There’s been a great deal of discussion recently about the single-payer system and actually that discussion has been going on for the last couple of decades or so, even dating back to the pre-Clinton era. The contention is that the single-payer system will help reduce costs among other things. It may actually simplify processes and data gathering and perhaps some administrative burdens, but at the end of the day it is not going to reduce healthcare costs in a significant way.

Within every plan there are two basic elements: fixed costs and claims costs. Fixed costs represent the cost of doing business including reinsurance, administration, state premium taxes, profits, underwriting expenses, reserves, etc. This typically accounts for about 20% of the total healthcare pie. Reducing the amount of fixed cost in a single-payer system may accomplish what? 10% reduction? 20% reduction? Since this would represent only a 10% or 20% reduction of 20% of the healthcare pie, what are we really talking about?

The other 80% of the pie represents claims. Physician claims, hospital claims, dialysis, prescription drugs, etc. – everything that’s incurred when a member has an encounter with a provider or needs a prescription and the like. This segment or piece of the pie is ballooning in cost at such an alarming rate that this is where the focus of employers and providers should be – to not simply attempt to control the increase in cost, but rather reduce it all together.

Believe it or not, there are programs that can do just this, but they will not be accomplished by simply going out to the market and shopping for a new insurance company who has a lower administrative fee. Employers seem to be slow to realize that that’s really what they’re doing every year when they asked their broker to go shop the marketplace – look for someone who can pay the claims cheaper and faster; look for a better PPO network that can get greater discounts, look for an insurance company who can give more benefits to the employees at a lower cost. All of these may be accomplished in the short term, but in the long term it’s not possible. For example, just because a PPO network says they’ve got better discounts than their competitors, I say (knowing what I know about how the PPO network game is played) “discount off of what?”  If a hospital increases their cost to counteract an increase in a PPO network discount, what’s really been accomplished?

Until our lawmakers and employers take their focus off of health insurance costs and refocus them on healthcare costs, nothing will be accomplished. People seem to not understand or connect the dots that their health insurance premiums are merely a function of the ever-increasing healthcare costs – sounds pretty simple. But no one’s talking about healthcare costs.

If you want to talk about how to reduce your healthcare costs i.e. your claims costs, you need to give me a call so that we can talk about the options that you have to accomplish compelling savings.