Jonathan Blum of CareFirst BlueCross BlueShield gave a great talk on delivery system transformation at the Leonard Davis Institute today. As someone that has worked for the Center for Medicare and Medicaid Services (CMS) on cost-control initiatives and now does similar work for a commercial insurer, he had a unique perspective on optimal strategies for curbing the rise in healthcare spending.
Unsurprisingly, he pointed out that brand name medications are a major driver of rising costs for health insurers (and thus a major driver of rising premiums). For both personal and legal reasons, insurers have a hard time saying no when physicians and patients push for expensive treatments.
Drug companies know this and so they have a extremely strong negotiating position when choosing a price for their therapy. They rightly predict that individual consumers, pressured by glossy advertisements, will demand their expensive medications; insurers will be unable to say no for an extended period of time; and when these costs push up premiums for everyone, this consequence will be so dissociated from its cause that it will lose emotional salience to the general public.
While pushing for cost-effectiveness research and decision-making at CMS would be the most direct route to strengthening the negotiating position of payers and thus utilizing market forces to curb spending growth, there is still a great deal of work needed to communicate the benefits of this strategy to politicians and the public to make such an approach politically feasible. In the interim, one suggestion was to design low-cost plans in which patients could opt in to a limited formulary in exchange for a decreased premium. This is akin to getting a discount on your cable television package if you opt out of ESPN.
The downside to this approach is that it would likely have a limited market. Thus, while it would save individual customers money, it would be unlikely to pressure drug companies to offer lower prices in the same way as a large payer like CMS could.
Other interesting ideas that came up during the talk:
- CareFirst has identified Primary Care Providers (PCPs) as crucial allies in improving healthcare cost-effectiveness, rightly identifying them as trusted healthcare advisors who have the skill-set necessary to help patients weigh the benefits of medical therapies against their costs.
- Recent efforts to identify so-called “super-utilizer” patients in order to provide them with extra care-coordination and other support services can improve the quality, experience, and cost of health care. However, because many patients tend to move in and out of periods of super-utilization,1 a hugely important next step in healthcare systems research is identifying ways to reliably predicting who is at risk for super-utilization and getting resources to them sooner.
- As CMS re-assesses the Meaningful Use program to promote beneficial integration of electronic health record resources in healthcare, there are many opportunities for cost-control. One is giving providers real-time feedback on the costs of medications, tests, referrals, etc. to help promote cost-effective decision-making. Another is promoting cross-compatible data structures to facilitate the development and use of models which can predict future healthcare utilization.
- As healthcare providers consolidate, their negotiating position strengthens allowing them to demand higher prices from insurers and in doing so, increase premium costs for the general populations. As a capitalistic society that depends on well-regulated markets for the provision of our healthcare services, we must maintain competition between healthcare providers and avoid local monopolies. This, of course must be balanced against promoting easy movement of patients and their medical records across different medical providers. Not a simple task.
All-in-all, it was a extremely interesting talk and I’m glad to have the Leonard Davis Institute in my backyard here at Penn!
- Johnson TL, Rinehart DJ, Durfee J, et al. For many patients who use large amounts of health care services, the need is intense yet temporary. Health Aff (Millwood). 2015;34(8):1312-1319. doi:10.1377/hlthaff.2014.1186.