The giant stirs
By Todd Thames, MD, MHA
“Change is the law of life. And those who look only to the past or present are certain to miss the future.” — John F. Kennedy
On occasion tectonic plates shift, and when they do the result can be tremendously disruptive. But the result can also be creative. Tectonic movements are taking place in the U.S. health care economy, and while much of it may be occurring below the surface, the rippling manifestations will become clear over the next several years. One shift in particular is the more direct and aggressive engagement of employers for driving change in the way health care is paid for and delivered. Put simply, the giant is stirring.
In 2017, employers sponsored health insurance coverage for 49% of the U.S. population; 1 in 2 Americans; 152 million people. That equates to 56% percent of the insured population, compared to 19.3% on Medcaid, 17.2% on Medicare, who 16% purchase insurance directly, and 4.8% covered by the military.1
In 2017, the U.S. spent a total of $3.5 trillion on health care, amounting to 17.9% of total gross domestic product.2 Collectively, employers contributed just over $980 billion, or about 28% of this total spending. While health insurance premiums have increased by 203% since 1999, wage growth of only 56% has been just slightly above inflation growth of 42% during this same period (Figure 1). In fact, the cumulative effects of inflation—though it remains low by historical standards—and rising employer and employee contribution to health care spending means that real wages for average Americans have actually dropped. This amount of spending and this degree of disparity has become critical, and employers are now awake and engaged to an extent they have never been engaged before. The giant is stirring.
You have likely seen some well publicized moves in this direction, such as the formation of the health care venture known as Haven by Berkshire Hathaway, Amazon, and JP Morgan Chase. But the shifts happening below the surface involve many more large and moderate-sized employers from all across the country, all taking much more active positions such as direct purchasing of health care services in local markets; direct contracting with centers of excellence, accountable care organizations, and in some cases independent practice associations; demanding better answers and more innovation from third-party payers; and direct involvement in care delivery through on-site clinics or direct care service contracts in local markets. Employers are also demanding much more transparency on cost, utilization, quality, and outcomes, and they are either staffing themselves with the personnel and skills to vet these issues internally or employing vendors beyond insurance carriers to inform their choices and decisions.
Historically, employers have been more passive, relying on insurance carriers to serve as intermediaries focused mainly on addressing absolute costs, but the evidence over the past two decades indicates this approach has not really been effective. As such, employers have become more active, applying direct pressure on both health care systems and insurance carriers to define better value on investment, centered around quality and evidence-based utilization. In the absence of solid or historical metrics to define “real value” in health care, employers are questioning whether this system can be saved.
“Perhaps the whole thing needs to be blown up and started over.” It’s not an uncommon refrain.
Largely by circumstance rather than deliberate policy, America has a long tradition of employer-sponsored health insurance dating back to World War II.3 In this way, we remain isolated internationally as the only country with such an arrangement. While the 2020 election cycle promises yet again to position health care as a central point of debate, it is unlikely that any political outcome would dislodge this central tenet of the U.S. health care economy in the near future. But employers are feeling the economic pressures around health care spending like never before, and they are now awake like never before. Employers have cost shifted to the extent that the typical American household now expends an average of between 12% and 15% of their monthly income on health care.4 Employers simply cannot cost shift any more, and this approach has not been effective at holding down costs. To quote the Director of Health Benefits for one large employer with whom I spoke recently, “I am simply finding myself with no other options. I find no remedy and see limited leverage in the systems as they exist. Our employees are getting crazy expensive but often low-value care, and we have no choice but to start taking control of this ourselves. So we will. The costs are just too high not to.”
And this is where family medicine, and primary care more broadly, can capture the creative from the disruptive. The value proposition that employers are seeking—high quality care with more appropriate utilization and outcomes that match the investment, and a healthier employee population—already exist to a large degree in the practice of comprehensive primary care in the model of family medicine. We stand on an enormous body of work done by our own giants, both in the U.S. and internationally, who have uniformly defined the characteristics of high-functioning health systems constructed on the foundation of robust primary care. Whether it be higher completion of preventive services, lower ER utilization and hospitalization, greater adherence to chronic care management strategies, advocacy for healthier and safer public spaces, or aggregate cost savings across populations and communities, the evidence defines primary care in the community as the fulcrum for better outcomes. Employers are taking notice; they are asking the right questions and taking note of the answer, and this is good!
For family physicians, this awakening offers great opportunity. As this giant stirs, we have the right story to tell, the data to support it, and an increasingly receptive, economically powerful and sophisticated audience. Employers are actively seeking to broaden their understanding through valid sources of information. Whether through building alliances with the employers in our local areas, aligning our policy objectives with employers at a regional, state, and national level, or perhaps considering something as practical as direct-contracted care with employers in your area—whether in a DPC model or otherwise—the time is right and the opportunities are lining up. Employers see that system level mergers have not resulted in lower costs or higher quality, and in many cases just the opposite. They see that medicine by disconnected serial subspecialty has not served their employees or their economic condition well. They see the value proposition of comprehensive primary care like never before as integral to the solutions they seek and want to play a role in facilitating system-level reform in this direction. The single most common question I get asked when working with employers is, “How do I get more of my folks into high quality primary care?”
We family physicians need to raise our hands boldly and say, “Here! Let me show you!”
1. U.S. Census Bureau via: https://www.census.gov/library/publications/2018/demo/p60-264.html.
2. The Henry J Kaiser Family Foundation accessed via: https://www.kff.org/health-costs and the Commonwealth Fund Reports accessed via: https://www.commonwealthfund.org/publications/issue-briefs/2019/may/how-much-us-households-employer-insurance-spend-premiums-out-of-pocket.
3. For an excellent synopsis of the economic history of health care in America, and why we have employer-based health insurance, see “The Economic Evolution of American Health Care,” by David Dranove (Princeton University Press, 2000). It is a great place to start.
4. The Commonwealth Fund Report via: https://www.commonwealthfund.org/publications/issue-briefs/2019/may/how-much-us-households-employer-insurance-spend-premiums-out-of-pocket.