Skip Page Banner  
Skip Navigation

Evidence Growing of ‘Very High’ Increases In Health Care Costs Due to Consolidation

Tuesday, January 29, 2013

Evidence is growing that in more markets across the country, private sector health plans and employers are facing “very high price increases year-to-year” in some of the same markets where accountable care organizations have been approved by Medicare, the chief executive officer of Equity Healthcare at the Blackstone Group said Jan. 28.

Speaking at a briefing sponsored by the Alliance for Health Reform, Robert Galvin said that coordinating health care among providers, which is needed to create new payment reform, is leading to consolidation. “But where appropriate consolidation becomes too much consolidation, it becomes a problem,” he said.

Galvin is in charge of choosing health plans for about 40 companies. The briefing was titled “Approaches to Bending the Health Care Cost Curve.”

Provider consolidation can result in large organizations that have “tremendous pricing power,” which will lead to cost shifting from public sector programs such as Medicare to private payers, such as employers and individual health insurance customers, Galvin said. In addition, “Innovation starts to get squeezed out,” he said. “Part of the worry when you get organizations that are that large is that it's just hard to be heard.”

Galvin cited a study released in November 2012 by Catalyst for Payment Reform, an organization sponsored by employers, health plans, consumers, and labor groups to further payment reform. It found that consolidation among hospitals and large health systems across the country is the major driver behind rising health care costs (223 HCDR, 11/20/12).

Employers and consumers need more information on health care prices and quality, and Galvin called for measuring the results of global payment, bundled payment, and other new payment reform plans. “There is no kind of neutral party that is today authorized to measure what is actually going on,” he said.

Galvin also called for funding antitrust regulation. “This has to be a whole system solution. It can't be that one sector does better and the other does worse, because real improvement is going to come when health care is more affordable and better quality for everyone,” he said.

AHIP: 'Clear the Barriers' to Cost Reduction

Karen Ignagni, president and chief executive officer of America's Health Insurance Plans (AHIP), said that “we need to clear the barriers that are standing in the way” of health care cost reduction.

“In the private sector, we're doing tiering,” forming partnerships with high-performing networks of physicians and hospitals in which consumers receive incentives to use those networks. “There's some significant results to report,” she said.

But the industry is not able to set up tiered networks in Medicare Advantage, the private sector segment of Medicare, she said. That is “a barrier to actually achieving the kinds of things we're doing in the commercial arena that could be thought about.”

In addition, there are barriers to sharing information with consumers, Ignagni said. “In some cases, health plans are forced to sign contracts … with providers where they can't share information,” she said. “To the extent we can't share information … those barriers should be broken and eroded.”

Extend Wellness Programs to Individual Market

Ignagni also called for allowing health insurers to adopt wellness incentives for enrollees in individual plans. “We're working and partnering with employers to encourage participation in wellness programs, rewarding people for doing so, but we're not able to do that on the individual side,” she said.

“With so many people purchasing on their own, that's something that ought to be looked at,” she said. A demonstration wellness program will be conducted in 10 states in the individual market, “but we ought to think more broadly about how to encourage individuals to participate in disease management and get rewarded for health risk appraisals and following the specific guidelines of their physicians,” she said.

AHIP, which represents health plans covering about 200 million Americans, called for extending wellness programs in the individual market in a comment letter it filed with the Department of Labor Jan. 25 on a proposed rule released last November governing wellness programs in group health plans (224 HCDR, 11/21/12).

Ignagni told the briefing there needs to be more focus on out-of-network charges, which are higher than charges for care obtained within health plan networks. “To an individual, if they're seeking care out-of-network, it matters to them if a particular physician is charging 10 times Medicare [rates],” she said.

AHIP is finishing a study highlighting price differences between in-network and out-of-network charges, Ignagni said. “The results are eye-popping in terms of out-of-network charges.”

Total costs need to be contained “to make sure that we are not designing strategies that yield reductions on one side that create cost shifting on another,” Ignagni said.

Nationwide Health Spending Target Urged

Stu Guterman, vice president and executive director of the Commonwealth Fund's Commission on a High Performance Health System, highlighted a study released Jan. 10 that maintained that health care costs could be reduced by some $2 trillion from 2013 through 2023 by adopting a series of measures, foremost of which would be adopting a nationwide health care spending target, patterned after a health care cost containment law adopted in 2012 in Massachusetts for controlling state spending (08 HCDR, 1/11/13).

He said a total health spending target should be based on gross domestic product growth. “The United States spends much more money on health care than any other country in the world,” he said. “Holding health spending to GDP growth ought to be a legitimate target, set nationwide, not just [for the] federal government.”

That would be a “motivating force” for the health care industry and would include implementing provider payment reforms, providing consumers with more information and rewarding them for making better choices, and making markets work better to create better health at lower cost, he said.

By Sara Hansard  


AHIP's comment letter on the wellness incentive proposed rule is at http://op.bna.com/hl.nsf/r?Open=shad-94dsh2.

To view additional stories from Health Care Daily Report™ register for a free trial now