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The 'Worst' Healthcare Payment Scheme

Philip Betbeze, for HealthLeaders Media, February 25, 2008

Many are still rightly skeptical about the potential of consumer-directed healthcare. Cynics see it as a chance for employers to cut their exposure to healthcare costs. Realists say to ensure that consumer-directed care works, at least initially, companies will have to spend at least as much as they currently do on managed care--at least until their employees are comfortable with their expanded decision-making. Optimists say that CDP is a tidal wave that will remake healthcare into a quality-based industry, governed by the efficiency of the marketplace. Oh, and by the way, saving money along the way.

As the consumer-directed healthcare concept enters the second half of its first decade, any of the above scenarios could still come true. But I think--and readers, you're on the front lines, so please weigh in with your opinions--that real success in improving quality and keeping price increases down will come down to two factors: making sure employees don't feel like they're getting shafted, and making sure those same employees have enough decision support so that they don't feel like they're shouldering the burden of navigating the horribly confusing healthcare payment system all by themselves.

Vik Kashyap, surprisingly, isn't in the optimist's camp. You'd expect him to be nothing but a rabid booster of consumer-directed care, given that his company's fortunes--and a good portion of his personal welfare--depends on CDP's eventual success. As chairman and CEO of a company called MyCanopy.com, Kashyap believes in the power of the consumer. But he also believes in giving consumers the tools to achieve that power. And those tools have little--necessarily--to do with health savings accounts or health reimbursement accounts.

MyCanopy allows companies that want to provide health insurance for their employees to use Web tools to pick their own insurance plan, with no restrictions other than the amount their company gives them to pay for their own insurance. They can purchase a PPO or HMO if they want to-and if they can afford one. In any case, they shop for the best deal they can directly.

Kashyap argues that in the current iteration of consumer-directed healthcare, the consumer is often not present.

"What I mean is that healthcare companies in general have not had to establish a direct financial relationship with consumers to date," he says. "This kind of education of current employees requires a lot of handholding."

He says MyCanopy can handle that handholding, calling it "the Expedia of healthcare." That remains to be seen. But at the very least, his cadre of clients seems happy with MyCanopy's efforts so far. And these aren't mom-and-pop outfits that don't know how to navigate healthcare's Byzantine payment system. They're huge healthcare-oriented behemoths like CVS-Caremark, Coventry Healthcare and big financials like Wachovia, Fifth Third Bank and The Hartford.

I can already hear the complaints. The consumer isn't ready to take on first-dollar costs for healthcare--even with the cushion of a health savings account. Look how Americans in the aggregate manage their credit card bills or their mortgages, for Pete's sake. Right on both counts. It will be a disaster, you might say.

Yes, it might. But what we currently have isn't working either.

Hospitals and other healthcare providers will likely have to bolster their collection efforts, regardless, to get the deductible or coinsurance amounts for those people who haven't fully funded their HSAs. That's a problem. But I think we can all agree that healthcare costs can't continue to rise at double-digit rates. To use another shopworn expression, we're all caught between a rock and a hard place.

And that is why I still think, despite all the missteps that have led us to this point, that consumer-directed healthcare has a chance to really change the industry for the better. Maybe consumer-directed care will end up being the healthcare equivalent of what Winston Churchill said about democracy: the worst form of government--except for all the others that have been tried.


Philip Betbeze is finance editor with HealthLeaders magazine. He can be reached at pbetbeze@healthleadersmedia.com.

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