Health Savings Accounts - Employers:Trust Your Employees, Give Them Health Care Choices

Death at the Hands of a "Choice" of One

From Who Killed Health Care: America's $2 Trillion Medical Problem - And the Consumer-Driven Cure, by Regina Herzlinger, McGraw Hill, 2007

Juno Beach, Florida --I have several friends with strong opinions about the employer's role in health care.

--One is John Burns, MD, who was vice-president of medical affairs at Honeywell (may not be exact title), about 10 years ago. John, an internist, felt all employees, from CEO on down, ought to have the same health benefits. This did not go down well with Honeywell executives, who thought rank had its privileges and therefore they ought to have their annual physical examinations at the Mayo Clinic while other employees could have their evaluations done elsewhere. John also felt strongly Honeywell should only pay for medical services that were based on evidence from the medical literature. Finally, John had his clashes with the Health Resources people who considered it their paternalistic and sacred duty to give employees as many health care benefits as possible and available..

-- The other is Brian Klepper, MD, president and founder of the Center for Practical Health Reform. Brian, too, is a believer in "evidence-based" medicine. He believes in care based on data on quality and outcomes and performance, as monitored by management platforms and as gathered in RHIOs, (Regional Health Information Organizations. Brian, like John, feels only business employers have the clout and leverage to reform health care.

Then, there's Regina Herzlinger, professor of business administration at Harvard Business School, senior fellow at the Manhattan Institute, and godmother of the consumer-driven health movement. You might think she would be sympathetic to the health costs plights of business. Health costs, after all, are said to be killing American business in the competitive global marketplace. GM, for example, spends $1500 for health care for each employee while Toyata is spending $110.

You might think this professor of business administration would put her emphasis on shifting of costs and risks to employees. These shifts could take the form of,

-- rewards for exercise and fitness
-- stopping smoking
-- losing weight
-- paying more to hospitals and physicians who adopt quality incentives
-- disease management at home and at work
-- tmanaging cost through HMOs, PPOs, and other forms of managed care.

But you would be wrong.

Instead she says: Businesspeople: trust your employees to make their own health care choices rather than relying on your Health Resources (HR) to narrow employee choices. Your employees, she insists, are just as capable of making intelligent informed choices about health care as they are of knowing what to do with their 401Ks, their cafeteria plans, and their private purchases of homes, cars, computers, and mutual funds. According to Herzlinger, HR personnel are paternalistic and bureaucratic rather being competitive and entrepreneurial. Like typical corporate bureaucrats, they do not believe in competition, choice, and entrepreneurship, and they mistrust employee's judgement in choosing between multiple plans. Instead they believe in making health consumers' choices for them. And they believe it is their duty to hire insurance plans to administer their employees' benefits.

If this approach fails, as it often does, they require employees to pay more for their premiums and elevates co-pays. If that fails, they further reduce the number of plans to one or two. They reduce the number of drugs available in the formulary. They reduce the number of hospitals or physicians in the network. The strategy is: narrow the choices, shrink the benefits, switch to generics, tightly manage use of health services to the sick.

Rarely do the HR types consider competition and different vendors. And so by 2005, this narrowing and shrinking process resulted in virtually all employeers offering only opne plan, typically a managed one. Only lately since 2004 have some employers began to switch employers to high deductible plans with health savings accounts (HSAs) and even a few have completely replaced HMOs and PPOs with high deductible plans.

Rarely have corporations turned to consumers and physicians to manage costs on their own. That would be their last stand. That might entail more individual responsibility, employees choosing between various plans based on costs, quality, and value. That would be radical, trusting employees to make choices, as they now do for cars, computers, pension funds, housing, and education. But giving consumers the option of spending their own money -- based on what they think they need and what they judge to be in their own best financial and health interest -- might also cure the health care cost crisis.