Reform What?

I have a client who has a typical health care plan for his company. He shared with me that his wife recently had a needed surgery performed here in Anchorage. He was shocked to learn how much the surgery itself cost and began to do his own research, ultimately finding out that the same procedure could be provided in Seattle for 40 percent less than in Anchorage. When he contacted his insurance carrier to discuss it, he was told that the provider was out of network so they would only cover it at a reduced coinsurance amount.

While this is not the first time I’ve heard this happening, I found this story disheartening for several reasons. First, why is the cost of care so much more expensive in Alaska than anywhere else? Some additional costs can be accounted for, but 40 percent? The cost of living between our two towns is less than five percent. But for some reason health care costs are different. Even the state’s economist Neil Fried, in the May 2011 Alaska Economic Trends, pointed out that our health care costs increased by 46 percent versus only 27 percent for the nation.

Second, how can the various consumers affect the cost of health care? In a free market economy, the rule of supply and demand prevails. However, health care is so complex and so intimate that it breaks all the rules. Health Care Reform set about trying to corral this and while there are positive impacts of the bill, many people may end up experiencing more of what my friend experienced – bureaucratic complexity that doesn’t lower the cost of anything and is inflexible enough to allow it.

Third, how can employers impact this enormous cost on their expense statement? Inevitably, I believe it will require employers to engage their staff and make some difficult decisions. Employers will need to carefully step into those intimate subjects of health and money, or pay the price with either increased costs or increased turnover when they can no longer afford to offer it.

This topic is much too large for a simple blog post, which is why I hope people will come to the State of Reform event at the end of September. Participation is imperative. Gone are the days when you could stick your head in the sand and hope for the best. Just ask my client who is still paying for his wife’s surgery.