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Economic Crisis, Healthcare Cost, Consumer Confusion:
Solution = Transparency?
By Joe Torella
For once we have a completely
common thread for fixing all
that ails us. It’s called transparency.
Once just another
word; today it’s connected to
just about every critical financial issue
we face.
Are we overusing it? Not yet, but
we’re getting dangerously close. The
best way to ensure the bottom doesn’t
fall out of the definition (the way it did
for the market) is to properly categorize
and understand the importance of
transparency in our professional and
personal lives.
Two major definitional splits have
emerged with respect to transparency:
First – it refers to a set of internet-based
tools for helping consumers effectively
navigate the healthcare system; and,
second – an oversight tool for measuring
performance or actions that can’t be
left managed or accounted for on their
own.
While both are important, if we apply
the concept of transparency to every
oversight issue and generalize it accordingly,
we are likely to lose sight of where
it’s value is most needed – improving
the healthcare system. Transparency
of healthcare – Claims: Without question,
this is most important area where
the value of transparency emerges. The
objective is to provide consumers with
the tools and information they need
to examine the cost of care, together
with the quality of care delivered, so
that they can make informed decisions
thereby becoming more effective and
accountable healthcare purchasers.
The pie chart says it all. If the goal is
fixing the healthcare system through
greater accountability, it’s more logical
to focus on the 86% component of the
problem, not the 14% component. And
remember that one-third (1/3) of the
14% goes to taxes.
But regulators, at least in NJ, are off
slightly on their priorities. They’re more
interested in the ‘watchdog’ aspect of
healthcare transparency which shifts
the focus away from the claims engine
to the administrative component. For
example, recently signed into law and
effective January 5, 2009, New Jersey
will have full commission disclosure
requirements that are defined in DOBI
Bulletin NO. 08-16. Commissions, of
course, make up part of the 14%.
Are the regulators correct? Yes, in
terms of employers knowing what
part of their healthcare spend is due
to commissions, but that’s not where
the problem lies and SHOULD NOT be
communicated or perceived as such.
And, one could argue that what a broker
earns is not nearly as important as
the value proposition they offer their
clients.
New Jersey’s Vitale Bill, offered an
additional provision, also effective
1-5-09, requiring carriers to disclose
the cost of benefit riders attached to
their standard plan designs. Perhaps,
reasonable on the surface, but it still
doesn’t attack the real problem; and
the administrative burden may off set
any perceived value. Most disconcerting
- the average person may not understand
the rider language and frustration
will surface when they learn that certain
riders can’t be unbundled.
But, given the financial crisis facing
our economy, the $700 billion bailout,
and many feeling that lack of transparency
led to the crisis, it’s easy to understand
why the term transparency
is getting so much attention. Senator
McCain called for complete transparency
in reviewing and implementing the
‘bailout’ legislation and said, “This cannot
be thrown together behind closed
doors. The American people have the
right to know which businesses will
be helped, what that selection will be
based on, and how much that help will
cost.” And, Senator Obama has included
internet-enhanced government transparency
in his technology agenda.
So, the concept of transparency will
continue to gain momentum. But concerns
abound. The open-government
advocates worry that banking industry
lobbyists may get what they want: a
repeal of last November’s mandate to
disclose bad debts on their books. In
healthcare, the potential recoil would
likely come from doctors interpreting
transparency as nothing more than ‘Big
Brother’ watching them.
We can avoid such recoil by remaining
sharp and focused on the key
issues. Legislated administrative disclosure
won’t solve the problem, but it
shouldn’t hurt. However, if and when
legislators truly understand that 86% of
healthcare’s price tag is due to claims,
that claims are trending upward by an
average of almost 10% year and that as
much as 50% of those costs are controllable,
we’ll have a shot.
Making claims data and quality
measures transparent will lead us to
a better understanding of cost drivers
and an opportunity for providers,
consumers and government working
together – to act more responsibly in
extricating waste from the system and
reducing costs. Keep in mind that for
transparency to work in healthcare,
it’s not about being a watchdog but
giving consumers the tools they need
and empowering them to make informed
decisions.
FA
Joe Torella is a vp with Savoy Associates,
and past president of the NJ-AHU. Joe
has more than 20 years experience and
is a frequent speaker on consumer directed
health care.
He can be reached
at (609) 584-8112 x12.
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