Wall Street Running Healthcare! Oh, No!

Nick Gier’s article in New West provides a neat perspective of the insurance industry’s profit motives that drive ever-rising healthcare costs in the U.S. Nick is a Professor Emeritus at the University of Idaho, and his unabridged version of the article, “Do You Want Wall Street to Control Your Health Care” can be found on his website along with a YouTube on the same topic.

Nick’s synopsis of the situation is right on target. Unfortunately, managed care middlemen in the U.S. have only gotten stronger amidst all the healthcare debate. They’ve done a nearly perfect job of shifting the emphasis away from themselves and onto medical providers as the reason for the healthcare crisis. Whether blaming over-utilization, runaway technology, cost-shifting from Medicare, or other indictments, managed care companies have successfully (and somewhat ironically) convinced employers (the ultimate buyers in the healthcare equation) that they (the managed care companies) are victims, too. Amazingly, employers readily buy this lie and continue to swallow ever-increasing premiums from those same companies.

Over the past 15 years, my firm has specialized in negotiating direct agreements between major employers and medical providers, effectively eliminating the managed care middleman. The results have been astounding. One of my largest clients with 45,000 covered lives has had seven straight years of flat medical trend, that is, annual inflation in healthplan costs of less than 1%. Today, their per-employee-per-year medical cost runs 65% below the national average. With a success story like that, you’d think other major employers would be beating a path to their door to find out how they, too, can achieve the same results. They’re not.

Managed care companies have so effectively convinced employers that theirs is the only cost-containment approach that can possibly work, that my clients’ success story is greeted with skepticism and disbelief. The response I get, from the mostly misinformed HR executives that decide health plan policy for their companies, goes something like this: “AJ, Blue Cross (or United, Aetna, Cigna, etc.) get the best deals (e.g. deepest discounts, etc.) from doctors and hospitals. There’s no way we, as one employer, could negotiate anything better.” That may be true, but it completely obfuscates the fact that the managed care company’s “cut” (in terms of administrative/network access fees and other middleman “skims”) erodes any discount, and ends up costing the employer much more than they’d have with their own directly-contracted provider networks.