Being healthier is key to cutting healthcare costs

It is a recipe for disaster.

“Nobody involved in the transaction has any incentive to control costs,” the American economics writer Charles Wheelan has declared. “Imagine if you could buy a television that way.

“You would walk into a retailer and discuss your needs with the salesperson (working on commission), knowing that the bill would get sent to Aetna.

“Would anyone walk out of the store with less than a 60ins flat screen with surround sound?”

Efficiency

Bermuda’s increasing healthcare costs — rising 8.8 per cent each year and accelerating — are unsustainable.

But what can we do without bankrupting ourselves or stopping healthcare for those who need it?

The key is to push hard for efficiency and lower costs — not an easy thing anywhere and especially not in Bermuda.

We need to do a better job educating doctors, insurers and patients about what the limits or high-cost advances really are and what really works and what is really just a waste of money.

Most importantly, we need to provide incentives for people to use less medical care — not by depriving themselves of what they need but by living healthier lives.

There needs to be greater restraint and oversight over medical spending. In the U.S., studies have shown that somewhere between a third (according to the Dartmouth Atlas Project) and a half (according to Boston University) of all healthcare spending is eaten up by waste, excess pricing and fraud.

Heaven knows what it is in Bermuda.

It has also been calculated that half of the increased healthcare costs in recent decades is directly because of technological, clinical and surgical advances.

A lot of this is clearly good. But doctors, patients and insurers need to be more realistic and better informed about what works and doesn’t work and what doesn’t work any better than tests and treatments that are cheaper and simpler.

An important element of President Barack Obama’s healthcare reform is the creation of an impartial institute to examine the effectiveness of treatments and drugs.

Bermuda will be the beneficiary of this. But there is a limit what one can do.

No patient wants the level of his care decided by a penny-pinching bureaucrat.

But surely it is realistic to introduce financial incentives for patients to do more to stay healthy on their own.

A sick person naturally wants the most expensive option — the best care money can buy.

But he would really prefer the cheapest option, which is not to get sick in the first place.

It is estimated that 70 per cent of all healthcare costs are a direct result of people’s behaviour.

What’s more, 74 per cent of healthcare costs are limited to four chronic conditions — obesity, diabetes, cancer and cardiovascular disease.

These health conditions are, to a large extent, preventable. In the U.S., for example, nearly 70 per cent of cancer deaths can be attributed to controllable issues such as smoking, poor nutrition, drinking and lack of exercise.

Over the last few years, the Safeway grocery chain in the U.S. has shown how an incentive scheme can make staff healthier and keep medical costs down.

Under the voluntary programme, workers are tested for each of these four high-risk factors and get discounts on their premiums for each test they pass.

Those who pass all four tests get a discount of $800 a year for individuals and $1,600 for families. They get a discount of $312 a year for not smoking.

Cholesterol

According to Safeway, the rates of obesity and smoking among their employees is 70 per cent that of the national level.

Many of their workers have reduced their blood pressure and cholesterol levels and the company’s health insurance costs have not increased for four years.

In the Wall Street Journal earlier this year, Safeway CEO Steven Burd wrote that he is convinced “that personal responsibility and financial incentives are the path to a healthier America”.

Relying on people to accept personal responsibility seems a shaky way of avoiding the looming crisis in healthcare costs.

Yet what choices do we have? We have to work on a lot of options at the same time.

Increasing efficiency will help us, as will reducing needless or ineffective treatments.

But prevention, as we knew all along, is the best medicine — and the best way to save on medical costs is not to get sick at all.

Next week I’ll look at fairness. Does everybody deserve the same level of medical care?