove their passivity, and become more engaged with their healthcare decisions, a sizable portion of wasteful spending can be mitigated. As a result of two significant regulatory effects–the No Surprises Act, as part of the Consolidated Appropriations Act, and the Transparency in Coverage Rule–patients will now be able to work alongside providers, identifying cost-effective locations and navigating to those facilities to receive appropriate care. Patients will now be able to leverage solutions, like TALON, to meaningfully engage within the complex healthcare system and make high-value decisions. This means billions of dollars can be saved.
As one of the authors from the JAMA article I had referenced earlier indicates, “Removing waste from US health care will require both awakening a sleepy status quo and shifting power to wrest it from the grip of greed.” The time is now to awaken the sleepy status quo.
-Mathew McCormick- Director, Partner Sales