While virtually every other sector of the economy stays flat, healthcare costs will climb once again in 2012. The average cost of healthcare coverage for US employees will exceed $10,000 (1). Already squeezed to balance budgets, employers are looking for any cost savings they can find. Given their track record for reducing costs, it is not surprising that over 70% of employers offering insurance will provide a consumer-directed health plan (CDHP) in 2012, and one-in-five will ONLY offer a CDHP (2). But to many employees, the change isn’t a welcome one. Typical reactions:
This new plan is disappointing and frightening. It’s not right that you are adding both more cost and more risk to what I have already. What if something serious happens to me or my children? How will I afford a bigger out-of-pocket cost? This is not what I signed up for. I’m switching to my husband’s plan.
It is clear this has nothing to do with “consumers”, and everything to do with shifting costs onto the backs of workers. Shame on you.
What they really mean: “I’m mad because you are taking something away. I want health care costs completely covered like the old days and I don’t want to be asked to take a greater role in paying or assuming risk. I’m angry because you (employer, HR) inflicted this change on me.”
Witnessing such responses to a company’s recent announcement that it will convert all of its healthcare offerings to CDHPs, I was reminded how sheltered employees remain from the business difficulty of balancing revenue and expenses in the face of rising benefit costs. Because I’ve run my own firm and used a health savings account and a high-deductible plan for many years, since 2005, I confess to being surprised by the anger and fear directed at managers and leaders. Complaints were not limited to lower-paid or under-educated workers. Regardless of socioeconomic status, none of us likes to have something such as money or security taken away.
But in this case, worker reactions also reveal a lack of awareness about where health benefit funding comes from: total compensation (3). The continued growth in healthcare costs comes directly out of take-home pay (4, 5). Workers have been paying more for healthcare for a long time, but the real cost has been largely hidden inside raises or bonuses that never happened. Thus, workers should have been angry about healthcare long ago, angry that an increasing portion of compensation has been diverted to cover fewer and fewer services. Benefits expenditures are not something extra that “the company pays for;” they are dollars not available for pay, training, new equipment or other things. And the higher healthcare costs get, the less competitive a company will be.
On the one hand, I cringe and empathize with human resources professionals who bear the brunt of incoming complaints. For them, I wish employees would exhibit rational understanding and an appreciation that cutting back healthcare benefits is sometimes the only way to avoid cutting jobs! If only more workers would acknowledge that their companies are grappling with difficult circumstances and not assume such cuts are an intentional wrong-doing.
Anger has its value, when directed where warranted.
On the other hand, I welcome the public outcry with, “It’s about time!” Consumers (even those who don’t perceive themselves as such) should be angry; healthcare prices have been irrational for a long time. Now that workers are no longer sheltered from actual price, they are justifiably upset by what they find. Medical providers cannot, or will not, tell them how much a service will cost, after-the-fact bills are difficult to understand and often incorrect, and prices are disconnected from quality or effectiveness. Spending more doesn’t get you better care. Plus, in a world where we can share every other kind of information and shop on mobile apps, health care lags decades behind. Consumers should be upset, but not with their employers.
Wendy’s Dream: Healthcare consumers armed with information, voting with their wallets.
Had consumers been paying the bill directly, we would have heard outrage long ago. Plus, we would have seen lower-cost innovations alongside all of the high-cost technologies that predominate in the medical field today. What a great opportunity we have to harness consumer discontent and direct it in useful ways. Imagine the power of millions of disgruntled new purchasers.
Imagine doctors and hospitals hearing every day, all day: “Why does this cost so much? Is there another alternative?” Imagine patient after patient, armed with information about the range of local prices, asking a provider how his service quality or outcomes justify higher fees compared to others. Imagine consumers questioning whether they need an MRI when an X-ray will do.
Imagine medical-clinic office managers hearing that patients are leaving their practice because another nearby clinic is offering a 20% discount—with better quality—prompting them to think about service delivery. Imagine investigative news reporters doing consumer segments finding the best-quality and lowest-price alternatives, instead of stories highlighting extreme cases where consumers were denied multi-million dollar procedures with questionable effectiveness. Imagine an exposé on how much medical service is delivered without ever being needed or clinically justified.
Imagine a shift in public opinion that recognizes medicine as an industry, which it is, and demands full transparency from those delivering services. Imagine citizens being appalled by providers who don’t reveal their practice records and prices, or facilities that don’t report their safety ratings.
Realizing that these subtle, but significant, changes in perspective don’t happen overnight doesn’t stop me from day-dreaming. If making workers angry can make it happen sooner, perhaps we should have done it a long time ago.
Why this matters: No one likes change, especially when it means more risk and potentially more cost. When workers get angry about being asked to take more responsibility for healthcare costs through consumer-directed health plans, it is a natural reaction to a perceived negative change. While painful, if employees can redirect that anger toward behaviors that demand transparency and market pressure, maybe it’s the only way to bring about a positive change.
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References
1. Average cost of U.S. health coverage per employee is expected to cross the $10,000. The Institute for HealthCare Consumerism, Oct 3, 2011; http://www.theihcc.com/SITEFORUM?&t=/Default/gateway&i=1188405849871&b=1188405849871&e=UTF-8&application=story&elementID=1318255528846 (accessed Oct 17, 2011).
2. Emerman, E. Majority of Large Employers Revamping Health Benefit Programs for 2012, National Business Group on Health Survey Finds. National Business Group on Health, Aug 18, 2011; http://www.businessgrouphealth.org/pressrelease.cfm?ID=179 (accessed Oct 17, 2011).
3. Levy H, Feldman R: Does the incidence of group health insurance fall on individual workers? Int J Health Care Finance Econ 2001;1:227-47.
4. Miller RD Jr: Estimating the compensating differential for employer-provided health insurance. Int J Health Care Finance Econ 2004;4:27-41.
5. Baicker K, Chandra A: The Consequences of the Growth of Health Insurance Premiums. American Economic Review 2005;95:214-18.http://www.hks.harvard.edu/fs/achandr/AER_BaickerChandra_PremiumsLaborMkts.pdf (accessed October 17, 2011).
“While painful, if employees can redirect that anger toward behaviors that demand transparency and market pressure, maybe it’s the only way to bring about a positive change.”
Well, good to hear about this from a Doctor!
I’m happy to report that I too, know of many doctors who really have the patient’s interest in mind first and foremost, and money, and the “gadgets” second!
After all, all that money people are spending on health care must go somewhere, right?!