Patients win as larger insurers seek to cut costs with better service
‘Will the recently announced mergers of top health care insurers help or harm consumers?’
The planned mergers of several of America’s largest health insurers — Aetna combining with Humana, and Anthem with Cigna — is almost certain to be good for the insurers, reducing overhead and improving their bargaining position as they attempt to negotiate better rates with providers.
But what’s in it for you and me? The answer may surprise you: In all likelihood, the mergers will lead to better medical care at lower costs.
There is little doubt that consolidation will reduce the insurers’ administrative overhead. Aetna estimates, for example, that its merger with Humana could produce approximately $1.25 billion in annual cost savings by 2018.
To reduce costs further, however, the insurers will have to look elsewhere. The best possible approach they could take is aiming to improve patient health.
This has not always been the focus of health insurers, but it is likely to be the big story that comes out of consolidation.
Most Americans get medical care today from an often-disorganized assortment of primary care doctors, medical specialists, therapists, diagnostic facilities, hospitals, pharmacies and so on. Costs and outcomes vary widely among providers in the same general locality and are usually unknown until after the fact.
The right hand often doesn’t know what the left hand is doing, and incentives — payments to providers based on quantity rather than quality, for example — are out of whack. The system is less than ideal.
Insurers — since they are the primary bill payers, along with government — have been looking for a better way. The model that’s emerging as the most effective mirrors the Medicare Advantage program, which is an alternative to traditional Medicare sponsored by the U.S. government. It is offered by private insurers and accountable care organizations, or ACOs, and is chosen completely and independently by the senior citizen.
Currently, some 16.8 million Americans are enrolled in Medicare Advantage plans, mostly (about 64 percent) in health maintenance organizations, or HMOs, according to the Henry J. Kaiser Family Foundation, a nonprofit that focuses on health care issues.
What makes these plans different and effective is their organization and focus: networks of “preferred providers” with a strong emphasis on primary care, financial incentives aligned with clinical best practices, and active “care management” programs focused on keeping patients healthy, which reduces the need for hospital admissions.