On Health Care, Private Sector May Show Congress the Way

Printed from: http://newbostonpost.com/2017/08/15/on-health-care-private-sector-may-show-congress-the-way/

 

Just because Congress can’t fix health care doesn’t mean it can’t be done.

That’s the message from the Health Transformation Alliance, 41 big American companies that have banded together to try to save money and lives on their own, without waiting for Congress to pass a new law.

The Alliance’s chief executive, Robert Andrews, himself a former Democratic congressman from New Jersey, had a recent New York Times op-ed reporting on three steps being taken by the companies, which spend about $25 billion a year on covering about 6 million employees and retirees.

One is using “big data” analysis to find patterns on which providers are delivering the best results. Another involves negotiating better deals with the medicine middlemen known as pharmacy benefit managers. A third will be setting up new medical networks in Dallas/Fort Worth, Phoenix, and Chicago to treat back pain and diabetes and to provide knee and hip replacements.

Andrews writes that the drug reforms alone “are projected to save participating companies, their workers and, in some cases, retirees at least $600 million over three years — while achieving the same or better results.”

Which raises one big question that he doesn’t get into in the Times op-ed:  if these savings are such a great idea and so easily achievable, why isn’t the federal government doing these things? 

After all, government spends more than $1 trillion a year on Medicare and Medicaid. State budgets pick up some of the Medicaid costs, in ways that are threatening to crowd out other expenditures; in Massachusetts, for example, MassHealth consumes 40% of the state budget. In New York, Medicaid is one third of the state budget. At the federal level, Medicare, the health care program for the elderly, is about 15% of the total federal budget, about the same as what gets spent on defense.

True, Medicaid reimbursement rates to doctors are already rock-bottom compared to private insurance. Some states are trying to save more money on the program. In Rhode Island, for example, where about 30% of the state budget is devoted to Medicaid, Governor Gina Raimondo, a Democrat, says she saved $75 million on Medicaid in 2016 and $120 million in 2017 “by reducing waste and increasing program efficiency and effectiveness.”

Even so, the private sector’s leadership here highlights some structural differences between government and business that may help explain why progress by Congress has been so slow by comparison.

One big difference is that what the private sector hails as “savings,” in the public sector gets demagogued as “cuts.” This is a bipartisan problem. Republican presidential candidate Mitt Romney repeatedly attacked Barack Obama and ObamaCare for having supposedly having “cut Medicare for current Medicare recipients.” Romney described ObamaCare as a “Medicare-cutting monster.” When President Donald Trump proposed reductions in the rate of growth of health care spending, Hillary Clinton denounced Republicans as “the death party.”

Another big difference is the influence of interest groups, and their effect on incentives. If a CEO wants to save shareholders money by wringing better value from health care vendors, he or she is likely to be thanked with a bonus for increasing profits. Or the CEO’s stock options will be worth more. When a politician tries to save taxpayers money by doing the same thing, big and powerful campaign donors and constituents and potential future employers — drug companies, doctors, their lobbyists, hospital board members, health care worker unions, medical device manufacturers, nursing home proprietors — push back hard in the other direction. The politician may decide the potential savings aren’t worth the aggravation.

What does that mean for health care cost and quality? A system in which government is the only buyer is likely to be more expensive. A system in which companies or groups of individuals are buyers may have more success in controlling costs without sacrificing quality. At the very least, the Health Transformation Alliance, a relatively new effort, bears watching closely. If it’s successful, perhaps more political pressure will eventually build to transfer private-sector innovation into the parts of our health care system that are more directly funded by the government.

 

Ira Stoll is editor of FutureOfCapitalism.com and author of JFK, Conservative.

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