For veterans of the healthcare industry, the current debate over the future of the Affordable Care Act – and proposed changes that would fundamentally alter Medicaid and individual market exchanges – is a frustrating battle of ideologies with the future of healthcare at risk. Our debate over who should be eligible for expanded coverage and how we reform reimbursement is often laced with self-preservation, which in our case means preserving an employer-sponsored system that is riddled with inequities, opacity, dubious middlemen and weak public and private sector fiduciary oversight. Those who provide, pay for and/or consume healthcare are drowning under rising per capita costs while many in the middle of these transactions grow fat.
As brokers, consultants and advisors, we have to face an inconvenient truth: we have presided over and benefited from a system in crisis. Not everyone believes our industry’s purpose is noble or necessary.
Health system stakeholders long to deal direct with employers. Many professional benefits managers hate being on the end of the latest pitch from their advisor to sell a project or broker to hawk a new product to increase commission income. In the digital age, there is a heavy bias in favor of disintermediation and the elimination of distribution costs that are often not easily rationalized.
How does one grade the contribution of a sentinel? How does a client know whether the advisor who is paid a commission or fee is acting out of self-interest or as a trusted change agent?
How one makes money is as important as how much one makes in certain industries. There are ethical implications to anyone who adds cost to a healthcare system fraught with waste, fraud and abuse. This expense translates into higher cost and erodes the ability for employers and public entities to finance care for those that are often most in need.
In the last two decades, ineffective regulatory and advisory oversight of the financial and healthcare industries has allowed abuses to take place in the form of mergers and protected opacity in pricing.
Sentinels – insurers, brokers and other intermediaries – often take the position that things could have been alot worse had they not provided oversight of procurement and payment. Yet, it feels like the cop who is asking to be congratulated because only half the suspects got away.
It’s actually hard to find a healthcare stakeholder who does not feel disabused for the role they play in this broken system. Everyone has a chip on their shoulder.
Doctors routinely wave out-of-network, out-of-pocket and steer patients to outpatient clinics and/or in office therapies to maximize reimbursement. Not-for-profit hospitals and outpatient clinics purchase drugs under special non-profit 340B provisions, affording them steep discounts from drug manufacturers and then significantly inflate pricing to patients while pocketing the difference.
Reserves at many non-profit insurers are as high as 400% of required capital reserves — and growing again. For-profit insurers engage in a range of obfuscation practices to preserve profit per member by leavening margin across a range of services they provide. When once asked how they could live with their business practices, a wry CEO remarked to me, “we’ll keep hiding the Easter eggs and you keep looking for them.”
Perhaps the worst offenders are certain larger Pharmaceutical Benefit Managers ( PBMs ) who engage in opaque pricing, formulary manipulation and contractual games of semantics to maximize their share of profit from drugs they neither produce nor consume. The roster of enablers magnifies the problem with consultants, brokers and agents who charge for services that they often cannot deliver in managing RX benefits. Caveat emptor to the generalist HR buyer who, in good faith, hires a generalist broker to manage a highly complicated pharmacy contract with an educated PBM.
Employers are often more focused on avoiding disruption than acting as responsible fiduciaries to drive market reforms. By abdicating to their insurers or a less than qualified advisor, employers have failed to drive fundamental market reforms that would otherwise slow or reverse the inevitable march toward a single payer system as a means to escape the unsustainable consumption and financing of healthcare. Market reform requires change agents and reformers. Its seems that only when faced with regulated or market based disintermediation does the brokerage and consulting community wake up to the need to change the system.
Greed Is Not Good
While insurers and other third party players in the healthcare system argue their role as sentinel is invaluable to prevent abuses in overtreatment, waste, fraud and abuse; one might argue the fee-based advisor should be the purest form of intermediary in our business. We exist in a world of carnivores and while it does not serve any purpose to malign any for profit firm’s focus to maximize profit; we should develop a thicker skin when those same stakeholders get angry at our efforts to affect their profiteering.
We cannot condone practices that unnecessarily inflate healthcare cost. Rising costs reduce corporate earnings, affect jobs, bonuses and GDP. It is a sin of omission that many intermediaries don’t understand and we have to accept that many ineffective advisors are part of the problem.
The role of benefits and risk advisor is that of a physician. The Hippocratic Oath of “first do no harm” should apply to everything that we do. To successfully eliminate egregious pricing, non transparent business practices, waste, fraud and declining public health by structuring a thoughtful plan of health and benefits for any employer is to serve a nobler purpose. We need to have a major voice about national reform and not only take an interest when our own industry is at risk. We should take an interest and have a position on Medicare and Medicaid which impact almost 150M Americans – including friends, family and parents. We live in a symbiotic ecosystem. If a bomb goes off in Economy, people in Business Class go down with the plane.
Sadly, the barriers to entry to the advisory business are ridiculously low. Unlike other industries where size and expertise is paramount to success and barriers to compete are limited for new entrants, any individual can pass a simple life and health exam and be licensed to advise clients on healthcare procurement. Size is not a determinant of capability. I’ve seen highly qualified competitors successfully hang their own shingle to start their own business. Some of my heroes and mentors in our business are idealogues and change agents who get offended by the status quo. They make enemies by simply doing their jobs.
Across a 35-year career, I’ve witnessed countless acts of self-interest and unselfish service. It comes down to incentives, the culture of the firm and its people. When I meet a prospectibe employer paying $750,000 for healthcare advisory services to a life agent when $200,000 is adequate to cover my services, I resist the temptation to shadow price the compensation arrangement that is tantamount to highway robbery.
When I give a speech on the need for reform, I risk offending people who honestly believe they are not part of the problem.
We are the last line of defense in the fourth quarter of healthcare in America. It’s even odds that within a decade we will have a single-payer system as a result of runaway health care inflation and the lack of private sector appetite to drive market-based reforms. If the pie shrinks, everyone’s share gets smaller. In a time where firms are looking to give 10%-15% ROE to investors, low single-digit organic growth means consolidation and job losses to increase economies and reductions in expenses (which are largely comprised of human capital). In the end, being liked could cost you your job. Being tougher with all stakeholders could end up saving your own skin.
The most valuable person in this frenetic landscape of self-preservation is the objective agent, broker or consultant. To be guided by a higher purpose and to understand every dollar saved and excessive dollar of margin eliminated is a job saved, a bonus rewarded or an investment in capital equipment and improved earnings for clients.
It’s our job to help prevent crises and “kick the can down the road” politicians from reneging on retiree medical and pension commitments made to public employees in lieu of wage increases. It is advocating for the least among us. It is preventing excessive profiteering and insisting on affordable healthcare for all Americans. It’s standing up to your own political party, your own boss or a senior industry executive and not blinking.
Humility isn’t thinking less of yourself, its thinking of yourself less of the time. In our zealousness to promote and protect employer-sponsored insurance, we need to do a better job as cops and regulators of free market solutions. We need to push clients to do the right thing. We need to be less cozy with vendors and fulfill our fiduciary obligations. We need to be more comfortable with transparent fees and tying our performance to outcomes instead of activity.
We are cops and evangelists. We are an imperative and essential last line of defense but if we are sleeping with the enemy, we can’t be objective enough to have the hard conversations required to change the system.
My mentor once told me that if you do not see yourself as a change agent, you aren’t one. No one said it would be easy nor fun to be the heavy or the bad cop in the conversation, however the best and brightest in our industry see themselves as zealots for change. They may not be always liked but they are respected. They don’t rant like maniacs demanding reductions not justified by a client’s experience, but they are thoughtful advocates who are always sitting on the client’s side of the table and content in the knowledge that every dollar they save, helps the market reform itself, improves public health and reinforces the integrity of an employer-based system. It can succeed if we develop a more symbiotic system based on natural tension, trust and social responsibility.
Michael Turpin is a 35 year veteran of healthcare and employer sponsored insurance. He has served as CEO of Oxford and United Healthcare Northeast as well as a national practice leader for Mercer, USI, Marsh and Johnson & Higgins. He is a published author of three books and a frequent speaker and contributor to public and private forums.
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Thank you Michael for the post. There’s a lot to digest in your post. I’ve always looked at participation in the “system” as “of course earn a profit but for God’s sake provide value somewhat commensurate to the profit.” In that regard, I agree there seems to be a total lack of accountability due to the total lack of transparency. No industry approaches healthcare in that regard.
I agree with Paul’s focus on this quote: “Employers are often more focused on avoiding disruption than acting as responsible fiduciaries to drive market reforms. By abdicating to their insurers or a less than qualified advisor, employers have failed to drive fundamental market reforms that would otherwise slow or reverse the inevitable march toward a single payer system as a means to escape the unsustainable consumption and financing of healthcare.”
Employers, and particularly CEOs and C Suites and Boards have delegated healthcare to VPs of HR, brokers and consultants. There is no employer-ownership of healthcare. Time to change, or truly we will be looking at single payor federal takeover.
Having executive experience with responsibility for heath insurance…I tried significant intervention. To the displeasure of our dominant non profit insured i advocated for an out patient amb. Surgery center that would cut fees by 1/2.
I also hired a data analysis firm that found 1 of 2 hospital systems charged on average over 20% less on all procedures.
Our insurer was not happy that we discovered that as they did not want disruption to the system.
I do credit corporate H.R. For widespread adoption of high deductible plans linked to health savings accounts….the only intervention shown to bend the cost curve (Rand study that all the experts like to ignore).
Selection bias and old study. More recent evidence suggests that HSAs don’t necessarily save money. (Try running a corporation for a while and watch how the employees learn to game HSAs.)
Steve
Please cite the studies. Rand study was nationwide with n=800,000. I ran a company and saw employees invest their H.S.A. Investments and see Their $ grow…and ask their doctors “is the MRI on my sore knee really necessary?” ( example was me).
I really would like to see the studies you refer to.
Thanks for the feedback. I agree the lack of transparency retards any real consumerism and a consumer must be informed with the true cost which is considered proprietary between insurers and providers. The billed and contracted rate differences are all over the map and in at least one major hospital systems case, they have negotiated with most carrier that they be paid the greater of billed or contracted rates — in this hospital’s case their contracted rate was actually greater than the billed rate which suggests some horse trading between the payor and provider with the system winning. Most employers don’t support the insurer in negotiations because a huge system knows that no PPO network is complete without them — or at least they believe the employers aversion to a network that does not include all major systems is incomplete. This guarantees rising prices. Until a NY based network of a major carrier – not a secondary network, gets the backbone to exclude one major system for better economics from the remaining three, prices won’t change. Also, many still pay for out of network benefits which are sources of revenues for insurers through a program called Shared Savings. It shows up as a claims charge and few employers understand the insurer makes money each time people opt out of network. Providers waive out of pocket costs for the consumer and then charge much higher billed rates to be paid as out of network. I could go on and on. Suffice to say, everyone’s fingerprints are on the fiasco but it’s impact is felt most by those who can least afford to pay for these practices. It’s a third rail subject for politicians so forget about legislated reforms. It’s going to have to get a lot worse before politicians perceive they have a mandate to turn the system on its head. Meanwhile stay long on the big insurer stocks. No impediments ahead that I can sadly see. Nor intermediaries with silver bullet solutions that employers will adopt especially in a 4% unemployment economy.
I heard that Highmark Blue Cross no longer has the UPMC Health System in its network. Do you have any data or insight into the extent to which Highmark’s Pittsburgh metro area business was impacted and how Pittsburgh based larger employers reacted? I thought the UPMC Health System was generally regarded as a “must have” provider. Presumably, West Penn Allegheny is significantly less expensive. Quality and outcomes differences would be the key issues but defining either or both is no easy task in healthcare, especially on a risk-adjusted basis.
Thanks for the feedback. I agree the lack of transparency retards any real consumerism and a consumer must be informed with the true cost which is considered proprietary between insurers and providers. The billed and contracted rate differences are all over the map and in at least one major hospital systems case, they have negotiated with most carrier that they be paid the greater of billed or contracted rates — in this hospital’s case their contracted rate was actually greater than the billed rate which suggests some horse trading between the payor and provider with the system winning. Most employers don’t support the insurer in negotiations because a huge system knows that no PPO network is complete without them — or at least they believe the employers aversion to a network that does not include all major systems is incomplete. This guarantees rising prices. Until a NY based network of a major carrier – not a secondary network, gets the backbone to exclude one major system for better economics from the remaining three – (and employers agree to offer this) prices won’t change. Many have tried but have less uptake except from younger groups who don’t use inpatient facilities. Most plans still pay for out of network benefits which are sources of revenues for insurers through a program called Shared Savings. It shows up as a claims charge and few employers understand the insurer makes money each time people opt out of network. Providers waive out of pocket costs for the consumer and then charge much higher billed rates to be paid as out of network. There is weak disease management and no primary care gatekeeper which could limit self referrals. Drug treatment centers are out of network in many instances and a big shocker for people desperate to get a loved one into a high end facility. No consumerism there. I could go on and on. Suffice to say, everyone’s fingerprints are on the fiasco but it’s impact is felt most by those who can least afford to pay for these practices. It’s a third rail subject for politicians so forget about legislated reforms. It’s going to have to get a lot worse before politicians perceive they have a mandate to turn the system on its head. Meanwhile stay long on the big insurer stocks. No impediments ahead that I can sadly see. Nor intermediaries with silver bullet solutions that employers will adopt especially in a 4% unemployment economy.
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Looks like TPAs are beginning to squirm. Even now I’m not optimistic. As long as group insurance plans continue to be tax advantaged the incentive to save remains compromised — for both client and TPA.
TPAs generally have poorer economics with larger systems and as a result can’t hit the price points for discounts required by multi site employers. One exception is Collective Health which rents Anthems network and can give larger employers competitive discounts. Problem is they also have to charge $25 more to rent the network. However, they have a very slick consumer engagement model that may be worth it for many tiring of traditional services and limited digital engagement from the larger insurers. If they get too much traction, look for them to be purchased by Anthem. Smaller TPAs lost opprtunities with the caps on community rated plans and can no longer cherry pick smaller insured plans with healthy workforces. We definitely need more competition but the barriers to entry are very high. The argument that there is real competition in group insurance and not a oligopoly engaged in synchronized swimming is not be supported by any fact pattern.
Thank you, Michael!!
Doctors have an even stronger fiduciary responsibility that is widely ignored when it comes to money and administration. THCB is full of people pointing the finger at others (politicians, regulators, vendors, hospitals, pharma) while taking no direct responsibility for themselves. This is starting to show in very objective ways such as Blumenthal’s “Drop in U.S. life expectancy is an ‘indictment of the American health care system’ https://www.statnews.com/2018/01/04/life-expectancy-us-health-care/
It’s time for all of us to start looking in the mirror in terms of complacency and greed.
I think ex-CMS Head Don Berwick said it best,” Real health reform means empty hospital beds”. Until incentives exist to reward keeping people well, behavior will follow the reimbursement model which drives treatment instead of cures.
This is an excellent insight… “Employers are often more focused on avoiding disruption than acting as responsible fiduciaries to drive market reforms. By abdicating to their insurers or a less than qualified advisor, employers have failed to drive fundamental market reforms that would otherwise slow or reverse the inevitable march toward a single payer system as a means to escape the unsustainable consumption and financing of healthcare.” ….and when they try (like Leapfrog) they get co-opted by the big system bureaucrat tweakers whose reforms make things worse and more expensive.
I often ask CFOs – what if you tied a percentage of your and HRs bonus to hitting a medical trend of 3% or less? Would it change the amount of time you dedicate to managing engagement and your cultural tolerance for change. Would you see healthcare as a social contract instead of a cost of doing business that can’t be controlled?
“This is an excellent insight… “Employers are often more focused on avoiding disruption than acting as responsible fiduciaries to drive market reforms.”
To me, that means that we need to end (the tax created) third-party payor and provide the individual with the same tax benefits with or without that third-party being involved. With greater individual control the individual can choose how he wishes to balance the triad (cost, quality, access) and decide upon the vehicle to use when considering some form of health insurance.
I don’t think there is only one good way and believe that different people do better when they have more responsibility for their lives.
Amen. Many agree with this line of thinking. The question always arises whether healthcare is a right or a privilege. Ones response to this question often informs the public or private solutions that follow as remedies for what all agree is a messed up system where middlemen and an oligopoly of stakeholders have found legal ways to continue opaque pricing and overcharge for services. Consumerism only goes so far in healthcare as a sick person by definition is not a great consumer and often out of fear or ignorance will seek the most immediate provider without regard to cost – especially if there is a third party payer. Every nationalized country is different in terms of what is required, how it is paid and where the seams are showing regarding the ability to provide access, quality and low cost. Seems all agree you can have two out of three of these deliverables but not all of them.
“Consumerism only goes so far in healthcare as a sick person by definition…”
That is why consumers should consider carrying private insurance to meet their needs and consult with an expert when doing so if needed.
I’m interested in your estimate of the revenue taken out of the healthcare system by intermediaries who are lining their pockets at the expense of their clients and patients.
Also, with respect to a potential single payer system, we hear a lot about cost shifting to commercial payers, especially by hospitals, who claim that Medicare and Medicaid don’t pay enough to cover provider costs. Can these hospital systems cover their costs, including capital costs, if they had to accept Medicare rates from all comers even if there is no uncompensated care? I have my doubts. Moreover, a tight-fisted single payer system could easily have a significant adverse impact on medical innovation which would hurt us all.
Maybe if our society were less litigious, medical practice patterns wouldn’t have to include as much “just in case” testing. In my view, most of our defensive medicine is embedded in how the standard of care is defined which is probably more testing intensive than healthcare systems in other developed countries.
Secondly, maybe we could save a lot of money if we knew when to stop at the end of life. In other countries, part of the social contract includes not imposing unreasonable costs and expectations and your fellow citizens. Too many of our folks want what they want when they want it and they expect someone else (taxpayers and insurers) to pay for it. Then they complain about high taxes and high health insurance premiums. We’ve met the enemy and it’s us.
Barry, someone wrote recently that you can have two of theee things in healthcare and you can choose: access, quality and lower cost. The American paradigm is access plus consumer perception of outcomes divided by cost equals value. In Europe it’s Ourcomes / Cost equals value. People don’t want to wait for anything. Politically the discussion of palliative care and rationalizing the cost of care at end of life is labeled “death panels for granny”. Whoever pays wears the black hat because they have to make clinical care decisions on what should be reimbursed. Employers hide behind payers who often draft behind CMS. In Europe, the government is the bad guy when they won’t afford a cancer patient an expensive therapy that only has a small chance of success. Do no harm has been supplanted by extend life at all costs and God forbid, you get sued for not throwing the kitchen sink at an incurable condition.
There are many options to fine tune our commitment to a well-performing health industry, such as the health insurance responsibilities. I continue to view the Paradigm paralysis within our nation’s healthcare as occurring from its attempt to respond to the profound loss of Social Capital in many communities. The loss of Social Capital has systematically augmented the social adversities faced by most citizens during their participation in the civil life of their communities, as in teenage pregnancy, young adult homicide/suicide, STD prevalence, worsening chemical dependency/disability/chronic pain/unemployment syndrome, worsening maternal mortality, obesity ‘epidemic,’ homelessness, dependent person neglect, and most importantly poverty. The healthcare industry struggles to manage the level of Unstable HEALTH associated with these social adversities. Clearly, our nation’s effort to support the level of the COMMON GOOD in each community has failed.
As our nation’s healthcare has focused on its scientific/economic mandate, the Common Good/humanitarian mandate will not improve without a national commitment to help each community re-charge its level of Social Capital. Since this must ultimately be a local responsibility, the best option for the healthcare industry would be a supportive partnership with each community to assure that enhanced Primary Healthcare is equitably available to each community citizen. The Design Principles already exist. Their minimum requirements only require Trust, Cooperation and Reciprocity.
Whai if the old indemnity style of payment returned–insurers paid claim money directly to patients and patients paid providers?
Would not this enhance price information for everyone?
Would not this enhance provider efforts to deliver high quality health care?
Would not the possibility of the patient defaulting in his obligation to pay his provider improve bedside manner [read: “humanity of care”].
What if the provider’s charge significantly exceeded the indemnity amount? This could be especially egregious in surgical and oncology cases with the patient stuck with unlimited exposure to healthcare expenses not covered by the indemnity payment not to mention the deductible.
Conversely, what happens if patients receive a reasonable indemnity payment but refuse to pay the doctor, hospital, lab, etc. because they would rather spend the money on other things and have few or no assets for the provider to recover by suing? Then there is the issue of huge charges for hospital based care that must be delivered under emergency conditions. What’s fair in those cases?
It’s tough. Employers don’t want to put patients in the middle. I favor reimbursing at a percentage of Medicare eg 300% and then balance bill patient for out of network costs. We can start with common elective services where people are clearly capable of acting as consumers and cap those exclusively at 300-400% of Medicare. Many specialty TPAs are attempting to gain share by inserting themselves into the negotiation to push back on excessive out of network charges and reduce costs. They claim their savings are superior to insurers overall because they are much more aggressive in pushing back on excessive prices that insurers often allow as part of their contract rates. They use R&C data much more refined to local markets to argue the provider is over charging. The problem is the consumer is stuck in the middle if the TPA fails to negotiate a reduction or the doctor refuses to see them because their health plan is not reimbursing fairly. Out of network retail pricing is a joke as it reflects the inflated cost of services and a business practice that is archaic and wrong.
Can you say “bad debt”?