Why Consumers -- Not Companies -- Should Make Health Care DecisionsPublished: March 18, 2009 in Knowledge@Wharton
Mike McCallister, president and CEO of Humana Inc., is precise when he chooses his words to describe the U.S. health care industry.
"We don't actually have a health care system. We have a lot of different systems that are glued together," he told an audience at the recent 2009 Wharton Health Care Business Conference.
McCallister began his keynote address by making that distinction, he said, because, in spite of all the political and economic talk going on, there is no single "health care system" in this country that needs to be reformed. Rather, he said, there is the health care sector -- a gigantic mix of varied players -- that is "broken, but can be fixed."
Because we don't have a system, he added, "we have the wrong objectives. We have the wrong forms of competition. The wrong geographic markets have been established, the wrong strategies and structures. The incentives are wrong for virtually everyone, including providers, payers and patients."
Humana, headquartered in Louisville, Ky., is one of the largest health and supplemental benefits companies in the country, with more than 10.5 million medical members. No longer in the hospital business, Humana is seeking to establish itself as a leader in "consumer engagement," or, as McCallister told his audience, in "harnessing the power of the consumer." In other aspects of the marketplace, consumers are "very powerful because generally [they] have actionable information at [their] fingertips," but in health care, "you can't get the price and quality information."
While McCallister applauded the goal of universal coverage, saying that "in a nation as wealthy as ours ... everybody should be covered in some fashion," he added that the endpoint will be impossible to achieve unless two interrelated objectives are met: "Cost and quality improvement is the dual imperative."
Excessive use of services is at the heart of the health care crisis. "If you lie down long enough, someone will scan you," he said, and the doctors and hospitals making money off the CT or MRI or PET scan aren't necessarily all to blame. Patients, he noted, can't seem to get enough medical care: The number of hospital and doctor visits increased by 20% in the past five years, and the demand for services is going to accelerate even more as 70 million baby boomers head into Medicare and the population as a whole keeps getting more and more obese, driving up the incidence of heart disease, diabetes and orthopedic injuries.
Consumers Understand Tradeoffs
But according to McCallister, there is no reason to think health care consumers would not make more judicious and cost-savvy decisions if only they had the necessary information to "choose, finance and use" health care. He noted that consumers understand the meaning of tradeoffs in other purchasing arenas. If they decide to buy furniture at Ikea, for instance, they know they will have to cart the furniture home and assemble it themselves, rather than have a delivery man do the work. But these consumers also know they will be able to save some money. Likewise, people moving out of their homes can hire a moving company to haul away their possessions or have PODS (Portable on Demand Storage units) delivered to their driveway and then pack up their belongings themselves.
When it comes to health care, he said, the concept of tradeoffs hasn't really penetrated the minds of patients who are doing the buying. While 84% of Americans rank health care as the benefit they need most from their jobs, most people are clueless about what that benefit costs them.
"It's coming out of our paychecks, but we don't even know what we pay for it," McCallister pointed out. Most employees give little thought to what health plan to join for the coming year, spending only about 30 minutes to explore their options. Even many employers, who foot much of the bill, fail to see the value in more informed decision making. He recalled suggesting to a business that it would be useful to offer a session on health benefits. The manager's reply: "I can't afford to have my people off the job for an hour."
In addition to looking more closely at the options -- and costs -- of health care coverage, consumers need real-time, evidence-based information to act on when they are deciding what treatments to get. "The estimate is that 15% to 50% of our health care is of no use," he stated, echoing a theme that surfaced more than once at the Wharton conference. "If we're ever going to be able to understand what we're doing in health care, we have to be able to understand quality."
He noted that there are great variations in the practice of medicine across the country, and something as basic as where the patient lives can have a big difference on what care they get, or whether they get a treatment or procedure at all. In Wyoming, for instance, the rate of back surgery is 9.63 per 1,000 people, while in Illinois it is 3.39 surgeries per thousand, he said. The rate of back problems isn't that different in the two states, so that doesn't explain why surgery is more likely to be done in Wyoming.
"We have no methodology to judge the comparative effectiveness of new technologies," McCallister acknowledged, although the latest economic stimulus package does include $1.1 billion to fund comparative-effectiveness research -- which is a polite way of saying it's time to get to the bottom of whether a given treatment is worth the price. He said the adoption of standards for care by doctors and hospitals can make a big difference to patients, leading to fewer complications, shorter lengths of stay, and in turn, smaller bills. Doctors at Johns Hopkins, for instance, found that they could cut the infection rate among patients in the intensive care units by 66% by following a simple checklist of safety precautions. Great strides could be made in assessing quality issues, he added, if the federal government chose to release the Medicare database, which would provide researchers and others an unprecedented look at both the effectiveness and cost of care.
Sharing the Wealth -- of Information
For reform to work, McCallister suggested, doctors and hospitals also have to modernize. Despite all the medical technology that fills U.S. hospitals and doctors' offices, both suffer from a surprising lack of information technology. "Only 14% of doctors use electronic medical records." Even as hospitals move to implement electronic systems, their approach may be very insular. If patient care is to be better coordinated and waste eliminated, patient information needs to flow from doctor to doctor, from hospital to hospital, even from one insurer to another. "As payers, we have incredible databases. We have to be able to connect all this." He cited the success of a joint project by Humana and Blue Cross/Blue Shield of Florida that created a web-based information exchange system that offers a full look at a patient's medical history by pooling insurance claims information such as doctor visits, hospital stays, lab tests and prescriptions. The stated goal is to improve the quality of care, eliminate duplication of services and enhance patient safety by allowing providers to see what other care the patient has received. Patients often don't tell their doctors that they are seeing another doctor or taking pills that another doctor prescribed, or they may simply forget when a previous illness unfolded or what medication they took and at what dose.
Humana, like some other health insurers, is making the most of the fact that consumers have become comfortable with using the Internet to comparison shop and sort through all kinds of purchasing decisions. McCallister said his company is trying to help its members get smarter right from the start about what level of coverage works best for them by providing easy-to-understand Internet tools, including a "Family Health Budget" tool that predicts their health costs for the year. After selecting a plan, members can then register on a website and do a personal health assessment. If a particular problem is noted, a Humana nurse is alerted, who contacts the patient to talk about seeing a doctor. Members can go online to look up quality information on doctors and hospitals in the Humana network, and even use a Humana-issued debit card to tap into a health savings account and pay their portion of the bill when they go to see a doctor. All the pieces related to cost and quality are tied into one Internet site.
Much of the information consumers get from their insurance companies is incomprehensible and does nothing to encourage them to make better choices, McCallister stated. The complicated "E-O-Bs" (explanation of benefits) that people routinely get in the mail from their insurance companies are "C-R-A-P," he added. He tosses his in the trash. "We're going to have to step up and make things simple, clear, easy to understand. The power has to be in the hands of the individual consumer."