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.