Cleveland SHRM

1
The Health Care ConundrumNavigating
the Minefieldof Rising Costs

• Cleveland SHRM
• December 13, 2006
• Lisa K. Horn
• SHRM

2
The Health Care Conundrum

• Health care is
• A vital tool for attracting and retaining quality
  employees
• One of the thorniest, most complicated and costly
  issues HR and employers face

3
Blame vs. Solutions

• Everybodys fixing the blame
• and nobodys fixing the trouble

4
Todays Focus

• Triad of challenges
• Cost
• Access
• Quality
• Strategies for HR

5
The Health Care Story

• The good old days werent always so good.

6
Historical Ups And Downs

• 1950s 80 percent of health care dollars paid by
  workers themselves
• 1960s 20 percent of workers paid for their own
  health insurance
• 1980s approximately 10 percent of workers pay
  for own health insurance health care spending
  and costs begin to skyrocket

7
Todays Picture

• Health insurance is offered by 60 percent of all
  employers, small and large combined
• However, about 99 percent of large employers
  offer employee health insurance plans
• Employer-sponsored insurance covers 3 out of 5
  non-elderly Americans
• Medicare has been expanded seniors now have
  prescription drug coverage
• Medicaid covers low-income families

8
Challenge 1 Costs

• In 2004
• Total health care expenditures 1.9 trillion
• Prescription drugs alone 180 billion
• Put it in perspective
• Health care costs 16 of the U.S. GDP.
• 4x U.S. defense budget

9
Consequences

• 45 million Americans uninsured
• This costs employers 152 billion in
  productivity, absenteeism, turnover and higher
  health care costs
• Fewer employers offering coverage
• 68 percent in 2001 vs. 63 percent in 2005
• Employees cutting back coverage and shouldering a
  larger share of costs

10
Employers, Employees Squeezed

• Years of double-digit increases taking a toll
• 11.2 in 2004, 9.2 in 2005, 7.7 in 2006
• 87 since 2000
• Big companies hit hard
• GM 5.5 billion in 2005 on health care costs
• As boomers retire, retiree health care costs will
  rise
• Fewer employers offering retiree health care
  today
• 1988 66 percent vs. 2005 33 percent

11
Challenge 2 Quality

• Errors drive up health care costs
• 98,000 inpatients die annually from errors
• 7,000 die annually from medication errors
• Medical mistakes cost 200 billion annually
• (Source Institute of Medicine, 1999)

12
Challenge 3 Access

• Of all the forms of inequality,
• injustice in health care
• is the most shocking and inhumane.
• -- Martin Luther King, Jr.

13
Climbing Mount Everest

• 
  

14
Consumer-Driven Health Care

• The premise
• If employees pay a bigger share of their own
  health care, they will make better, more
  cost-efficient health care choices.
• Nobody spends somebody elses money as wisely or
  frugally as he spends his own.
• -- Milton Friedman

15
Types of CDHPs

• HRA Health Reimbursement Account
• Employer-funded account used to reimburse
  employees for out-of pocket medical expenses
  below their deductible
• Unused funds can roll over to following year
• HSA Health Savings Account
• Tax-advantaged savings account into which
  employers and employees can make deposits
• Can be used to pay for qualified medical
  expenses, such as office visits, prescription
  drugs, copayments, and vision care
• HSA money belongs to employees, so they have an
  incentive to be selective in their health care
  choices

16
CDHPs Jury Still Out

• Some encouraging data
• Mercer Study
• Employers who offer consumer-driven health care
  plans pay an average 17 percent less per employee
  for health care than similar PPO coverage.
• Aetna
• Saw post-HRA reduction in emergency room visits
  and prescription drug costs increase in
  prevention
• Whole Foods
• Medical dollars spent per employee fell by 25
  percent after CDHP introduced

17
Education Key to Success

• Employees cant make better
• health care decisions unless they have
• better information.
• HR must take the lead.

18
HRs Educational Role

• Use meetings, print materials, the Internet,
  special initiatives, and one-on-one counseling to
  educate employees
• Use technology to improve access to health care
  system
• Pressure insurers to provide cost and quality
  information

19
HR As A First Responder

• Dont wait - get creative and courageous now!
• Follow the lead of forward-thinking companies
• E-mail reminders for cancer and other screenings
• Share information about new generic drugs
• Develop a wellness program
• Introduce a disease management program
• Offer customized health risk assessments
• Put medical care on-site

20
What to Do?

• Much happening, but still no consensus
• Various proposals
• Nationalize health care like Canada or UK
• Hybrid system or more incremental approach
• Continue current market-based approach
• With Federal options limited, many initiatives
• have come from state governments

21
State Trends

• Fair Share or employer-mandated hc
• Smoking Bans
• Ohio Smoke Free Workplace Act
• Effective December 7, 2006
• Enforcement rules due June 7, 2007
• Employer requirements Signage and removal of
  smoking receptacles
• For more info
• http//www.odh.ohio.gov/alerts/ohiosmokingban.aspx
  

22
Health Care Agenda

• Significant Focus on the Building Blocks for a
  Better Health Care System
• Health Information Technology (IT)
• Pay-for-Performance
• Greater access to health outcomes data
• Other Issues
• Small business pooling options
• Medical liability reform
• HSA/FSA improvements
• Increase access to care

23
SHRM Actions

• Organization-wide effort to support members
• Collecting important data from members through
  surveys, focus groups, and special expertise
  panels
• Providing educational content via webcasts,
  conferences, and research on key issues
• Advocating HR perspective on health care before
  public policy decision makers
• Developing partnerships to confront health care
  issues collectively

24
Mixed Results in 2006

• 2006 KFF/HRET Survey
• 7.7 percent health care cost increase for
  employers in 2006, 3rd consecutive year in which
  the growth rate has declined
• 6 percent increase projected for 2007

25
Closing The Gap

• HR must be a catalyst for changebuilding bridges
  to close the health care gap.

26
Questions?

• Lisa K. Horn
• Manager, Health Care
• Society for Human Resource Management
• 703-535-6352
• lhorn_at_shrm.org
• www.shrm.org