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Jan
2

A response to a physician’s rant about health care costs…

I was reading a blog from a practicing generalist, who was making the point that health care costs are increasing due to technology, and that this was benefiting patients. There were no statistics to confirm this (longer life expectancies, better survival rates, improved functionality), but I take his point. There is no question technology is improving many people’s lives.
However, technolgy can be a two-edged sword, especialy for those who get a false negative or positive on a prostate cancer screen, and take/don’t take action based on what is acknowledged to be a very poor test.
As one from the “payer” side, I’d recommend we take the argument on health care costs a step further. Like it or not, employers pay a significant portion of health care costs, both directly (premiums) and indirectly (cost-shifting for uninsured, FICA taxes, income taxes, etc.)
The real issue employers have with health care costs is they have NO sense for their return on the investment. And that is the fault of the medical and managed care communities. Employers carefully assess each investment into plant and equipment, personnel and training, investment options and new products. They calculate RoIs carefully, assess performance constantly, and get as comfortable as possible with an expenditure BEFORE they make the investment.
Think about health care – what do employers get? Happy employees? Rarely – health insurance is a terrible “good” – people only use it when they are ill or injured, it is convoluted and difficult to understand, and they have to pay for part of it too!
Actually, what employers SHOULD be thinking about is the demonstrated ability of a health care provider to “deliver” healthy, fully functional employees and families, thereby enhancing productivity and, therefore RoI. Health insurance is an investment in productivity.
If we can evolve to this way of thinking, much of the present bickering about health care costs will end. Sure, there will be arguments about impact rates, who delivers what benefit, and what evaluation methodology makes the most sense, but that will signal we are talking about the right things.
So, the next time someone complains about charges, costs, or premiums, ask them how that “good” will help them function. They won’t know the answer, but perhaps they’ll start thinking about it.


3 thoughts on “A response to a physician’s rant about health care costs…”

  1. “The real issue employers have with health care costs is they have NO sense for their return on the investment.”
    Exactly. And I would apply your comment specifically to the fastest-rising costs in our plan – inpatient hospital, pharmacy, and imaging. We have an older average-age group so “high” costs aren’t completely unexpected. But why does our spend increase so much, every year? Are new drugs and new technologies expected to improve medical outcomes and/or avoid other medical expenses? If not, what is their justification?
    I can quantify the facts of more services and higher charges. There do not appear to be any data that show “better outcomes” for patients than if new technology or drugs were simply not available – or that use of the newest pharmaceuticals and modern imaging offsets costs that otherwise would have been incurred if the new or the modern simply did not exist. Why aren’t such data available?
    “And that is the fault of the medical and managed care communities.”
    I’d add two more to that – add our employees’ demands that every freakin bill be paid at 100% and that the employees’ premium should be zero; and add our state’s plaintiffs’ bar. The probability of lawsuits and labor unrest scare away our senior management from steps that could restrict the use of technologies (steps that are taken for example in the UK or in Canada, or other nationalized systems). The alternative is to manage the benefits plan by its budget: how much can we afford to buy this year? Then retrofit benefits to this year’s budget – and duck.
    . . . a bass-ackwards strategy that can be described without laughter only when the constraints are understood.

  2. The notion that employers are the ultimate payers for health care costs is a fallacy.
    Employers provide health insurance only due to a historical accident (the need to bid for workers during World War II when salary increases were restrained by government wage controls); and due to the not necessarily rational tax law (that gives employers a deduction when they pay for health insurance, but do not give workers a deduction if they pay for it.)
    The money employers use to pay for health insurance is presumably money that would go to workers’ salaries were the tax incentives (and perhaps the history) different.
    It makes more sense to think of health care insurance as paid by patients who forego wages in order to get health insurance.
    It also makes no sense to think about return on investment for health insurance other than as the return on investment for paying wages.
    It is the individual worker who needs to think about the value of his or her health insurance given the wages foregone to pay for it.
    (See similar posts on MedRants about this subject:
    http://www.medrants.com/index.php)

  3. “The notion that employers are the ultimate payers for health care costs is a fallacy.”
    Yes. Of course it’s a fallacy. Just as it’s a fallacy that corporations pay for anything – cost of materials, manufacturing, taxes, whatever. The consumer pays for it all. But that epiphany does nothing to help employers manage the benefit plans for which they are responsible.
    Corporations and other benefit plan sponsors function as wholesale purchasers of health care on behalf of employees. This entails responsibility both to the corporation and to employees to make good purchase decisions. That is why I asked “Are new drugs and new technologies expected to improve medical outcomes and/or avoid other medical expenses? If not, what is their justification?”
    And that is also why it is so frustrating to me to be unable to obtain information that can answer that question.

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Joe Paduda is the principal of Health Strategy Associates

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