A Bite of the Poison Apple
Private talks between health insurers and brokers warning of steep premium increases in 2014 were front-page news today in the Wall Street Journal, with costs for some self-purchasing consumers expected to more than double. The article juxtaposes this development with a 2009 projection by the Congressional Budget Office stating premiums would actually decline when coverage broadened. Let’s get real. A 2009 financial projection—especially from what could be seen as a branch of the White House—should be considered little more than a fantasy. Earlier this week, I heard one of the authors of a book on the financial cost of the Iraqi conflict acknowledge that the projected cost of the war had more than doubled since the book was written in 2007—and a Nobel-prize winning economist was in on the original projection. (For the curious: The Three Trillion Dollar War: The True Cost of the Iraq Conflict.) An oft-heard criticism of ACA is that it did not address bending the cost curve. That is not entirely accurate. Hospitals were the first to feel the pinch in penalties for readmissions and lower-than acceptable HCAHPS, with further reductions ahead. Shared Savings demonstration projects and ACOs both introduce at least the concept of cost-based risk for providers. Perhaps a more interesting question is this: “Will the consolidation underway among health-care payors and providers be a positive or a negative factor in the war on high health-care costs? Walgreen and two drug distributors (Alliance Boots GmbH and AmerisourceBergen Corp) announced a new international pact this week, giving the partners tremendous buying power with pharmaceutical companies (and Walgreen the ability to potentially waive deductibles for consumers). We are seeing many other examples of vertical (and horizontal) integration in health care, and it will be interesting to see how the new behemoths use their market power. On the other end of the health-care price seesaw is the purchaser, and while individual consumers may not have much clout (other than to choose to not participate and pay the penalty instead), major employers are continuing to exert downward pressure on health care costs in new and interesting ways. Earlier this week, Catalyst for Payment Reform, a consortium of Fortune 500 employers), gave 29 out of 50 states a failing grade for health-transparency laws—and they were grading on a curve. Carriers will be filing proposed prices with regulators over the next few months, and as a realist, I strongly suspect that things will get uglier before prettier. Unlike Snow White, I plan to keep my eyes wide open while our saga unfolds.