Chapter 1: Game On 1 GAME ON In 2019, Donna Ferguson was a poster child for America''s out-of-control health care prices and the game-changing ways now emerging to find better and cheaper care. Her meme status stemmed from a story that explained how Ferguson''s employer--privately held Ashley Furniture Industries in Wisconsin--had paid for her to fly to Cancun from her home in Mississippi and then put her up in a nearby Sheraton hotel. It flew in a surgeon trained at the Mayo Clinic, and paid him to give her a knee replacement that was free to her. The quality of the surgery and her care were first-rate. The costs for the procedure at a nice hospital were so much cheaper than in the United States that Ashley, which self-insures its health care coverage, came out ahead--so far ahead that the company cut her a $5,000 check to reward her for her troubles! In 2020, by sobering contrast, the COVID-19 pandemic took us back decades. There were shortages of critical-care equipment, hospital beds, and caregivers, plus tragic weaknesses in nursing homes. But we also saw what we had been missing in health care. Dedicated and compassionate healers put their lives on the line.
Hospitals, doctors'' offices, pharmaceutical and insurance companies, and health care regulators relaxed or waived access and pricing rules so people could get protection and care. Health care heroes were everywhere. This was a health care system we could support. Beyond the compassionate heroics, what was wrong with U.S. health care in 2019 is not only still wrong today but likely even worse. We have too few caregivers, rising affordability challenges, and a profit-driven system at odds with human needs. However, the pandemic also accelerated positive forces surrounding Ferguson''s treatment.
They can make health care work for us, not the other way around. Get What''s Yours for Health Care will explain what you can do right now to benefit from these changes. They are elements of a consumer-focused shift in care that is happening now and not waiting for government health reforms. Self-insured employers like Ashley Furniture are beyond tired of paying out the nose for rising health costs. The tab for employer health insurance is about $700 billion a year and rising at double the rate of general inflation. This does not include the $375 billion in annual premiums and other out-of-pocket health care costs that we as employees pay. Singly and in growing groups of like-minded organizations, employers are bypassing traditional health pathways. They are contracting directly with hospitals, doctors, and other providers of high-quality care at advantageous prices.
These early adapters are proving how to save money--for themselves and their employees--while providing new incentives and decision-making tools that support healthier work forces. Employer efforts to break the cycle of unsustainable health cost increases are hardly new, of course, so what''s changed? The short answer is digitized information and "big data." It has taken hold of health care, just as it has other aspects of our lives. The ability to capture and analyze massive amounts of health care information has guided existing companies and thousands of venture-backed start-ups to find ways to cut health waste and costs while improving the quality of care. Within the medical community, this information has created pathways to evidence-based care. What works and what doesn''t? Where are doctors, hospitals, and other medical experts likely to make mistakes in their diagnoses and treatment recommendations? What does health care quality look like, which providers do it the best, and how can you find them? The organizations and people who pay for health care--that means us!--are learning what care costs and not just what providers charge. Health insurers gather this information as part of their work to process and pay claims. They keep it to themselves, for privacy reasons and because the knowledge generated by their claims information is a competitive asset.
With self-insured plans, the insurers don''t always call the shots. They work for employers under administrative service contracts. These employers thus have the opportunity to know the prices their health plans have agreed to pay doctors, hospitals, and other health care providers. Thanks to the enormously detailed coding systems for medical billing that are now standardized, they can get detailed apples-to-apples comparisons of health payments where their employees receive care. Even without government involvement, health care is already being reformed. Compelling signs that major changes are near a tipping point were provided last spring when hospitals were flooded with COVID-19 victims and closed to routine care, as were doctors'' offices. Virtual health care, also known as telemedicine or telehealth, boomed. A study from management consultants at McKinsey & Company estimated that telehealth services soared in March 2020 from 0.
2 percent to 7.5 percent of private health insurance claims. Total spending on telehealth, it projected, could rise to $250 billion a year, or nearly 100 times what had been forecast before the pandemic closed down much of the country. Health providers "have rapidly scaled offerings and are seeing 50 to 175 times the number of patients via telehealth than they did before," the report said. Ten years of projected growth occurred in sixty days. Healthcare Bluebook, based in Nashville, Tennessee, was formed in 2008 because cofounders Jeff Rice and Bill Kampine believed they could unlock the secrets of health care pricing, find employers and others willing to pay them for their efforts, and, in the process, create tools to help employees and consumers understand the true cost of health care and how to find care that was less expensive and higher in quality. They explained their business to me last year in a company conference room. Rice used a black marker to draw a simple word graphic on a well-worn whiteboard.
It had only four entries--two across the top and two on the bottom: The top entries were "Patients" and "Employers"; the bottom entries were "Hospitals" and "Insurers." Patients and employers are health care''s payers; hospitals, other health providers, and insurers receive our money. Once upon a time, he explained, employer-funded health insurance paid patients for their health costs, and the patients then paid their health care providers. Over time, the connecting lines between patients and providers and those between patients and insurers began to blur and eventually vanished. Providers and insurers today bypass us. They negotiate in secret with one another over what providers will be paid for care, and then insurers send the agreed-upon amounts directly to providers. In theory, insurers work for employers and others who pay their premiums. In practice, this has not been the case.
"Once insurer payments began going directly to providers, consumers lost control," Rice said. He then drew a new line on his whiteboard--a thick horizontal line separating patients and employers from providers and insurers. "All the money flows from the north to the south" of this line, he explained, and all the information about provider prices and final negotiated health costs stays on the south side of the line. People pay close attention to their out-of-pocket costs and surveys chart rising health care affordability problems. Out-of-pocket costs, while certainly important, tell only part of the money story. They vastly understate the full costs of U.S. health care, which, as you''ll soon see, have largely been hidden from us.
We spent an astronomical $3.6 trillion on health care in 2018, including nearly $3.1 trillion for personal care (the rest went for research and other indirect spending). We will pat ourselves on the back if this total grows by only $100 billion from one year to the next. Health care in this country costs roughly twice as much per person as it does in other developed countries. Imagine for a moment what we could do with an extra $1 trillion or $1.5 trillion every year! Education. Infrastructure.
Clean energy. Add your spending wish here. Here''s a summary of personal care spending, including major payment sources: 2018 NATIONAL HEALTH SPENDING ($ BILLIONS) 3,075.0 375.6 1,078.7 697.2 532.8 1,191.
8 34.8 481.1 297.0 196.6 725.6 61.2 311.8 170.
2 77.4 103.9 26.1 35.1 27.2 7.5 135.6 54.
9 62.2 1.2 12.8 191.6 6.8 13.6 4.9 111.
1 102.2 10.2 12.2 40.3 35.9 168.5 44.8 17.
1 38.1 49.9 335.0 47.1 134.3 107.2 33.4 54.
9 25.5 11.3 8.9 8.1 66.4 64.2 - 2.1 - Source: Centers for Medicare & Medicaid Services We spend a much smaller percentage of that $3.
6 trillion on actual care than in other places, and more dollars on hea.