Dr David Blumenthal Tells Employers to Get Tough, Get Smart, Get Informed on Healthcare

The US health system is a big deal. If the US health system’s spending was a separate country, it would be the fifth largest gross domestic product in the world, behind only the United States, China, Japan, and Germany. And it’s not getting any smaller, said David Blumenthal, MD, president and chief executive officer, The Commonwealth Fund, during the 2019 Annual Conference of the Greater Philadelphia Business Coalition on Health.

It took a long time for the US health system to grow to the size it currently is, and not only will it not get smaller over night, but we’re losing the battle to manage cost, he told a room of mostly employers.

Blumenthal highlighted the ways in which employers are slipping competitively regarding the performance of their health plans. From 2007 to 2014, per member health spending for employer plans grew 16.9%, while Medicare health spending per member actually decreased by 1.2%. These numbers don’t exactly reflect the perception that government cannot get it’s act together to manage anything effectively.

“This is our incompetent government at work,” he said.

Another way in which employers are slipping is regarding the underinsured. In 2003, 10% of adults were underinsured, which steadily grew to 28% in 2018. By comparison, while individual plans continue to have a far greater percentage of beneficiaries who are underinsured, the proportion started to decline in the last few years.

“Costs are going up, you’re not controlling them, and the insurance that your employees are getting isn’t protecting them from the cost of illness nearly as well as it used,” Blumenthal said.

Prices are the problem. Research has shown that as inpatient utilization and intensity declined and outpatient utilization and intensity remained flat, the prices for both have skyrocketed. Prices are going up, he said, “because they can."

Blumenthal pointed to market concentration. Only 0.3% of the country has unconcentrated markets and 9.6% of the country has moderately concentrated markets. The remaining 90.1% is highly concentrated or super concentrated, meaning there is effectively no competition in those markets.

Another contributing factor to rising prices is the lack of transparency. There is no other market where the consumer is not allowed to see the price of something before they buy it, Blumenthal said. The United States might love the idea of free markets, but the basic principles of a free market are easy entry and a high level of information about prices. However, neither of those pertain to the US healthcare system.

“A market for healthcare does not exist. It just doesn’t exist,” Blumenthal said. “Prices aren’t known and there’s no competition.”

If employers want to do something, they need to get informed, get tough, and get smart, he said.

Getting informed means knowing prices. But while there is more interest in price transparency, it remains a challenge. Theoretically, though, price transparency will be helpful in making decisions about coverage and networks.

Getting tough means getting bigger and gaining market power by banding together and channel business to select providers who will provide the quality of care they want at the cost they want. The challenge is that it is tough to get businesses that have nothing else in common to work together for a common purpose.

“Collective action in our society is hard to create,” he noted.

Getting smart means finding a different way to pay instead of fee-for-service, such as through alternative payment models that use creative ways to identify the quality that payers want. The challenge here is how complicated healthcare is. Blumenthal has multiple degrees from Harvard, has worked for the federal government and helped write policy, and currently runs a philanthropy dedicated to studying healthcare.

“I find healthcare really confusing,” he admitted. And if he finds it confusing, it must be worse for people whose business is not healthcare. “It’s tough enough to master your own business.”