December 3, 2001
Health insurer: Business can help control health costsby intensifying involvement
Costs of health care and health insurance are increasing in double digits again this year, and that trend is likely to continue, if not worsen, in the short term, one of the leaders of New York's health insurance industry has told Business Council leaders.
Business can begin to reverse the trend and help improve health-care costs and systems by becoming actively involved and embracing four key principles, added Howard Berman, president and CEO of Excellus, Inc., a diversified not-for-profit health-care company that operates Blue Cross and Blue Shield companies in Rochester, Syracuse, and Utica, and Univera in Buffalo.
Berman, a member of the board of directors of The Business Council, gave a talk entitled "The Rising Costs of Health Care: Causes and Challenges" at the Nov. 13 "Issues Conference" of The Business Council's Government Affairs Council (GAC). The complete text of his prepared remarks is available in PDF format at www.bcnys.org/pdf/bermanbiz.pdf.
How business can help contain health costs: The ongoing escalation of health-care costs partly reflects too little involvement in health-care planning and decision-making on the part of both the business community and individual communities, Berman said in remarks prepared for his presentation.
"We have taken the easy road, relying on the promise of information technology and the delegation of our instructions to others to solve the problem," Berman said. "The data shows that both approaches have failed."
Health insurers can't control many of the health system's costs without more active and real business support, Berman said. In particular, business must "embrace and publicly advocate certain principles that will redefine how care is provided," Berman said. The four key principles are:
- Collaboration: Business must encourage health-care
providers and institutions to collaborate to avoid costly
duplication of services at the community level, Berman said.
"We have to ensure that we have what we need, but not so
much that we pay for it twice," he said.
Business must strongly support efforts by providers and
institutions to do what works to provide good results, "not
just an empty activity," he said. That means business must
support health insurers' efforts to demand "evidence-based"
care - that is, treatments based demonstrably on the likelihood
- Regional "Centers
Business must support creation of world-class regional "centers
of excellence" where patients can get highly specialized
services. This approach will ensure regional access to world-class
care while minimizing the creation of costly redundant capabilities
in many different communities.
- System-Based Solutions: Business must influence health-care providers and institutions to provide services driven by patients' needs, not providers' convenience, Berman said. For example, business must support efforts to create lower-cost alternatives to emergency rooms for round-the-clock service, such as after-hours call centers.
Business can support these principles by rewarding enterprises that support them and opposing those that don't, Berman said. Specifically, business groups can do this with their rhetoric, with their support or opposition to health-care providers' capital requests or government programs, and with support for health insurers' pursuit of cost-management initiatives.
Active, consistent business support of this kind could bring significant improvement to health care within three to five years, Berman said.
Factors contributing to escalating health costs: Berman said there are many factors contributing to escalating health costs generated by hospitals, doctors, and drugs. He highlighted some of the "drivers" behind the cost escalation:
of promising technologies that providers and health-care
institutions tend to seek and use regardless of their costs
aging population that seeks increasing levels of care as
people remember how they felt when they were younger and
strive to feel that well again.
economic reality in which supply creates demand and increases
in supply increase demand. In business economics, in contrast,
increases in supply generally intensify competition and
drive costs down.
- The growing power of providers that stems from such factors as legislation and regulations that have cut insurers' ability to control costs, the closing of some hospitals has strengthened the negotiating power of survivors, and the tendency of surviving hospitals to reject "disruptive innovation."
"Most importantly, there is nothing in the current environment that has the power to change any of these relationships," Berman said. "In fact, over the near term, things may even be tougher."
The complete text of his prepared remarks is available in PDF format at www.bcnys.org/pdf/BermanBiz.pdf.