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Fifty-Two Card Pick Up

Remember when you were a kid and someone asked you if you wanted to play "fifty-two pick up" with your new deck of cards? He would throw them all into the air and you would pick them up. Fun!

The health care industry today resembles this game. All of the cards have been thrown into the air and we are gradually picking them up. But the order has changed completely. Things are no longer assembled in tidy boxes by suit and number but completely re-ordered into new relationships.

I am not speaking here about "health reforms" as envisioned by Washington, but about what is happening in the market. The "reforms" just add to the complexity of the environment for the real players in health care. If anything, Washington will serve to retard the transforming re-arrangements.This notion has been nagging at me ever since Consumer-Driven Care started becoming a reality, but was focused especially by Bill Boyles' latest issue of "Consumer Driven Market Report." (For subscription information, e-mail Bill Boyles at Interpro Publications This email address is being protected from spambots. You need JavaScript enabled to view it. )

Things had been quite stable for half a century before CD Health. On the financing side there were insurance companies doling out benefits. Even Medicare and Medicaid did not alter that fundamental arrangement. These companies paid benefits to doctors, hospitals, maybe also to some "allied professionals," labs and drug stores. And that was the "system."

All this began to change with the advent of cash accounts in health care financing — first Flexible Spending Accounts (FSAs), then Medical Savings Accounts (MSAs), then Health Reimbursement Arrangements (HRAs), then Health Savings Accounts (HSAs). Suddenly the banks were involved in financing health care. There may not have been much competition between insurers (all offering virtually identical products at virtually identical prices), but the new players (banks) started working hard to get a piece of the pie.

They brought in the card companies (credit, debit and discount), which began to blend with wellness and incentive programs, which relied on infotech companies. Boyles says the "new configuration" is "ACCOUNTS-CARDS-INCENTIVES," all powered by technology. Notice that he gives insurers barely a mention.

At the same time all of this is being supercharged by employers moving to Defined Contribution and Private Exchanges.

Boyles wraps up his newsletter with an essay on three "Lookouts" (not "outlooks") for 2013.

The first is the entirely new environment for employers and insurers. They will have to start reserving for the new federal premium tax, limit premium increases to avoid a federal rate review, add costs to comply with Exchange data requirements, and deal with new underwriting uncertainty as they can no longer ask medical questions of applicants. He concludes —

Chances are very good that employers and insurers will have no choice but to cut benefits even more to subsidize all the new sources of costs.

The next Lookout is —

Everybody will be looking for relief from the incredible complexity of the 'new' U.S. health system coming this year, and rising costs will make simplicity a lovely word to the ears of employers and consumers.

Concerns include a new emphasis on coordination of benefits across payers, cost shifting from expanded Medicaid programs, the complexity of dealing with different Exchanges in different areas with a portion of employees in them while others are not, plus the complexity of subsidies for some and not others and the prospect of having three different account arrangements (FSA, HSA, HRA) across all these platforms. A vendor who can smooth all this out will be very popular.

Finally, Boyles discusses the likelihood of market consolidation of the various vendors. He doesn't expect any winner-take-all consolidation in the near future. There is too much innovation going on for the market to become that settled. Instead, he expects that some break-through innovations will become standard across all of the market, enhancing everyone's market position.

I haven't mentioned yet, but it is worth noting, that similar realignments are happening in the medical service delivery side. Some of this is due to the ACO push that merges physicians and hospitals, but the real revolution was already happening before ACOs were even thought of. This includes the advent of retail clinics, medical tourism both foreign and domestic, concierge medicine, physician-owned hospitals, at-home testing and monitoring, and many other innovations.

Much of this was anticipated years ago when I was running Consumers for Health Care Choices. Let me add a couple of links to some of the visionary speeches given at some of our events —

John Goodman speaking at our annual meeting in Washington in 2006.

Bill Boyles speaking at our annual meeting in Washington in 2007.

Tony Miller (founder of Definity Health) at the same event.

Gary Ahlquist (of BoozAllen Hamilton) at a banquet in Las Vegas in 2007.

We can't know how all this will settle out or even when it will become settled. All we know now is that the entire health sector is going to look very different in the future than it was just a few years ago when all the cards were neatly organized in a little package.

  1. John Goodman speaking at our annual meeting in Washington in 2006.
  2. Bill Boyles speaking at our annual meeting in Washington in 2007.
  3. Tony Miller (founder of Definity Health) at the same event.
  4. Gary Ahlquist (of BoozAllen Hamilton) at a banquet in Las Vegas in 2007.

 SOURCE: NCPA Health Alerts

Greg Scandlen Greg Scandlen is the founder of Consumers for Health Care Choices, a non-partisan, non-profit membership organization aimed at empowering consumers in the health care system. A former NCPA staff member, Scandlen is an accomplished writer, researcher, and public speaker. He is considered one of the nation's experts on health care financing, insurance regulation and employee benefits. He testifies frequently before Congress, and appears on such television shows as the O'Reilly Factor, NBC Nightly News, and CNN.

Scandlen has published numerous papers on topics such as health care costs, insurance reform, employee benefits, individual insurance programs, HSAs and HRAs, and every aspect of consumer-driven health care.

He also has served as a fellow in health policy at the Cato Institute and as President of the Health Benefits Group, a consulting firm in Frederick, Maryland

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