By Todd Sloane
Despite an apparent slowdown in the annual increase in
U.S. healthcare costs-to
only about twice the rate of general inflation-there is little cause
for
celebration. Yes, a recent study's finding of a 7.4% health spending
increase in
2003 is a good sign after several years of much higher growth. A slowing
of
prescription drug cost increases is also excellent news. Hospital utilization
was almost flat, a sharp falloff from the increases seen in the past
several
years. God is great.
The problem is that the long-term trends, though they may be moderating
somewhat, are still on an unsustainable course. The study that reported
the new
cost numbers, conducted by the Center for Studying Health System Change,
also
found no evidence of any systemic change. The dissemination of new
technology
and a payment system that still refuses to differentiate among treatment
options
based on efficacy will continue to cause healthcare costs to rise much
faster
than growth in the overall U.S. economy.
Everyone is still in on the party.
In 2003, hospitals used enhanced local market control to push hospital
prices up
8%, even as utilization increases slowed to a crawl and wage rates
increased
only 4.2%.
Despite a slowdown in drug prices, manufacturers got away with a 9.1%
increase
in 2003, the center's study found.
For 2004, health premiums are rising at least 12%, more than 60% above
the
underlying health-cost inflation rate, surveys by benefit consulting
firms show.
That translates into employers looking to cut coverage and/or shift
large costs
to employees, threatening to expand the number of uninsured while making
everyone else angry and less well off.
Which is why the situation involving WellPoint Health Networks is
so
embarrassing for this industry. WellPoint is trying to merge into Anthem
in a
$16 billion deal. The merger partners keep talking about how the combined
company will provide new economies of scale and new abilities to track
outcomes
and thus lowering costs and improving quality. But WellPoint-which
among major
health plans pays out the least amount of its premium dollar for members'
care-intends to pay 293 executives as much as $600 million in bonuses,
severance
pay and stock options.
The company's chairman and chief executive officer, Leonard Schaeffer,
would get
a diamond parachute worth $331 million. A spokesman for the company
says only
$42 million of this payday for the ages is ''directly related to the
merger.''
The rest consists of ''incentives'' he has accrued since 1986. That
means he has
received an average of $16 million each year in compensation beyond
his huge
salary and already-paid bonuses. He makes Dick Grasso look underpaid.
Here's a
question: Does WellPoint have a board of directors?
Put another way, if you take the midrange of the Institute of Medicine's
cost
estimates for covering each uninsured person, Schaeffer's booty would
reduce the
number of un-insured by some 236,000 people for a year.
However you look at it, it's a terrible statement about a healthcare
system
trying to lower costs and win added re-imbursement from the federal
government.
Instead of treating executives like Saudi princes, we need to treat
this
spending situation as the crisis it is. Every player must work to speed
the
development and dissemination of strong clinical evidence of treatments
that
work, and base payment to providers on their successful use of those
options. We
also need far more preventive care and disease management programs.
The fear here is that the study showing a temporary slowing of health
cost
inflation may slow the movement toward desperately needed health system
change.
Instead of a pat on the back, treat it as a kick in the shorts.
