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ANALYSIS
March 2, 2009
Sagging Index no longer reflects what’s going on in the market, some say, Replacements? Google it, to start.
March 2, 2009
Downward price spiral will actually boost the cost of capital for most companies. CFOS, take note.
March 2, 2009
The latest bailout at AIG could be a preview of how the president will deal with Wall Street.
March 2, 2009
No corporate defaults. Big debt offerings. Percolating CP issuance. Things may be looking up in the capital markets.
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September 24, 2007 12:01 AM ET
It's nice that politicians are talking in earnest about federal health-care reform again. But as the debate swells, both the core problems with health care and the policy proposals to fix them—to say nothing of the rhetoric—get only more confusing. Some buzzwords are almost household terms now: “universal coverage,” “ERISA waivers,” “employer mandates,” “purchasing cooperatives.” For many voters, the understanding of health-care reform isn’t any deeper. Large employers, however, have a lot invested in the health-care system and arguably know more than just buzzwords. Private employers, in fact, spend nearly $500 million a year to insure 160 million people (workers, plus their dependents and retirees), or roughly 65% of the 200 million Americans believed to have health insurance. According to National Health Care Expenditures, an annual study published in the journal Health Affairs, the biggest portion of the $1.9 trillion in total health care expenditures in 2005 (the most recent year for which data are available) went to pay for “private health insurance premiums,” which totaled $694 million. So-called “plan sponsors,” or employers, paid for two-thirds of these premiums, or $463 billion. The rest was paid by employees through cost sharing, or by self-employed workers who finance their own coverage. The biggest problem employers have with the proposals from presidential candidates to reform the country’s health-care system is that they lack concrete ideas on improving the system itself. The proposals are all about coverage—getting more people health insurance. While proponents contend that universal coverage would go a long way to cut costs, employers say it’s putting the cart before the horse. “Until you fix the system we’re all going to pay more,” said Andrew Mekelburg, vice president of federal government relations at Verizon Communications. Verizon spends $3.5 billion a year on health care for 900,000 people, including current employees, their dependents and retirees. “The key is that we start addressing the cost problems,” he said. “Our No. 1 priority at Verizon is pushing the government to pass health IT legislation. The health-care sector has not undergone all the business process changes that exist elsewhere in the economy. You can go anywhere in the world and get money from an ATM, but you can’t go across town and get a document or an X-ray from your medical records.” Ted Nussbaum agrees, though he concedes that lack of coverage is part of the problem. “The annual healthcare budget is bloated by $32 billion of uncompensated care costs—the emergency room visits that lead to hospital [stays] for patients with no coverage. Big ratepayers, like large employers, are struggling under the weight of these costs, plus an incredibly inefficient health care delivery system that provides inconsistent quality,” Mr. Nussbaum, director of the health care consulting practice for North America at Watson Wyatt. “One of the things that I do not hear from any of the candidates are proposals to improve the consistency of the quality of care,” he said. “How can we reform a system that has no standards of care?” Mr. Nussbaum has consulted to Fortune 500 companies about how to get the most out of their health insurance plans since the 1970s. In 2006 Verizon implemented an IT health records system for employees that allows them to electronically manage claims data and prescription drug information from their doctors. “An IT solution is one way of putting more tools in the hands of consumers to make us better consumers of health care,” said Mr. Mekelburg. “If we’re smarter about health care we’ll all save on costs.” He added that one of the problems with employer-mandated health care insurance is the limits. “They have to prescribe the amount we spend. ‘You spend X% of your payroll on health care.’ But how do we know what the right amount is?” he wondered. “And when you set the amount it takes out the incentive for employers to come up with more cost-effective care. What if I just cut my employees a check for $15,000 and said ‘go get something yourself.’ [A mandate] leaves no room for innovation and flexibility and creativity.” Helen Darling is president of the National Business Group on Health, a non-profit in Washington that researches health-care issues on behalf of its 245 member-employers, mostly Fortune 500 companies that collectively insure 50 million Americans. Her complaint is that all the reform debate is about coverage, not cost. “It’s ironic: the main reason people do not have coverage is because they can’t afford it,” she explained. “We must put in protections that control costs too. And this isn’t for the sake of large employers, who already spend an average $9,000 a year per employee on health care—which will go up some with universal coverage, but not much. Politicians say, ‘we’ll get the coverage in first, and we’ll worry about the costs later,’ but you’ll never be able to do the cost part later.” One way to lower costs is by directing patients to higher-quality providers, according to data collected by Watson Wyatt. “Say we pay more for Bob’s bypass procedure: he recovers faster, he returns to work more quickly and he is less likely to return to the hospital or need expensive aftercare,” Mr. Nussbaum explained. “So one thing that would lower costs and improve the health of the U.S. population would be to focus in any national reform first on creating standards of care,” he said. “If we don’t, I’m concerned that none of the estimated costs of universal coverage—one is $110 billion—will be close to accurate.” Setting standards of care, he said, should not be an overwhelming task, with reams of data in Medicare’s database that can be used to suggest which treatment methods provide better outcomes, for example. “No one starts out trying to give subpar care,” Mr. Nussbaum added. “It’s just that the providers themselves don’t even have data to see how they compare to their peers or what [treatments] seem to be working best.” Ultimately, alas, the devil will be in the details, Mr. Mekelburg at Verizon said. “Right now all the proposals sound pretty good,” he said. “We think the idea of universal coverage, there is some sense in that, but how do you enforce a mandate? There are some people who drive cars who don’t have car insurance. You can’t enforce it.” FW
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