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A Most Unhealthy Market
The state of the health-care market has left doctors, insurers, drug producers and consumers pointing fingers at one another
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Business New Haven
9/30/2002
By: Melissa Nicefaro
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Traditionally, health-care benefits have been almost as important as salary to prospective employees in choosing a place to work. Now, as the cost of health-insurance premiums is commensurate with a sizable proportion of salary, it is the whole package that is up for consideration.
And that chunk may grow even more, as health-care costs overall are anticipated to grow by about 13 percent this year.
What is driving double-digit increases in health-care costs? It depends on whom you ask. Health insurance companies blame increasing pharmaceutical and drug costs. Consumers blame HMOs. And everyone seems to blame consumers.
Ellen Andrews, director of the Connecticut Health Policy Project advocacy group, says consumers will be the ones to suffer as prescription drug prices skyrocket to support the costs of developing new drugs. She says managed care never really did a good job of managing care.
We got all the fat we could out of managed care, says Andrews. Providers have been cut to the bone and are basically starting to negotiate back even harder.
So costs are going up, hospital rates are going up and people are getting older and in need of ever-escalating levels of care.
Consumers have been insulated against cost increases in the past, explains Andrews. They pay the same amount, whether they go to an expensive doctor or a cheap one. Or whether they go to an expensive hospital or a cheap one.
Consumers have never had much opportunity to price-shop, but many insurance companies and employers are now looking into tiered rates. It s about how consumers can put some skin in the game, Andrews says, and there are various ways to do that. Many are just excuses to offload responsibility, but others have real potential for giving consumers some voice and control.
The choices most consumers have faced before have been to have a cheaper plan with fewer benefits ‹ or a more expensive one with more benefits.
As Andrews says, you ve never had a choice of, Do you want to have your baby at this hospital or the other one?
If it s a normal pregnancy, it really doesn t matter, but consumers might make a different choice based on cost, Andrews says.
Something else that has the potential to lower health-care costs is education and, by extension, prevention.
Managed care is only beginning to get into things such as disease-management, Andrews says. The state of that industry is very new, but it has real potential to cut costs.
The idea is to start preventing sicknesses through disease-management and wellness programs, a concept that is taking ground.
I think there is an understanding that a small amount of people use the vast majority of resources, Andrews explains, so if you can get to those people who have chronic problems such as asthma, diabetes, high blood pressure, and get them under control so they can stay out of the hospital and they re using appropriate drug therapy, and changes in lifestyle, you can have a huge impact on the bottom line. The challenge would be keeping people healthy.
Hartford-based Aetna is attempting to nip costs in the bud through prevention.
We understand that the population is aging and more people are living longer, so we are preparing for that with preventive care, says Fred Laberge, Aetna s assistant vice president of public relations.
If you can educate people about proper diet and exercise and looking for the early signs of health problems, it improves their chances for success in not getting sick and it reduces the cost associated with getting sick, adds Laberge.
If people are educated about health, they ll be aware if the potential for diabetes, heart problems, asthma or other diseases is high.
We certainly are aware that people are living longer and one of the ways we can pass on managed medical costs is by providing people with information that helps them make good health decisions, Laberge says.
Aetna gets the prevention word out through mailings and online access to information through InteliHealth.com, a joint project with Harvard Medical School. Aetna, like most other insurance companies these days, also provides screenings and reminders for annual physicals or mammograms.
Laberge agrees with Andrews that health-care costs are going up in large part because of increasing drug and pharmacy costs.
He says: The health-care industry is changing rapidly. Consumers want more control over their own health care. They want products that give them control of the benefits that they have, and they want more information about the health care they re being provided through the doctors and hospitals. They want to make more informed choices.
Education, prevention and making informed choices do not mean consumers are any less behind the proverbial eight-ball.
Costs have gone up a great deal and employers are generally not in a position where they can absorb these double-digit increases in costs without passing the increases on to consumer premiums.
The economy is not good, and quite frankly, employers don t have to [foot the bill] because the labor market is a lot softer than it was before, Andrews notes. Employers can pass those [costs] on and still not lose the treasured employees.
But increases will be found across the board: in premiums, co-payments and higher deductibles. Small businesses will continue to be much harder hit than unionized and larger employers since they have more leverage and protection for employees to insulate themselves to one degree or another.
Taxpayers will also be increasingly affected as more people lose insurance coverage and the number of uninsured is growing and costs are being shifted onto public payers and private payers.
The public sector is going to see a lot more of the effect, especially as costs are shifted onto consumers and benefits are denied, Andrews says.
If a provider no longer offers mental-health care and a consumer needs that care, the latter will go to a state-operated facility for treatment. So taxpayers are going to pay more, providers are going to pay more, employers are going to pay more and HMOs are going to pay more.
An Exception to the Rule
New Haven s largest employer, Yale University, has too felt the blow of rising pharmaceutical and drug costs.
Yale offers five medical plan choices to its 12,000 employees (including university staff and faculty) where most employers would offer only one or two choices. It offers two HMOs: Yale Health Plan, a captive staff-model HMO, and the BlueCare HMO.
According to Yale s director of benefits, Kenneth Korsu, 75 percent of employees belong to the staff-model plan. All doctors that work for the HMO are Yale employees, but they contract out for special services. Many of those doctors are at the Yale Medical School. The plan is offered free to all employees, although there are co-pays.
For example, Yale offers its clerical and technical employees fully paid medical insurance for employee, spouse and dependents under the Yale Health Plan. Three alternate plans are available, two on a contributory basis under which employees pay a share of the cost. Yale also offers a dental program free to employees and at a minimal cost for family members.
Korsu says Yale employees have been relatively safe from the rocky health insurance market, but, If you have something other than a single membership in the Yale Health Plan, if you have dependents, as many of our employees do share in premium cost-sharing, the costs go up. So it has been affecting everyone in those cases.
He knows cost increases have been double-digit. And we expect that to last for the foreseeable future. Pharmaceuticals are going up about 20 percent per year, Korsu says.
Another distinguishing factor between Yale and most other employers, aside from the city or state, is that Yale provides retiree medical benefits.
There are almost no private businesses or public companies offering retiree medical benefits, Korsu notes.
Yale, although in a different situation with an in-house HMO, complete with doctors and a hospital, is still trying to come up with more creative ways of buying medical care services.
That s the avenue that we re choosing to approach, Korsu says. That is, how can we provide the same level of medical care coverage through more creative plan design and purchasing initiatives?
Korsu believes it s part of Yale s philosophy and part of the academic philosophy of Ivy League colleges to have excellent benefit programs for its employees.
In addition to substantially free health care, if employees choose the home-grown HMO, those falling in the management and professional tier, the level above clerical and technical employees, are entitled to 22 vacation days, 12 sick days, four personal days and 14 holiday or recess days annually.
Links to a few helpful web sites:
Agency for Healthcare Research and Quality www.ahrq.gov
Center for Medicare and Medicaid Services www.hcfa.gov
(formerly the Health Care Financing Administration)
Connecticut Oral Health -- www.ctoralhealth.org
A program of Connecticut Voices for Children
Connecticut General Assembly Homepage www.cga.state.ct.us
Connecticut Managed Care Ombudsman www.omc.state.ct.us
Connecticut Medicaid Managed Care Council www.cga.state.ct.us/ph/Medicaid
Connecticut Department of Insurance www.state.ct.us/cid
Connecticut State Homepage www.state.ct.us
Healthnet - Connecticut consumer health www.library.uchc.edu/departm/hnet
information network
HUSKY - Affordable health care insurance www.huskyhealth.com
for uninsured Connecticut children
Check out your Connecticut physician's profile, www.physicians.dph.state.ct.us/
from the Department of Public Health
Source: Connecticut Health Policy Project
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