How confident would you be in an economic market where those consuming the product or service had no idea of the costs? You'd probably think that a market like this would be a disaster. Unless consumers are price-sensitive, free-market influences simply cannot work.
That's exactly what we're facing right now with our U.S. healthcare economy. As it's currently structured, the model of employer-sponsored healthcare coverage has created an entitlement mentality and minimizes consumers' responsibility and accountability in the healthcare equation.
The result? Today, healthcare costs are at $5,400 per capita and projected to rise to $9,000 by 2006. For many major U.S. businesses, these costs represent their largest nondiscretionary expenses. A recent USA Today survey found that healthcare costs rose by 13.5% last year for midsize companies and more than 20% for small firms.
While the employee's dollar contribution for family coverage has increased (albeit slightly) over the last decade, the employee's share of the total health insurance premium has steadily declined. As a percentage of total healthcare spending, consumers' out-of-pocket expenditures are at a historic low. According to the Kaiser Family Foundation and Health Research and Education Trust's 2002 annual survey on employer health benefits, employees paid 34% of the total health insurance premium in 1993, but only 26% in 2002.
Further, consumers have been shielded by employers and insurers from the true cost of medical care and have had little opportunity or incentive to express their own choice regarding payment for healthcare.
I'd like to share a personal anecdote to illustrate this. As a consumer myself, I have a health plan with a very high deductible. Recently, I had a rotator cuff injury and was advised by my orthopedic surgeon to get an MRI. Living in New York, I thought there must be plenty of places to get an MRI. I called a dozen hospitals in the New York area that provided MRI services, just to find out how much it would cost, since I would be paying 100% of the cost. Of all the places I called, only two could or would tell me the cost. The response, nearly across the board, was, "Well, you have insurance, don't you? Why do you care about the cost?"
We simply cannot begin to fix this problem without the consumer. Greater consumer awareness is the most critical component of this initiative. By joining together, health insurers and providers can begin to shape and influence the key stakeholders toward achievable solutions that will moderate this escalating affordability crisis. To that end, we need to encourage consumers, hospitals and physicians to take steps to reduce unnecessary healthcare spending. Anyone can pick up a Consumer Reports and research the price of a washing machine or a car. But what about a mammogram or an emergency room visit? We need to support the creation of information resources that put consumers in touch with costs to promote better "shopping."
Tied to the knowledge of costs is the awareness of savings. As healthcare providers, you know that preventable conditions such as those related to smoking, obesity or other unhealthy lifestyles cause billions of dollars in health expenditures per year-billions that could be saved by behavioral changes. The value of wellness, preventive medicine and healthy lifestyles cannot be underestimated. As you know, there is ample evidence that individuals who try to keep themselves healthy through diet, exercise and other wellness activities and who follow physician-recommended treatment and prevention regimens have better health outcomes, and therefore fewer medical costs. The patient-physician relationship is key here-and the stronger it is, the better this will work.
While consumers themselves have the greatest potential for making an impact on this crisis and turning it around, we're supporting this on the health insurance side by the very design of our products. Consumer choice health plans play a key role in the shift in thinking and behavior that must take place, by encouraging more involvement and better healthcare decisionmaking. These types of plans include health reimbursement arrangements, medical savings accounts, flexible spending accounts and, pending the passage of new national legislation, health savings accounts. Coupled with tax incentives, these plans promote greater discernment and put consumers back in the equation where they need to be.
These innovations are gaining strong momentum. The Health Insurance Association of America recently released findings from its research into consumer choice health plans. That study is considered the most comprehensive yet of consumer, employer and provider attitudes toward these plans. The group found that even though most Americans are happy with their current employer-sponsored health insurance, the majority of respondents said they would consider switching to a new consumer choice plan if given a chance. Most of the businesses asked said they either currently give their employees that chance or intend to offer it sometime in the next five years.
We are truly at a crossroads with our U.S. healthcare economy. Changing the way we look at our healthcare and how we pay for it is critical. As health insurers and healthcare providers, we both play a vital role in promoting awareness of costs, awareness of savings and awareness of consequences to consumers. It's our best chance of fixing our broken healthcare economy.
Ben Cutler is chairman of Fortis Health, Milwaukee, and co-chairman of the board of AAHP/HIAA, Washington.