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Consumer-driven healthcare on horizon

Gov. Haley Barbour’s Health Insurance Summit February 5 focused on the difficulty employees of small businesses in Mississippi have in acquiring and retaining health insurance.

In response to that challenge, Barbour has proposed a health insurance exchange, which will centralize health insurers and providers and empower consumers and patients to choose their policies and plans from that list. The idea, Barbour said, is to break the tie that binds employers and health insurance, and shift ownership of the policy from employers to employees.

“Nearly 134,000 Mississippians work for small businesses that don’t offer employer-sponsored health insurance,” Barbour said. “As we explore new ways of trying to fill this gap in the healthcare system, we should look to the benefits of this program, and two major ones are reducing administrative costs and paperwork and providing workers with a broader choice of coverage plans, insurance portability and tax benefits.”

Summit panelist Regina Herzlinger, chair of Harvard University’s Business School and professor of business administration, said the system of buying and delivering health insurance needs an overhaul.

Herzlinger drew a comparison between the retail and automobile industry and the healthcare industry. The retail and auto industry, she said, has managed to increase quality and decrease costs, while the quality of healthcare is erratic and costs have steadily risen, which she attributed to “bad economic circumstances that lead to small companies not offering health insurance.”

Consumers use their own money to buy their own cars and computers, creating an environment that offers choice and product information, rewards innovation and generates competition among manufacturers. That environment, Herzlinger said, ultimately benefits the consumer.

The method used to purchase healthcare, with employers using the employees’ money, limits innovation, restricts choice and favors the insurers.

“I wouldn’t have my employer buy my house for me,” Herzlinger said. “Why should they buy my health insurance?”

Add to that the constant consolidation of health companies and the small differentiation in their products, said Herzlinger, and the system is broken.

“The solution is simple: consumer-driven healthcare,” said Herzlinger.

A health insurance exchange should provide data that would list doctors’ menu of services, their price lists and how other patients have rated them. Herzlinger likened the comparative data to the annual list J.D. Power releases that rates auto manufacturers and their vehicles.

But there is resistance from the medical community.

“Nobody wants to be measured,” Herzlinger said. “There’s a huge pushback against that.”

But such a rating system would introduce an entrepreneurial spirit into healthcare that currently is lacking, Herzlinger said. With data that could identify doctors and healthcare providers that have earned solid ratings and who offer a range of prices, consumers would reach a level of empowerment that is currently exclusive property of insurers and providers.

“The only way to make things better and cheaper is to introduce new ideas,” Herzlinger said. “No entrepreneur wants to work in a system (currently) controlled by the federal government.”

Herzlinger said she favors a system that requires participation from everybody, touting universal healthcare coverage as “an idea whose time may have come.” She said the 80-20 rule — 20% of people are responsible for 80% of healthcare costs — has been proven true through studies and from mining data, and that there is no other option than for healthy people to defray the cost of sick people’s healthcare. All this, Herzlinger said, intensifies the need for consumers to have a choice in buying health insurance, just like they have a choice in what kind of vehicle or computer they buy.

Even so, she said the role of government, outside of setting prices, coverage and benefits and setting up a process for delivering healthcare, should be limited.

“Most people don’t want people in Washington deciding how to spend their money,” Barbour said, noting that between and 20% and 25% of Mississippi’s budget, on average, is spend on healthcare, including funding for mental health services, money for the University of Medical Center and healthcare for the state’s prison population. With $5.6 billion allocated for lawmakers to dole out in this year’s budget, healthcare will eat up between $1.2 billion and $1.5 billion.

Ed Haislmaier, a senior research fellow at the Heritage Foundation’s Center for Health Policy Studies, said state budgets are broken down into three categories: education, healthcare and everything else.

“And healthcare is eating the other two,” he said. “Ways of doing business will have to change.”

Contact MBJ staff writer Clay Chandler at clay.chandler@ msbusiness.com .


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