We all know the health care system is rife with wasteful spending. But when researchers from a prestigious institution like the University of Pittsburgh School of Medicine estimate that waste at 25 percent of all spending, alarm bells go off. And it got me to wondering what the magnitude of employer health care spending might be.
The University of Pittsburgh research, published in JAMA in October, was referenced in a HealthLeaders article that cited more research pinning total 2019 U.S. health care spending at $3.82 trillion. OK, 25 percent of that gives us $955 billion.
Let's take the next step: The Integrated Benefits Institute, a health research group that works with U.S. employers, said in its report that U.S. employers spent $880 billion on health care benefits for their workers and dependents last year. A quarter of that equals $220 billion. Lots of nations don't have GNPs of $220 billion.
Now, let's take a look at how the University of Pittsburgh team subdivided the cost of wasteful spending. The six main wasteful spending categories:
- The annual cost of wasteful spending from administrative complexity accounts for the highest category of waste, estimated at $265.6 billion.
- The annual cost of waste from pricing failure is estimated between $230.7 billion to $240.5 billion.
- The annual cost of waste from failure of care delivery is estimated between $102.4 billion to $165.7 billion.
- The annual cost of waste from overtreatment or low-value care is estimated from $75.7 billion to $101.2 billion.
- The annual cost of waste from fraud and abuse is estimated between $58.5 billion to $83.9 billion.
- The annual cost of waste from failure of care coordination is estimated between $27.2 billion to $78.2 billion.
Most of us in the employee health care industry have come across some of these issues in several silos, but rarely are all six called out in an article.
Seeing these pain points laid out in this format has shown me that there is a common theme trending between all of them. The theme is knowledge… Or lack of it. Or lack of sharing it.
Amidst deep blue ocean of employee health and benefits solution providers, some solutions have been developed, implemented and are actively being deployed to combat each of the six essential items. Every single one of these categories has generated ways to reduce spending. Unfortunately, employers are not in a position to address all of them. But even by banding together and targeting three–for instance, administrative complexity, failure of pricing, and overtreatment or low-care value–businesses could save billions they now dedicate to health plans, using those precious dollars to drive new business, attract top talent, and seek innovations in critical products and services.
The problem
We have to get the information out there. Most employer groups or, more specifically, those who are in decision making roles regarding employee health benefits and risk, do not know that these solutions exist. There is a knowledge gap that is continuing to widen daily, in part due to the way that solution providers approach employer groups with this knowledge. Unfortunately, there are less and less consultative minded front-line professionals who are solely dedicated to educating and providing value without the need for reciprocation. As always, there are two sides to every coin, and this one is no exception. Either the status quo, hubris, or many other reasons impede employee health decision-makers from opening a curious ear to new ideas and solutions to the problems they face.
The resolution
Free-flowing knowledge–not pitching, but freely educating those who are eager to listen and learn–is what we need. This presents a challenge to those like me who provide solutions. Sure, my job is to sell our products, but if our potential customers don't even know such products exist, don't I have an obligation to talk about our products in the context of a health plan spending revolution? The pieces for that revolution are in place. The challenge is to engage those who would be freed by the revolution.
Spend 30 minutes in a "learning session" without saying your company's name. Make the time to listen and learn. Thirty minutes of listening won't ruin your day; however, what you may discover in those 30 minutes can improve the health care experience for your employees and reduce the waste in spend that your company loses year after year.
Simply put
Waste in health care is real, and no one disputes that its impact is evident. Employers who are the most educated about the available solutions in the market are leading the charge in reducing the knowledge gap, positioning themselves to actively take control of their spend and futures.
Joseph Hopkins is the director of business development at Premise Health.
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