By HCMS Group, Special for USDR
Even people who get health benefits through work should be concerned about premiums rising 22 percent on public health exchanges, according to Dr. Hank Gardner, the CEO of HCMS Group.
The same dynamics cause costs to soar for private employers, which provide healthcare for 55 percent of Americans. And the trend of 10 percent annual increases in medical costs drains compensation budgets and holds wage gains to 2 percent.
That’s a pre-existing condition in the healthcare system itself. Hidden economic incentives lead to healthcare waste, Gardner says. And waste – over-treatment by providers and unwitting over-utilization by consumers – accounts for 30 percent of healthcare spending. In our current system, there are no incentives to reduce waste, and lots to increase it. Research showing how incentives shape behavior won the Nobel Prize in Economics this year for Harvard’s Oliver Hart and MIT’s Bengt Holmström. So costs climb, taking money out of everyone’s paychecks.
Encouraged by the insurance industry, many employers offer a private health exchange choice of medical plans. These typically include three to four levels of coverage, from low-premium, high-deductible policies to high-premium, low-deductible plans. People with greater health risk often pick high-premium, low-deductible plans, expecting to reap more in benefits than they pay. Additionally, in healthcare it is not uncommon for employers to face claims of $1 million or more in a year for one or more employees. Nobody has an incentive to reduce waste. This is an unsustainable system that can’t pay for itself.
Some employers have learned to realign the incentives to lower waste and cost by adopting HCMS Group’s 5|50 Solution®. First, they offer employees one choice. That puts the whole population from low to high risk in the same pool, paying the same premiums – and is designed to cover costs.
They also use a high-deductible health plan with an employer-subsidized health savings account. That gives consumers a financial incentive to challenge over-treatment. Providing fully covered preventive care is another waste-fighting incentive. And offering HCMS Group’s unique KnovaSolutions clinical prevention service when people are in a complex health situation – the 5 percent who account for half of costs and 50 percent of waste – encourages people to return more quickly to health and work.
That’s real healthcare reform.
SOURCE HCMS Group
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