The "C" Word
In a blog for Health Affairs, Rob Cunningham actually mentioned “cost.” Of course, he was talking about the cost of health insurance, not healthcare, but we’re getting closer. He was reporting on the poor earnings report from UnitedHealth Group and quoted them as saying, “business is bad because the company’s products are getting too expensive.” And he went on to question the wisdom of “trying to buy everyone into a system that we can’t afford.” In other words, if health insurance is too expensive, why are we planning to buy health insurance for the uninsured? That constitutes heresy in the Health Affairs world.
A long time ago, someone said, “If ordinary people can’t afford to send their kids to college, what good is education?” Colleges have, in fact, priced themselves out of the “ordinary” market by offering ever more expensive inducements to attract students. In healthcare, we are seeing a similar phenomenon where we promise infinite healthcare and provide “insurance” to pay for it. First, healthcare became too expensive for “ordinary “ people. Now health insurance is reaching the same point. Sooner or later, we have to bring down the cost of healthcare, and health insurance premiums will follow.
But somehow, no one wants to use the “C” word. Instead, we talk about “value.” Or talk about reducing the “overuse” of healthcare. (Translation: Overuse means healthcare that I don’t think you ought to have.) A few places that have discovered ways to reduce the cost of caring for some chronic condition complain about lost revenue and hold out their hands for more money. Let me spell this out: you discover a new way of caring for, say, diabetic patients, so they don’t need to come see you so often--thus reducing the cost of their care. Now you have holes in your schedule to accommodate new patients or reduce the time-to-next appointment for existing patients . . . and you’re complaining? I suppose if there is no one waiting to see you, you might reduce the size of your company, but I can’t see begging for higher fees because you’re doing a better job. But that’s the complaint from Geisinger, among others. As Cunningham states, “cost-saving innovation is a losing proposition.” Note, however, that the concept of “cost-saving innovation” means reducing the demand for healthcare services, not the cost of individual healthcare services.
United’s problems may be a manifestation of a slowing economy (that’s PC for recession), and employers may back out of health insurance expenses by various means, as suppliers wring their hands over lost revenue. However, a few low-cost providers will emerge and may eventually dominate the market. When I bought my first car, GM was ignoring the Japanese. Today, Toyota is having them for lunch. In healthcare today, retail clinics provide a limited menu of healthcare services at low cost without appointments. The GM of healthcare is wary, but keep your eye on the lunch menu.
A long time ago, someone said, “If ordinary people can’t afford to send their kids to college, what good is education?” Colleges have, in fact, priced themselves out of the “ordinary” market by offering ever more expensive inducements to attract students. In healthcare, we are seeing a similar phenomenon where we promise infinite healthcare and provide “insurance” to pay for it. First, healthcare became too expensive for “ordinary “ people. Now health insurance is reaching the same point. Sooner or later, we have to bring down the cost of healthcare, and health insurance premiums will follow.
But somehow, no one wants to use the “C” word. Instead, we talk about “value.” Or talk about reducing the “overuse” of healthcare. (Translation: Overuse means healthcare that I don’t think you ought to have.) A few places that have discovered ways to reduce the cost of caring for some chronic condition complain about lost revenue and hold out their hands for more money. Let me spell this out: you discover a new way of caring for, say, diabetic patients, so they don’t need to come see you so often--thus reducing the cost of their care. Now you have holes in your schedule to accommodate new patients or reduce the time-to-next appointment for existing patients . . . and you’re complaining? I suppose if there is no one waiting to see you, you might reduce the size of your company, but I can’t see begging for higher fees because you’re doing a better job. But that’s the complaint from Geisinger, among others. As Cunningham states, “cost-saving innovation is a losing proposition.” Note, however, that the concept of “cost-saving innovation” means reducing the demand for healthcare services, not the cost of individual healthcare services.
United’s problems may be a manifestation of a slowing economy (that’s PC for recession), and employers may back out of health insurance expenses by various means, as suppliers wring their hands over lost revenue. However, a few low-cost providers will emerge and may eventually dominate the market. When I bought my first car, GM was ignoring the Japanese. Today, Toyota is having them for lunch. In healthcare today, retail clinics provide a limited menu of healthcare services at low cost without appointments. The GM of healthcare is wary, but keep your eye on the lunch menu.
