Sam Baker April 5,
2019
Employers are
the linchpin of the U.S. health care system. But they don't always act like it.
The big
picture: Employers play a minor role in the political debate over health
care costs, but they have a lot on the line — and a lot more political muscle
than they're choosing to flex. An increasingly bipartisan cadre of policy
experts is trying to tell them that staying on the sidelines is both
counterproductive and unsustainable.
Collectively,
private-sector employers are one of the biggest and most
politically powerful stakeholder groups in the health care debate. They cover
more people than any other source, and account for about 20% of all health care
spending — almost $700 billion in 2017.
- "You would think that employers have
a ton to gain by engaging in these discussions" around cost, said Dan
Mendelson, the founder of the consulting firm Avalere Health. But they
have consistently "failed to realize those expectations."
The
catch: Even though businesses are the core of the health care system,
health care typically isn't the core of what they do. They have similar
structural interests, but they're not necessarily organized around those
interests.
- For years, businesses
have responded to rising health care costs primarily by shifting more of
those costs onto their workers, through higher deductibles and other
cost-sharing. The average deductible is now 212% higher than it was in 2008.
- If employers ever reach
the conclusion that they've taken this kind of cost-shifting as far as it
can go, they could be powerful voices in the political debate over more
aggressive cost-control measures — and they do want to control costs. But
for now, they're still on the sidelines.
- "The frustration is definitely
rising, but I would be hesitant to predict a breaking point,"
Mendelson said. "It would be great if they were more engaged, but at
the same time it's rational that they are trying to reduce their
exposure."
There are
exceptions. Walmart, for example, has undertaken an especially
aggressive effort to overhaul its health benefits, even
ditching traditional insurers and bargaining directly with health systems that
have reputations for high-quality care.
- Then there's Haven, the joint effort from
Amazon, Berkshire Hathaway and JPMorgan Chase. But it's still not clear
whether that project will try to affect systemwide change, or simply a
better deal for its many employees, more similar to Walmart's
direct-purchasing goals. Those tools are only available to the largest
companies.
Most employers still
rely on their insurers to negotiate the best prices, preferring to stay out the
weeds themselves. But insurers are becoming increasingly vocal about the
difficulty of negotiating big discounts on hospital care, as hospitals
consolidate, and for new prescription drugs that don't have any competition.
- Government-led efforts
to directly control those costs run into fierce industry opposition. But
if anything could help them break through politically, the most likely inflection
point would likely be some kind of "enough is enough" moment
from employers.
- "I think you're going to see more and
more pressure, and even openness to public policy interventions that take
advantage of negotiations" — for example, tying some private payment
rates to Medicare's, Democratic health care strategist Chris Jennings
said.
It's not just
Democrats.
- John Bardis, a former
Trump administration health care official, said in a speech this week that
employers need to take more aggressive stances toward cost containment.
- Avik Roy, a conservative policy analyst
who advised Mitt Romney's presidential campaign on health care, has
also endorsed more
direct intervention. In the most concentrated, least competitive markets,
the government should cap how much hospitals can charge private insurers,
using Medicare rates as a baseline, he says.
The bottom
line: If there's ever going to be a turning point that would make cost
containment more politically attainable, employers would probably need to be
the ones who drive it.
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