Rising Healthcare Costs and Consumer Driven Healthcare

March 12, 2007

If you’re like me, you have heard the words “consumer driven healthcare” associated with lowering our healthcare costs from President Bush’s State of the Union to the healthcare debate in Congress…to news articles…etc…but I keep scratching my head and wondering when I’m going to read about HOW!

In our healthcare system, most are insured via their employers so to evaluate true rising costs we can use the rising healthcare premiums as a good proxy (hey, those carriers have armies of actuaries tracking this stuff). The good news/bad news is that in 2006 premiums rose more slowly than any other year since 1999. The bad news is, that’s still twice as fast as inflation and almost three times faster than salary increases. It doesn’t take Lou Dobbs to do the math on that one. And the irony is….this is good news as this is a lower rise than we have had in 7 years. Since 2000, health insurance premiums have gone up 87% while wages have only gone up 20%. Ouch.

In the 90’s the cost-saving strategy was to push everyone into HMO’s, thereby limiting access to non-essential healthcare by creating “gatekeepers.” While it worked for a short time, the general public did not like the limitations on access and the insurance carriers (who are ultimately businesses) plummeted in popularity. I recently heard a great talk by one of the senior executives of Great West, and he said today the insurance carriers have a favorable rating only 1% higher than the tobacco industry. So I wouldn’t expect any revolutionary or controversial strategies coming out of the insurance carriers anytime soon but they know better than anyone else that 7% of the US insured population is driving 82% of the healthcare costs.

So where will good ideas come from? At this moment, it seems two places: State Governments and employers themselves. No one in the industry thinks the federal government will act before the 2008 elections, so it’s left to individual state’s to take action. Massachusetts and California are leading the way with mandatory health insurance requirements for their citizens (Mass has already passed, and CA is considering). Watch what CA does, as they will likely set the tone for the debate in Washington after the 2008 elections.

Employers, on the other hand, seem to be focusing on health and wellness initiatives to address that 7% of the population that is driving the majority of the costs. If you can’t limit access through HMO’s or national waiting lists, then you have to try and solve the problem another way…make people healthier. I applaud this route and will look for some great anecdotes to share on how employers are trying and succeeding to help their employees get healthier. Does anyone have some good ones to share?

So back to consumer driven healthcare. In simple words, the hope for consumer driven healthcare comes from the simple notion that putting responsibility for expenses and decisions back into the hands of the consumer will result in more rational utilization of resources. In other words, make employees pay a greater share of their costs, and they will become more informed about what they need. Create high deductible plans, let consumers put money into HSA’s, put consumers on the hook for the pain of over-spending. Great in theory, but the reality of this means consumers need HELP making more informed decisions. They need information about everything from costs, provider quality, options for expensive hospital visits, access to preventitive care, etc….and where will this great data come from?

Well, as far as I can tell, I’m not seeing it come from carriers, employers, or governments….but rather data-driven internet businesses like us. Take a look at www.mymedicalcontrol.com where you can actually get help negotiating better rates with providers (e.g. if you walk into a hospital from the street and pay in cash, you will pay an average of $3 for every $1 Medicaid would have spent on the exact same care). We at BRINGO can help consumers make good decisions about finding general dentists in their area rather than wait for a dental emergency to strike. Other sites are working (like we are) on developing some good cost comparison information. Of course, you’ve all heard about WebMD and their focus on content. www.realage.com does a great job of helping individuals better understand their own health IQ.

So while the healthcare debate heats up in Washington, across the state capitals, in corporate boardrooms, on the campaign trail and on TV, some of us folks are trying to make sense of “consumer driven healthcare” by providing our consumers with more information and the ability to make better decisions. Good old-fashioned American entrepreneurism may help lead the way to controlling healthcare costs.

Anyone else have good examples of health care ingenuity at work?

Signing off for now…

-Mark

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