Shared Responsibility for Affordability
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About the Show
Health care affordability isn't just a consumer problem—it's a system accountability issue. Consolidated health systems promised lower costs. Insurers and employers are demanding more value. This episode brings together health systems, insurers and business leaders to explore how each player in the health care system can do more—collectively—to lower the cost of coverage. From legacy partnerships to forward-looking value-based models, what does meaningful collaboration look like?
Guests:
•Tricia Keith
•Brian Peters
•Brian Calley
Transcript
Chuck Gaidica:
Welcome to this special series of A Healthier Michigan Podcast, coming to you from the Mackinac Policy Conference where we're taking a closer look at one of the most urgent challenges in healthcare today, affordability.
To begin this special series, we're looking at the big picture, why is health insurance so expensive? Who is responsible for fixing healthcare affordability, and how do we do it together? How is this affecting Michigan's employers? In this episode, you'll hear from leaders across sectors, Tricia Keith from Blue Cross Blue Shield of Michigan, Brian Peters from the Michigan Health & Hospital Association, and Brian Calley from the Small Business Association of Michigan as they discuss what real partnership looks like and how collaboration is key to progress.
Well, Tricia Keith has joined us, president and CEO of Blue Cross Blue Shield of Michigan officially. Congratulations. I haven't seen you since the beginning of the year. It's nice to see you again.
Tricia Keith:
Thank you. It's nice to be seen. It's nice to be here.
Chuck Gaidica:
Well, I'm driving up and I see the billboard, affordability. I know it's a thing we're talking about it a lot in this podcast, this idea of affordability. Let's start with the big picture. You've got pressures that are driving the affordability crisis in one direction that everybody's concerned about. Talk about that idea. Is it really a crisis?
Tricia Keith:
I think we're approaching a crisis in affordability in the health insurance industry. And what we seek to do at Blue Cross with our mission is to cover people. And covering people means having that access. And access, you have to have affordability to have access. And so it's really important to raise the discussion on that. And we have to get you one of these affordability matter pins that you were referencing in the billboard. We're trying to raise that conversation because when you think about some of the price increases, frankly, that we've had to pass on all for very good reasons that we'll talk about here today, we recognize the impact that that has on employers and their bottom lines. We recognize the impact that that has on families. And we need to do more as a health system in working together to combat the affordability crisis.
And so what we're trying to do is raise that conversation, have all of the partners in that equation come to the table and work to do what we're all seeking to do. And we're all seeking to create great outcomes to create healthier people here in Michigan.
Chuck Gaidica:
So it sounds like this is an evolution in partnerships, right? So what are you seeing with the health systems over time? What's actually occurring and do you see still happening now?
Tricia Keith:
So we're deeply proud of our network and our partnerships that we've had with the health systems and the providers and the physicians all through Michigan. As you know, we have the broadest network in Michigan, and that's something that we deeply, deeply value. But when we see some of the things that are happening, for instance, in the hospital industry, we've seen dramatic consolidation in Michigan since 2019. The top three systems used to have about 19% of the market share. They have over 60 now. And so those corporate style health systems that have come together are trying to drive up the prices in our negotiations. And we need to work together to figure out a way to create opportunity to better serve our members on that.
There was a recent study that came out that showed across the board, hospital prices since 2000 have gone up 250%. That's four times the rate of inflation. We need to do more to talk about the costs that are there to create opportunity for the providers and the physicians to work together to create the outcomes, to get the appropriate care to their members and work together. And so that's one important part.
We have a long, great history of working together. We have a program called Value Partnerships that last year celebrated its 20th anniversary, and over that time has saved over $6.3 billion in savings for our members in their healthcare costs, working towards shared outcomes and getting the right results that we need for our members. That's an example of those programs, and we're encouraging our hospital partners to work together on those value programs going forward.
Chuck Gaidica:
So when you start throwing out decades of involvement and connection, this is real progress?
Tricia Keith:
This is real progress and we need to continue because what we've done heretofore is critical. It's been successful, but it's not enough. And so we've talked just now about hospitals. We need to talk about the pharmaceutical industry and what's happening there. 21 cents of every dollar that a member pays in goes to drug costs right now. And we have a super unregulated market federally with pharmacy costs, and we need to do more around that.
And so when we think about the entire equation of healthcare and that dollar that a member pays us right now, I talked briefly about the hospital systems, 47 cents of every dollar that a member pays in goes to hospitals. 25 cents of every dollar goes to providers, 21 cents to the drug companies, pharmaceutical, 9 cents goes to Blue Cross. And that goes to pay for things like our digital app and creating that access, goes to pay for call centers, claim services. And so we need to do our part too. And so we've launched an internal program called Blue Cross Accelerated that seeks to reduce our administrative cost over three years by $600 million. And so we're doing our part in that to keep that cost affordable as well.
Chuck Gaidica:
But when you mentioned it's only 9 cents out of the dollar, that means those other partners may be having a similar program is even more important.
Tricia Keith:
We think that that's highly desirable is that we need to not just talk about building revenue, we need to talk about controlling the overall cost.
Chuck Gaidica:
So what other way would you say you're working on? Maybe it's that program is the way, but what other programs are there, if any, to address this affordability internally for healthcare and health insurance?
Tricia Keith:
Well, there are a lot of other programs. Over the last couple of years, we've had a number of investments in partnerships with other Blues plans that have created opportunities in the pharmaceutical industry. We have different programs where we bring different generics to market, where we use biosimilars on really high-cost medications. Those types of things dramatically impact the cost because I mean, think about all the ads that you see on TV advertising, certain drugs, this direct-to-consumer marketing is something that we really think the federal government should play a role in curbing as well. All of these things will contribute to changing the trajectory of the overall health trend.
Chuck Gaidica:
Yeah, well, Blue Cross is doing a lot to make health insurance affordable, but it's also good to know that Blue Cross is Blue Cross, right? I mean, that's a pretty big name to be a partner with.
Tricia Keith:
We're deeply proud of our brand.
Chuck Gaidica:
But also something to be proud of apparently is this new J.D. Power survey, right?
Tricia Keith:
Yes. We were thrilled, absolutely thrilled this morning to be able to announce that we were just selected the number one plan in overall customer satisfaction by our commercial members in Michigan. This is actually the fifth time in seven years that we've been awarded this award. And in overall satisfaction, if you think about it, it encompasses everything. It thinks about access, it thinks about affordability, it thinks about the trust that somebody has in our card. It represents our digital capabilities. It represents how people feel when they call in and they talk to our employees who are there to serve them.
When I decided to seek the role of president and CEO, one of the things that I was really excited about is our employee base and their commitment to mission, and I knew that they stood behind. They show up every day to serve people. And so that has been really exciting for that. And I think this award, just to bring this all back, this award really represents everything everybody does trying to fulfill our mission every day.
Chuck Gaidica:
So it is the Academy Award of health insurers?
Tricia Keith:
It's a pretty big deal.
Chuck Gaidica:
Pretty big deal.
Tricia Keith:
We're really excited about this.
Chuck Gaidica:
Well, congratulations on that as well.
Tricia Keith:
Thank you.
Chuck Gaidica:
Tricia, it's good to see you.
Tricia Keith:
It's great to see you. Thanks for having us.
Chuck Gaidica:
Be well.
Tricia Keith:
Thank you.
Chuck Gaidica:
Well, we're happy to have Brian Peters back. He's the CEO of the Michigan Health & Hospital Association. Great to see you.
Brian Peters:
Thank you so much for having me. I appreciate it.
Chuck Gaidica:
Yeah, we've had some wonderful weather. I'm looking out at the porch here at the Grand Hotel, and it's a place to be, I'll tell you.
Brian Peters:
It's unbelievably beautiful.
Chuck Gaidica:
MHA's mission is to advance the health of individuals and communities. How are you looking at affordability fitting into that puzzle?
Brian Peters:
Well, we know that affordability is critically important. It's an element of the access question, right? If people have technology and highly skilled providers and wonderful hospitals in their community, but they can't afford coverage or can't afford their co-pays and deductibles, that becomes a problem, not just from a financial perspective for the healthcare ecosystem. More importantly, it becomes a problem for their health status. And we know that's true for individuals throughout the state and communities throughout the state. So affordability is top of mind for the Michigan Health & Hospital Association and our members.
Chuck Gaidica:
So what is MHA doing with and helping member hospitals to really find this affordability? I mean, we hear a lot about charity care. We hear a lot about unpaid care, but what are you doing when it comes to the hospitals themselves?
Brian Peters:
Well, we certainly want to make sure that we're not stuck in an old model that when you think about care delivery, that we're utilizing all of the cutting edge technologies that we know can make a difference, that we're utilizing all of the prescription drugs. Technology and drugs together have led to a situation in Michigan and across the country where average length of stay, in other words, how long an individual tends to stay in an inpatient hospital bed, it's dramatically fewer days today than it was 30, 40 years ago. And it's because of those new technologies and new drugs that fortunately have been able to lead that change.
We want to see more of that for sure, but we know that it goes beyond technology and drugs. We know that the way we go about intersecting with our communities, the social drivers of health status, whether that's access to food, whether that's housing, whether that's transportation. If we know that the people that we serve lack any one of those things, and too often they lack all three of those things, we know that that's going to deter their ability to access quality healthcare and maintain affordability. These are things that lead to an increased expense in the healthcare system overall. So we need to address those problems early on, and we can't do it in a silo. We have to work with partners like Blue Cross Blue Shield and Michigan and others to get that done. But I think it's something we can all rally around.
Chuck Gaidica:
And a bit of a challenge when you think that you've got the context of different communities. Like you're saying, not everybody is going to have the lack of transportation. If you're in a really densely populated urban setting, maybe you can get to a hospital quicker.
Brian Peters:
Quite possibly. Even in our urban settings though, transportation has become a problem and certainly food insecurity. But to your point, in rural Michigan, particularly in the winter months, in the Thumb, in the Upper Peninsula, when you see the inability of an individual, let's say a pregnant mom who can't get to a hospital or an outpatient facility for their prenatal care because of those transportation barriers. Well now all of a sudden, you're talking about a potentially worse outcome for mom and baby, both, which of course translates to increased cost in the system, which of course gets right back to the question at hand, which is affordability.
Chuck Gaidica:
So a lot of consolidation of hospitals in Michigan in general, not just Southeast Michigan. Specifically in Southeast though, we've got some of that going on at this moment. Many hospitals have promised better access and lower costs. From your perspective, are Michigan's health systems meeting these promises, this idea of affordability and access? Is it increasing, I guess, from the inside out because the hospitals want it to happen as well?
Brian Peters:
Absolutely. In fact, this is a trend that's been underway for some time, not just in Michigan, certainly not unique to our state, but across the country where we've gone in Michigan from having about 240 hospitals back in the early 1980s to 134 hospitals in Michigan today. And back then, most all of those hospitals were truly independent. Now, most of our hospitals are part of multi-hospital systems, and we're even seeing the consolidation between multi-hospital systems that have a footprint in multiple regions throughout the state.
There are challenges to be sure, but I think at the end of the day, you're seeing the benefits of economies of scale in the supply chain so that we have better access to good pricing, whether that's medical supplies and equipment that we use day to day, access to prescription drugs, certainly. And then when you think about the electronic medical record, that's an incredibly important and expensive element of the healthcare ecosystem now. And when you have an integrated system now that encompasses multi hospitals, there's economies and efficiencies of scale that are involved there because we can share best practices, share information in real time. That's going to benefit the patient, and ultimately it's going to save on cost because we're not as likely to duplicate services unnecessarily. And so we think there are a lot of benefits from this integration. As I said, there's challenges too, but we're committed to working on those.
Chuck Gaidica:
There are a lot of initiatives that the Michigan Health & Hospital Association has been supportive of, the Keystone Center, right? That goes back a while.
Brian Peters:
It does. And the Blue Cross Blue Shield Michigan's support of the Keystone Center, really from day one, has been absolutely critical in our success and our ability to engage with literally every hospital in the state of Michigan, large and small, urban and rural. It's a real success story. In fact, what we have done over the last 25 years now is reduce adverse events in Michigan hospitals because we have implemented best practices across the entire hospital field.
So we're addressing medication error, patient fall risk, wrong site surgery, hospital acquired infection. We have clinical evidence, peer-reviewed data that demonstrates the success we've had in moving the needle on all of these important issues. Better outcomes for patients, and certainly Lowered healthcare costs for Blue Cross and for other payers as well by virtue of the fact that we don't have these medical errors that are extending hospital stays.
Chuck Gaidica:
Well, this whole idea, we hear this word up here, I'm sure from corporate titans of productivity, that somehow things are going to get a little smoother. And as a consumer, I want to get out of a hospital faster, and I want the bills to be lower. And what you're saying is there's a lot of work behind the scenes making that happen.
Brian Peters:
Well, there really is. And as I said, we're proud of the work we've done, but we have a long ways to go yet. It is a partnership, I think between insurers, providers, and other members of the healthcare ecosystem. But first and foremost, we have to think about the individuals themselves. They bear some responsibility to do the right things in terms of managing their own chronic condition perhaps, or to engage in healthy behaviors, healthy lifestyles. That's where again, we can play a role. Aside from just the provision of acute care hospital services, we can play a broader role.
Chuck Gaidica:
So it sounds like an exciting time when you're looking forward now toward maybe new opportunities to work together with insurers to align incentives and some of these best practices and reducing healthcare costs. What are you excited about as you look to the future?
Brian Peters:
I'm really excited about emerging technology. I've always been fascinated by some of the things that have come online, particularly in the healthcare arena, that have enabled us to identify a chronic illness at a much earlier stage, which means we can treat it at lower expense and certainly with better outcomes for patients. I think AI is on the tip of everyone's tongue across multiple sectors, but my belief is that healthcare is the sector of our economy that is most ripe for dramatic change as a result of the deployment of artificial intelligence. We're seeing it already, but I think in five years we're going to be absolutely blown away by some of the change in the way we go about the provision of healthcare services in this country and beyond. And that's a cause for optimism, in my view.
Chuck Gaidica:
Yeah. Well, it's good to see you, Brian.
Brian Peters:
Likewise. Thank you so much for having me.
Chuck Gaidica:
Sure thing. Brian Calley joins us, president and CEO of the Small Business Association of Michigan. It is good to have you back.
Brian Calley:
My pleasure to be back with you again.
Chuck Gaidica:
Well, let's talk about employers and the idea of the big word that is being used a lot, especially by Blue Cross, affordability. I mean, talk about this idea of how this is affecting your membership year after year.
Brian Calley:
Small businesses are really struggling with the year-over-year experience with the increase in the cost of healthcare. It is something that in the past, people always complained about it, but then in the end, they just kind of suck it up and pay it because what choice do you have? But it is different now. We surveyed our members in this spring, and what we found was a pretty shocking result is that about three out of four, a little more than three out of four of our members say that they can't really expand employment because all of that horsepower, their margin has to go to cover those increases. And then when it comes to investment or generally expansions of the business, four out of five say that the rising cost of healthcare is a barrier to that, which those were shockingly high numbers.
It's always been a struggle to deal with, but now it's really getting in the way of employment and the way of investment. And that's why we've decided to really elevate this discussion at the Small Business Association of Michigan. It deserves more discussion. And sometimes there's overly simplistic arguments that are made about it. And the nice thing about the situation with insurers in particular is everything is transparent. You can see the claims, you can see what's driving the costs. And part of our job, our responsibility is to point to the areas that are causing the increases in cost.
And it's not the insurers. Blue Cross experienced a net underwriting loss last year of $1.7 billion. That means that they undercharged premiums. So obviously that's not where the problem is. So when you look under the hood, you find out that within the healthcare systems that have become huge conglomerates with a lot of pricing power and that have been raising their costs at an alarming rate, not quite as much as pharmaceuticals and pharmaceuticals are driving so much of the cost. So if you look at experience rating over the last couple of years, you see that the costs from the health systems, claims from the hospitals and health systems, up 7%, twice inflation. So inflation has come down some, it's twice inflation. Cost of pharmaceuticals, five times inflation. These are not sustainable, and I have to underscore, it is different now to where small businesses are saying it is stopping additional investment, additional employment. And our economy is going to pay the consequence for it.
Chuck Gaidica:
So if you're getting that reflected to you, if I'm a business owner, my job is getting this coffee out the door with donuts, I'm really busy, but how can I be pointed with your help towards solution making then? What can I do as a small business person?
Brian Calley:
Well, we really do need to advocate for the entire system to work more toward a value-based system. Today we have a system that incentivizes building more and more infrastructure and then driving utilization of that infrastructure. And that's the most expensive way to do it. But what we would rather see is a reimbursement system to the healthcare industry that is based on value, on health outcomes. How do we avoid people needing to use that infrastructure? Right now, to make the metrics or to make their financials work, it literally incentivizes the opposite behavior that we would want. In fact, we see now hospitals making these strategies where they'll say, this hospital is here and that hospital is there, and we want to build a medical center in between to divert this traffic from going to that hospital because we want to capture it and be more ... Those sorts of things happening are extraordinarily expensive. And at the end of the day, it's the small business owners that are paying the bills.
And unfortunately because they're not self-insured, small business owners are not self-insured. So in some ways, they are victims of the way that the system is developed. And so it's always worth it to encourage or incentivize healthy behaviors among their employees. But because they're not self-insured, there's not a direct benefit that comes back to them. Small businesses more than anything, need the entire system itself to move toward this value-based or health outcomes-based reimbursement method that incentivizes the right types of behaviors of the health systems themselves.
Chuck Gaidica:
That's interesting. So when you look at other partnerships that are leading toward affordability, is there any direct link you can point to outside of that one and say, this is a place we're concentrating?
Brian Calley:
Well, I do want just to acknowledge that to the extent that Blue Cross is taking aggressive steps toward reducing administrative expenses, right-sizing the organization, deploying technology, focusing on wellness, and really trying to push the reimbursement systems toward health outcomes as opposed to reimbursement of heavy use of infrastructure, those are all the right moves.
And so as I try to carry this message forward, I do point to Blue Cross is actually one of the people that's trying to fix it, but they can't do it on their own. We need willing participants in the healthcare industry, those that are delivering the care, to accept a different type of repayment system where it's not just a fee for service, how many of these procedures or these tests can be ordered and they make more money and do better if they order more, as opposed to you get paid based on the health outcome. And that incentivizes more efficiency and also the health of the individual. I mean, it shouldn't work against the health system for people to be well. People not being well is what drives their revenue up. It's just not a good system. The incentive needs to be wellness.
Chuck Gaidica:
But when you talk about the local level, again, as a local business, small business person, one of the things you may not have the capacity for is extra time. So hey, employees, why don't you go for a walk, which is good for your health, it's good for your heart health, it's good for your brain health, and it brings your anxiety down? Well, a lot of small businesses don't have the wherewithal to say these are some of the things we should all be doing. The ones that do it, awesome, but it's got to be a new learning curve for a lot of businesses.
Brian Calley:
Yeah, there's an important societal aspect to health that I think is going to be a limiter in how much progress we can make. We need the population themselves to adapt healthier lifestyles and to reduce costs. And that's really where the biggest cost savings probably could be found. But it's also a system that right now, it's hard to engage with. It's hard to coordinate.
And so the default people use because it's hard to coordinate and to use health systems, people default in the most convenient option to them, which also happens to be most expensive, emergency room or urgent type care in place of primary care. These are really tough questions and problems to solve, but small business owners stand ready to help. But we know that at this point, their role is paying the bills. And so we're taking it upon ourselves at Small Business Association of Michigan to drive the conversation and try to push all the players in the system to solving these problems. Because those that are just paying the bills at the end of the day are not the ones that are creating the system, that control the system. And it's difficult to really create a meaningful impact on their bottom line.
And so yeah, promoting wellness still makes sense even if it doesn't hit the bottom line on premium reductions. But it sure would be nice if the year-over-year increases that are tied back to what hospitals and health systems are charging and what pharmaceuticals are charging, if those were on a similar trajectory to regular inflation, because that's what everything else is tied to.
Chuck Gaidica:
Well, it's good to know. The way you started our conversation was regarding your listening to your membership, and that's important.
Brian Calley:
That's the key. Everything that we do is informed by, driven by actual small business members and small business owners. They're the ones that set our agenda. They're the ones that decide what the priorities are, and I'm one of the folks that have the privilege of carrying the message.
Chuck Gaidica:
Well, Brian, it's good to see you again.
Brian Calley:
Likewise. Thank you.
