Transitioning Toward a Consumer-Centric Approach in Healthcare

Orlando—As a partner in Oliver Wyman’s Health & Life Sciences group, Michael Lovdal, PhD, is accustomed to people asking or complaining about the problems associated with healthcare spending. Recently, an acquaintance told him he thought the federal government was “an insurance company with an Army,” making Dr. Lovdal laugh at the description. Although the comment was meant to elicit amusement, Dr. Lovdal said there was some truth to the statement.

In a keynote general session at the Spring Managed Care Forum, Dr. Lovdal relayed that conversation and others, and discussed how healthcare professionals could embrace a consumer-centric approach to confront spending issues.

In 2010, the United States spent $2.81 trillion on healthcare, accounting for 18% of the country’s gross domestic product (GDP), according to Dr. Lovdal. Spending on Medicare and Medicaid accounted for 23% of the federal government’s budget. By contrast, United States health spending in 1960 accounted for only 5% of the GDP.

There are various reasons for the recent trend: the population is getting older, the health status of Americans is worsening, technology costs are soaring, and a fee-for-service environment encourages doctors to order more tests and focus on quantity of care rather than quality of care.

“[Health spending] is just not sustainable,” Dr. Lovdal said.

Still, he is encouraged with steps people are taking such as focusing on disease prevention, utilizing genomics, switching to value-based care and reimbursement, and using information technology to gather more data and analyze the best methods to care for patients while keeping costs down.

Healthcare today is mostly reactive and transactional, according to Dr. Lovdal, but it is starting to move toward a system that emphasizes preventive, interventional health management. However, the transition to health management will take time.

“It will be a long journey,” Dr. Lovdal said.

Dr. Lovdal added that there is “a new consumer-centric world” in healthcare thanks to provisions in the Patient Protection and Affordable Care Act (ACA). Starting next year, most people in the United States will be required to purchase health insurance or face a penalty.

As of now, there are 51 million uninsured people, according to Dr. Lovdal. They will be able to buy insurance via state-based health exchanges, which are run by states or the federal government and are set to start enrolling people on October 1, 2013, for coverage beginning on January 1, 2014. However, Dr. Lovdal said many of the uninsured, particularly healthy young adults, will choose to pay the penalty because it would be cheaper than buying insurance. Subsidies are available for people whose salaries fall below a certain threshold.

Further, more full-time employees are in jobs that do not offer insurance. In 2011, approximately 58% of workers were covered by health benefits through their employers, down from 66% a decade earlier, according to an Oliver Wyman analysis that Dr. Lovdal presented. Thus, more people will be making individual decisions on their healthcare options rather than relying on their employers.

This year, consulting firm Aon Hewitt introduced a private health insurance marketplace, where its employees plus workers from Darden Restaurants and Sears Holdings Corporation are given a set amount of money to buy insurance online. They can choose from 5 plans that have various designs and costs.

Dr. Lovdal predicted more companies will opt for exchanges because it shifts the risk to employees and provides employers with a fully insured product, one which they pay a set amount to insurers in advance. He compared the upcoming trend to how many companies in recent years have moved from defined benefit retirement plans (pensions) to 401(k) and other defined contribution plans.

Dr. Lovdal also predicted changes to Medicare that could lead to individuals having more choices in their health insurance coverage. He said the government needs to re-think Medicare and cannot continue to slow down cost increases through cutting reimbursement to physicians and implementing other measures that may help in the short-term but hurt in the long-term.

“We need some sort of structural change [in Medicare],” Dr. Lovdal said.

Although people will likely have more choices and power in healthcare, Dr. Lovdal said “it is a maze out there” when it comes to the difficulties people face when trying to buy insurance. Provisions in the ACA are attempting to make information about health insurance more transparent and easier to understand, but most people have a difficult time comparing plans and realizing the costs and benefits of each option, according to Dr. Lovdal.

For health insurers, Dr. Lovdal said “it is a whole new world” as they shift from their typical method of selling to businesses to selling directly to consumers. They must do a better job of understanding what people want and improving their customer service.

Dr. Lovdal described some of the research Oliver Wyman and other organizations have conducted to determine what people want in healthcare. They indicated they hope to improve their health, receive help in making complex health decisions, and have access to simple, secure health information and health services. Dr. Lovdal mentioned that people are confused about, and hold resentment towards, the healthcare industry because of its complexity and lack of coordination between doctors, health plans, and patients.

According to a 2009 Gallup poll, 32% of respondents said healthcare and insurance access was the most pressing health problem in the United States, while 18% said it was healthcare and insurance costs. Ten years earlier, a Harris poll found the most pressing problem in healthcare was AIDS (33% of people), followed by cancer (23%) and healthcare and insurance costs (13%).

In 2010, the American Heart Association conducted a survey that found 58% of people in the United States wanted to improve their health, but 50% indicated they did not have enough time to exercise or eat right. Dr. Lovdal said that according to the Centers for Disease Control and Prevention, a person’s behavior such as exercise or eating patterns account for 50% of health status, while genetics accounts for 20%, environment for 20%, and access to care for 10%.

Accessibility of care is another issue, according to Dr. Lovdal. He cited a Commonwealth Fund survey that found 60% of respondents said it was difficult or very difficult to receive care on nights, weekends, or holidays without going to the emergency department (ED), 40% said it was difficult or very difficult to receive advice from physicians during their regular office hours, and 30% said it was difficult or very difficult to get an appointment with a physician the same day or the next day after becoming ill without first going to the ED.

In addition, as more people search online for health information, they are also concerned with the security of the information. Dr. Lovdal discussed a survey that found that 70% of people in 2011 said they used the Internet for health information compared with 30% in 2004, while 51% of people in 2011 said they received information from physicians, down from 67% in 2004.