New rules for healthcare

In “Insurance ‘eggheads’ make women pay,” Times columnist David Lazarus explains how insurance companies set different rates by gender. This leaves employers to use age and sex as the main criteria for predicting costs. Because older people tend to have more medical needs, and employees age, these models always predict a rise in annual medical costs. Recognizing that aging is immutable, employers are resigned to the fate that cost increases are inevitable.

The Golden Rule of business, that he who has the gold sets the rules, is true in most markets -- except in U.S. healthcare.

A different model of healthcare costs -- one that uses parameters that can be monitored and controlled -- is needed. Employers could then bring their considerable financial skills to bear in managing costs. The good news is that this is not difficult to accomplish.

The basis for this new model comes from a simple observation: More than 80% of all medical costs can be attributed to patients with chronic diseases like diabetes, asthma, coronary artery disease and cancer. Because chronic disease is a much better indicator of cost than age and sex, why not use the number of chronic patients and the severity of their diseases to build a better cost model for healthcare expenditures?

By definition there is no cure for chronic disease and, when neglected, these diseases can become severe and result in soaring medical costs. Analyzing claims and lab data could establish the correlation between costs and the severity of the disease, as measured by factors like blood pressure, cholesterol, body-mass index and blood sugar. An employer’s goal for cost saving would then become quite simple: Make sure that the chronic diseases of their employees do not get any worse. By setting target values of risk factors for their employee population, employers could be active participants in controlling and managing healthcare costs.

As the emphasis shifts to preventing employees’ chronic problems from getting worse, employers -- and this includes anyone who pays for healthcare -- would in effect impose new rules on insurers, providers and patients, which would require them to behave and operate differently.

Insurers could no longer pretend that preventive care is already part of the healthcare delivery program and that doctors are consistently providing such care. The new rules would require that they go further: They would have to formulate incentives for patients to participate in the program, offer fair compensation to physicians for rendering this care and carefully monitor the outcomes, as measured by trends in risk factors.

Providers would have to adjust to the new market demand for preventive-care programs. Right now, our current predicament in healthcare is like having auto repair shops for major problems, but no shops for simple maintenance services. The new rules would demand that providers offer less acute and more accessible settings than the local clinic or hospital. Providers might need to develop alternative settings for delivering care, such as retail “walk-in” clinics or pharmacies.

Providers also would have to meet rising demand for preventive care while keeping costs low. With nurses in short supply and doctors busy treating sick patients, the new rules would require a new class of service providers: health coaches for chronic patients. With lesser clinical training, these health coaches would not treat patients or prescribe medications. Their role would be to help patients comply with evidence-based preventive-care regimens; answer questions; monitor and interpret lab results; and alert both patients and their doctors when intervention is needed. Because one-on-one monitoring would be expensive, more innovative approaches would be required.

Patients in our current system are often accused of being unaccountable, even though they share expenses through co-payments and deductibles, and sometimes with health savings accounts. But these programs have met with mixed success. The change an employer would demand, as part of the new rules, would be more fundamental: Make patients accountable for their health status by teaching them to self-manage their diseases in partnership with their doctors.

Once employers buy into the notion that their financial-management skills can lower healthcare costs, other innovative practices could emerge. Many services would move to the Web in spite of institutional resistance, and preventive care would become more convenient and less disruptive of daily activities. Geographic boundaries will fade as arcane trade practices are abandoned. Tools like Google Health will become invaluable, especially when patients in rural areas want to seek help from specialists affiliated with prestige institutions like the Mayo Clinic. Uniform standards of practice would reduce costs and improve quality of care.

This is all about bringing economic sensibilities to the healthcare market, one step at a time. It starts when employers -- whether companies or government organizations -- begin to take advantage of the Golden Rule and unleash pent-up market forces seeking to improve efficiency, quality and profits. Arcane trade and business practices and those who profit from them resist change. Let’s give mandates and regulations a rest. Instead, give free markets a chance to correct these problems.

Jacob Kuriyan, PhD, is president and chief executive of Physmark Inc., which develops software to help companies, providers and health plans lower costs and better manage delivery.

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