Healthcare Cost Cutting Starts With You and You and You

After decades of gorging at the fee-for-service trough, all healthcare industry stakeholders are facing a more austere future.

The healthcare party is over.

Whether you are a young doctor starting out your career with less money pouring into your bank, a health plan forced to spend at least 80 percent of every premium dollar on actual patient care, a citizen "incentivized" to stay as healthy as possible, or a hospital getting lower reimbursement for patient services from government programs such as Medicare… the squeeze is on, or at least beginning.

Don't just take my word for it. Otis Brawley, MD, chief medical officer of the American Cancer Society, believes excessive spending on U.S. healthcare is both unsustainable and unjustifiable.

"The problem is in the waste in the healthcare system," the oncologist, author, and global leader in health disparities research told me this week. "We spent $2.6 trillion on healthcare in 2010 and $1.1 trillion on food. If the U.S. health economy were a country, it would be larger than France, the world's sixth-largest economy. Yes, in 2010, we spent more on healthcare than they spent on everything in France.

U.S. Healthcare Spending Growth to Resume

"We average about $8,000 per man woman and child for healthcare [per year]. The average per-person costs in the next most expensive countries are at about $4,000. Those countries are Switzerland and Norway… Our percent of GDP for healthcare has grown every year for the past 20 years and will continue growing until it collapses the U.S. economy."

While they will be bitter pills for many healthcare industry stakeholders to swallow, Dr. Brawley prescribes curbing greed and promoting shared responsibility.

"The solution is for us to be a more evidence-driven medical system. Programs such as Choosing Wisely help, but we all have to get away from the philosophy of gaming the system for all we can. All are responsible for our healthcare system being in extremes to include doctors, healthcare systems, insurers, drug companies, lawyers and patients."

Employer-Based Change
At San Francisco-based Castlight Health, a data analytics-driven company that helps large employers manage healthcare spending, officials believe the light of day has healthcare industry party animals scurrying for the exit to make sure their own houses are in order.

To Cut Healthcare Costs, Start at the Top

"For too long, U.S. healthcare has operated as a merit-free market with little transparency, an asymmetry of information, misaligned incentives, and — as a consequence – restricted competition," says Lorie Fiber, VP of corporate communications at Castlight Health.

"This dynamic is changing, due at least in part to growing transparency to the cost and quality of healthcare. We see large employers at the forefront of this change, working closely with their employees, providers and payers, among others, to enable quality care at an affordable cost and in a highly personalized way. The change means more engagement and accountability for all involved, certainly, and that's a good thing if it means we're more effectively applying the billions spent annually on healthcare."

With America's Health Insurance Plans waging a near daily barrage of press releases, the drug companies have been enduring a beating in the media over costly medications such as Sovaldi. AHIP, in a media statement, says the high cost of specialty drugs is placing a crushing burden on health plans: "Many of these new treatments certainly represent the best care. That's why, despite the cost, health plans provide coverage for drugs like Sovaldi, which offers a chance to cure hepatitis C but also runs $1,000 per pill. When considering the limits on out-of-pocket consumer spending now in law, plans are paying at least 92 percent of the cost of Sovaldi, often more."

But the pharmaceutical industry offers some powerful statistics in defense of marketing medications with astronomical price tags, including the claim that only 2-in-10 approved medicines produce revenues that exceed average research and development costs.

Ruth Krystopolski, president of Sanford Health Plan and executive VP of care innovation at Sanford Health in Sioux Falls, SD, says that changing the mindset of two key healthcare stakeholders is critical to any fundamental reform effort: patients and providers.

"We've had this idea that if something's broken, you can just fix it. You can take a pill," she told me, noting individuals are being cajoled into taking greater responsibility for their health, mainly through a range of economic incentives and employer-sponsored efforts such as wellness programs. "The question is, how will the public respond? For issues like charging people who smoke more, sometimes it's an agonizing talk [for health plans] to have with employers."

Krystopolski says that "changing premiums according to behavior" is one of the most effective ways to prod people to change unhealthy behaviors and adopt healthier lifestyles: "If you hit the pocketbook, that works."

Less punitive incentives may not be as effective, she says: "Positive incentives work, but I don't know how well they work."

Healthcare providers also need a new set of incentives, Krystopolski says. "People do things because they're incentivized to do them. Payment models are moving away from episodic care," and "prevention is everybody's responsibility," she says.