Consumer Power Report #146

Published October 3, 2008

I spoke last Friday in Madison, Wisconsin at an event organized by Jeff Mayers, founder of The topic was “Diagnosing a Policy Fix to U.S. Health Care,” and I was a keynote speaker along with Ken Thorpe of Emory University and Antonia Maioni of Canada’s McGill Institute.

It turns out the event was televised on the local public television outlet, so I was not able to use the PowerPoints I had prepared. That means I had to wing my remarks and have no idea what I said or how well I said it. I also had to stand still at the lectern instead of wandering around. Alas.

Still, I thought the event was excellent though a bit unnerving.

It was excellent because it brought together a lot of people who are involved in health care issues in Wisconsin.

But it was unnerving for the same reason. During an afternoon discussion, it seemed that each person had his or her own narrow cause. One was smoking cessation, another was abortion rights, another was information technology, another was employer wellness programs, and on and on. And each of them wanted to use the power of government to make me (the consumer) do what he or she wanted me to do.

If they all get together to support each other they will have a very powerful coalition. But it will be a self-interested coalition of rent-seekers. As a consumer/taxpayer I find that scary.

I am all for them using persuasion to convince me and everybody else of the merits of their services. But I draw the line at using the power of government to force me to comply with their agendas.




The Kaiser Family Foundation has released its annual survey of employer benefit plans. Gary Claxton, John Gabel, and others summarized the findings in an article published in Health Affairs. There is a wealth of interesting information here.

Starting with overall trends, the study finds that employer heath care costs rose a mere 5 percent from 2007 to 2008, and that the percentage of employers offering coverage rose from 60 percent in 2007 to 63 percent in 2008. In fact, the rate of cost increases has been dropping every year since 2003 to the point that it is very close to the rate of increase in overall inflation and workers earnings in 2008. And the percentage of employers offering coverage is the highest since 2004.

These are both very good news, worthy of banner headlines. It will be interesting to see if the media pays any attention.

One of the contributing factors to these trends has got to be the rise of consumer-driven health care. The survey finds that 13 percent of all employers now offer a CD health plan, up from 10 percent in 2007 and 7 percent in 2006, and that 8 percent of all workers are now covered by such a plan. While CDHP enrollment grows, HMO enrollment has declined from 26 percent in 2004 to 20 percent in 2008. And no wonder–the premium advantage of a consumer-driven plan is dramatic. Below are the annual family premiums for the different forms of coverage.

HMO — $13,122
PPO — $12,937
POS — $12,330
HRA — $11,571
HSA — $9,101

For single coverage the annual premium is:

HMO — $4,754
PPO — $4,802
POS — $4,647
HRA — $4,468
HSA — $3,527

Now, obviously it is easy to lower premiums by raising the deductible, so it is not surprising that these premiums should be lower. But PPO deductibles are also increasing to the point that they are no longer very far from a CDHP deductible. This survey finds PPO deductibles rose from $461 in 2007 to $560 in 2008 for singles and from $1,040 to $1,344 for families. And, of course, there is considerable other cost-sharing on top of that in the form of co-payments and co-insurance.

Also, employers contribute significantly to a worker’s account to offset the deductible. The average employer contribution to an HRA is $1,249 for a single and $2,073 for a family. Twenty-eight percent of employers with HSA coverage make no contribution to the worker’s HSA, but those that do contribute $1,139 for singles and $2,067 for families on average.

SOURCE: Health Affairs; Kaiser Family Foundation


Meanwhile, Towers Perrin has issued another study of “high-performing” versus “low-performing” employers when it comes to health benefits. On average the employers spent $9,660 per employee on benefits, but this amount varied by 20 percent up or down depending on the practices followed by the employer. The study finds that employees as well as employers in high-performing companies save money, so it isn’t just a matter of cost-shifting. The study notes, “High performers also show success in holding down costs across all plan types. Notably, high performers offering account-based health plans (ABHPs) with a health savings account (HSA) feature are keeping the total per-employee cost under $6,700–a figure well below the low-performer cost ($7,584), as well as overall costs for other plans.”

These employers do not rely solely on plan design for results but also engage in a lot of employee engagement, wellness programs, clear communications, and performance metrics. The high-performing plans also tend to prefer HSAs over HRAs because they want to encourage employee wealth accumulation in preparation for retirement.

SOURCE: Towers Perrin News release


Okay, here’s a twist. For decades we have heard about what a crisis rising health care spending is. Now Vanessa Fuhrmans writes in The Wall Street Journal that consumers are taking it upon themselves to spend less — and that, too, is a crisis!

She reports, “The number of prescriptions filled in the U.S. fell 0.5 percent in the first quarter and a steeper 1.97 percent in the second, compared with the same periods in 2007 — the first negative quarters in at least a decade.” And, “the number of physician office visits also has been declining since the end of 2006. Between July 2007 and 2008, the most recent month for which data are available, visits fell 1.2 percent.” She adds, “In a survey by the National Association of Insurance Commissioners last month, 22 percent of 686 consumers said that economy-related woes were causing them to go to the doctor less often. About 11 percent said they’ve scaled back on prescription drugs to save money.”

Sounds pretty good to me. But not to some other people who worry that people are not getting the care they need. Really? Maybe people are deciding to live with their “restless leg syndrome” or skip the Enablex and just go to the bathroom more often (is it really a medical crisis that Joe missed the group photo because he was in the men’s room?) Maybe instead of making an appointment with a doctor for every ear infection they are going to the retail clinic instead. Is that really such a bad thing?

The article goes on to say that knee replacements for a group of mid-Atlantic employers fell by 18.6 percent between March 2007 and March 2008. So people decided to live with a sore knee for a while longer. This is consumerism in action. Most experts estimate that 30 percent of the care we get is unnecessary. Now people have a financial reason to think twice about ordering up a useless service. Good for them.

SOURCE: Wall Street Journal


“Hospital Guy” Changes His Mind

Dr. Thomas Lansdale wrote a short essay in the Cleveland Clinic Journal of Medicine in which he laments what has happened to hospitals during his career. He says when he first started in medicine, a teaching hospital was “a humming beehive of academic activity. Everybody knew everybody, from the hospital CEO to the night security officer. The nurses called you by your first name and worked with you for weeks at a time, fostering mutual respect and sometimes even affection. In those days, nurses actually nursed their patients, spoon-feeding them broth with their medications, washing them in bed and bathroom, holding their hands and heads. Patients came to the hospital to be diagnosed and treated until they recovered from whatever illness had felled them.”

But now all of that has changed with bureaucrats running the show, physicians keeping up “with the unending deluge of arcane demands from the accreditation organizations watch-dogging our teaching efforts,” and staff nurses being replaced by agency nurses who rotate between facilities.

Today, he writes, “My real job is to do everything in my power to keep my patients out of the medical center. I walk the halls now and don’t recognize the institution I grew up in and came to love. Everywhere I look, I see not magic and promise, but dirt and danger. I’m not a hospital guy anymore.”

SOURCE: Cleveland Clinic Journal of Medicine

What Employers Can Do

CHCC member Jan Ozga looks at these problems from a patient’s point of view in an article published by Employee Benefit News. He writes, “Ask most people where they think they would be safest if they were sick or injured, and they would say without hesitation ‘In the hospital.’ But they’d be wrong. Unfortunately in some cases, dead wrong.

He walks through recent studies of hospital conditions in areas such as medication mistakes, surgical snafus, hospital hygiene, and overworked physicians and nurses, and then lists a series of actions employers can take to help their employees survive and offers examples of organizations that are working on patient safety. Of course, if a hospital has a monopoly in a community, employers and patients may not have much choice.

SOURCE: Employee Benefit News

Get Rid of the CON Job

Maybe one of the most effective things employers can do is encourage competition by repealing Certificate of Need. An editorial in Newport News’ Daily Press says, “a story in Thursday’s Wall Street Journal offered a reminder of why health monopolies — which both Sentara’s Williamsburg and Carillon’s Roanoke are, when it comes to inpatient care — can have profoundly negative effects.”

The article says that Roanoke’s health insurance premiums “have risen from the lowest in the state to the highest,” mostly because of Carillon’s monopoly status. It sees the same thing happening in the area where Sentara Hospital is trying to block construction of a new Doctor’s Hospital. The editorial argues, “Patients should have choices. The state regulatory apparatus should protect them and advance their interests, not protect big, powerful and financially thriving enterprises.”

It concludes, “The case for approving Doctors Hospital is strong, and state health regulators should get out the “Yes” stamp when the application hits their desks.” Or better yet, get out of the business of approving new facilities in the first place.

SOURCE: Daily Press; Thomas Net; You Tube