24/7 physician access by phone or video has the potential to do great things for health plans and consumers. Getting a doctor’s help without waiting in a medical office is a great convenience, especially if you’re traveling or your primary care physician is unavailable. The challenge, however, is that telemedicine does not sell itself – it needs to be communicated over and over again if we want members to remember they have this great, easy-to-use benefit instead of driving to an urgent care center. Technology is great, but it won’t activate itself. People are creatures of habit and it takes a good deal of effort to change behavior. Low tech tactics like email reminders, flyers or refrigerator magnets may just be what the doctor ordered when trying to drive home the benefits of telemedicine.
Telemedicine offers a lot of potential for everyone – added convenience for busy families and lower costs than a traditional office visit. But as helpful as this service can be, it will only make a difference if it is used.
Low utilization is not unique to telemedicine. It’s a common problem with many new, well designed and well-intended health care services. Encouraging plan members to actually use new offerings is a challenge for employer groups, large and small. And while utilization is often higher in self-funded health plans, all employers need help turning talk into action. Here are a few ideas to consider:
It’s all about them – With health care consuming more of everyone’s income and attention, we all have a vested interest in our benefits. And while wonderful tools like telemedicine keep coming to the table, you need to look at these offerings from your member’s perspective rather than your own. Talk with your employees; ask if a service will help them and listen to their feedback. If it can add real value to your employee’s lives, utilization will follow.
Talk about health, not cost – Research indicates that when it comes to their health and well-being, there are many things members would prefer to hear about than fees and costs. A majority are interested in improving their health. It takes time, but focusing on current health risks and personalizing communications as much as possible will help members want to get more engaged.
Educate to empower – Transparency tools and online portals are no different than other modern advances. If people don’t understand them, they will never catch on. Like telemedicine, unless employees understand how to use it and when they can use it, they will never realize the benefit of having an experienced, board certified physician, with access to their medical records, available to help them 24/7.
While it seems that other new disruptive innovations, such as Alexa, catch fire overnight, they do take time. Since your employee communication budget likely pales in comparison to those driving consumers to Amazon, talk with your TPA about new ways to zero in on the needs of your employees. Doing so can lead to increased utilization and a happier, healthier workforce in 2018 and beyond.
After reading the article included below, we couldn’t help but agree that the question every employer should be asking this year is…Should I self-fund my employee benefit plan?
As the article discusses, this is a great time of year for companies to review their status, evaluate changes that have been made and consider new items for their 2018 benefit to-do list. The article includes 8 questions benefits managers should be asking themselves this year. But, we’d like to help you address one key question – Is Self-Funding Right for You or Your Client?
Whether you’ve been asking this question for some time or you’re new to the concept of self-funding, we’d be happy to explain the flexibility and potential for savings that a self-insured plan can offer. Gain control over your group health plan, eliminate the high costs of insurance premiums and obtain access to monthly claim reports – all with help from Diversified Group!
8 benefit management items to evaluate in 2018
This article was published on January 24, 2018 on Employee Benefit News, written by Zack Pace
Even 20 years into the benefits business, I still can’t always immediately remember details about my clients’ benefits plan — a given employer’s standard measurement period, affordability safe harbor or health savings account trustee, for example. That’s why I track all of these details across 32 columns in a simple spreadsheet.
While I use this reference tool most every day, I find that January is a great month to go even further with the employers I work with, carefully reviewing each company, considering how the employer’s circumstances have changed, and proposing items of consideration for our mutual 2018 benefit to-do list.
Employers are wise to have a similar benefit to-do list when it comes to their 2018 planning process. Here are eight common questions that benefits managers may find wise to ask.
1. For calendar year 2018, is your organization a “large employer” subject to ACA employer shared responsibility? Meanwhile, is your organization a “large employer” per your state’s fully insured group health plan market?
Generally, employers that averaged 50 or more full-time employees + full-time equivalents in calendar year 2017 are subject to ACA shared responsibility for all of calendar year 2018. Importantly, penalty risks generally now begin accruing in January, not when the plan year begins (if the date differs).
However, confusingly, in most states, the threshold to be considered a large employer for group health insurance contracts is an average of 51 or more full-time employee + full-time equivalents in the previous calendar year. How do the rules work in your state?
Now’s the time to finalize your 2017 calculation and determine your 2018 status for both employer shared responsibility and your state’s group health insurance market. And, yes, I’ve seen several employers average exactly 50 and be deemed a large employer regarding ACA employer shared responsibility and a small employer in reference to their fully insured group health plan contract. Talk about bad luck.
2. Is it time to self-fund the group medical plan?
The financial headwinds faced by fully insured plans have never been greater. Fully insured premiums are laden with the roughly 4% ACA premium tax (aka the Health Insurer Annual Fee), state premium taxes, the cost of various state-mandated benefits, and often robust retention and pooling point charges.
Thus, employers sponsoring group fully insured health plans should consider if moving to a self-funded contract (including so-called level-funding contracts) could be advantageous. Given the varying state regulations, state stop-loss minimums, organizational risk tolerance, reserve requirements and other variables, there is no one-size-fits-all answer to this question. Especially good times to perform a comprehensive self-funding evaluation are when your company crosses over from small group to large group and/or when meaningful claims experience becomes available from your fully insured vendor.
3. Is it time to self-fund the dental and short-term disability plans?
For most employers of size sponsoring plans that are not 100% employee paid (aka not voluntary), the answer to this question is simply “yes.” Run the math and make your decision.
4. Does benefit eligibility for life and disability vary by class?
For start-up companies, it’s not uncommon to offer better group life and disability benefits to certain classes, including management and executives. However, as employers grow, the budgetary and cultural reasons for doing so can quickly diminish or go away. A quick litmus test is simply asking yourself if the continuing benefit discrimination still makes sense.
Regardless if these benefits vary by class, is your group life plan compliant with the Section 79 nondiscrimination rules? Double-check with your attorney, accountant and benefits consultant.
5. Who is the health savings account trustee (i.e., the bank)? Is it linked to the health insurer?
If your organization sponsors a qualified high-deductible health plan, you likely allow employees to contribute to an HSA pre-tax through your Section 125 plan. Is the bank you selected still the best fit? Is the bank tied to your fully insured group health vendor? If yes, if you change your group health vendor, are your employees allowed to maintain the HSAs with this trustee with no fee changes? Should you consider moving to a quality stand-alone HSA vendor?
6. Does your firm employ anyone in California, Hawaii, New Jersey, New York, Rhode Island or Puerto Rico?
Most employers headquartered in these states (and territory) are acutely aware of the state disability requirements. However, given the advent of liberal telecommuting policies, it’s becoming more common for employers without physical locations in these states to employ individuals in these states. If you answered yes to this question, double-check your compliance with the state disability requirements. Your disability insurer or administrator can assist.
And, please note that, just this month (January 2018), New York became the latest state/jurisdiction to require paid family leave.
7. For firms offering retiree health plan benefits, are benefits for Medicare-eligible retirees and spouses self-funded?
While retiree health benefits have generally gone the way of the American chestnut tree, these benefits remain fairly common among certain sectors, such as higher education, government and certain nonprofits. Historically, most employers simply allowed Medicare-eligible retirees to remain on the employer’s active health plan, with the employer’s plan paying secondary to Medicare for Part A and Part B expenses and primary for prescription drug costs.
This arrangement was just fine when a really high annual prescription claim was $15,000. Now, $90,000 claims are not uncommon and $225,000 claims are possible. Does it still make sense to self-fund this retiree risk? In states where it is permissible, would it be prudent to transfer the risk by adopting a fully insured group Medicare Advantage plan or supplement program?
Regardless, all employers self-funding retiree health benefits should double-check that their individual stop-loss policy includes retirees.
And, regardless if retiree benefits are offered, all employers sponsoring self-funded health benefits should double-check that their individual stop-loss policy covers prescription drugs.
8. Is your firm required to file health and welfare Form 5550s? If so, who is handling the filings?
Generally, employers subject to ERISA that sponsor benefit plans that, at the beginning of the plan year, cover 100 or more participants, are required to file health and welfare 5500s and the related schedules. Some smaller employers must also file. Most multiple employer welfare arrangements (MEWAs) must file.
It’s very easy for health and welfare Form 5500 filing requirements to fall through the cracks. While U.S. Treasury’s penalties for non-filers are substantial, Treasury doesn’t keep track of who is required to file and thus doesn’t individually remind employers of this requirement. Further, this requirement doesn’t seem to be on the checklist of most auditors and accountants.
Employers should review all enrollment counts of all plans at the beginning of each year and consult with their accountant, attorney, and benefits consultant on the filing requirement and next steps.
I recommend avoiding the shortcut of saying “5500” in these discussions. Always say “the health and welfare 5500.” This practice will mitigate the risk that someone hears “5500” and thinks retirement plan 5500.
The article below was published on December 20, 2017 by BenefitsPRO, written by David Hines.
As we head into 2018, large employers are bracing for a 5 percent rise in the cost of providing employee health care benefits, according to the latest National Business Group on Health survey. In a world where health care costs seem to only go in one direction, that may not be a surprise. Yet, new data and insights related to employee health are enabling employers to craft novel strategies to bend, or at least stay on top of, the cost trend. Here are five things we learned in 2017 that can help employers turn the cost challenge into an opportunity to better manage expenses in 2018 and beyond.
1. High-cost claimants are the key
In late 2016, the American Health Policy Institute analyzed claims data from 26 large employers and found that the average high-cost claim has a price tag of $122,382 per year, or 29.3 times as much as the average member claim. Though they represent just 1.2 percent of all members, high-cost claimants make up 31 percent of total health care spending for the surveyed employers. Cancer treatments, heart disease, live birth/perinatal conditions, and blood infections are among the costliest claims, the report says, adding that 53 percent of those costs represent chronic conditions, while 47 percent cover acute conditions.
Recognizing this reality, savvy employers are developing new and improved strategies to better manage the care of these costly claimants. For instance, some are taking a closer look at how to manage the big C word – cancer.
For example, one large manufacturing employer has just begun some groundbreaking work to help identify and assist cancer patients earlier in their diagnosis, which is improving outcomes and reducing costs. We’re excited to see more about those results soon.
2. Stay ahead of high-cost, high-variation surgeries
While there may be some overlap with high-cost claimants, another area of high spend is employees who have surgeries for preference-sensitive conditions, e.g., joint replacement surgery (knees and hips), back surgery, hysterectomy or bariatric surgery.
These are called preference-sensitive because in most cases the employee has alternative treatment options.
In 2017, ConsumerMedical reviewed Truven’s Marketscan data and learned that, on average, an employer with 10,000 employees has approximately 258 individuals contemplating surgery for one of the five conditions noted above. The average cost-per-episode for these surgeries is a staggering $29,700. That means employers spend around $90 billion annually on these procedures and their related costs.
Many of these patients might actually choose a lower-cost option with a better health outcome if they were fully aware of their choices. This represents an enormous opportunity for employers to save money and improve health outcomes. One way to help guide employees is by offering a medical decision support program. A study of one large employer that leveraged predictive modeling and financial penalties to spur decision support engagement realized savings of $4.7 million from just 206 employees.
Guiding these surgery candidates toward high-quality providers is an equally powerful strategy for avoiding costs, including the costs of misdiagnosis and unnecessary drugs. The National Business Group on Health (NBGH) reported 88 percent of employers expect to use COEs in 2018 for certain procedures such as orthopedic surgery, in an effort to contain costs and improve the value of care.
3. Keep experimenting with new ways to manage the cost of drugs
The rising cost of specialty drugs is a major reason why health care expenses are continuing to rise. As Mike Thompson, President and CEO of the National Alliance of Healthcare Purchaser Coalitions recently said, “If you’re in the kitchen and one of these new specialty drugs rolls under the refrigerator, you’ll throw out your fridge, because the pill costs more.”
According to PwC, in 2018, employers will explore new technologies, such as artificial intelligence, to match people with the best treatments, along with traditional strategies, such as requiring prior authorizations for costly specialty drugs and instituting step therapies. In addition, employers are paying closer attention to treatment environments, looking for opportunities to shift the delivery of care to lower-cost settings.
4. Employees need more support with behavioral health
With more employees experiencing a behavioral health issue,employers are recognizing the need to provide greater employee support in this critical area as well. A 2017 survey conducted by ConsumerMedical found that almost half of U.S. employees had dealt with a mental health issue on behalf of themselves or a loved one in the last year―and most reported that this was a distraction for them while at work.
The reality is that healthcare expenses, such as medical and pharmacy claims, are only the tip of the cost iceberg for employers; they are compounded by the productivity, absenteeism and related expenses that result from employees with behavioral health concerns.
Unfortunately, the traditional support platforms offered by employers may not be enough. For example, studies show that only about 5 percent of employees take advantage of their company’s Employee Assistance Program (EAP). Employers are learning they need to do more.
According to Willis Towers Watson survey of 314 mid- and large-sized companies, employers’ top health care priorities over the next three years include: locating more timely and effective behavioral health care, integrating behavioral health with medical and disability case management, providing better support for complex conditions, and expanding access to care.
5. Consumerism is no longer the panacea
While most large employers continue to lean on consumer-directed health care as a strategy, we are entering a new era, and that is good news for consumers. According to PwC, after shifting healthcare costs to employees for years, employers are starting to ease off.
Employers are beginning to recognize that cost sharing has its limits. In 2017, research showed us―yet again―that cost sharing may cause employees to skip needed care.
Today, employers are realizing that health benefits need to place a greater focus on the employee experience.
NBGH President and CEO Brian Marcotte says, “One of the most interesting findings from the (NBGH) survey is that employers are focused on enhancing the employee experience….For example, there is a big increase in the number of employers offering decision support, concierge services and tools to help employees navigate the health care system. The complexity of the system and proliferation of new entrants has made it difficult for employees to fully understand their benefit programs, treatment options and where to go for care.”
As we head into 2018, we will face another year of rising health care costs. But thanks to research, surveys and some trial and error, employers are learning more about the drivers of costs and the strategies designed to control them―while improving employees’ health outcomes. It is a constant struggle to stay ahead of the cost curve and meet employees’ needs, but that is the goal we are all committed to pursuing as benefits leaders and professionals.
The article below was published on August 19, 2017 by Green Bay Press-Gazette, written by Mike Ferguson.
Wisconsin lawmakers are at an impasse over the state budget. Senate leaders can’t agree with their Assembly counterparts on how to fund road repairs, schools, and various agencies.
Resolving this dispute would be easier if lawmakers hadn’t rejected a reform of the state’s costly health insurance program. Switching state employees and their families to a “self-insured” plan could have freed up tens of millions of dollars.
Under such a plan, the state would have covered employees’ medical expenses directly, instead of paying a traditional health insurer and hoping premiums don’t increase. Cutting out the insurance company middleman could have saved millions and enabled Wisconsin to offer higher quality benefits to government workers. It’s a missed opportunity — one that lawmakers should reconsider next year.
The purpose of health insurance is to minimize financial risk. Individuals’ health spending can fluctuate from one year to the next. That’s why people pay premiums to insurers to protect themselves against costly, unpredictable events.
Organizations with hundreds of thousands of employees like the state of Wisconsin don’t experience such fluctuations. They have a steady mix of young and old workers, and healthy and sick ones, making expenses for the entire organization predictable.
The risk of a spike in expenses is virtually nonexistent. So it makes sense for employers like Wisconsin — which offers health coverage to 250,000 government workers and family members — to pay for care directly rather than fork over premiums to traditional insurers.
Budget analysts predicted that self-insuring would save Wisconsin at least $60 million over two years, according to the Wisconsin Group Insurance Board. Private research firm Segal Consulting found that switching to a self-insured plan would save the government $42 million annually.
Despite these projections, Wisconsin’s politicians rejected self-insurance. Instead, the state will continue buying traditional premiums from 17 local insurance carriers.
Some legislators worried that shifting state employees onto a self-insurance plan would deprive traditional insurers of business and force them to raise premiums on other large organizations.
That’s akin to arguing that taxpayers should continue wasting millions of dollars on inflated premiums to subsidize coverage for other large organizations.
Others argued that a switch to a self-insured plan is risky, given the uncertainty surrounding Congress’s attempts to repeal the Affordable Care Act.
But this uncertainty is actually an excellent reason to switch. Self-insured organizations don’t have to worry about premiums swinging wildly or facing a raft of new compliance burdens. Self-insurance is governed by a 40-year-old federal law that will be largely unaffected no matter what happens in Washington.
Instead of addressing the rising health care costs that drive up premiums, Wisconsin lawmakers have decided to shift those costs onto workers in the form of higher deductibles. They’re also raiding the state’s rainy day fund to help pay the coming year’s premiums. This isn’t a strategy for cutting costs.
Twenty-nine states already self-insure their employees’ coverage. Nineteen others self-insure at least some of their health plans. In fact, Wisconsin has been self-insuring its employees’ dental and pharmaceutical benefits for years with excellent results.
Private companies further prove the model’s effectiveness. Fifty-eight percent of all private sector employees are enrolled in self-funded plans. Businesses that self-insure save up to 12 percent on health expenses.
It’s unclear why state lawmakers left tens of millions of dollars on the table by rejecting self-insurance this budget session. But they’ll have the chance to correct their mistake during next year’s inevitable budget crunch.
For the sake of taxpayers and state employees, let’s hope they take it.
The article below was published on July 25, 2017 by Kaiser Health News, written by Rachel Bluth.
COLUMBUS, Ohio — Two years after it passed unanimously in Ohio’s state Legislature, a law meant to inform patients what health care procedures will cost is in a state of suspended animation.
One of the most stringent in a group of similar state laws being proposed across the country, Ohio’s Healthcare Price Transparency Law stipulated that providers had to give patients a “good faith” estimate of what non-emergency services would cost individuals after insurance before they commenced treatment.
But the law didn’t go into force on Jan. 1 as scheduled. And its troubled odyssey illustrates the political and business forces opposing a common-sense but controversial solution to rein in high health care costs for patients: Let patients see prices.
Many patient advocates say such transparency would be helpful for patients, allowing them to shop around for some services to hold down out-of-pocket costs, as well as adjust their household budgets for upcoming health-related outlays at a time of high-deductible plans.
At the Ohio Statehouse, the law’s greatest champion in state government has been Rep. Jim Butler, a Republican and former Navy fighter pilot whose wife is a physician. He authored the legislation and has beat the drum for it since he got the idea in 2013, as he waited for a garage mechanic to repair his car and absorbed the shop’s posted rates for brake jobs, oil changes and tuneups.
Opposition has been formidable, led by the goliath Ohio Hospital Association. It has filed a court injunction that is currently delaying enactment, peppered local news media with editorials, and lobbied Republican Gov. John Kasich, who has eliminated funding that would allow implementation from the latest state budget.
Joining the hospital association in its legal action are a wide range of provider groups including the Ohio State Medical Association, the Ohio Psychological Association, the Ohio Physical Therapy Association, and the Ohio chapters of the American Academy of Pediatrics, the American College of Surgeons, and the American Osteopathic Association.
These groups say that the law, which applies only to elective procedures, is too broad and that forcing providers to create estimates before procedures would slow down patient care. “The only way to even try to comply with the law is to delay care to patients in order to track down information from insurance companies, who may or may not provide the requested information,” wrote Mike Abrams, the president and CEO of the Ohio Hospital Association, in an op-ed in The Columbus Dispatch in January.
But Jerry Friedman, a retired health policy adviser for the Ohio State University Wexner Medical Center, said the opposition doesn’t stem from genuine concern about patients but from a desire to keep the secret rates that providers have negotiated with insurers under wraps. Transparency would mean explaining to consumers why the hospital charged them $1,000 for a test, he said, adding that providers “don’t want to expose this house of cards they’ve built between hospital physician industry and the insurance industry.”
Said Butler on his quest to see the law enacted: “The health care industry has a lot of political power and lots of money. It’s hard to fight on behalf of people against this kind of force.”
The law’s next test will come in August, when the first court hearing on the association’s lawsuit is scheduled. The Kasich administration said it couldn’t comment on the law because of the pending litigation.
Greater price transparency has been a popular policy prescription for America’s high health costs, especially at a time when many patients have high-deductible insurance plans and face larger copayments. Upfront estimates exist in other countries, such as Australia and, for patients facing out-of-pocket expenses, in France.
In Massachusetts, patients can get an estimate within two days of admission if they ask for it. Nebraska requires hospitals and surgical centers to provide a list of the average charges for services. New Hampshire has a website where consumers can compare costs.
Hospitals and doctors often oppose such measures. The American Hospital Association’s position is that health plans — not hospitals — are responsible for telling insured patients about their out-of-pocket costs, according to its website.
Aimee Winteregg, 35, of Troy, Ohio, said she would have liked such information before five miscarriages in four years left her buried in unexpected medical bills. She and her husband became first-time parents in November. Though they are well insured, tests and treatment cost the couple $4,000 out-of-pocket, demanded in bills that were sometimes no more descriptive than for “medical service.”
“We don’t want to deal with this, especially when the doctor tells you stress is bad for the pregnancy,” her husband, J.D., said. But imposing greater transparency has been controversial in both the medical industry and among some health care researchers, who say it puts patients in an untenable position.
The transparency law “was written by someone thinking about health care as a TV, and not as health care,” said Sandra Tanenbaum, a professor of health services management and policy at The Ohio State University College of Public Health.
She said people could not shop for procedures as they would for a TV or car repairs, since they often lack information on the quality of doctors and hospitals, and make health care decisions based on much more than cost.
Consumers are more likely to base their decisions on their doctors’ advice, not on cost alone, according to a report from the Health Policy Institute of Ohio.
Only around 10 percent of health care costs are even “shoppable” expenses — procedures that can be scheduled in advance, like an MRI or elective surgery — according to the HPIO.
Regardless, Butler maintains, the health care industry can give consumers better information upfront. “If you really want patients to be empowered, they really need the information,” he said.
In support of such access, Butler has written letters to the Ohio Hospital Association, the Ohio attorney general and the Dayton Daily News, all in defense of the transparency law.
The Ohio Hospital Association, along with seven other Ohio health organizations, went to court last December to block the law, a month before it was supposed to take effect.
Butler said Gov. Kasich’s administration is helping the hospital association stall by not writing regulations, eliminating funding for the law in the state budget, and declining to meet with Butler to discuss it.
State Rep. Michael Henne, also a Republican, has worked with Butler in the Ohio General Assembly on the transparency law. He called Butler a “driver” on the law, noting: “It’s frustrating. You don’t realize how much [influence] special interests have in the process.”
The article below was published on June 26, 2017 by CNN, written by Elisabeth Rosenthal.
(CNN) – When Jeffrey Kivi’s rheumatologist changed affiliations from one hospital in New York City to another, less than 20 blocks uptown, the price his insurer paid for the outpatient infusion he got about every 6 weeks to control his arthritis jumped from $19,000 to over $100,000. Same drug; same dose — though, Kivi noted, the pricier infusion room had free cookies, Wi-Fi and bottled water.
Mary Chapman, diagnosed with multiple sclerosis, started taking a then-new drug called Avonex in 1998, which belongs to a class of drugs called disease-modifying therapies. Approved in 1996, Avonex was expensive, about $9,000 a year. Today, two decades later, it’s no longer the latest thing — but its annual price tag is over $62,000.
Marvina White’s minor elective outpatient surgery to remove an annoying cyst on her hand was scheduled in 2014 based on her doctor’s availability. Because it was booked in a small facility that is formally classified as a hospital (with two operating rooms and 16 “spacious private suites”) rather than the outpatient surgery center where the doctor also practiced, the operating room fee was $11,000 rather than $2,000.
Len Charlap had two echocardiograms — sonograms of the heart — within a year: One, for $1,714, involved extensive testing at a Harvard training hospital; the other, for $5,435, was a far briefer exam at a community hospital in New Jersey.
It is not just that US healthcare is expensive, with price tags often far higher than those in other developed countries. We know that. At this point, Americans face astronomical prices that quite simply defy the laws of economics and — as each of the above patients noted when they contacted me — of decency and common sense.
‘The balance sheet just doesn’t work out’
“It’s the prices, stupid.”
This phrase, part of the title of a 2003 scholarly article in the journal Health Affairs explaining high US health expenditures, has been bandied about by a number of health economists for years.
But politicians have long been prone to ignore this essential wisdom. They do so today at their own peril. Outraged Americans at Town Hall meetings are wising up. Like patients who I’ve spoken to in my last few years of reporting, they have experienced the bankrupting and baffling illogic of US medical prices firsthand.
With the prices the US medical system demands for care, it’s no wonder that Republicans have had so much trouble finding a recipe to replace the Affordable Care Act, aka Obamacare, with “something better” for less money, as they’ve promised endlessly to do. Ironically, despite the extreme differences, the GOP is stumbling on the same underlying problem that ultimately tarnished the ACA in critics’ eyes: spiraling prices often necessitated skyrocketing premiums and deductibles, belying the “affordable” moniker. The balance sheet just doesn’t work out.
Any plan to solve America’s health care mess must confront this reality: Our prices for tests, drugs, hospitalizations and procedures — old or new — have gone up dramatically year by year, and are vastly higher than in other developed countries. Indeed, prices for similar interventions in other countries have often declined.
Why? The United States — more or less alone among developed countries — has no direct mechanism to rationalize prices for medical encounters, to insure they are at least nominally related to value. Worse still, we alone effectively allow businesses — mostly for-profit — to set the asking price. And, as these examples show, price and value have in many cases become completely uncoupled, allowing price to travel into the stratosphere.
The perils of ‘sticky pricing’
According to the rules of economics, the prices of innovative, breakthrough medical offerings should go down as they become more common. Competition should reduce prices as more manufacturers enter the field allowing purchaser-prescribers to choose from alternatives.
The pricing of pharmaceuticals and treatments in the United States often does exactly the opposite. Continue reading