MINDING THE MEDICAL MONEY MYSTERIES

August 1, 2006: Our speaker was Ed Sellers, CEO of Blue Cross Blue Shield of South Carolina, an organization that insures half of all South Carolina commercially-insured residents. Setting the stage for the complexity of understanding the high cost of medical care he told us that there are a host of issues to be considered, many of which he could not even begin to discuss, such as: How technology affects medical costs; the dilemma of the uninsured; the new all inclusive health care plan implemented by the state of Massachusetts; or the privatizing of medical insurance into major business ventures.

Medicine 101 tells us that a simple formula explains it all. One must simply divide the total U.S. population into the total of all costs that it takes to deliver medical care to the U.S. “All costs” includes buildings, salaries, new medical machinery, all of which eats up about 50% of the delivery cost. Unless the population goes up significantly to spread the cost over more people, the unit-specific delivery cost will only continue to rise. As the costs rise, the medical providers must ensure their reimbursement increases to cover the increased costs per visit. In some cases the consumer may also visit the doctor more often or use more of the new tests and services that are coming available, which also helps cover the increased costs for the providers.

Since the Federal government does not significantly increase its reimbursement for Medicare and Medicaid beneficiaries, the overall cost of medicine for the commercially-insured population will rise to offset the provider losses on the governmental patients. At present, governmental healthcare costs are approaching 3 trillion annually and represent approximately 15% of the gross national product.

Another trend is a literal explosion of privately owned clinics and service delivery centers, especially physician-owned, such as a center with an MRI machine. The more patients who go to the private facilities, the deeper the trouble for the hospital systems, who also have the same equipment. It should be noted that the private, non-hospital facilities focus on profitable services and do not accept uninsured patients or Medicaid patients, thus they can offer the same service at a cheaper rate.

Medical plan premiums are expected to go up in the year 2007 in a range of 8 to 11 percent, which is lower than the increases over the last few years. Every new hospital built, such as the planned new East Cooper Hospital, adds to the overall cost of the delivery of medicine in the region. So what is the BC/BS response to these issues?

1. Implement consumer directed health plans where the consumer has higher out-of-pocket costs than under traditional managed care insurance, and therefore should be more interested in the value (cost and quality) of the services provided.
2. Consumerism/Transparency – provide tools for consumers to use to understand the type, quality, and costs of health care services.

So, what does he see in the future?
There will definitely be continued health care inflation.
There will be some medical breakthroughs, but they will not contain costs, because they will be focused on small segments of the population (e.g. stem cell research).
The states will continue to struggle with the cost of Medicaid.
Individuals will become more empowered as they learn more about medicine.
The poor will continue to be very vulnerable.

Asked what he would do to solve the problems if he were totally in charge, Ed Sellers responded:
I would work on problems in small bites.
I would add a 5% tax on all goods to go into a medical pool.
I would make every person have medical insurance just as they must have car insurance.
I would help people pay their medical premiums, from the pool, adjusted by their income.

Reported by Ellen Jackson and Fred Sales, Keyway Committee