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“The Role of Planning in Controlling Health Care Costs”
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This speech was delivered by Dr. Marsha Gordon, President/CEO, Westchester Business Council, at a recent Albany forum on healthcare issues affecting NY. Marsha is a dear friend and colleague and I thought her words might be of interest to all of you in the RBA. They are reprinted here with her consent. -- Al Samuels Let me begin by talking about why cost matters. For starters, consider that the annual growth in health care spending has outpaced the growth in the gross domestic product for the past thirty years. In 2005, health care spending accounted for 16% of GDP, compared to 7.8% in 1975. Rising health care costs comes at the expense of spending on other goods and services. The ultimate payers, in most instances, employers who offer health insurance coverage to their employees, are forced to adjust as health care consumes an increasing share of their budgets. This often means shifting more of the cost burden to their employees or cutting back on benefits or both. Rising costs in the health care sector drive up taxes at all levels of government. This is most visible at the Federal level through Medicare and at the state and local level through Medicaid. The cost of employer-sponsored health care increases the underlying cost of doing business in the United States as compared to nations in which the cost is fully borne by the taxpayer. Businesses in New York State have overwhelmingly identified employee heath care as their top cost-of –doing business concern. In a survey conducted by the Business Council of New York State, thirty percent of respondents said health insurance for themselves or their employees was their top cost-of-doing business challenge. In fact, more than 65 percent of respondents ranked health insurance as one of their top four issues. At the Business Council of Westchester, the county’s largest business organization with over 1,300 members, we conducted our own member survey this fall. We found that over one-third of our members do not provide health insurance at all and for those that did, nearly half paid 50 percent or less of their employees’ costs. With rate increases that are twice the rate of inflation every year, health insurance is becoming unaffordable for more and more employers - - putting more and more workers in danger of losing their coverage. In New York State, which has the second highest total health care expenditures per capita, employers are at a competitive disadvantage when it comes to utilizing heath insurance as an employee recruitment and retention benefit. Therefore, it is imperative to make the health care system in New York State more efficient and accessible. The ability to expand coverage and improve access to health care services cannot be achieved without containing costs. Just as a business cannot expand into new markets without a firm grip on its costs to set prices that will attract customers, the price of critical health care services needs to be within reach of more of our employees. And that can only be done by controlling costs so that more of our workers can have access to health care. The business community was a strong supporter of the Berger Commission and its recommendations to right-size the state’s health care facilities. The commission was long overdue. Its creation was an outgrowth of the need to address the combined reduction in admission rates and lengths of stay that yielded an excess in capacity in our hospitals and nursing homes. The Berger Commission addressed the supply side of the health care equation. In traditional markets, a manufacturer absorbs excess capacity by increasing sales, often by lowering prices. However, in health care, more is often not a good thing. Furthermore, price signals are hidden from consumers. As a result, hospitals compete with each other for market share by expanding services. This has the effect of increasing capacity, making the problem even worse. Hospitals are major employers and sources for community pride, with very loyal patients and supporters. So closing hospitals is never an easy task. One of our co-sponsors – the Finger Lakes Health Systems Agency – deserves much credit for its efforts in the Rochester and Finger Lakes area in avoiding a hospital closing by the Berger Commission. It was the only region in the State to do so and it’s reasonable to assume that strong planning helped to avoid the type of over-supply of hospital services that the Berger Commission was scrutinizing. Health planning agencies like the FLHSA are independent and use a collaborative approach with all stakeholders in the health care system. They create a structured process for understanding a community’s specific health needs, based on objective data and leverage the resources of the health care system to meet them. Hospital capacity is only one example. Successful health planning initiatives must deal with all aspects of cost, quality and access to health care. Today, the business community is turning its attention towards controlling the demand side of the equation – encouraging the ultimate stakeholders -- consumers -- to take greater care of their own health. One thing we simply must do, though, is to better support people in their efforts to stay well and obtain early, continuous treatment for chronic diseases; the best medicine here is investment in the primary care infrastructure – internists, pediatricians, family physicians, geriatricians, in private practice or in efficient group practices, including community health centers. Here’s why: Health care expenditures tend to be concentrated among a small number of high cost consumers, especially the elderly and disabled, who tend to have multiple, costly conditions. Often these people also have social and economic circumstances that affect their ability to access appropriate and timely care and manage their conditions. Typically these cases lack a primary care provider, a needed source of accessible and continuous care who is able to coordinate medical and non-medical services. The result is multiple hospitalizations and spiraling health care costs. For the uninsured and many low income people, including our growing immigrant population, primary care is too often delivered in the hospital emergency room. Not only is this an expensive setting for minor health problems but also, it is not designed to deliver preventive care and health education. As a result, employers are faced with the following health care landscape today: • Savings from managed care and cost shifting have reached a plateau Healthy initiatives include options such as health screenings, weight and physical fitness programs, wellness evaluations, stress management programs and charitable involvement/sponsorships. A reward system can be used as an incentive to drive behavior. For example this could include waiving of a prescription drug co-payment for a chronic disease if a member adheres to protocols. Another example might be reductions in an employee’s contribution for health care benefits if he or she takes a health risk assessment. Consistent with this strategy has been the growing popularity of Consumer Driven Health Plans, a strategy that seeks to put economic purchasing responsibility and decision-making in the hands of individuals. It also encourages personal involvement in health and health care purchasing behaviors. The key elements of a consumerism plan design are: • Preventive care covered at 100% Consumer directed health plans usually involve a trade-off between high deductibles and low co-insurance rates. They offer a significant opportunity to change the consumer’s understanding of health care spending. Ultimately their success is contingent upon demonstrating a more cost-effective health care system. I want to emphasize again that controlling the demand side of the heath care equation is dependent upon having widespread access to a strong primary care infrastructure. Advocating for a stronger infrastructure sends a clear message that employers care about the health, safety and well being of their employees. It also makes good business sense since healthy employees are more productive and enhance the bottom line. Strengthening the infrastructure means addressing the shortages in health care professionals that is expected to get even worse in the future unless concerted action is taken soon. According to The Federal Council on Graduate Medical Education, while the supply of physicians is expected to increase over the next two decades, demand for services is likely to grow even faster. The major driver of this increase is our aging population, which has a higher per capita physician utilization rate. Over 5 million New Yorkers – more than a quarter of the State’s population – live in areas currently designated by the federal government as health professional shortage areas, HPSAs for short. The fact that we have so many HPSAs in this State means that we must take action to address the underlying reasons for a lack of primary care services, particularly upstate. We must find ways to make primary care practice attractive to interested physicians. A good starting point is aligning provider incentives to promote cost-effective primary care. The current reimbursement system creates incentives for high volume care and high utilization of expensive procedures. Primary and preventive care services are reimbursed at much lower rates or not at all. You only have to look at the shrinking number of geriatricians, alongside the growth of our elderly population, to know that the reimbursement system fails to address the health care needs of our society. Research has shown that high quality primary care can be the most cost-effective way to address chronic conditions, prevent hospitalizations and improve community health. The growth in demand for health care professionals presents a significant workforce development challenge. In Westchester, for example, health care jobs are projected to grow by 13% over the next 10 years. The six largest health care occupations – home health aids, registered nurses, physicians and surgeons, support occupations and therapists – are each forecasting double digit growth. It is imperative that we devote the resources necessary to train and develop talented people to meet this demand. As every community grapples with the issues of rising costs, changing needs, new technologies and workforce development challenges, effective planning is essential at the local level. The solutions to the issues I’ve raised won’t come easy and will involve hard choices. But they must involve all stakeholders – businesses, providers, insurance companies, pharmaceutical companies, government and community leaders -- acting in a collaborative way, seeking a more efficient system that expands access and improves patient outcomes. Marsha Gordon |
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