Session 4: Health Care Cost Drivers and Implications

April 14, 2023
2:30 pm-

3:45 pm

This panel provided an overview of the main drivers of health care costs in the United States, and addressed key cost factors specific to various populations covered under major health care programs and sources of insurance. The panel discussed major health care cost drivers, including demographics, system complexity and fragmentation, reimbursement model incentives, third party payment effects, utilization and pricing factors, site-specific care requirements, underinvestment in prevention and social determinants of health, technology driven demand, and defensive medicine. 

This session: 

  • Explored budgetary and fiscal considerations associated with high and rising U.S. health care costs, delivery system reform approaches to reduce costs, resource allocation issues and constraints, and the impact of such constraints on innovation.
  • Addressed trends in health care spending and patient/employee cost-sharing.
  • Described the incentives the incentives that drive costs embedded within fee for service reimbursement as compared to value-based care models, the relationship between cost and quality, for-profit drivers of unit costs, industry consolidation impacts on health care pricing and cost, and emerging cost-effectiveness approaches.


Christina Bell, MHA

National Alliance of Healthcare Purchaser Coalitions, Director of Healthcare Strategy

Katie Martin, MPA

Health Care Cost Institute, President and CEO

Anand Parekh, M.D., MPH

Bipartisan Policy Center, Chief Medical Advisor

Fahad Tahir, MPH, MBA

Ascension Saint Thomas, President and CEO

David Merritt

Senior Vice President, Policy and Advocacy, Blue Cross Blue Shield Association

Presentation: Health Care Cost Drivers and Implications

Event Resources


Bailey : 

Well, welcome back to our final panel of the day. As a reminder, if you stick around after, we’re going to have a brief networking reception, with some food and beverages. But with that, I will turn it over to our final panel who are going to discuss healthcare costs, drivers and implications. Our moderator is, Dr. Anand Parekh, Chief Medical Officer at Bipartisan Policy Center. We’re really glad to have you all with us today. And with that, I will turn it over to you. 

Anand Parekh: 

Wonderful. Well, thanks for that introduction. Great to be here. I want to thank the Alliance for hosting us, and thanks to everybody for sticking around for, I think, what is going to be the best panel of the day. 

Katie Martin: 

Last set, best set. Let’s go. 

Anand Parekh: 

That’s right, that’s right, that’s right, that’s right. So as Bailey mentioned, my name is Anand Parekh, I’m the Chief Medical Advisor at the Bipartisan Policy Center. In a previous life, I was an internal medicine physician and also served in government at the US Department of Health and Human Services for a decade. So great to be here. And we have a terrific panel that will be focusing on many, many different aspects of healthcare costs and drivers of healthcare costs in this country. They’re going to be covering issues related to demographics, system complexity and fragmentation, reimbursement, model incentives, third party payment effects, utilization and pricing factors, site specific care requirements, social determinants of health, technology driven demand and defensive medicine. 

So a whole slew of topics, but I think as you’ll see in their slide presentations, a lot of important foundational points for all of you. Each of them are going to make a few minute presentations, we have some slides, but please start thinking about your questions ahead of time. This is really for you and an opportunity for you to hear from the experts and get your questions answered. So I’m delighted today to introduce four excellent speakers. To my left, we have Katie, Katie Martin. Katie is the President and CEO of the Healthcare Cost Institute, and she has served nearly 15 years prior to that in federal government, both at the Office of Management and Policy, Office of Management and Budget at the White House and at the Department of Health and Human Services, where she served as the acting Assistant Secretary for planning and evaluation. 

Next to Katie, we have Fahad Tahir, who is President and CEO of Ascension, Saint Thomas. I think all of you know Ascension is one of the largest health systems in the United States. He previously served as president of some of the individual hospitals in the system and led strategy for the system, and we welcome Fahad here as well. Next to him, we have David Merritt. David is the Senior Vice President of Policy and Advocacy for the Blue Cross Blue Shield Association. As you all know, this is a national federation of 34 independent operated Blue Cross and Blue Shield companies, and he has nearly 20 years experience in high profile healthcare leadership positions and proven track records in politics, policy and the press. And finally next to David, we have Christina Bell. Christina is the Director of Healthcare Strategy with the National Alliance for Healthcare Purchasers Alliance. She has over 15 years of experience emphasizing program and project administration in a healthcare environment, and she was also former Vice President of the Pittsburgh Business Group on Health. 

So with that excellent panel, I’m going to turn it over to Katie and hopefully the slides will … Oh yes. And I’ll turn over to Katie now. 

Katie Martin: 

All right. Thank you all. Thanks so much to the Alliance for having me, and thank you all for hanging in here. I know last panel’s rough. I work with data, so it’s kind of like math, which is extra, extra rough, but we’re going to breeze through this and have a good time. It is way too much to go through in the allotted time, so consider this an amuse-bouche of health policy and healthcare costs, and you can dig into the entrees later as you go about your business over the course of the year. There’s a brief slide about the healthcare Cost Institute. Main things for you to know are that we are a non-profit, non-partisan organization headquartered here in DC. Our mission is to use data and analytics to make the US healthcare system work better. And we do it in a bunch of cool ways, which you can read about later. 

Okay, so we were told that we had seven minutes and five slides, so I thought I would condense it into the five things I want you to remember at the end. And don’t do the thing where you write the five things down and then you gloss over the rest of the time because there’s good stuff here. But the five things I want you to take away from our time together is that healthcare costs are high and growing, and that’s sort of a universal truth in no matter how you look at it or how you measure it. Precision matters in how you define the problem and how you identify solutions. So are you talking about premiums or cost sharing or underlying costs? You should follow the money because a lot of the issues in the system stem directly from the financial incentives that have been built into the system. 

It’s the prices, and there are plenty of opportunities to change the trajectory. So some of what I’m going to present is going to seem kind of big and overwhelming, and we need the one thing that’s going to take this whole thing down and finally bring costs under control. And let me assure you that there are lots of small things you can do, lots with bipartisan support. And so don’t let the enormity of the problem be intimidating, look at ways to sort of chip away at it. Okay, so healthcare costs are high and growing no matter how you look at it. The pie chart shows that national health expenditures made up 18.3% of the US economy in 2021. You’ll see on this slide I used 2019 a bit because obviously with COVID, spending in 2020 did some very strange things that weren’t lasting. So we will sometimes use 2020, but I think for all intents and purposes you can focus on the trends you see in 2019 are going to continue moving forward. 

So the bottom left line that just looks like a bunch of flat lines, shows the payers. So it looks at Medicare, Medicaid, Veterans Affairs, private health insurance, out-of-pocket costs. And the point here is that no one part of the system is bearing this more than others. The costs are growing and at similar rates irrespective of who the payer is. And then the chart on the right is from our healthcare cost and utilization report. This is among people with employer-sponsored insurance. And it breaks down total spend, which is the black line, inpatient, outpatient, prescription drugs and professional services. Again, the point here is everything’s growing everywhere no matter what. 

So precision, I’ve laid out here some problems that are cited with healthcare costs and spend and illustrative interventions. To be clear, I’m not advocating for any of these policy interventions. I more want to illustrate that if you’re concerned about a problem on the left, it will dictate the solutions that you have available to you on the right. And you can be concerned about all these things, by the way, you don’t have to choose just one. But if the policy problem that you’re trying to solve is that economy-wide healthcare spending is too high, you have a certain set of interventions. If you’re concerned that people are paying too much in premiums, that would give you a slightly different set of intervention. Are you concerned that people are paying too much at the point of care? That would give you a different set of interventions. And are you concerned about taxpayer dollars, et cetera? 

I will note that if you can address underlying healthcare spend, underlying healthcare costs, you do address all of these, but as you’re considering what your policy options are, this is what I mean about, there’s lots of opportunities to do things. You can address something that solves one of these four problems that does not address underlying healthcare costs, and still really make a difference in people’s lives. But if we could figure out a way to just lower spend altogether, that would solve many of these at once. All right, ready for the ugliest graph you’ve seen all day? Okay. I know, she’s pretty, actually she’s not a looker, but she tells a lot. So here’s the thing. it’s deliberately complicated, what this represents is our national health expenditures by sector, that big blue pie is hospital care, the big orange pie is physician and clinical services and so on and so forth. 

The reason I’ve included it here is to tell you and to … the way I think about this is every piece of that pie represents income and revenue to a stakeholder. And because every part of that pie represents income and revenue to a stakeholder, all of whom, many of whom, the vast majority of whom got involved in healthcare to help people. So this is not a vilification of any one sector, any one unit, but they do have financial incentives associated with how they make their way through the healthcare universe. And there are very few financial incentives to shrink the pie overall. Everyone is here to protect their piece of the pie or grow their piece of the pie. So when there are policies that require trade-offs, you’ll frequently look at people who want to grow their piece of the pie and shrink somebody else’s pie, or who just want to grow the pie overall because then everybody wins. 

And so this is really just to convey the significance of the financial incentives that are built into the system. It’s the prices. There was an article several years ago, oh sorry, that was gross, by Uwe Reinhardt called, It’s the Prices, Stupid. I didn’t want to call anybody stupid, but it is indeed the prices. These two graphs are from our 2019 healthcare cost and utilization report. Healthcare spending is growing faster than inflation. It is the price, that solid line that is pulling that number up, rather than the dotted line, which is utilization. Our price metric encapsulates a lot of different things, so we wanted to break out just sort of like what is unit price? That’s the chart you see on the right. And the main takeaway here is that two thirds of that price growth, of that overall spending growth that you see is because of price. 

It’s not because people got older and sicker. It’s not because of mix in gender. It’s not because of the services that people are using. And so paying attention to price has a huge opportunity for impact, but it’s one of the hardest things to change in healthcare. Last, but not least, I just ran out of time, I’m not going to say 10 things real quick because that would be annoying. But here are just a series of examples of policy interventions that you can take, facility fees or site neutral payment, the things that you’re seeing on the left of your screen are those where you can affect price. The ones on the right are more related to use. I’m happy to answer any questions or get into any of these in the Q&A, but my time is up and I want to be respectful of that. So thank you for your time and I will hand it over. You don’t have slides though? 

Fahad Tahir: 

I do. 

Katie Martin: 

Oh, nice. 

Fahad Tahir: 

Thank you. And we were just talking about that article this just a few minutes ago, so you picked the pick a great reference. It’s great to see everybody. Thank you for having me. My name is Fahad Tahir. I get to lead the health system in Nashville, Tennessee, that’s part of Ascension Saint Thomas and part of Catholic Health Association. We were founded 125 years ago this week. Four sisters, daughters of charity came to Nashville because they got a letter that a bunch of poor people needed help and they entered a house and they essentially started taking care of people. And 125 years later, that gets to be the health system I get to lead. So it’s an incredible part of our culture and our history that I get to be a part of, and I’ll tell you a little bit more about us in a moment. 

We’re part of a national organization called Ascension, and we provide more than 2.3 billion in care for those living in poverty. That’s true cost. So when a doctor or a nurse uses supplies to take care of a person who doesn’t have access to care or has a lack of ability to pay for that care, when you add all that up, it’s 2.3 billion annually across the country. So as a not-for-profit, faith-based system, we don’t always pick where we go, we go where people need us and we don’t close the door when someone enters our needs. And so when you add all that up, it’s 2.3 billion care for the poor. We’re a mission-driven organization, and you’ll hear a lot more about that in the course of our discussion today. Across the country, we have more than 2,500 sites of care in multiple states that are part of the Ascension system. 

And then we take care of millions of people across the region. And one of the regions that I get to lead is the Tennessee region. And so in middle Tennessee, we take care of about 45 counties of patients, millions of patients in that area, and these are just some of our statistics. We’re about a 10th of Ascension as a whole, so about $2 billion in net operating revenue and 180 million in care for the poor. So again, that’s true cost of taking care of those who can’t afford to pay, that we say yes to. In a typical industry, all the non-health folks would essentially find a price where the supplier of a service and a purchaser of the service would agree on that price being acceptable. In healthcare, we don’t do that. We take care of people when they need us, and often the pricing is happening in retrospect or not happening at all. And so we’ll talk more about how that translates into the practical reality of taking care of patients every day. 

So I want to really just paint the picture of following the journey of a patient. So when a patient enters our doors, they may or may not have coverage, and if they have coverage, what kind of coverage is incredibly different in terms of its reimbursement level. And essentially you’ve seen a lot of these headlines, so this is just a snapshot of some of the biggest brands in, quote, “healthcare” across the country, and they’re all posting these remarkably significant operating losses. So you see the sticker shock of these headlines, you say, “Okay, what’s underneath it?” And there’s a lot of different components to it, I’ll highlight some of the pieces of the picture. So at a snapshot, there are components of the industry that are incredibly, significantly impacted right now, in a way that’s completely different than in years past. 

I love that your graph ended in 2019. I wish ours did because it looks so crazy after 2019, and what we’re seeing today around labor costs and just a lot of other trends in terms of the operating environment and the inflationary environment. And here is an intentionally complex picture of that reality. So the highlight is when you compare what we’re experiencing today to the same time prior to the pandemic, whether you choose a specific month or a year or an extended period of time, our costs are materially higher, significantly higher. So what that means is when a patient comes in to be taken care of today, the cost increase compared to the pre-pandemic environment is about 17%. And there are components of that that are driving it more than other components, and I’ll just kind of give you a picture of what that means. 

The biggest thing you’ll hear about is the cost of labor. And so what does that really specifically mean to someone running a hospital or series of hospitals every day? What that means is today we’ve had major increases, double-digit, more than 100% increases in the cost of every hour of nursing care, every hour of labor. When you kind of add all that up, the cost of what it takes to take care of a patient has gone up so significantly and so much greater than the pace of inflation of any other expense category, and more than any classic reimbursement system, that has resulted in these negative operating margins. How that translates to our ability to keep our doors open and take care of patients is in January of this year, three months ago, we had to say no to four out of 10 phone calls that we received for a patient that needed a bed at our downtown Nashville hospital. 

So our ability to say accept and yes to a patient, in January, we had to say no four out of 10 times. This month, we’re saying yes, eight out of 10 times, but we’re still saying no two out of 10 times when a patient calls. And that’s because of the limited amount of nurses and the incredibly expensive costs that it takes to operate a single bed. That has now spread beyond nursing to other components of the overall labor force, and these are the kind of macro numbers that that adds up to. And it affects our ability to provide access to care and limits our ability to continue to invest in growing and adding other services because the cost of growth is so much higher than it’s been. And it’s especially a burden on a community like Nashville, which is growing so significantly, that there’s more and more folks who need that access to care. 

The second component, just another major example of how this total inflationary environment applies to us ,is because of the cost on individuals and families and the delays that happened during the pandemic, what happens is folks come in later in when they need our healthcare services. So as a result, we’re taking care of folks who are sicker than they’ve been, and as a result, they’re staying with us longer and we don’t get paid for every day that they stay, we typically get paid a fixed amount. So as a result, our operating margins are declining because of that. That’s the other component. And the third is it’s just really, really complicated to take care of patients, it’s just complicated to run. And a recent study said that there was more than 600 regulations that every hospital is juggling every day. That’s the reality of the … you can’t remember that many components. 

So what it translates to is essentially we are spending 8% more year over year than we did in the past. And essentially the classic CMS Medicare reimbursement is about 2%. So if you’re spending 8% and you’re getting 2% every year, you’re compounding that loss over a period of time. And that’s essentially what’s happened to the industry on a macro billion dollar basis when you’re talking about these significant numbers. We’re not going to be able to solve it alone. We are going to have to partner with our health plans. You’ll hear more about that in a moment, just about how we work together to solve this overall cost conundrum. We have to stabilize our workforce at a more affordable level so that we can provide access to individuals, reduce the kind of complexity of taking care of patients. 

And then ultimately, this is a safety net. We don’t say yes to those who have means and no to those who don’t. People can walk into our hospitals every day and be taken care of. And for our ability to do that, we have to have a sustainable operating model to do that for patients. I’ll turn it over. 

Dave Merritt: 

Only 629 regulations? I actually thought it’d be quite a bit more than that. Well, I’m David Merritt, I’m with Blue Cross Blue Shield Association. And just to give you a sense of Blue’s plans across the country, we ensure and cover and support 115 million Americans every day. That’s every zip code, every community. Our mission is pretty simple, it’s to give affordable access to high quality care for every single American, period. So we have a lot of work to do to achieve that goal. But over the last 20 years, I think we’ve actually made a lot of progress, particularly on the coverage side. When you think of how many folks have, well, they have insurance, whether it’s affordable or not is the challenge that we’re looking at, but historic levels of folks who have coverage, and that’s a really, really tremendous achievement over the last 20 years. We’ve also seen a lot of growth and a lot of technology and innovation. 

You think about what we’re doing today compared to 20 years ago. I mean, the technology that these folks deploy every day to keep us healthy and to prevent illness is tremendous. On the other hand though, we have seen tremendous pressure on costs. Katie went through many numbers, there are plenty others that you could point to. The cost of a family policy over the last 20 years has, I think, tripled in cost. That is such a financial burden for patients, for consumers, for employers, for taxpayers, and it manifests itself every day. People skipping medications, people skipping visits to the hospital or to the doctor. So there’s a price that we pay. And I think Katie’s point was really, really important, that the underlying price is driving what consumers ultimately pay. It’s just like any product, if the cost of the materials that go into a vehicle continue to go up, the cost that consumers pay will continue to go up. 

So the problem really is the price, that’s something that I really hope policy makers always keep in mind. For instance, when you think of the debate we’ve had over prescription drug prices over the last five or 10 years, with EpiPen and Pharma Bro, that is driven by really, in some cases, outrageous launch and list prices. We always have to remember though, these are products that keep us alive and keep us healthy. We need them, but at the same time, we really have to balance access, innovation and affordability. The same goes for the costs that you just mentioned, the driving costs underneath that impact how hospitals actually deliver care, that is reflected in higher insurance premiums and higher out-of-pocket costs. So those are totally intertwined, and that’s why BCBSA actually outlined earlier this year, what we call the affordability solutions for the Health of America. 

It’s divided into three buckets. And the first one is improving competition and looking at the way providers bill. I think there’s a small but significant component of the provider community that does focus on revenue. Obviously you’re a business, you have to keep your doors open, but at the same time, there are so many games that can be played on the reimbursement and billing side that ultimately impact what consumers pay. A good example of this is we’ve seen this trend over the last 10 years where big systems are buying independent physician practices. As of now, about 70% of all doctors are employed by some type of corporate entity. And oftentimes we see a health system or a private equity firm that buys a physician practice, and then the next day they’re billing as though they are the hospital. And we all know that the cost of delivering care in a hospital, because they have so many services, so much infrastructure, is ultimately about, in some cases, 300% more expensive than it is just delivered in a physician office. 

So again, these types of reimbursement approaches really do drive what consumers ultimately pay. The second bucket is around prescription drug pricing. We had a debate a year or two ago about Medicare’s role with negotiating. I think there’s so much more that we can do to actually increase competition, speeding biosimilars and generics to the marketplace to actually create more competition, more choices, more options. I mean, we see it in every other market, where you have more competition, it actually brings prices down. But more than that, looking at the way that pharma often games the system. A good example is an approach they use called pay for delay. Pay for delay is literally paying off competition to keep competition on the sideline and keep it out of the market, so a brand name drug manufacturer can continue to have exclusive rights on a drug. We think that’s just distorting the marketplace and it’s ultimately raising prices and raising costs for consumers. 

And then the last bucket is around improving the quality of care. We have talked for a really long time, and there are some phenomenal partnerships, you mentioned payers and providers working together. There were some phenomenal partnerships out there where value-based care really is the approach that can balance access, quality, and affordability. We’ve been talking about it for a long time. I remember the days of pay for performance like 20 years ago, we’re still talking about it because it really hasn’t expanded as dramatically as we need it to. So the more that … here’s a great example in Medicaid. Medicaid is the largest insurance program in the country. As of now I think it’s 80 to 85 million people. Redeterminations will obviously, I think, affect that total number, but it will continue to be the largest health insurance program in the country. Very few programs within Medicaid are value-based care models. It’s simply fee for service or managed care in many cases. 

But combining quality, access and value is something that Medicaid really needs to drive and really embrace in a big way. So our analysis actually, if you take our affordability platform, you could actually save with these policies, more than $750 billion a year. We had this scored by a former senior economist at CBO, he was actually the lead economist on the original ACA score, so very credible numbers. And even in Washington, three quarters of a trillion dollars will get some people’s attention. But we really think that we have to have a serious conversation around affordability. I mean, the graphs that Katie showed earlier are only going to get worse if we really don’t have a serious conversation. So thank you to the Alliance for teeing up this conversation and thanks to you for your interest in the topic, and I really hope that we can drive some of these solutions. 

Christina Bell: 

You made it with time left. Oh, good for you. All right. So let’s move, next slide. All right, so good afternoon. And I just want to tell you a little bit about the National Alliance of Healthcare Purchaser Coalitions. We are the only nonprofit purchaser led organization, and when I say purchaser, I’m talking about employers. So we have over 40 regional coalitions. And if you were listening to my bio, I previously came from a regional coalition located in Pittsburgh. So with these coalitions, their members are actually employers, there are businesses, and they represent over $400 billion in annual spend. 

Now, the reason why I have this slide is because I want to make sure that you’re aware why employers are important and why they need to be a part of the conversation when we’re talking about healthcare cost. Employers are the second-largest payer of healthcare services, they follow right after the government. There is over 159 million that are actually covered by employer sponsored plans. And there’s also some other statistics, like 60% of the employees actually elect to get benefits from their employer. But if you see the chart over to the right, what amazes me here is the cost of premiums, the cost that individuals are paying for insurance. And could you imagine that 31% of what you take home is going to healthcare and benefits? So the employer, as they’re looking at healthcare and benefits, and we surveyed them, they said the rising healthcare cost to them is, it is indirectly and directly impacting wages. 

So we have 78% of employers that strongly agree, they’re having issues with attracting and retaining employees as a result of the cost of healthcare because it’s unattainable, and you’ve heard from the other panelists who have showed a lot of data speaking to that. Now, when we continued with the survey, they identified four main cost drivers and it shows exactly the percentage right next to each one of them. The first one is high cost claimants. This is when you receive a claim that is over $50,000. And what’s interesting is they’re saying that the new $100,000 claim is the old 50. So costs are continuing to rise. And they’ve also, when you think about these cost drivers from the HR and benefit professionals, they’re saying, “This is keeping me up at night. This is my job to make sure that healthcare is affordable. People are able to access it within our employee population, and it continues to increase.” 

So if you look at the chart on my right and probably your left, is that there’s some employer actions that are underway. When we’re looking at high cost claims, we’re talking about precision medicine, and that is making sure that the drug that is prescribed for you is the actual drug that will best work for you. So we’re not trying to do a try and fail, a try and fail, we’re limiting that scope. There’s other measures like centers of excellence, negotiating and auditing hospital prices, case management. When we get into drug, I think there was a lot that was said about drug pricing and the management of it. There are four areas, four top areas that employers are looking at. They’re looking at their specialty drugs, making sure that maybe the site of care, if we have access to specialty drugs at retail, that it is going to save patients, it’s going to save employers as well. 

And I believe David was mentioning site of care is key, it costs more for somebody to go into a hospital, but it costs more for somebody to go into a physician office to get their specialty drug medication. The other thing is hospital price transparency, they’re talking about steerage. That is one of the things that is helping to drive quality, is by selecting a network that is actually taking care of the employees that are covered. And then whole person health, and you’re talking about whole person health because of social determinants of health, because of health equity, and those are some of the employer actions that are underway. When we look at addressing high cost claims, these are some of the actionable insights that employers were looking to take, and they said they need to understand these cost drivers, what’s behind them. 

They need to identify exactly the potential high class claims that could actually occur. So they need data, they need access to this data, they need to look at the trends and they need to be more proactive. And the chart that is on this screen shows how healthcare costs have been increasing year over year, well couple years over year. And the bottom piece actually gives you a glimpse of Walmart’s Center of Excellence program. This is their strategy and it’s a directional strategy. And this is the one where they were offering a Centers of Excellence program to their employees. And if they would go there, then they could take advantage of low cost, high quality care. And initially when they started this journey, it didn’t look like this. There was nobody signing up to this program, and it was because they had first, out the gate, had cost sharing tied to it, nobody wanted to pay for it. 

So they had to flip the script, and that’s where you see where they mandated it, they brought down zero cost sharing, they also made sure that you got penalized, employees got penalized if they choose somebody that was outside of the network. Whole person health, I wanted to provide an example of American Eagle because we were looking at the health inequities that were occurring as a part of a project actually, and they were identifying several different barriers that was impacting their employees. What they found is that one of their distribution centers actually had eight times the number of non-white employees, they were offsetting the demographics of the county surrounding it. And it was so unusual because they didn’t speak the language, they were Dominican, and that’s a different dialect. And as a result, there was several different barriers. 

They didn’t speak English, they weren’t really enrolled into a program that they didn’t even understand. The other thing is they couldn’t afford it and why couldn’t they afford it? So over on the chart, those are the actions that American Eagle has taken, such as partnering with a local college to provide English as a second language classes, they adjust their benefit design. They also are launching an onsite clinic that is going to have zero to flat copays for those employees. So looking at your benefit design and tiering your benefits based off the salary level, actually creates access. And these are the type of strategies that employers are looking to do, they’re stepping outside of the box and they’re partnering with hospitals, they’re partnering with providers, they’re partnering with colleges and other health systems to address the needs of today. Okay. 

Anand Parekh: 

Well, let me begin by thanking all four panelists. Those were really, really excellent presentations, and I hope everyone was taking copious notes. Let me make a couple of comments and then I’m going to ask a couple of questions, but I hope this is the time for all of you to provide your questions because I think that’s why we’re really here. Katie’s initial point is really important. We all agree that healthcare costs are high. When you then say that we want to lower healthcare costs, you have to first, before identifying solutions, identify the problem you’re trying to solve. So lowering healthcare costs to individuals, versus employers, versus hospitals, versus state Medicaid programs, versus Medicare, there may be some overlap in the levers, but you have to really be specific in terms of the problem you’re trying to solve. And I think that’s one important point you’ve heard from the panelists. 

I will also sort of reiterate that when we say about 18.3% of our GDP goes to health, that’s over $4 trillion. The best evidence that we have from multiple studies over the last decade is that about a quarter of that spend actually doesn’t really go to improving health outcomes. Some people call it waste, that’s a difficult word for us to swallow because that waste, as Katie said, is someone’s income that’s connected to jobs in a community, that’s connected to community wellbeing. It’s very difficult to extract waste or services that just don’t improve health outcomes. But that’s a lot of money, that’s a trillion dollars that is currently being spent every year via healthcare, that is not going to improve health outcomes, and that’s something that we all need to continue to grapple with. I want to start sort of the first question to the panel, and certainly I think what you’ve heard you, you’ve heard about the trends, you’ve heard about the importance of this topic. 

But before we get too much in the realm of pessimism, I want to sort of go around and talk about some examples of each of you, talk about stakeholders, participants in the health system that are addressing costs and affordability in a positive way. What are some of the success stories for the audience here? What are some things that are working, that could be scaled, that you’re seeing based on your experiences? I loved, Christina, your example about Walmart and reference pricing, value-based insurance design and tiering. If each of you could just maybe start the by telling us some good news, what is potentially working out there that you’re seeing to address cost and affordability? And any one of you can start. 

Fahad Tahir: 

Happy to start. Thanks for the question. I love starting optimistically, I do believe, despite the uniquely complex time we’re in, it actually forces some real opportunities for creativity to challenge our classic thinking and do something novel. And I’ll give you an example. We partnered with the Blue Cross Blue Shield of Tennessee to look at really taking joint replacement surgery outside the limitations of a classic hospital, to the ambulatory surgery and outpatient environment together. So we brought together our physicians, our largest commercial health plan, Blue Cross of Tennessee and Ascension Saint Thomas, the largest orthopedics and joint replacement program program together, to say, “How do we design this network in such a way that expands access to joint replacement surgery by bringing care closer to home, at a lower site of service cost option for clinically appropriate patients?” As a result, that started in 2018, we’d planned it in 2018 and went live January of 2019. 

Today that partnership of those three entities, the health plan, the physicians and the health system together, are performing 20% of our joint replacement surgeries in the outpatient ASC setting, which wasn’t happening at all five years ago. And together we’re doing more joint replacement surgery, but within that curated network of experts, that specialty orthopedic group that has depth and expertise in what they do, the health plan and the health system. So as a result, we’re taking care of more patients, we’re creating more access at a more cost-effective way on a unit price level, and more folks have access to low complexity, outpatient joint replacement surgery closer to home. And so we think that’s an example of bringing alignment, trying to identify an opportunity to create access, lower cost, create value, which David mentioned earlier, in a purposeful way, through a relationship and through aligned incentives. 

Anand Parekh: 

That’s great. Others? 

Dave Merritt: 

Sure, I’ll jump in. That’s a great one. I think the Walmart one is phenomenal as well. I mean, that’s one, it’s cliche to say win-win, but when you think of employees getting better value, better quality, and you paying less, I mean, that’s exactly what we need more of. I’d actually point to something that was actually COVID related. I know all of us have our own COVID stories and struggles, but we had been talking about telehealth and telemedicine for decades, and it was basically a niche. Some people had it, there was regulations that actually prevented it from going across state lines because of licensing rules. But COVID really forced us to actually come up with solutions. And I think the way that we handled telehealth and expanded that and dramatically expanded access during COVID, when all of us needed it, is a huge success story. 

That way, we had not only a challenge where we had incredible increase in demand with for mental health services, but we actually had access to it by increasing telehealth and breaking down those regulatory barriers. I think people got the care that they needed. There’s a lot more to do, obviously with mental health, but opening up a new point of access dramatically to millions and millions of people, I think is a real success story. Some of those regulations and flexibilities have been temporarily extended, we hope that they’re extended in perpetuity. But I really think that was one of those positive examples that got us through COVID as much as we did. 

Christina Bell: 

So I know that I mentioned two employer examples, but another one is working with a manufacturer, and this was as a result of COVID and the impacts, and they were really trying to identify what was happening with their employees because they were sick. They kept calling off, their distribution, their productivity had dropped tremendously. And we were asking them, “Well, have you looked at your data? Have you gotten a chance to speak with any of your employees?” And they said, “No. When we do a survey, our employees, they don’t respond. We don’t get enough information to be able to act.” So then the next thing was, “Well look at your claims data. What is it telling you? How many of those individuals are actually enrolled in your benefit, and how did this issue really even come about?” “Well, we’ve been getting calls about some of our guys where their teeth are imploding in their mouths over the weekend.” Imploding. Could you imagine, your teeth? And they had to put in emergency dental service, and it’s like, what is happening with this group? 

So in our discovery, we asked, “Can we see your plan benefit design?” And they said, “Well, we have rich benefits, we have rich benefits. Everybody has access to it.” That is not where we are anymore. It’s not about having rich benefits, it’s about making sure that the individuals who are employed can access the benefits. And so we had to take a deep dive into who was utilizing the plan and who wasn’t. And we discovered those individuals weren’t seeking care, there was delayed care of which a lot of … I mean, the panelists have mentioned earlier, I mean, because of COVID, because of hesitancy, because they couldn’t pay for it. And what this employer did is they reevaluated their plan design and they reduced their deductibles, make it more affordable. 

They could not, because of the culture of their organization, actually say, “All right, fill out this survey,” because they weren’t going to get a response, because that wasn’t their thinking prior to the pandemic. So not only did they have to shift their mindset, they needed to look at their culture, they needed to look at their benefit design, and they did have the emergency dental service, but it was no longer an optional choice. It came with the benefits. So you signed up, you got it. And that’s what they found, is that people weren’t selecting it, they didn’t think they need it, that extra cost coming out. 

Anand Parekh: 

That’s great. Katie, I don’t know if you wanted to comment, but perhaps a separate question based on your organization’s work. All payer claims databases and their potential role in trying to help track costs and increase transparency and competition, I don’t know if you want to speak to the audience a little bit about what that is and why that might be important. 

Katie Martin: 

Sure. So HCCI is an example of a voluntary multi-payer claims database, where we ingest data from several insurance plans, combine it, and then make that data available for research and policy makers. An all payer claims database takes different shapes and sizes. Many states have them. The idea is that it’s claims data. So a healthcare claim, just take a minute, a healthcare claim is basically a receipt or a document of a healthcare service that was provided. And the richness of claims data are that that is how money exchanges hands and flows through the system. So there is a high degree of incentive for those numbers to be correct. And so you can use claims databases to do a whole range of analysis, and there isn’t really a lot of opportunity for people to choose the numbers they include. There have been a good handful, maybe two dozen state all payer claims databases, but there was also a Supreme Court decision several years ago that was interpreted to mean that self-insured employers didn’t have to contribute to those all payer claims databases. 

So there is not at present a single source of information about healthcare spending use or healthcare services for everyone in the United States. And I think it’s really to the detriment of all the efforts to improve the healthcare system, both in terms of quality, but also lowering costs. You can’t fix what you don’t know is broken. So from my perspective, it’s a really powerful tool and lots of good opportunity there. I will note that historically, and I’m not sure today, but historically there’s been pretty fervent political opposition by some of my colleagues on, not personally, but some of the industries represented by my colleagues on the panel, because there’s just concern about transparency. But I do think we’ve reached a tipping point on transparency, that it’s become the norm. And the last point I would make on that front is there are the hospital transparency regulations and the transparency and coverage regulations, and there are lots of opportunities for improvement there. 

And I would just note that I’ve observed that there are a couple of vendors who have managed to reach the forefront of the industry on taking advantage of that data and turning that data into products that they sell to health systems, plans, individual clinicians and providers, to tell them, excuse me again, to tell them what information is in there so that they can price more competitively. And a lot of those vendors are backed by venture capital and have a strong incentive to increase their sales. And so at the moment, while I am encouraged by the emphasis on transparency and the progress that’s been made through regulation, I am quite concerned that the data are not available, widely available, easily accessible to people in the public, and that it will be misused in ways that could potentially cause costs to go up instead of the other way around. That was more than you wanted. Sorry. 

Anand Parekh: 

No, no, no. Thank you. Thank you.