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Employer sponsored healthplan management, what are the basic numbers? December 29, 2010

Posted by medvision in Employee Wellness, health data, Healthcare Costs, Insurance Plans, Risk Management, Uncategorized.
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On July 20, 1969 Commander Neil Armstrong became the 1st man to set foot on the moon.  Over 41 years ago, American ingenuity created a process which sent 2 connected spacecraft into earth orbit,  into lunar orbit, deployed a landing craft & landed on the moon, took off from the moon, rejoined the mother spacecraft, returned to earth orbit and subsequently entered earth atmosphere to splashdown in the Pacific Ocean. This event occurred prior to the birth of the average American. NASA sure had a multitude of basic numbers, exact numbers many calculated on slide rules. 

So, what’s this have to do with healthcare? Let’s speculate. If our national space exploration program was run like healthcare, retired pilots and astronauts would be present only as myths. As employer sponsored health benefit managers ponder their future strategies, what are their basic numbers? Here is an example of a 5,000 employee client.

5,000 employees with covered dependents equal 12,000 members of the health plan. Over the past 12 months, 12,000 members incurred $30.2 million (employer medical & Rx expense not including member co-pays/deductibles). Simply dividing 30 million by 12K members equates to $2,500 per member average annual healthcare spend. It even justifies logic of increasing deductibles into levels now known as high deductible health plans. We all recognize the MCO marketing glitz: “Make members think before using the healthcare system”! “Consumerism is the member’s responsibility and solution to employer sponsored plan cost inflation”! “Add a 4th tier to compensate for speciality drugs”!

Here’s the problem. Dividing the plan expense by the member total is the wrong way to develop plan strategy! Instead, look at the member expense distribution. Back to the 5,000 employee client: Here’s their expense distribution:

12 month employer spend: $30.2 million for 12,000 members:

1% of plan members (120) spent $9.9 million, $82,800 average each–32.9% of total $30.2 million total

the next 4% (481) spent $8 million, $16,600 each–26.4% of the total

the next 10% (1,202) spent $6.1 million, $5,050 each–20.1% of the total

the next 15% (1,804) spent $3.7 million, $2,052 each–12.3% of the total

the next 30% (3,606) spent $2.3 million, $639 each–7.6% of the total

the last 40% (4,809) spent $228,000, $47 each–.8% of the total

Hmm–40% averaged only $47 and the next 30% only $639. If 70% of the group spent an average of $308 over the year, should the plan managers: (1) Develop strategy based on the average member averaging $2,500 of health and Rx claims or (2) Pay close attention to the fact 70% of members spent an average of only $308 for the entire year?

I’ll bring this expense distribution into future blogs as it represents the basic numbers/foundations of zero or negative trend.


Eliminate benefits for depression? December 27, 2010

Posted by medvision in Employee Wellness, Healthcare Costs, Insurance Plans, Risk Management, Rx Costs, Uncategorized.

Many times I read an article concerning healthcare plan management and wonder:  “What in the world are these people smoking”?  Well here’s a current national head-scratcher as featured in the Dec. 23rd WSJ: “Law Prompts Some Health Plans To Cut Mental-Health Benefits”  http://tinyurl.com/2dqpaud

The article tells of employers/plan managers finding a window of opportunity to completely drop coverage for mental illness/substance abuse. On the surface, absent any plan specific data and/or any knowledge of the impact conditions like depression have on health care cost, maybe the actuaries and carrier cited have a logical argument? Let’s reframe this strategic act into another headline: “Law Prompts Some Health Plans, Lost-at-Sea in Leaky Life-Boats, to Cut Holes in Floor”

If, as the CDC notes, 75-80% of our national healthcare cost goes to treat chronic disease, what impact does untreated depression have on diseases like, cancer, diabetes or CHF (chronic heath failure)? “Google” something like, “Impact of Depression on Diabetes” or Cancer and Depression!

You will find untreated depression, anxiety or other mental health diagnoses, have very negative impacts on the clinical and resulting financial results of members suffering from chronic disease. Is it logical to think someone facing cancer may suffer from co-morbid depression/anxiety? Absolutely. In the cancer example, is it possible the cancer patient suffering from deep depression may need multiple emergency room visits? Probably 10 more visits. Let’s move to diabetes. Published data indicate untreated depression doubles the cost per member. If so, is it good management for the plan to offer 0 (no) coverage for mental health providers and drug therapy (i.e. save $500) while funneling the patient into a 10 day hospital stay, due to non-compliance?

I’ll argue a very robust plan management (best class) focus upon mental illness offers very large ROIs. Oh yes, it’s also the best for human outcomes!

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