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Tag: purchasers

ACA 101: An Employer’s Search for Objective Advice

flying cadeuciiIn ancient Athens, the philosopher Diogenes wandered the daylight markets holding a lantern, looking for what he termed, “an honest man.”

It seems since the dawn of the consumer economy that customers and buyers have traded most heavily on a single currency – trust.

Three millennia later, our financial system still hinges on the basic premise that the game is not rigged and any trusted intermediary is defined by a practitioner who puts his client’s interests ahead of his own.

Anyone responsible for procurement of healthcare may feel like a modern-day Diogenes as they wander an increasingly complex market in search of transparent partners and aligned interests. The art of managing medical costs will continue to be a zero-sum game where higher profit margins are achieved at the expense of uninformed purchasers.

It’s often in the shadowed areas of rules-based regulation and in between the fine print of complex financial arrangements that higher profits are made.

Are employers too disengaged and outmatched to manage their healthcare expenditures?

Are the myriad intermediaries that serve as their sentinels, administrators and care managers benefiting or getting hurt by our current system’s lack of transparency and its deficit of information?

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Yes. Employers Really Are to Blame For Our High Medical Prices

I welcome Leah Binder’s earlier post on this blog, written in  response to my blog post in The New York Times. To be thus acknowledged is an honor.

As an economist, I am not trained to respond to Ms. Binder’s deep insights into my psyche, dubious though it may be. Nor, alas, can I delve into hers, fascinating though that might be. Let me therefore concentrate instead just on substance.

First of all, I do not recall calling employers “stupid,” nor did I question their IQ. I do confess to having once called employee benefits managers, when addressing them at some of their usually mournful meetings, “kind-hearted social workers dressed to look like tough Republicans.” At that meeting I contrasted how carefully their company’s tough-minded VP for Procurement, Murgatroid de B. Coverly III, Princeton ’74, purchased paper clips for the company with the much more mellow approach taken by their V.P. of Human Resources to purchase health care for their company’s employees.

Benefit managers – I hate to call them BMs — really are the nicest folks. They care deeply about their employees’ well being (until, of course, the latter lose their job with the company). They worry incessantly about their company’s ever rising outlays for health insurance. And, after a cocktail or two, they regularly lament how rarely they get the attention of top management and of the board of directors – the very folks I once told to go look into a mirror in their search for the culprit behind rising health care costs.

No, when I say “employers” I really mean top management and boards of directors who make the rules. And  I did not even call those mighty ones stupid, but merely “passive payers” as did, by the way, David Dranove on this blog in his critical response to my New York Times piece. Why these usually tough and smart people have behaved so passively in buying health care for themselves and their employees remains a puzzle at the level of economic theory.

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