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Eliminating Unnecessary and Inappropriate Care – Could Health Premiums Drop to 2010 Levels?

Here’s a quiz regarding the estimated annual cost of inappropriate and unnecessary healthcare in the U.S.  Please select the answer you believe reflects the best cost estimate:

a. $210 billionInstitute of Medicine (2013)
b. $265 billionOliver Wyman (2017)
c. $393 – $958 billionGoodman, et al. (2011)
d. $1 trillion + – Various sources
e. No one really knows

The correct answer is, “e,” as measurements vary widely based on different methodologies – such as the year it was performed, and just how broad the term, ‘inappropriate,’ was used in each analysis. However, as new reports become published, unnecessary care is typically considered between 20 and 30 percent of overall needed care. In fact, based on a 2017 study of surveyed physicians regarding unnecessary care, physicians reported that more than 20 percent of overall care was not needed. Yes, even physicians acknowledge that at least one-fifth of care is not appropriate!

Despite the ABIM Foundation’sChoosing Wisely” campaign, which began in 2010 and has been widely adopted by at least 80 specialty societies, 75 percent of physicians believe unnecessary care is still a serious problem. Additionally, 69 percent said the average practitioner ordered useless tests and procedures at least once a week. Noted physician, Marty Makary of Johns Hopkins University, theorized that “Ninety percent of C-sections are unnecessary; 80 percent of stents are inappropriate; and 30 percent of people with cancer get the wrong treatment.”

But our broken healthcare ‘system’ allows for defective and unsuitable care to be paid out anyway. In a $3.5 trillion healthcare industry, inappropriate costs can account for as much as 30 percent of the total healthcare economy, or over $1 trillion annually. To put this number into perspective, the Congressional Budget Office reported that U.S. defense spending during fiscal year 2017 was $590 billion.

The above estimates do not specifically include another form of ‘waste’ as it relates to the fragmentation of care – the complexity of administering healthcare. This complexity leads to additional indirect costs and duplication of effort because there are so many different health plan payers with a myriad of administration functions. Functions which cause providers to hire additional staff to meet health plan requirements, like pre-authorization, administering various billing methods, etc. This is yet another problem with add-on costs that provide little-to-no value in a system already wrought with excessive waste of unnecessary care. I will not be addressing waste due to indirect costs in this blog.

Unnecessary and Inappropriate Care

Unnecessary and inappropriate care commonly consists of wasted spending due to ‘defensive medicine,’ whereby physicians order more (than necessary) tests and procedures to avoid potential malpractice lawsuits. Some studies suggest this amount of waste is not as great than commonly thought, perhaps less than three percent of overall costs. Another reason for inappropriate care is due to patients wanting unnecessary care. Misdiagnosis (overdiagnosis or no-diagnosis) also impacts the overall cost of healthcare. Of course, medical mistakes, both preventable and otherwise, also greatly impact healthcare costs, in addition to societal costs for patients and our communities.

Put another way, if inappropriate care could somehow be scrubbed from the healthcare system, it would make sense that our costs (premiums and, consequently, out-of-pocket expenditures for care) would correspondingly drop by a commensurate amount. According to the Kaiser Family Foundation, employer-sponsored health coverage continues to cover more American workers than earlier this century. Employer-sponsored plans in 2017 covered 156 million people, dwarfing the next largest form of health coverage, Medicaid (74 million).

Employer plan costs would be greatly impacted by eliminating inappropriate and unnecessary care. Another big takeaway: Employee takehome pay would increase, providing an economic boost.

Paying 2010 Premiums

In 2018, the 19th Iowa Employer Benefits Study© reported that the average monthly single and family health premiums were approximately $573 and $1,454, respectively. If about one-third of inappropriate care was eliminated, these rates would also be reduced, presumably by the same ratio (if we assume waste is across the board in all medical settings and procedures – and it appears to be). The newly-adjusted (unscientific) rates would now become $401 (single) and $1,017 (family) – rates that we have not seen in Iowa since our 2010 Iowa Employer Benefits Study©.

If we could eliminate ineffective, harmful and wasted care, we could revert to paying insurance premiums we paid eight years ago – even without eliminating bloated administrative costs. In the past, medical cost trends have historically exceeded the consumer price index, but by eliminating this excessive waste, and assuming the waste is continuously ‘engineered out’ of the delivery system, the medical-cost trend should be more favorable in the future. The problem, however, is not a small one. This problem comes from the idiom, “One man’s loss is another man’s gain.”

No organization or practitioner desires to lose revenue, because their income would be adversely impacted. Yet, obfuscating the cost by using chargemasters, backroom discount pricing methods and other unorthodox means to keep costs opaque serve no one other than those who allow our system to be ‘gamed’ for profitable purposes. Smarter regulation, appropriate technology and quality improvements can all reduce waste. Additionally, we must find the antithesis of greed.

As a country, think about how such ‘savings’ could be diverted to fund other programs that would proactively impact population health. We live in a world of trade offs, and trading wasted care (and its’ associated cost) with preventive health-related programs seems to make a lot of sense.

Market-Based Healthcare?

Let’s be honest. Our healthcare ‘system’ is not a true market-based model. It is different from any other part of our economy. True market-based models are characterized by three things not currently found in U.S. healthcare:

  1. Transparency in cost and quality.
  2. Accountability for care across the continuum (payment would be connected to outcomes that really matter).
  3. Information that allows for consumer choice and competition – patients need to be treated as consumers when appropriate.

All three allow us to get to the value of care, and ultimately, a market-based model that would theoretically provide checks and balances to keep the system ‘honest.’

Overall, a market-based model has more clarity around the producer, the seller and the buyer.  Historically in healthcare, the buyer (consumer) has not been part of the equation.  It is not yet clear the role in which the buyer will play as the healthcare system evolves. Currently, healthcare services are paid by somebody else – such as employers (offsetting employee pay), insurance companies or the government. This disconnect between the seller and producer from the ultimate consumer allows for perverse behaviors which are not commonly found in other market-based systems.

Payments Must Incent Appropriate Outcomes

Until we have payment systems that reward appropriately-determined outcomes, a market-driven system in healthcare will be merely a dream, not reality. In fact, if our hodge-podge system continues without much needed disruption, a true market-based system may not have a chance to see daylight. Market systems may wring out the unnecessary additive costs over time, but this cannot be done without having the three components in place as mentioned earlier.

The simple question is this: How can we turn back the clock to eight years ago and pay what we really should be paying today? Eric Coldwell, an analyst with Baird Equity Research put it quite succinctly when describing the push for transparency and value-based care: “The U.S. healthcare system is a sandcastle and the tide is coming in.”

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Caregiving Crisis – Employers Beware

Iowa is fortunate to have many jobs available for applicants, but unfortunately, there are not enough bodies to fill those positions. According to a 2017 Wall Street Journal article, Iowa, and 11 other Midwestern states have experienced a net outflow of 1.3 million people between 2010 and July 2017. In fact, if every unemployed person in 12 Midwestern states was placed into an open job, there would still be 180,000+ unfilled positions. The Iowa Workforce Development recently announced the number of unemployed Iowans in December (2018) is 40,600, an historic low of 2.4 percent. Iowa has THE lowest unemployment rate in the U.S.  (The U.S. unemployment rate in December moved up to 3.9 percent.)

To combat low unemployment, Iowa along with other states have developed plenty of free programs to train low-skilled workers for higher-skilled positions. For the second consecutive year, Iowa was named by Site Selection magazine as the Midwest’s top state for workforce training and development.  Another 2018 Wall Street Journal article indicated that Iowa’s extremely low unemployment rate has drawn “thousands of workers off the sidelines…with the share of Iowa adults working or seeking work at 67.9 percent in February (2018), nearly five percentage points more than the national average.” Rural Iowa employers have it more challenging, as the pool of local talent is just not there to fill positions.

Caregiver Responsibilities at Home

Now comes yet another challenge, but not just for Iowa employers. A new national survey by a pair of Harvard Business School researchers found that employers are likely to underestimate the struggle their employees have when balancing their professional and caregiving responsibilities. Caregiver responsibilities include providing for children and elderly parents. In fact, about three-quarters of U.S. employees face caregiving responsibilities, of which, 32 percent have left their job because they were unable to balance work and family duties. If employers fail to provide support for caregiving responsibilities, they will pay the hidden costs of presenteeism, absenteeism, turnover and rehiring.

This study was based on surveys of both employers and employees. A key finding was that despite more than 80 percent of employees saying their responsibilities at home kept them from doing their best at work, only 24 percent of employers believed that caregiving was affecting their employees’ performance. This enormous divide is troubling, yet it can also help nudge employers to understand what they can do to retain employees, especially during a very tight labor market.

Other study highlights include:

  • Younger employees, ages 26 to 35, were more likely to leave a job because of caregiving responsibilities.
  • Hard-to-replace higher-paid employees and those in managerial or executive positions were also most likely to quit.
  • More men than women said they left a job because of family needs.
  • As the nation ages, caregiving responsibilities are expected to grow. The Census Bureau projects that for every 100 working-age Americans, aged 18 to 64, there will be 72 people outside that range by 2030, an increase from 59 in 2010.
  • With an increasing share of jobs expected to require a college degree or beyond, the loss of many women could exacerbate labor shortages in the future.

This study caught my interest because, for the first time since we began in our employer benefits study in 1999, we will ask a series of work-life and convenience questions in our 20th Iowa Employer Benefits Study©. Among asking many work-life benefit questions, we will learn about the prevalence of the following caregiver benefits offered by Iowa employers, such as:

  • Personal days
  • Sabbatical leave
  • Adoption leave
  • Foster child leave
  • Leave to attend a child’s activities
  • Maternity leave
  • Paternity leave
  • Child-care subsidies
  • Elder-care subsidies
  • On-site or near-site child and/or elder care
  • And more…

As we learned from surveying both Iowa employers and their employees in our 2007 Iowa Employment Values Study©, there can be a great disconnect between what employees’ desire at the workplace versus what their employers think is important to employees. The aging of the Iowa workforce, in addition to the challenges faced by young families can cause caregiver ‘tension’ that adversely impacts both employees and the unsuspecting employer. To address these challenges, Iowa employers must search for new ways to further accommodate the changing workforce environment pressures that are vital to employee well-being and, consequently, their productivity.

Sometime this summer, our 2019 survey will reveal new results about the prevalence of caregiver programs offered by Iowa employers. Such benefits, I suspect, will vary greatly by industry and by employer-size categories.

To stay abreast of employee benefits and healthcare issues, we invite you to subscribe to our blog.

Standing at Your Desk – A Healthy ‘Fad’?

Since mid-October, I have been experiencing a pinched nerve in my lower back. Anyone who has experienced this type of condition knows the pain can be excruciating, as my symptoms also include numbness or weakness of my lower back and left leg. Lumbar radiculopathy is typically caused by a compressed spinal nerve root, which results with pain in the leg rather than in the lumbar spine. Why this happened to me is unknown, but I would speculate it gradually developed from daily running when not biking. Having ‘additional’ birthdays may also be another reason!

With the help of a physical therapist, I perform various daily exercises at home (or in the office). Despite PT, however, the searing pain persisted enough to have an MRI performed, confirming the Lumbar 4 location. As I wait for the next elevated level of care – most likely an epidural steroid injection – I judiciously use Tramadol, a synthetic analgesic opioid medication that is used to treat moderate to moderately-severe pain. For me, the best relief is to simply sit down, which allows me to forgo Tramadol. Accordingly, I spend more time sitting at my desk working on projects that don’t require traveling to outside meetings. Needless to say, having these physical limitations are wreaking havoc on my daily activities…and exercise routine.

I share this ‘protected health information’ because I am intrigued by the latest craze – the stand-up desk – a desk that allows you to stand up while working at the computer. You will find ads in newspapers, magazines and the internet about these desks, often touting why it is so much healthier to be working on your feet rather than, well, your bottom.  The purported health benefits of these desks are both broad and deep. One website listed at least seven potential health benefits when using such desks:

  1. Standing Lowers Your Risk of Weight Gain and Obesity
  2. Lowers Blood Sugar Levels
  3. Lowers Risk of Heart Disease
  4. Appears to REDUCE BACK PAIN!!!
  5. Helps Improve Mood and Energy Levels
  6. May Boost Productivity
  7. May Help You Live Longer

Fantastic! I want…no…I NEED to have a stand-up desk!

Due to our sedentary office jobs and daily living habits, American workers burn around 140 fewer calories per day compared to 59 years ago (1960). In July 2016, The Lancet issued study results that indicated 60 minutes of daily physical activity (e.g. brisk walking, pleasure biking, etc.) may help offset health risks of having to sit eight hours a day at the office. This November, The Department of Health and Human Services (HHS) issued updated activity guidelines for Americans to help combat the fact that nearly 80 percent of U.S. adults and adolescents are insufficiently active. The health benefits of exercise are clearly not fake news, as there is too much scientific research to refute the naysayers.

Cautionary Note

Before buying into the aforementioned stand-up desk ‘craze,’ one might want to consider some research that at least tempers its glowing accolades.  Aaron Carroll, professor of pediatrics at Indiana University School of Medicine, writes well-researched blogs about healthcare and policy. Recently in the New York Times, Carroll wrote a compelling piece about why standing-desks are ‘overrated,’ winnowing fact from fiction.

I will not take up my sitting time by regurgitating Carroll’s article, but I would like to summarize his ‘finding’ with the following: Exercise is important for our health, but merely standing is NOT considered to be ‘exercise.’ Sitting may not be the problem on why we are unhealthy, but rather, it may be a “marker for other risk factors that would be associated with higher mortality.”

Personally, I’m intrigued about standing while working at my computer. But first, my lower back must heal before I can stand for any period of time. For now, my lofty expectations about using a stand-up desk have been adjusted at a more reasonable (and comfortable) level…that of my office chair!

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