Can’t Help Ourselves

I BECAME INVOLVED with employer health benefits in 1962. Back then, my job was to screen medical claims before sending them to the claims’ administrator for processing.

In the decades that followed, I designed, negotiated and managed health plans for a company with 15,000 employees and 4,000 retirees. My job was twofold: to make sure the health benefits were working correctly and to manage costs. The first goal was relatively easy. The second was nearly impossible. It appears that, as of 2022, not much has changed.

Over the past 60 years, I’ve seen many strategies that promised cost savings. In the end, none has actually worked.

Providing full coverage, along with paid time-off for second opinions and preadmission testing, were early cost-saving efforts. The idea behind these efforts: Much health care and surgery are unnecessary. But the policies were ineffective, even though unnecessary care is still a real issue.

Self-funding was supposedly going to save money for large employers—but very little, as it turns out. Nearly 60% of large employers are now self-insured. The often-repeated assertion that insurance company profits are a big driver of health care costs is simply not accurate. When you consider all the Americans covered by any number of government plans, plus all of the employees in self-insured plans, you find only a minority of Americans are actually covered by health insurance.

Requiring employees to pay more toward the cost of their coverage was thought to give them skin in the game, so to speak. To ease the resulting burden, the employees’ share of the premiums is typically tax-free—which most employees don’t even realize.

Starting in the early 1980s, health maintenance organizations promised cost savings by keeping people healthy. I was on the board of directors of four different plans. The problem was that the physicians thought they could continue with business as usual. It couldn’t work that way if you wanted savings. Attempting to manage a patient’s care is met with significant resistance from both patient and physician. Any effort to do that is still a major source of discontent.

Giving employees a choice among different types of coverage was supposed to help. It didn’t. It did, however, cause adverse selection because the highest users of health care services typically selected the most generous plans.

Many employers spend a small fortune on health and wellness programs under the assumption they’ll generate savings. They don’t. Companies sometimes charge more for those who don’t participate or make it appear they’re providing extra premium credits if workers take a health quiz or submit to simple screenings. It’s all smoke and mirrors.

Those supposed extra credits from wellness programs are already built into the premiums so employers can’t lose. More important, employees typically don’t stay with an employer long enough for there to be any cost savings realized. Also, the programs often leave out the employee’s family, which accounts for a majority of plan costs.

Somewhere along the line, we accepted the idea that competition was the key—that the more companies selling health insurance in an area, the better. That’s exactly the wrong strategy. Health plans rely on networks of providers. To win provider contracts, the insurance company promises to deliver many patients. The more insurers in an area, the less leverage a plan has, and so its ability to negotiate lower fees is weakened.

In recent years, the idea of the patient as a health-care consumer caught hold. Many people accept that patients will shop to save money on health care, and thus seek out the lowest cost option. Sure, shopping for a generic over a brand-name drug works. But for any serious and expensive health care, patients aren’t looking for the Walmart alternative.

To support the consumer concept, employers have started offering high-deductible health plans. This is nothing more than cost-shifting. Of course, these do save the plan sponsor money—any increase in a deductible or copay saves them money. But it shifts costs and creates financial hardships for the insured, especially lower-income families.

To help with all this cost-shifting, we leverage tax laws that also naively embrace health care consumerism—things like health savings accounts and flexible spending accounts. But they help only those individuals who can afford to fund these accounts.

Why can’t we deal with health care in America? Okay, I know this may be a generalization, but it’s based on a great deal of experience. My contention: Americans don’t see spending on health care as their individual responsibility. We want the best, the most, the latest technology, and we want it all immediately—without anybody interfering with the relationship between us and our doctor. In other words, we want a blank check—drawn on somebody else’s bank account.

I recently saw a meme on Twitter promoting Medicare for All, claiming it would cover medical, dental, vision, hearing and long-term care with no deductibles or copays and would do so with “affordable” premiums. Have you ever seen affordable defined? A close look at the chart indicated some “government funding,” but no indication of where precisely that funding would come from.

Americans simply have no concept of the link between their demands for health care and the high cost of paying for it. Instead, we blame insurance companies and their CEOs’ pay packages. I saw a study showing the impact on the premiums charged by a major insurer if compensation for all its executives was eliminated. It lowered individual premiums by 83 cents a month.