May 10, 2004
This Wall Street Journal ($) article reports on innovative techniques that several corporate health care finance departments are undertaking in an attempt to mitigate the adverse effects that the third party payor system has on the consumer's decision regarding health care choices. The entire article is well worth reading, and here is one of the strategies noted:
In the fall of 2001, Pitney Bowes Inc.'s corporate medical director, John Mahoney, proposed an unusual experiment: Slash the amount that employees pay for diabetes and asthma drugs, and see what happens.
On its face, the proposal seemed it would only add to the company's escalating health-care costs. But there was a simple logic to Dr. Mahoney's theory: If diabetic or asthmatic employees found drugs more affordable, they might take them more regularly. Over time, taking better care of their chronic conditions might reduce expensive complications.
But Dr. Mahoney says even he didn't expect the dramatic savings that resulted. Since 2001, the median medical cost for a Pitney Bowes employee with diabetes has fallen 12% from about $1,000 a year. The median cost for a patient with asthma has dropped 15% from $900 annually. Overall, the company says it will save at least $1 million in 2004, with continued savings in future years.
Pitney Bowes's move is indeed radical. Amid health-care cost increases of 11% to 15% annually, many employers are taking the more obvious approach: have employees shoulder some of the financial burden by raising premiums, deductibles and co-pays. Such moves appear to be helping to slow health-care cost increases in the short term. But Pitney Bowes's experience shows that spending more upfront to make it easier -- and cheaper -- for employees to manage some chronic illnesses may actually bring about greater savings in the long run.
"There's a reluctance among many people to take this kind of a chance because conventional wisdom says it's going to increase your costs," says Dr. Mahoney, a former White House physician in the Ford administration.
"But health care is kind of like a balloon. When you squeeze costs in one place, they often pop up in another."
Posted by Tom at May 10, 2004 6:52 AM |
That's an actual practical manifestation of the theory behind HMOs. They were originally called health "maintenance" organizations b/c the thought was that, with most standard check-ups and diagnostic tests covered (again, as to standard items), people would be encouraged to have them done more regularly, thus maintaining their health and lowering long-term costs. Such was the theory, at least. Interesting to see even one example of it working in practice.
Posted by: TP at May 10, 2004 4:19 PM
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