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No reform proposal addresses the core problems of the nation's health care system, says Chandler J. Rapson, president and chief executive officer of Lakeland, Fla.-based First Service Administrators Inc. Health care reform must address networks that hamstring the ability of regional insurers, third-party administrators and self-insured employers to contract with enough quality providers to make serving an individual market financially feasible, he says.
The rhetoric continues to flow on how health care reform will increase insurer competition and drive down costs for care and coverage. It will not, at least not in its current state.
None of the reform proposals addresses the core problems of the nation's health care system: insurer monopolies that have stifled free-market competition and the growing prevalence and severity of chronic conditions that consume the majority of health care dollars.
A single insurer controls the market in 56% of the nation's urban areas. In most states, one or two insurers control 90% of the market. Without competition to keep them in check, premiums have risen 120% during the past 10 years—nearly triple the growth rate of inflation and quadruple the growth rate of wages.
Unfortunately, no public option will change this. Because it wouldn't be available to an estimated 85% of the population, any public option as currently written is unlikely to have a significant competitive effect. With nothing to threaten their lock on individual markets, there is no impetus for private insurers to change their practices.
To succeed, health care reform must address the root cause of rising premiums and declining coverage—networks that hamstring the ability of regional insurers, third-party administrators and self-insured employers to contract with enough quality providers to make serving an individual market financially feasible.
Insurers are not forbidding providers from participating in competing networks. Rather, their dominance forces providers to accept contracts with most-favored-nation clauses. These require providers to match any higher discounts they may give to new insurers to join their networks. For providers, the cost of expanding their patient base is simply too high to bear. The big player keeps its hold on the provider and the competitor goes away, along with any incentive to keep premiums down.
Thus, instead of introducing the government as yet another dominant insurer, reform efforts should focus on restoring free-market competition through mandates designed to level the playing field. These include outlawing the use of most-favored-nation clauses and establishing a federal any-willing-provider mandate, precedents for both of which can be found at the state level. Both would reduce the choke hold that dominant players have on individual markets by giving providers the flexibility to join additional networks to increase their patient base.
At the very least, reform legislation should address the need for transparency in contracting, which would place insurers, TPAs, self-insured employers and even providers on equal footing in contract negotiations.
The restoration of free-market competition would go beyond eliminating the monopolies that have allowed insurers to focus more on profits and market share than on ensuring their networks deliver quality care. It also would pave the way for empowering consumers to choose payers and providers based on quality and preference rather than solely on price.
The second core problem is that the health care system is breaking under burden placed upon it by the increase in chronic conditions, which consume 75% of the nation's $2 trillion in medical costs. An estimated 125 million U.S. residents have at least one chronic condition, and that is expected to climb to 171 million people by 2030.
It is a preventable epidemic that also affects business. An analysis by PricewaterhouseCoopers L.L.P. found that productivity losses associated with workers who have chronic conditions are as much as 400% more than the cost of treating those diseases, and individuals with chronic disease account for approximately 40% of total lost-work time. Clearly, the majority of disease management and wellness programs are not working.
Nothing in reform proposals addresses this problem. In fact, by subsidizing coverage for everyone and eliminating any differentiation based on preexisting conditions, the situation will worsen. There would be no penalties for those who choose to lead unhealthy lifestyles that exacerbate their chronic conditions, and no reward for those who take the steps necessary to prevent or control them.
Some proposals designed to finance reform efforts, such as capping annual flexible spending account contributions at $2,500 and scaling back eligible expenses, are likely to affect consumers' ability to afford medications and other prescribed therapies to control their chronic conditions.
Medical costs will continue rising along with the prevalence and severity of chronic conditions. Not even “Cadillac” insurance plans can change that. It requires wellness and disease management programs that are truly effective at driving necessary change in consumer behavior.
I am not proposing that the government dictate how much a person weigh or the number of minutes they exercise. Rather, reform legislation should fund initiatives that support deployment of wellness and disease management programs that are based on a proven model that utilizes predictive modeling, early intervention, and personalized education and support. Effective programs also maximize individuals' engagement in health care by providing incentives for them to manage their chronic diseases.
Some possible initiatives include:
c Funding the establishment of national or regional clearinghouses of patient and claims data, which has personally identifiable information removed, for population-based risk assessments and predictive modeling;
c Providing financial assistance to employers, providers, communities, etc. for to establish wellness programs;
c Establishing an outcome-based incentive program to reward providers for wellness care;
c Providing tax credits or subsidies to consumers to offset the cost of smoking-cessation or weight-loss programs, fitness club memberships, etc.;
Investing a small fraction of the estimated $1 trillion cost of health care reform into funding proven wellness initiatives would save a significant portion of the $1.5 trillion consumed by chronic conditions—hard dollars that could offset other costs associated with reform.
As the president and chief executive officer of First Service Administrators Inc., Chandler J. Rapson is responsible for the overall direction and leadership of the company. His duties include strategic planning, revenue growth management and expansion of the Lakeland, Fla.-based third-party administrator's market share. Mr. Rapson has more than 15 years of experience in the health care and insurance industries and serves as a board member for several organizations.