Reason.com

Free Minds & Free Markets

On Health Care, Private Sector May Show Congress the Way

Just because Congress can't fix health care doesn't mean it can't be done.

picture alliance / Frank May/Newscompicture alliance / Frank May/NewscomJust because Congress can't fix health care doesn't mean it can't be done.

That's the message from the Health Transformation Alliance, 41 big American companies that have banded together to try to save money and lives on their own, without waiting for Congress to pass a new law.

The Alliance's chief executive, Robert Andrews, himself a former Democratic congressman from New Jersey, had a recent New York Times op-ed reporting on three steps being taken by the companies, which spend about $25 billion a year on covering about 6 million employees and retirees.

One is using "big data" analysis to find patterns on which providers are delivering the best results. Another involves negotiating better deals with the medicine middlemen known as pharmacy benefit managers. A third will be setting up new medical networks in Dallas/Ft. Worth, Phoenix, and Chicago to treat back pain and diabetes and to provide knee and hip replacements.

Andrews writes that the drug reforms alone "are projected to save participating companies, their workers and, in some cases, retirees at least $600 million over three years—while achieving the same or better results."

Which raises one big question that he doesn't get into in the Times op-ed: if these savings are such a great idea and so easily achievable, why isn't the federal government doing these things?

After all, government spends more than $1 trillion a year on Medicare and Medicaid. State budgets pick up some of the Medicaid costs, in ways that are threatening to crowd out other expenditures; in Massachusetts, for example, MassHealth consumes 40 percent of the state budget. In New York, Medicaid is one third of the state budget. At the federal level, Medicare, the health care program for the elderly, is about 15 percent of the total federal budget, about the same as what gets spent on defense.

True, Medicaid reimbursement rates to doctors are already rock-bottom compared to private insurance. Some states are trying to save more money on the program. In Rhode Island, for example, where about 30 percent of the state budget is devoted to Medicaid, Governor Gina Raimondo, a Democrat, says she saved $75 million on Medicaid in 2016 and $120 million in 2017 "by reducing waste and increasing program efficiency and effectiveness."

Even so, the private sector's leadership here highlights some structural differences between government and business that may help explain why progress by Congress has been so slow by comparison.

One big difference is that what the private sector hails as "savings," in the public sector gets demagogued as "cuts." This is a bipartisan problem. Republican presidential candidate Mitt Romney repeatedly attacked Barack Obama and ObamaCare for having supposedly having "cut Medicare for current Medicare recipients." Romney described ObamaCare as a "Medicare-cutting monster." When President Trump proposed reductions in the rate of growth of health care spending, Hillary Clinton denounced Republicans as "the death party."

Another big difference is the influence of interest groups, and their effect on incentives. If a CEO wants to save shareholders money by wringing better value from health care vendors, he or she is likely to be thanked with a bonus for increasing profits. Or the CEO's stock options will be worth more.

When a politician tries to save taxpayers money by doing the same thing, big and powerful campaign donors and constituents and potential future employers—drug companies, doctors, their lobbyists, hospital board members, health care worker unions, medical device manufacturers, nursing home proprietors—push back hard in the other direction. The politician may decide the potential savings aren't worth the aggravation.

What does that mean for health care cost and quality? A system in which government is the only buyer is likely to be more expensive. A system in which companies or groups of individuals are buyers may have more success in controlling costs without sacrificing quality.

At the very least, the Health Transformation Alliance, a relatively new effort, bears watching closely. If it's successful, perhaps more political pressure will eventually build to transfer private-sector innovation into the parts of our health care system that are more directly funded by the government.

Photo Credit: picture alliance / Frank May/Newscom

Editor's Note: We invite comments and request that they be civil and on-topic. We do not moderate or assume any responsibility for comments, which are owned by the readers who post them. Comments do not represent the views of Reason.com or Reason Foundation. We reserve the right to delete any comment for any reason at any time. Report abuses.

  • Juice||

    On Health Care, Private Sector May Show Congress the Way

    They usually write the bills, so, sure.

  • Cyto||

    I just moved to a different private sector solution.

    We were with an Exchange plan that cost over $2k per month. No, that's not a misprint. Actually $2,200 was the unsubsidized price, and that comes with a deductible of $13,500 for a family of 5.

    They forced my hand with yet more incompetence and bureaucracy that caused us to be cancelled for the 3rd time in 6 years (having never been cancelled in the 30 or 40 years prior.)

    So we are going with one of those Christian healthcare cost sharing programs. $450 per month for the family, plus we have to pay the first $5k out of pocket.

    So a max of $35k out of pocket (including $20k in premiums) for the Exchange plan. And a max of about $11k out of pocket for the Christian plan. Plus the exchange plan had a lifetime limit of like a million bucks. There is no limit on the Christian plan.

    There is a downside. You have to live by "Christian principles". Which means no abusing drugs. No drunk driving. No getting injured while committing a crime. And they won't cover you for pregnancy if you get pregnant out of wedlock. But for a discount of at least $10k per year, and up to almost $25k if we actually use it.... it is worth it.

    Now I'm trying to find one of those boutique subscription doctor practices, where you pay a monthly fee and then everything is included, all visits, treatments, drugs, etc. I'm not sure if they exist in my area, but it sounds like a pretty good idea.

  • Eric Bana||

    Which means no abusing drugs. No drunk driving. No getting injured while committing a crime. And they won't cover you for pregnancy if you get pregnant out of wedlock.

    What's the point of living, then, really?

  • NotAnotherSkippy||

    I don't think this isn't quite what you're looking for (concierge care) and I don't know if any providers are in your area, but it can't hurt to look:

    https://www.medibid.com/

  • Len Bias||

    Ahem, it's not about saving lives or saving money, it's about making sure no one profits off of health care, ever, even if outcomes are better for everyone.

  • sweettea71||

    What do you mean by no one profits off of healthcare?

  • Mickey Rat||

    More importantly, how many if t hese private sector solutions are illegal under the ACA? Part of what breaks the health care system by limiting what health care insurance companies can do.

  • JFree||

    I'm almost certain these particular companies are part of the problem - but not in the way you think. All are self-insured so insurance companies only serve as the claims intermediary.

    More importantly - I can almost guarantee that they:
    push those with expensive disabilities onto the public system
    supplement any retiree stuff not replace Medicare (this actually helps drive up prices)
    weed out those over-40 or over-50 (except execs) which is when medical usage tends to ramp up
    don't offer first-day coverage at the bottom of the income scale - lots of ways to do this the effect is to minimize pre-existing conditions

    IOW - they cherry-pick. That said - looking at the companies, they are much better than most and are probably sincere (eg few tech companies who actively age-discriminate and thus amazingly save money)

  • AlmightyJB||

    "why isn't the federal government doing these things?"

    I think everyone here knows why with the exception of the trolls.

  • Michael Hihn||

    "why isn't the federal government doing these things?"

    I think everyone here knows why

    Wriong. Most are anti-gubmint trolls, with no clue. How much of the problem is that the entire libertarian establishment is proposing ... not a damn thing that's credible? Nothing. Trolling ain't gonna do it.

    Most actually OPPOSE free market outcomes ... which included universal treatment for the uninsured, regardless of income. So reducing Medicaid is typical horseshit for anti-gubmint goobers ... but LIBERTY LOVERS would transition out of Medicaid entirely, as a phase-in back to a restored private charity market. Sadly, that requires a little more thought than beating one's chest and growling "git gubmint out."

    So, we KNOW that Americans have ALWAYS been willing to pay for indigent care, with their own money, If the phony libertarians have no fucking clue how to do that in the private sector ... then Bernie is the ONLY offering to provide ... what Americans have always wanted .. and been willing to pay for. Progressives will keep kicking our ass. And brainwashed bobbleheads will nod in celebrating a "libertarian moment" (as the Titanic sails closer to the ice)

    Sadly, today's libertarians have no idea how free markets work, no desire to learn, and no interest in electing enough people to restore those markets. Snarling and whining of memorized slogans and soundbites is all they can handle.

  • Dillinger||

    But if these savings are such a great idea and so easily achievable, why isn't the federal government doing these things?

    thy name is Irony, Ira?

  • Michael Hihn||

    Bureaucratic gobbledygook is not just in government.
    Not a single word on "skin-in-the-game" for consumers -- and the data to make it useful.
    Looks about as useless as Cato's Medicaid vouchers,

  • Longtobefree||

    "Which raises one big question that he doesn't get into in the Times op-ed: if these savings are such a great idea and so easily achievable, why isn't the federal government doing these things?"

    Because none of these things increases campaign donations from companies who have fully surrendered to the feds.

    And the only to really get the prices down, for both health care and for health care insurance, is competition in the private marketplace. Which means no mandates and no restrictions on what a policy covers, and everyone pays the same price for the same service.
    Once, out of curiosity, I asked a Doctor directly (not a clerk or bookkeeper) how much he charged. I said "I have no idea. That is up to the people out front, and depends on regulations, insurance coverage, networks, and a bunch of other stuff I can't keep up with. I just try to take care of people, and until the end of the year balance goes negative, I will do what I can. When the money stops, so will I."
    Yes, he was an older doctor.

  • JFree||

    everyone pays the same price for the same service.

    That ensures failure. Medical has ALWAYS been about the higher-income subsidizing care for the lower-income one way or another. Usually one of two ways:

    For primary/infrastructure care, it's the rich who want to make sure the medical capability is nearby. So they pool their money to pay a doctor to set up a practice or build a hospital. Those are fixed sunk costs once paid - and there have been many ways of funding that historically. The only thing they expect is that when they personally need care that they go to the front of the line since they paid the fixed costs. They don't care how the doctors fill the rest of their time - but that also means the poor only pay variable costs and deal with rationing. The result is differential pricing.

    For specialist/surgical care, the rich have always been the ones who want to pay for 'quality'. They don't want a surgeon who is still 'learning' and they want surgeons who have already made their mistakes on poor people. Poor people can't be so picky. And NO patient will ever have the knowledge to really know how to judge 'quality' here. Lots of different ways this happens - but essentially it means that the rich indirectly pay for the 'experience' their surgeon of choice has acquired from previous poorer patients and again - differential pricing.

  • Michael Hihn||

    Try again.

  • EscherEnigma||

    "[...] if these savings are such a great idea and so easily achievable, why isn't the federal government doing these things?"
    Because when you're talking about providers, pharmacies and networks, that's all state-level issues, not federal.

  • Michael Hihn||

    Ahhh! An intelligent response! But I had to read to the bottom. :-(

    Plus ,.. the increasingly inept Reason failed to see that no part of this includes ... skin in the game for consumers. duh It's not just gubmint that suffers bureaucratic incompetence.

    And why is nobody promoting, or even defending, free markets?

  • Dell Support||

    As medicines are becoming very expensive we should have a saving or them. Th price of medicines is increasing at a higher rate. The government should take some serious steps towards medicine so that everyone can afford them.

    https://dellcustomerservices.net/faqs/

  • Michael Hihn||

    Responding to SPAM --

  • laro||

    Other than the large drug companies objections, I'm sure voiced along with the campaign donations they make, why can't we subject big pharma to free trade like EVERY other industry has to deal with?

GET REASON MAGAZINE

Get Reason's print or digital edition before it’s posted online