State of the Industry 2009: Cost Control

10.01.2008Managed Healthcare Executive

Despite the relatively small impact that consumer cost-sharing strategies have had in corralling healthcare costs, optimism remains high. The challenge for health plans will be to create value as opposed to simply adding costs.

“In other words, there’s going to be both a carrot and a stick, rather than just a stick,” says Roy Schoenberg, MD, CEO of American Well, an online healthcare marketplace. “[There must be] meaningful incentives for consumers to take part in this cost sharing. The only question is, how overt will the government and health plans be in making that happen?”

The implication behind the cost sharing is the establishment of a partnership. If health plans win, members have to tangibly feel that they are winning as well.

Members who are involved and choose care settings appropriate for their needs should be rewarded in a tangible way, Schoenberg says.

David Knowlton, president and CEO of the New Jersey Health Care Quality Institute, and a director of the HealthWell Foundation, a non-profit organization that provides financial assistance to individuals, says that consumer cost sharing is short-term and, as research has proven, inspires patients to go without needed care.

For example, a high copayment on atorvastatin could deter a patient from filling the prescription and therefore, he or she may not control cholesterol levels well enough, says Knowlton. The health plan will end up paying for charges related to a resulting heart attack, however, the plan might not recognize the connection.

“They may say, ‘Look at all the money we saved with the high copayment,’ but I think what’s more likely to control healthcare costs is managing chronic disease,” Knowlton says.

Others, such as Georganne Chapin, president and CEO of Hudson Health Plan, believe cost shifting goes on at a larger industry level as well.

“Everyone wants someone else to help solve their financial problem,” she says. “The states or the feds want to make Medicare cuts to providers, and providers want health plans to make up the loss of revenue. It’s happening more and more. Instead of meaningful conversation, everyone’s scrambling to stay alive in the way that they’ve always been doing business.”

Chapin says cost shifting will only become more prevalent as healthcare dollars become more scarce.


Although it is often talked about, mandated coverage ranked third among the cost-containment strategies for 2009, with just 13.3% agreeing that it would be helpful. Knowlton believes that part of the reason respondents are skeptical of mandated coverage is because many could have too narrow of an idea of what “mandated” means.

“It starts with quality health insurance being accessible to all people at an affordable price,” he says.

Consider the early results in Massachusetts, as reported in the New York Times in August: the number of uninsured dropped to the lowest rate in the nation, and there has also been a decrease in the number of individuals using hospital emergency rooms and community health centers for routine care. The cost of uncompensated care dropped from $166 million in the first quarter of fiscal year 2007 to $98 million in the first quarter of 2008.

“Insurance is more affordable when more people have it,” says Knowlton.

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