Controlling cost of health care starts with prevention

"In this world nothing can be said to be certain, except death and taxes." Were Benjamin Franklin alive today, he'd undoubtedly add "rising health-care costs" to that list.

But even Franklin's remarkable inventiveness could not easily solve our health-care crisis. Instead, companies must be strategic to secure more value from company and employee health-care spending.

Lessons on controlling healthcare costs abounded at the annual meeting of the Employers Health Care Alliance, an employer-owned and directed cooperative that helps southeastern Wisconsin companies maximize value from health-care spending.

Keynote speaker Jack Mahoney, corporate medical director of Pitney Bowes, has an aerial view of our health-care system. His Fortune 500 company has small and medium-sized offices throughout America and abroad that manage mail and documents for customers.

Dr. Mahoney advised the audience to never forget that your total health-care spending is a sum - the interesting dynamics are at the individual spending level.

Adopting a micro-view, Pitney Bowes discovered that a very small percent of its insured pool, 5 percent in fact, absorb 75 percent of Pitney Bowes' health-care costs.

"The key to containing health-care spending is to keep any individual from bumping into this or other high-cost segments," Dr. Mahoney advised.

The second highest spenders are the 35 percent that spend 15 percent of the budget, spending comprised largely of treatments for chronic diseases like asthma, heart conditions and diabetes. If these conditions are poorly managed, employees inevitably bump into the highest spending segment.

Pitney Bowes eliminated co-pays and brand price differentials for costly drugs that keep chronic conditions under control.

By reducing the employee cost of such drugs some 85 percent, far more employees now follow recommended drug regimens. A strategy that some might deem to be counter-intuitive offers high financial and productivity payback, according to Dr. Mahoney.

Another 50 percent of employees spend only 10 percent of the budget. Keeping this group healthy is key.

Pitney Bowes created financial incentives for wellness and health improvement. Managers, for example, receive higher bonuses when their employees achieve their individual health goals. Health savings accounts also create financial incentives to remain healthy.

Whereas many companies see nonspenders as a lucky cost savings, Dr. Mahoney sees the remaining 10 percent who never use a health-care provider as future liabilities.

Lacking preventative health care, a high percent of these employees bump into high-cost segments and become less productive at work.

Pitney Bowes' benefit plan now encourages all individuals to use preventative care.

Pitney Bowes also educates employees to choose providers with better outcomes for the dollar, a strategy called value-based purchasing. They inform employees of the 20 percent of outpatient clinics that meet national accreditation standards.

Health plans whose outcomes are lower than others and not improving are dropped from consideration. The company also levels the playing field between HMOs and PPOs, thereby encouraging employees to pick an approach that best manages their health.

With these and other changes, Pitney Bowes reduced per-capita health care costs by $2,000 relative to benchmark companies.

Closer to home, Alliance CEO Cheryl deMars commented that Lab Safety Supply Inc., a W.R. Grainger business headquartered in Janesville, reduced its health-care spending by almost 23 percent in one year by offering an on-site clinic and wellness initiatives that led employees to shed a collective 3,000 pounds.

Ben Franklin's claim to fame was his intense curiosity. If fully understanding health-care costs were critical to your company's future (which it is), what would you want to know? What smarter strategies might you deploy?

Kay Plantes is a Madison economist, strategy consultant and executive educator.