Health care reform. Its goals are to extend coverage those who are uninsured, make sure that citizens won’t max out their coverage, see to it that people who cannot obtain coverage because they’re already sick can access coverage. The goals for this extensive and Supreme Court-sanctioned legislation are many and noble.
One question remains: how, exactly, will all of that save money for purchasers of health care services? According to Jonathan Edelheit, whom many know as a medical tourism expert (www.medicaltourismassociation.com), the answer is a resounding “No.”
“If you look at what health care reform did not reform, it’s things like tort reform, medical malpractice — it did nothing for those,” Edelheit says. “It did nothing to reform pharmacy costs, except a very small amount for Medicare and Medicaid but not for individuals or employers. Medical supplies and equipment weren’t reformed. None of the things that have a major impact on cost were reformed with this legislation.”
The downside of reform
In fact, Edelheit says, health care reform is very likely to have a significant cost impact — just not in the direction that the average American thinks it will. “People I know and come in contact with, just average people on the street, believe that one thing reform will do is allow everyone to get free surgery,” he says. “The whole campaign for it was that it was going to lower your costs and you’re going to get a better plan. Lots of people still believe that.
“But when 2014 comes around, once the guaranteed issue with no pre-existing condition limitations and the mandate take effect, my personal belief is that this could not only increase costs but it could very well make more people uninsured.”
The mandate, which says that everyone must purchase health insurance, comes with a penalty for failing to do so. On the surface it seems that most people would cooperate. But Edelheit’s concern is that the mandate is weak; “…so weak it’s worthless,” he says.
“The monthly penalty in 2014 is roughly equivalent to one hour of the minimum wage in most states. Why would somebody, if they know they’re healthy, buy insurance for $500 to $1,000 a month as an individual if they know they can just wait until they’re sick, and in the meantime pay about $9 per month as a penalty? Even 2 years later, the fine is about $600 for the year, so about $50 a month. If you compare that to buying insurance at $600 to $1,000 a month and just buy it when you need it, why wouldn’t you? I believe it will actually cause adverse selection.”
Edelheit believes companies that employ low-wage service workers will be in for a shock when health care reform is fully implemented — and so will their employees. “A lot of hotels and restaurants currently offer mini-med or limited medical plans,” he says. “Starting in 2014, they either have to provide major medical insurance or pay a fine. They’re going to have to make a decision — do we pay $2,000 a person or go ahead and provide major medical?
“Major medical is something they’ve never had to budget for before. With a mini-med plan, employees are paying maybe $50 a month, now they’re told they’re going to have to pay $500 or $600 a month, or more. They’re going to need a way to reduce those costs.”
Cost saving measures still needed
Whether or not Edelheit’s predictions come true, companies still need to address continually increasing medical costs. “If you’re an employer and you want to lower your costs, you have to find something innovative to try,” he says. “Everybody has already tried high deductible and consumer-driven health plans, and they haven’t seen much cost change. In my opinion, there are two things that can help. One is corporate wellness, getting employees engaged in healthy behaviors. But if you implement that, it’s going to take 2 to 5 years for you to start seeing results.
“It’s really a long-term investment, and employers can’t wait that long because costs keep going up. Then, to make things worse, in just 5 years — 2017 — the Cadillac tax kicks in. The majority of health insurance plans in the U.S. are going to count as Cadillac plans and have a 40% tax imposed on them. The only thing left to try, that I know about, would be medical tourism: giving your employees the option of traveling either overseas or domestically where they can save money on costs and still get high quality.”
In the years before health care reform, medical tourism was gaining credibility and popularity among employers as a way to put the brakes on the costs of certain conditions. For example, a knee replacement in an overseas hospital considered to be a center of excellence — even exceeding the quality measures of many U.S. hospitals – may cost tens of thousands of dollars less.
“There was a huge movement toward medical tourism with all the big insurers and employers, and one of the things that kind of slowed down the industry was when President Obama was elected and said he was going to reform health care,” Edelheit explains.
“The carriers put everything on hold to see what would happen. A year or so after health care reform passed, everyone was pretty comfortable with what it would do, and the insurers and employers were starting again to look at implementing medical tourism in a big way. Then the Supreme Court announced they would rule on it. Once they approved it, our phones started ringing off the hook.”
“Domestic medical tourism is really emerging as a very big trend,” says Edelheit. “There are two types. One is sending people to very good quality but low cost facilities; maybe an outpatient facility that does knee replacements for half the cost of a hospital. The second model is where a company partners with a medical facility.
“Lowes, for example, partnered with The Cleveland Clinic for employee heart procedures. They negotiated for fixed payments, so they can easily budget. The belief is that if you go for really high quality, there will be fewer complications, the outcomes will be better, and the employee will be back to work sooner. This is a way for employers to say, 'I want high quality services for my employees, and I want to know what my cost is going to be.'”
What to do first
“Companies need to get informed about medical tourism and how it can help them control costs,” says Edelheit. There are very high quality hospitals, and high quality facilitators out there. But there are some bad hospitals and some very bad facilitators. Employers can get into real trouble if they’re not working with a quality facilitator. So read, find out, and choose a company that knows what it’s doing.”
“Employers also need to know that medical tourism is easy to implement. And as long as they make good choices about facilities and facilitators, they really don’t have liability under a self-funded plan. For companies that want to keep high quality benefits in place to attract and retain employees, they’re going to have to look at things that are going to significantly lower costs. And the only thing I know that’s out there is medical tourism.”