Milwaukee Biz Blog

We have the tools to reduce the cost of health care, contain cost increases, reduce the number of uninsured and improve quality and service to the patient. These changes can be accomplished in a very short period of time and with no government involvement or expense.

No corporation or group of corporations, no insurance company regardless of how big and no government can create the changes necessary to improve the quality, expand access and control the costs of health care.

Only the tremendous power of consumerism has the ability to create these changes. But how do we unleash this power? It’s simpler than you may think. Health insurance plans (regardless of if they are employer based (insured or self insured), individual insurance or government run plans) have distorted the health care delivery market.

The market distortion is a result of the economic incentives and strategies that have been used by the health insurance industry over the past 60 years to control plan costs. Plans contain a variety of benefit building blocks including physician benefits, a lab and testing benefits, a hospital benefit and other benefit components.

These separate benefit components were originally intended to help the payers (insurance companies and self insured plans) control costs. The provider market has responded by dividing the bill along the same lines. As a result even the simplest procedure can result in numerous bills from numerous provider sources. In this environment consumerism can not function.

Health Savings Accounts, which are designed to provide employees with incentives to be consumers, are handicapped. Because of the fractionated nature of the marketplace, providers cannot tell the consumer what the total bill for a service will be. An estimate (probably with one or more of the components missing) is the best you can get.

So, the consumer is flying blind when is comes to buying some of the most important services in his or her life. In areas where health benefits do not apply we see a totally different presentation of the health care service.

In these areas, the consumer is central and has the information and clarity of price and quality to function as a consumer. In these areas, normal competitive economic forces are at work on a daily basis.

Quality is improved, customer convenience is required and prices are competitive. Cosmetic surgery is an example of this system at work. Most cosmetic surgery is elective and therefore not covered by health benefit plans. If Ms. Jones wants a “nose job” the cosmetic surgeon presents his or her credentials, describes what needs to occur and presents a single price for the service.

The surgeon has assembled the “team” that will provide the service. The surgeon, assistant surgeon, anesthesiologist, radiologist, laboratory services, facility costs, pre care and post care are all included. The surgeon has also developed a single price for the service which includes all of the “team’s” fees. The consumer can evaluate the proposed procedure, the “team’s” credentials and the price. Comparisons can be made and normal consumerism functions.

At least 80 percent of the services that we as Americans purchase can be presented in this all inclusive “Global” format. Benefit plans can be modified to support the Global program. For example, if the Global is $10,000 the benefit plan could pay $9,000. The employee would be advised of the $9,000 benefit and those providers who are prepared to accept the $10,000 fee. The employee, being a free American consumer, can choose to use one of the participating provider “teams” or take the $9,000 and go shopping.

This approach unleashes the tremendous power of consumerism. It will drive quality up, access up, response to patient needs up and prices down. More companies and individuals will be able to afford insurance reducing the number of uninsured. Governments at all levels can adopt this plan reducing benefit costs and reducing taxes. Medicare can adopt this plan reducing its costs and extending the program’s solvency. History can help to predict the future.

In 1984, I assembled the first PPO (Preferred Provider Organization) in the state of Wisconsin. It was not until 1994, ten years later, that the concept gained wide acceptance. In 1995 and 1996, in large part due to PPOs, the cost of health benefit plans increased by less than 1 percent. Today, over 80 percent of private sector health care is provided thru PPO’s.

In 2000, my Wisconsin PPO had over 100 Global procedures. Most cardiac procedures, all podiatric services, many orthopedic services, child deliveries and even some cancer treatments were on the list. I sold the company in 2001 and the Global program was not continued by the new owner. Now, 10 years later, this concept is ready for acceptance.

Integrated hospital systems in Boston, Milwaukee and other cities are developing Global programs to respond to consumer demand. The current government proposals will cement in the inefficiencies of the old system and kill the evolution of normal market based consumer focused health care. I ask that our elected representatives grant the health care industry a one year window to fix the system. Global programs will be a major part of that effort as will wellness programs and fair underwriting rules.

But first do no harm. Don’t destroy the world’s finest health care delivery system.

Richard Blomquist (former owner Associates for Health Care) is president of Blomquist Benefits LLC in Milwaukee.

Having spent the last 33 years addressing the cost of employee health benefit plans, I naturally viewed with great interest the recent proposal to provide universal health care to the citizens of Wisconsin. After reviewing the proposal there are several concerns that I have with the content and methodology of the proposal.

1. It is clear that the current system of delivering health care is not sustainable from a financial perspective. We simply must make changes in the quantity of what we purchase, the location of the purchase and the method which we use to pay for the purchase. To propose sweeping changes as part of the state budget process, however, does not allow adequate time for serious, thoughtful, and thorough consideration of this important issue. A separate proposal focused solely on how to best deliver and pay for health care for Wisconsin’s citizens would afford the necessary time and resources to correctly consider the alternatives.
2. The Healthy Wisconsin proposal appears to be unworkable. First, half of the health care purchases in the state are excluded from the proposal; Medicare and Medicaid purchases. Of the remaining half over 60% are made under self insured benefit plans which are preempted from state insurance law by a federal law called ERISA. (More on this in section 3) This leaves 40% of the states employers who provide health insurance and the uninsured to be covered by the proposal. Making changes that impact only 20% to 30% of the health care purchases in the state will not produce the desired results.
3. ERISA (Employee Retirement Income Security Act 1974) was developed at a time when multi state employers had to adhere to individual state insurance laws which meant that an employer with employees in 50 states had to play by 50 different sets of rules. For example, one state may require a type of care be covered and another state may exclude the coverage or require the coverage at a different level. ERISA explicitly states that it supersedes any and all state laws that relate to any employee benefit plan. The logic from Healthy Wisconsin supporters is that employers are required to pay a tax, not provide benefits. The state then provides the benefits. Employers therefore cannot claim ERISA exemption from the state law. The argument is thin at best. The United States Supreme Court has held that similar state wide plans violate ERISA.
4. Healthy Wisconsin embraces plan designs which have proven to generate unnecessary costs and which have forced numerous employers to abandon health benefit plans over cost issues. The average cost for the proposed plan for state employees is over $11,000 per year. The average spent by private sector employers is slightly over $6,000. Higher deductible plans coupled with medical savings accounts have come to be regarded as the future of health benefits. These plans provide employees with an incentive to function as consumers seeking quality and price information to determine the value of proposed health services. In addition, the medical savings accounts enable people to build a financial reserve to deal with future health needs regardless of their employer. The accounts can also be used to supplement Medicare payments assuring people of access to the best health care in the future.
5. The implementation of this plan will threaten the continued presence of high quality health care providers in the State of Wisconsin. A talented physician is in demand in numerous parts of the country. Why would these highly trained men and women subject themselves to the reimbursement levels established by a state plan? Many would undoubtedly leave the state which not only threatens the availability of those services in the state but also a valuable state “export”. Many people come to Wisconsin from other states and other countries to receive care at places like Children’s Hospital. If the physicians are not at Children’s the patients will not come to Wisconsin.
6. Small businesses and start up businesses have provided virtually all growth in state employment for several years. Larger businesses have actually lost employment in the state. Many of these small businesses could not survive if forced to provide health benefits through a state tax system. This would result in a loss of current employment and future employment opportunities.
7. Existing businesses of all sizes have employees who choose not to participate in the employer’s benefit plan because they are covered under a spouses plan as a dependent. The cost of including a spouse as a dependent is typically less to the employee than the cost of being covered as an employee. Under the Plan employers would now need to cover all employees and employees would incur additional costs to be covered as employees as opposed to being covered as dependents.
8. There is no evidence that a state run activity of any type is better or more efficient or results in better quality than a similar activity run by the private sector. Why then should we trust that the state will run health care better?
9. One of the key components to the increase in health care costs is the continued duplication of health care services and the equipment required to support the medical professionals. The state has been unwilling to limit this expansion since Certificate of Need ended in 1985. There is no evidence that limitations would occur in the future. A legislature faced with the need to increase the “health benefit tax” above stated limits or have the program “financially crash” would certainly increase the tax.
10. Tourism is one of the key industries in the state. How would this health care system interface with a vacationer?  Would these guests to our state be at risk, or perceive that they are at risk for health problems?

These questions and more must be addressed and effectively answered for any proposed change to our health care system to succeed. As with the physician, those who entertain changes to the current system must “first do no harm.” The Healthy Wisconsin Plan should be excluded from the budget and addressed as a stand alone issue.
 
Richard Blomquist is president of Blomquist Benefits LLC. He is the past president of the Independent Business Association of Wisconsin (IBAW), is a board member and Health Care Taskforce member at the Council of Small Business Executives (COSBE), is a Metropolitan Milwaukee Association of Commerce Advisory Board member and a member of Americans for Prosperity-Wisconsin.