Meet the panel:
Cheryl DeMars is President and CEO of The Alliance. She is involved in national and statewide initiatives to improve health care quality, safety and value, including The Leapfrog Group, the National Quality Forum, The Catalyst for Payment Reform, The Consumer and Purchaser Disclosure Project and Wisconsin Healthcare Purchasers for Quality. She serves on the National Business Coalition on Health Board and the Population Health Institute Advisory Board. Ms. DeMars earned a master’s degree from UW–Madison.
Lon Sprecher is President and CEO of Dean Health Insurance. He was previously Senior Vice President at CUNA Mutual Group (Fortune 500). Mr. Sprecher holds a B.A. in economics and a M.S. in Public Administration from UW-Madison. He is also past Chair of the Governor’s Business Council, a member of the Wisconsin Health Information Organization (WHIO) Board, and a member of the Overture Center Board and Finance Committee. 
Jeff Mayers is President of WisPolitics.com, which runs WisPolitics.com, WisBusiness.com, WisOpinion.com and related paid subscriber services. He’s a former political reporter at the Wisconsin State Journal and former AP reporter-editor who also has written books and articles on fishing, golfing and travel. Mr. Mayers has degrees from George Washington University and UW-Madison.
Michael Mohoney, CPA, is CEO of Physicians Plus Insurance Corporation. Mr. Mohoney has been with Physicians Plus since 1988, serving as Vice President of Finance, Treasurer and Chief Financial Officer prior to being appointed CEO in 2008. He serves on the Board of Directors of the Wisconsin Association of Health Plans and the Health Plan Alliance. He received a Bachelor of Business degree from UW-Madison in 1977.
Linda S. Hoff is Chief Financial Officer of Meriter Health Services, Inc. and President of Physicians Plus Insurance Corporation. Ms. Hoff is a Certified Public Accountant and received a B.S. Degree in Economics and an MBA in Healthcare Fiscal Management from UW-Madison. Ms. Hoff is a member of the Wisconsin Institute of Certified Public Accountants, the American College of Healthcare Executives, and the Healthcare Financial Management Association.
Moderating this discussion is SCOTT Klug, the publisher emeritus of Corporate Report Wisconsin. A former U.S. Congressman, he now runs the Public Affairs practice at Foley & Lardner.
Ronnie Garrett is the editor of Corporate Report Wisconsin.
Photography by Shanna Wolf
Conference room and amenities provided by Hilton Madison Monona Terrace.



SCOTT: There was a Kaiser Family Foundation poll done in April that said 53 percent of respondents described themselves as confused about health care reform. Assume that our readers are confused. We’re 15 months past health care reform in Washington, and where are we? What’s begun to change in the market, and how much is still held back where we haven’t seen any changes at all?

MICHAEL:There is still a lot of confusion amongst even those of us who are in the business. There are an awful lot of regulations that are still being developed. Having said that, there’s a lot of momentum about things that are changing. Probably one of the biggest is the development of integrated delivery systems. I think one of the best ways for us to actually deliver more cost-effective quality care is going to be tighter integration amongst the hospitals, the doctors and the health plan. Health care reform is still up in the air in terms of what may ultimately happen because of the court decisions, but frankly, I think the heat is on the industry. I think that’s a good thing because as good of a job that I think that we collectively do there’s a heck of a lot of room for improvement.

LINDA: The health care reform picture looks very different depending on where you’re sitting in this country. If you look at some of the states where there isn’t a lot of coverage available to the low-income uninsured, you have a very different view of what health care reform is meant to do, which is to cover the populations that don’t have access to insurance. In Wisconsin, the percentage of individuals in this state who are covered is very, very different than anywhere else in the country. The only place that has a greater percentage is Massachusetts. We’re fortunate that we have greater coverage. The issue for us, for the hospital, for the physicians, is being paid at a rate that covers the cost; when programs, such as Medicare, Medicaid and others continue to ratchet down those costs, it puts more pressure on the commercial market. Health care reform has not meant as much for the state of Wisconsin as it has to other states because: (a) we have a greater level of coverage and (b) we’ve already done many of the things that health care reform is meant to do, which is to align the physicians and the hospital and insurance products to deliver cost-effective care to the market.
LON: In terms of where we are, I think the focus has been not on the cost side in Washington, it’s been on the access side, and there’s been a little bit of quality focus. Washington has to now start helping us all focus on bending the cost curve down, as opposed to just giving more and more people access, which is important, but is not the whole picture. The other piece of the puzzle is that the insurance companies have been the monkey in the middle, and I think we have a whole different viewpoint here in Wisconsin — Madison in particular — than what we have nationally. National insurers are now starting to figure out what we’ve been doing in Wisconsin, and see that it’s the model of the future, so they’re scrambling to get a lot tighter relationship with providers as opposed to just a strict arms‑length contract in relationship. I think they’re a little bit ‘day late and dollar short,’ and I think there’s a lot of opportunity for health plans like us in the state and outside of the state.

CHERYL: We represent self-funded employers, the business community and their employees and family members, and as we look at health care reform, first and foremost, it was a pretty broad framework that was passed, and there are a lot of moving pieces that have yet to be determined through the regulatory process. Our hope is that through the efforts that we make to implement the Affordable Care Act, we’ll stay true to the name of the act, and that is, make health care more affordable. Integration of delivery systems can bring greater coordination of care. The focus though has to be on really making care patient-focused instead of trying to maximize revenue for a delivery system and then, also, looking for ways that we can really get after costs, not just shift cost from the public sector to the private sector.

SCOTT: Obviously, there’s a political overlay to this, going into an election year. How does the politics of health care play on the state level and on the federal level?

JEFF: We have an embarrassment of riches here in Madison and Wisconsin. We have a lot of great health care systems, and we’re ahead of the game in a lot of respects, but it’s still very bewildering. Then you add on a much-debated law and court challenges and a presidential election, and I think uncertainty reigns. I think the small businesses are especially tormented by it all because they’re trying to do a thousand different things at once.

SCOTT: Do you have confusion from your customers trying to figure it out?

CHERYL: There’s so much that’s yet to be defined. With 2014 and then 2017 looming when there will be an exchange, and then the exchange potentially would be opened up to larger employers, I think employers are faced with the decision about whether they remain engaged in the administration of health benefits or whether they provide a fee for their employees to be able to go into the exchange.

MICHAEL:The Wisconsin Office of Free Health care recently released a fairly lengthy survey that a number of us participated in. It has about four or five different takes on: Will you participate in the exchange and what are your expectations for it? The number one expectation of just about every constituency is: “I expect to have a lower insurance premium as a result of health care reform and the exchange in particular.” So, there’s confusion, but there’s an absolute expectation that we’re going to address a cost issue, which isn’t really addressed.

LON: I think the No. 1 issue is the cost. Medicare and Medicaid reimbursement isn’t going to be going up. We’re going to have to collectively get our cost structure down to be competitive in the Medicare and Medicaid marketplace because both of those are going to be growing in the future. The individual marketplace is a lot tougher to make a buck on from an insurance industry perspective, so you got to get the cost side down; if you can’t bump the premium up, you have to get the cost side down, otherwise there is no product.

SCOTT: We’re 90 days away from this new commission panel in Washington that’s got to figure out a trillion dollars in cuts. I have got to think that leaves all of you gasping because Medicare and Medicaid are going to have to be a component of it. That makes your life even harder, right?

LINDA: It makes our life harder, and fortunately, the things that we already had in place and are working toward expanding as fast as possible are things that are going to help bring down costs, and the number one way we believe that’s possible is through access to primary care. People can get access to their primary care physicians, have the services they need at a relatively low cost setting to prevent things like that ER admission or that long hospital stay. There are significant dollars in that side of the equation. Through the insurance company, we partner together to make sure that people are filling their scripts, are taking those scripts, thus aligning all of our efforts with the physician, the hospital and the insurance company to bring down the entire cost curve.

SCOTT: But by definition, doesn’t it shift more onto the private folks, and then if you’re getting a nickel less from Medicare or Medicaid, somebody else has got to pay the other nickel, right?

CHERYL: If we can actually control costs, take some of the what’s estimated to be one-third of the cost of health care spent on poor quality and waste, there doesn’t have to be a cost shift to the private sector. I think that is absolutely an imperative to figure out ways to finally address the problems of poor quality health care and medical errors.

JEFF: All these cost pressures on those kinds of programs will translate into the pressure needed to make the stuff happen because in many ways why have costs gone up, up, up, and up?  And there are a lot of reasons, but in part, because they could, and so maybe this could help make it happen where it hasn’t been able to happen before.

LON: The focus has to be on primary care and the Primary Care Provider. PCPs account for probably 8 to 9 percent of the total cost of care, but they control probably 75 to 80 percent of the cost of care, so if you get the hearts and minds of those primary care physicians and allow them to practice at the top of their license as opposed to the middle or the bottom, meaning the hand on the door, I need to get you out of my office in 10 or 15 minutes max, you eliminate a lot of unnecessary specialty referrals, you eliminate access issues, you eliminate emergency room visits. We’ve been seriously focusing as a system on primary care, primary care access, and giving the primary care physician physician-extenders. Those things are key to the cost curve. The other thing that we’ve been doing as a system for the last three years is we have a medical value program that has the doctors, the hospitals, and the insurance company all at the same table taking unnecessary costs out of the system. Part of the whole primary care medical home initiative, is the extenders, the nurse practitioners, it’s also bumping salaries for these primary care doctors. The other piece of the puzzle is increased reliance on a nurse hotline, increased reliance on TelaDoc, so there’s a lot more technology that can actually open up access and keep the cost down. The issue is do insurance companies get paid for that? Do doctors get paid for that? We’ve got to use a lot more different ways to access the medical care system, than what we’ve historically done.

SCOTT: Could somebody take the dollar apart that we spend on health care?  How much goes to prescription drugs, how much is emergency room visits, how much is surgery? Can we start with the insurance level?

MICHAEL:Prescription drug costs are probably in the 8 to 10 percent of the premium dollar range, the in‑patient hospital costs are probably anywhere from 30 to 50 percent depending upon the particular market segment, physician costs make up the balances as well as ancillary providers, chiropractors and the like, but there are so many different pieces to the puzzle. That’s what makes it really difficult to try to determine where do you start. Obviously you want to start with those that drive the cost the most, and at the end of the day most of that tends to be in the hospital setting. That’s where we really need to focus on getting rid of some of the inefficiencies.

LINDA: We had a really unique project that started about a year and a half ago, and it was focused around the uninsured. What it was is access to volunteer physicians set up downtown near the Capitol and helped manage the uninsured population with their medications because one thing that we noticed in the Meriter Hospital ER that oftentimes the reason they were there were preventable reasons. So, we just did an analysis of how that turned out. We determined that about 72 percent were uninsured, but another 25 percent had insurance — Medicaid, other programs — but couldn’t figure out how to access the health care system. We looked at how they utilized the hospital before the program and after the program, and it turned out that we saved a million dollars on the cost of ER visits by having this program in place. That’s an example of how a community program can be translated to the commercial population, to Medicare. It’s all about making sure you’re interacting with that patient, they’re filling their script, they’re managing their diabetes, they’re managing their high blood pressure. Those kinds of things.

SCOTT: You talked about salary gaps between primary care physicians and other specialties. If you’re a primary care doctor, what do you make?  If you’re a radiologist, what do you make?

LON: In general a primary care doctor in Wisconsin makes somewhere around $150,000 to $200,000, and the high-end people — anesthesiologists, some radiologists, some specialty surgeons — are making a million dollars plus.
SCOTT: So, the less you talk to patients, the more money you make?

LINDA: It’s an interesting analogy there because that’s the same for hospitals. You know, the procedural type things are reimbursed differently than a behavioral health, as an example, and you know, there is a big difference in what’s rewarded in a hospital setting, too, which impacts physician specialties.

SCOTT: But does that translate in the insurance market to the folks who are buying it as individuals? Small employers get that letter every year that says, “Congratulations, your rates are going up 9 percent, 11 percent, 13 percent.” What’s driving it?  How much of it’s cost shifting?  How much of it’s new technology?

CHERYL: If we can overhaul the delivery system and reorganize how we’re delivering health care that translates to individuals, small employers, large employers, and the Medicaid and Medicare population. That’s the kind of change we’re after, something that works on a system‑wide basis so that we’re not dealing with suboptimization; where we make an improvement for one group, but it’s at the expense of another.

SCOTT: Jeff, how much do you hear about that from your folks in the business world who read your Web site and talk to you about it?

JEFF: It’s a cost that they can’t depend on controlling. I think that has led to the frustration over the law, and because there is that frustration, there is a sort of wish for some other solution. With big corporations who have been doing this already, it’s an easier adjustment. I think the people who are right around the threshold of the new law, they’re the ones who are really sort of floundering about thinking about it. Should I pay these fines that may come at me? Should I set everybody free? What should I do? And you know, they’ll postpone the decision as long as possible because there’s too much uncertainty.

SCOTT: You talked about primary care as being a big driver in emergency room abuse. How much of a driver is technology?

LINDA: It’s very little in my analysis. Meriter Hospital determines whether we purchase a new technology by involving the physicians and determining what kind of impact it’s going to have on the cost of care. An example would be how technology is used in joint replacements. We are seeing real-life examples of how technology has had an impact. We’ve taken some of the length of stay on hip replacements from four days to overnight in some cases. IT technology also has had a positive impact on the cost of care. The reason is that physicians now have access, a great advantage in this community. In any ER you visit, doctors are able to pull up all your past tests, labs, X-rays, etc., so they’re not ordering those kinds of things again. The key is making sure that we utilize the technology in the most cost-effective way. If we have a PET scan and it’s used in lieu of an X-ray, of course, that would drive up the cost of care. But what we’re working on, led through Physicians Plus, is making sure that the physician at the point of decision-making is picking the technology that has the best probability of getting the results we need at the most efficient cost.

LON: My view is a little different. The technology isn’t a major driver but what happens is new technology very seldom replaces old technology, it just gets layered on top of the old technology. We have prior authorization for every high-end radiation scan. It’s a soft stop, not a hard stop, so it’s not a major set of hoops that people have to follow through. Our utilization of unnecessary high-end radiology assessments has dropped by almost 30 percent since we’ve put that in place. So, people were getting more radiation than what they probably needed, they were getting a higher level of tests than what they needed, and now they’re getting just right care and just right tests, and that also has a cost impact, a positive cost impact.

SCOTT: What about the consumers? How do you change the mentality that I hurt my knee on Wednesday, and I want an MRI on Thursday?

LON: That’s the one piece we haven’t really talked about here. The consumer has got to want it as well. The consumer has to want to make some changes as well. If they torque their knee playing softball over the weekend, they don’t necessarily need the high‑end arthroscopic surgery from the get go. It’s got to be a step therapy. You need to work your way through with the patient. What are the steps that you need to take before you get to the decision point that a serious intervention is needed?

SCOTT: And for your members, what constraints are they putting on their employees? Meaning higher co‑pays, higher emergency room stuff?  Do they start to rope off services?

CHERYL: I think our approach has been to create a scenario where it’s very clear that we’re all in this together. Employers and their employees and family members all have a stake in not only helping people maintain and improve their health, but also using health care as effectively as possible. The strategies that help us get there are not only financial through the benefit plan where people have a financial stake in the health care services that they use, but also through education, helping employees understand the fairly dramatic cost differences in various treatments and between provider organizations as well as the quality differences.

MICHAEL:The members have had a lack of incentives for a long time to get them engaged in their management of their health care and making healthy lifestyle decisions. The financial incentives haven’t been there because the employers have paid for the costs. People have to look in the mirror. They have to become personally accountable for their health care. They can’t just assume that the doctor is going to take care of them. They have a personal responsibility to eat the right kind of foods, to exercise, and to make good decisions. That has a huge impact on long-term health care costs. There needs to be changes in the benefit plans so that members have skin in the game. Employees have had too much paid for by the employer, and that has to change. Once you have skin in the game, you start to think about that. What is the actual cost to me and to my family? There’s a really big need to have better cost transparency. It’s all been insulated, and it’s very complex. There are a lot of good organizations trying to work on how can you determine what is it going to cost me if I have this procedure at Hospital A versus Hospital B or this doctor group or that doctor group. It’s very complicated, but we have to get there, and it’s going to take a while, but until people get engaged in their own personal health style decisions, I think that’s a huge problem in terms of trying to bend that cost curve.

LINDA: We tried a quick care clinic in this community. We set up a couple, one on the west side, one on the east side, and charged a very minimal payment of $40 to $50 to have minor issues taken care of. They ultimately were not a success because many times members had a lower co‑pay to go to an ER. We learned a valuable lesson there: We have to align the member incentives to utilize the appropriate lowest cost place of care.

LON: We’ve gone to a tiered co‑pay for emergency room and urgent care for that exact reason. Make it a lot higher price for the member to go. You get the care that you need, but you get the care at the right place.

SCOTT: When you look at what some of your individual members are doing, what constraints are they putting on employees?  What are they asking employees to do more of?  Give me a couple of examples.

CHERYL: An employer we work with, for fairly routine procedures or tests, encourages their employees through the use of gift cards to choose a provider organization, one of a handful of provider organizations that are dramatically lower in cost for those procedures, where the quality is comparable. If you can get a colonoscopy or if you can get a knee arthroscopy for thousands of dollars less in the same community, why not choose that provider organization, quality being comparable?
SCOTT: Do you believe the evidence is already showing that electronic medical records are actually bending the curve of health care costs?

CHERYL: We’ve heard anecdotally that the Care Everywhere project, which allows access to clinical medical records through the emergency rooms, is allowing tests that would ordinarily have to be done to be foregone because you could see the results from someplace else. So, we think that’s very promising. We also think that electronic medical records have the potential not only to help speed the transmission of important clinical information but also to improve outcomes of care and improve our ability to measure and compare the quality of care, the outcomes of care, much more effectively.

LON: What electronic medical records really do is add to the quality, getting rid of medical errors, whether it’s a transcription from the doctor to the hospital, transcription of the prescription. It’s incredible how many prescription errors there are when it’s relied on a handwritten note, handwritten prescription.

SCOTT: Once upon a time, in order to control costs, states used to have certificate of needs for new hospitals, new buildings. That got phased out years ago. Is there any pressure on politics to resurrect this?

JEFF: The hospital cost containment commission at one point blessed certain projects. When that went away, I think it was viewed that the marketplace would take care of itself. But you only have to read the news reports to see there is duplication in a lot of communities across Wisconsin. I think that concerns a lot of people in the policy arena. If there are all kinds of duplication, then that goes to the efficient delivery of services, and if that’s not efficient, then that tends to drive up the cost.

SCOTT: Does that construction boom bother you as somebody who negotiates fees for your customers?

CHERYL: Well, I think the business community is concerned because we understand that adding to the infrastructure adds to the cost, and we also understand that in health care, supply can produce demand, that the more equipment, hospital beds, etc., that we have, the more we get, the more procedures and tests, etc., we get, and so on. Our interest is in seeing competition in health care focused on the right things, on patient-centered safe effective health care at a reasonable cost. There are competing points of view about whether we’re creating oversupply and, therefore, adding to costs or whether we’re filling a needed gap, but what we’re not seeing is objective data that would help us really understand what this community needs.

SCOTT: You saw the same thing in the financial services world where you turned around one day and there were banks on every corner and a bank in every grocery store. I think now folks are discovering that part of the problem banks are struggling with is all the brick and mortar issues. How has that impacted health care?

LINDA: I’ll start at the national level where Meriter Hospital is rated by S&P and Moody. We look at those national trends of how hospitals are utilized now, and the trend is decreasing; length of stay is decreasing, so we recognize that the need for expanding access to hospital beds is not happening nationwide and not happening in this community. On the reverse, there is expanded need for primary care in this community. It’s all about having access to physicians, as I stated earlier, so that we can prevent that hospital admission. All things aren’t equal in how you look at where you expand your capacity.

MICHAEL:We have a severe shortage of primary care physicians, and it’s going to get worse. We’ve all read the stories about how kids that go through medical school, they rack up horrendous loan obligations, and they look at the compensation of primary care versus specialists/subspecialists. One of the fundamental flaws of our delivery system is there are way too many services being rendered by the specialist that could be controlled by that gatekeeper at the front door, the primary care physician. I think we need to look at how we can from a policy perspective incent some of these kids to stay in primary care as opposed to going into these high class specialty services. I’m really worried about five, 10 years down the road if we don’t do something to impact getting more of the kids into the primary care pool, then we’re just going to continue to exacerbate the cost problem.

LINDA: You know one thing that we haven’t touched upon is the level of collaboration that’s happened in this community around high costs services. St. Mary’s and Meriter for years have jointly owned an MRI facility and shared the cost of it. You see collaboration around services that are difficult to provide cost-effectively. An example would be dialysis, sleep labs, those kinds of things, and those are collaborations, also.

LON: I think that the trend from in-patient to outpatient is only going to accelerate, and empty beds will ultimately take care of themselves, meaning that there will be further consolidation in the provider communities, when empty beds start getting to 40 percent, 65 percent. The building boom is focused on quality and choice. The competition is going to be based on choice and quality, and I think each one of us has to make our own decisions in a free market setting as to whether we need to build another clinic in order to meet that quality and choice criteria or if we need to add to the hospital. Those are the three things — in-patient versus outpatient, quality and choice — is what’s causing part of the building boom here in Madison.

CHERYL: I’d like to elaborate on that a little bit, especially as it relates to how the health care industry markets itself to consumers.  In 1999, the Institute of Medicine released a study documenting the problem of medical errors contributing to up to 100,000 deaths in hospitals each year, more than breast cancer, car accidents, and AIDS combined. In the wake of that study, there was a tremendous amount of work and effort put into improving patient safety. In this last year, two studies have been released, one in the New England Journal of Medicine, and the second by the Inspector General’s Office that documented that we’ve not made much progress at all in curbing medical errors that cause harm to patients. I would like to see our health care organizations focus much more energy and significant effort on improving patient safety and use those efforts to market themselves, to talk about what hospitals, what clinics, what health systems are doing to improve patient safety instead of focusing on the amenity side of health care, which we find alarming; the waterfalls, the fireplaces, the curb appeal elements of health care that seem to be front and center. Meanwhile we still have a significant problem with medical errors that cause harm to patients and contribute to health care costs.

LON: Provider profiling, if it isn’t here already, is going to be here within the next couple of years, whether it’s through the Wisconsin Health Information Organization database or other databases. Who are the most efficient doctors? Who are the most quality outcome providers? If they’re a primary care doctor, do they refer to the most efficient specialists, the highest quality specialists, and then do those specialists refer to the highest quality hospital for that particular intervention? I think that the whole issue of provider profiling is going to take on a lot more importance than what it probably has in the past, and it’s going to be basically like an Angie’s List of doctors.

SCOTT: But I’m not a sophisticated consumer of health care, so I don’t know where to look for that information.

JEFF: You can exercise consumer choice within your plan. You don’t necessarily pick between plans every time you have a health care problem. It’s not quite the same as picking out the best big screen TV. So, I think that raises an issue. The other thing, back to the government side, Medicaid costs are gobbling up budgets. The Medicaid portion of this population doesn’t necessarily have ready access or knowledge about these things in the first place, and so, where all this building is going on and where all the education is going on is really in relatively affluent parts of the state. If you’re looking at how you reign in Medicaid, it’s an entirely different problem-solving arena than what we’re talking about. We’re talking about steering people who are educated and have a certain affluence in the right direction, but for all these other people, that’s not really in the arena.

SCOTT: You still have a significant portion of the state that’s still fee‑for‑service, right? So, all the incentives are wrong?

MICHAEL:Madison for a long time has been different. We’ve been on a capitation model for 20 something years. But there still are some physician compensation packages that are tied to production so even though the organization may have a capitation, the individual physician has a compensation arrangement tied to production, so there’s still a little bit of perverse incentive embedded in that.

LINDA: And that all comes around to having greater access to physicians. Everyone’s competing for those primary care physicians, and it drives those kinds of models.

SCOTT: And what about the fee-for-service?

LON: In the Madison area, we’re all capitated. In the Marshfield area, they’re also pretty well capitated in the northern part of the state, so really, the bottom is Milwaukee, and there’s just some announcements now of Aurora and then a variety of other Milwaukee providers looking to become an ACO. I think Milwaukee is starting to figure out that the model in Madison is the right model to get the cost and quality where it needs to be, so I think the fee-for-service will be going away, whether through Accountable Care Organizations or the extra pressure of Medicare/Medicaid reimbursement cuts or the extra pressure of the exchange is forcing more people into the individual markets. The exchanges are going to really focus on the quality and cost transparency, and I think there are Internet vehicles that can be put in place on the exchange to allow the individual customer to make a wise choice in terms of where do they want to get their care.

CHERYL: It’s one thing to set up Accountable Care Organization or have capitation, but unless the incentives are properly aligned to the level of the individual physician and to the individual consumer, I think we’re falling short of where we need to be. We’ve talked about consumers needing to have more personal responsibility. We can reinforce that through financial incentives and benefit plan design. We also need to have physicians appropriately compensated to get better results. Physician-extenders and other support can really deliver high quality care and get the best results for their patients, rather than physicians being in this production mode where they’re compensated by doing more stuff, seeing more patients.

LINDA: Again, in this community, we’re very fortunate that physicians work with hospitals to find and utilize hospitals appropriately. Examples are committees that look at which hip [procedure] you choose. The cost of a hip can vary anywhere from $1,000 to $10,000. You need your physicians working with you to make a good quality decision that’s cost-effective.

SCOTT: One of the things that’s coming down in 2014 is a defined benefit package that says every insurance plan has to carry these elements. Early on you were talking about much of the focus has been on access, and if you put that kind of thing in place, aren’t you by definition just going to drive more service to more people because the employers won’t have the ability to put any constraints on it?

CHERYL: A defined benefit package will be critical, and this is an area where I think it’s so important for us to be using evidence to determine what goes into that benefit package. Most employers want to be paying for the right care for their employees, but they don’t want to pay for a lot of extraneous stuff. They’re much more focused on what we’re referring to now as value‑based benefit design where high value care that’s really going to make a difference for someone is covered and a lot of the financial incentives or financial obstacles are removed, but other sorts of care where the jury is out or where the evidence is thinner might not be covered at all or is covered with a much more significant co‑pay to consumers. I think the design of the benefit plan is going to be extraordinarily important, and we’ve yet to see what’s going in there, but I know that it’s a focus of a lot of political lobbying to ensure that certain services are covered.

SCOTT: Don’t you assume just about everything is going to be in there? A decision at the government level, that’s going to be ultimately political, the pressure is going to be on to throw everything in that basket.
MICHAEL:It’ll probably be fairly comprehensive, but embedded within it are the four different levels of benefits that will be offered. There’s the gold, silver, bronze, platinum combination. So, there’s going to be an ability for folks to choose lesser benefit plans; if that’s a path they want to go, they’ll pay lesser premiums. Some of the inherent problems yet to be resolved are: If you are healthy, you’re going to choose that benefit plan that costs the least; if you become ill, have a significant condition, then guess what?  You’re going to want that higher benefit plan so that your out-of-pocket costs are minimized. They’re still trying to figure out how to manage that, and that’s going to be difficult to quantify.

LON: It’s part of the Affordable Care Act. There were mandated critical services that are already starting to play out, which are just increasing the cost of care, to be real honest about it. So, I think the real issue is going to be whether it’s a bronze or a platinum is where is that base level of benefit set by Congress and by the President. If it’s set too high, the people who were expecting the cost of care and the cost of insurance to go down in 2014, are going to be sorely disappointed. I think the real trick is going to be where is that bronze level of care and cost set so that you can scale up from there.

SCOTT: And meanwhile, we have a Supreme Court case hanging over our head.

JEFF: Yes, again, is the uncertainty of it all. I mean, the Health Care Reform Law is built upon a lot of mandates, one of them being everybody has to have insurance. So, if that gets tossed out, things can start to unravel, and so much of this is state-based, too. You have the health care exchanges, which are moving rapidly in some states, nominally rapidly in other states. That’s a key to providing that small business coverage. But what if 30 percent of employers say: “I’ll pay the fine. OK, go ahead folks, go find insurance on your own. We’ll provide some information.” Then what happens?  I’m not sure how the marketplace even grapples with that.

LON: We’re placing a bet that individual insurance will be a growth area between now and 2014 and certainly after 2014, so it’s going to turn from more of a wholesale to the employer insurance sale to a retail sale, and what we’re looking at is on the banking industry. What have they done in the past years to get that customer loyalty to get that access to the customer?  We’ve been doing some experimentation in terms of benefit and price points in the market for the last year or so on our individual product and trying to get a figure on  when the gold and bronze definitions really come out, where do you place your marker, and where do you place your marketing efforts and your branding efforts and your sales efforts. The issue is going to be a lot more of a retail environment than what we as an industry have been used to in the last 40 years.

SCOTT: What happens if the individual mandate gets pulled out?

MICHAEL:I think most of the delivery systems are working on the right things. Whether that law stays as is or not, we’re all trying to deliver better, more cost-effective quality care, so let’s get rid of the fat in the system, let’s center on the patient. We know there is significant improvement, and we’re going to have to compete against each other regardless of whether the law stays as is or not. We have to continue to derive and do a better job of delivering that more cost-effective quality care. I don’t think the end game changes.

SCOTT: But if you have these integrated systems that should be a model under a capitated system, fairly sophisticated electronic records, and a fairly collaborative audience in Madison, I can’t believe there are a lot of your members doing handsprings based on how much their insurance cost went up over the last three or four years.

CHERYL: No, absolutely not. It really is cold comfort to the business community to know that health care costs in Madison are lower than Milwaukee. The fact is they’re too high, and it’s a problem for the competitiveness and economic development in our community. So, we have to do more than we’re currently doing to reign in costs and to create a market that’s competing on the right things.

LINDA: We’re all trying to commit that from many different perspectives. We’ve talked a little bit about engaging the customer, but we haven’t talked about the depth of where we need to take that. One concept that Physicians Plus has been rolling out to the market is a healthy goals product, so it’s a commitment with the enrollee to do certain things to change their lifestyle or there is a financial consequence to them personally in the form of how much premium comes out-of-pocket. We haven’t talked enough today in my estimation how individual choices drive the cost of health care.

MICHAEL:We all have personal horror stories about your grandfather, grandmother, father, and mother. Think about some of those cases where the last two, three, four, five, six years of their life was spent in a nursing home where they didn’t even know who you were. There is an extraordinary amount of dollars spent in those last couple of years of life but what’s the quality?  In many cases, the quality is awful. Not the quality of care being delivered but the quality of life to that individual. That’s a societal issue. . . How do you address that?
LON: I think we’ve been focusing today’s discussion on what I’ll call the middle of the problem, and there’s the front end, which is early prevention. There’s a front-end problem, there’s a back end problem, which is palliative care. When you’re doing all sorts of heroic things to save a terminal cancer patient that has no more than six months to live no matter what, there has to be more focus on shared decision-making. It’s not that we’re saying you can’t have the care, you won’t have the care, but it needs to be a shared decision-making process between that family and their doctor. The front end, the preventative care, and the back end, the palliative care, those are the two places to bend the cost curve as much as you possibly can.

CHERYL: The fact of the matter is we spend a tremendous amount of money on feudal care at the end-of-life that is also unwanted, and if we could just figure out a way to have the conversations and really help people make their wishes known, we would both improve end-of-life care and cut significant costs.

MICHAEL:And that’s where the outreach, the proactive outreach, from insurers and hospitals, in particular, on palliative care, making sure that patient, that family, knows what their options are. Nobody’s forcing them into Decision A or Decision B or Decision C, but it’s saying here’s your options, and here’s what the implications are for each of the options.

LINDA: I don’t think we can forget about the growing percentage, 50 to 60 percent, of hospital care is Medicare and Medicaid, which isn’t covering costs, and the reimbursement is going down very quickly. If you look at that as one bucket of dollars that’s decreasing, yet the demands are increasingly going the other way, that gap is growing from a provider perspective. We’re providing more and more care for less and less dollars, and in the past, to some extent, that was squeezed out as increases to individuals on the commercial plan, but that cannot go on.

LINDA: I don’t think the community understands that all Medicaid patients, if they have an outpatient surgery, hospitals are paid $250. $250! And you think about where nurses’ salaries are, where technicians, etc., where their salaries are, you don’t come close to covering your costs.

SCOTT: $250 for what kind of procedure?

LINDA: Any outpatient procedure. If you stay overnight that still could be an outpatient procedure, and the list of procedures defined as outpatient is growing. You could stay in the hospital three days and be classified as an outpatient for Medicaid purposes. Of course, there’s not a hospital in the country that can deliver three-four days of service for $250.

SCOTT: Some people make the argument that if the Health Care Reform Plan stays on track, the Supreme Court doesn’t kick out the individual mandates, the ultimate end game will be private employers walking away and essentially not providing the sort of coverage you see today, or it goes into the government plan.

CHERYL: Employers at the end of the day are going to make a financial decision about whether or not they stay in the game, but I think the calculation that will go into that decision is much more complex than merely looking at their premium and looking at what the penalty would cost them. Employers understand that the success of their business is really inextricably linked to the health of their employees, and so, for them to say we’re walking away, we’re washing our hands of being directly involved in health care and ensuring that our employees get appropriate health care, would be a tough decision to make.

SCOTT: It’s pretty easy to shift the system to put more dollars into primary care if you could control it, the problem is it’s back to the “I hurt my knee on Wednesday and want an MRI on Thursday” mentality.

LON: If you took a survey of 100 people and asked: Do you want the absolute best care that money can buy for your family? The answer would be 100 out of 100, saying: Yes we do. So, the problem is there’s the demand that we want the best care, we want it yesterday, we don’t want to take the time to do step therapy, we want to go straight to an ultimate solution. The impatience of  population also has to be dealt with because the idea that ‘I want the best care, but I really don’t want to pay for it’ isn’t going to work anymore.

JEFF: This population is so varied, you can’t do a one size fits all. A lot of employers are so beside themselves, they say, ‘I’d love to have somebody else do this for me.’ Now, you know, so in some ways this Health Care Act, which we did debate but didn’t quite get there, could just be a bridge to something else. There will be another debate, there will be another law, and you know, I don’t know exactly what direction we’re going. Whether we go totally retail or go this other way, I think it could go either way because the pressures are only going to get worse.

SCOTT: Well, isn’t that the same as medical savings accounts, which seemed to have lost some of their luster?

CHERYL: I don’t know that I would agree that they’ve lost some of their luster, at least not among the employers that I talk to. High deductible plans and medical savings accounts have proven to be an effective way to get at some cost and quality sensitivity among employees.

MICHAEL:It’s drawn a little bit in our end. I don’t know if Lon sees something different, but it’s a relatively slow growing product line. A lot of folks are still confused by it, and again, the cost transparency on what it actually costs for procedures and the like is still not there, so I think we’re still a ways away from that really having a major impact.

LON: Employers want to have it quoted, but then very rarely buy it. There’s been a fair number of employers that have said we don’t want to cost shift to our employee.

CHERYL: It depends a little bit on how the plan is set up. I think it can be set up so that it’s not a cost shift to employees, and that’s what we see our members doing, but it may be a difference between self-funded employers for whom what they spend on health care directly impacts their bottom line versus someone who’s in an insured product.

SCOTT: Nine months ago, if we would have all sat down and talked, everybody thought health care would be the number one issue on the election a year from now. Does it even end up in the discussions because of the economy?

JEFF: Most people think we’re still in a recession no matter what the economists say, or we’re on the verge of another recession, so I think that businesses will always care about this because it’s a cost of doing business, it’s a key to profitability. But in terms of the political template, it’s all about jobs and the unemployment rate.

SCOTT: Anything I missed that you all wanted to touch on?

MICHAEL:I think we’re all going to have to think a little bit more creatively on how to work better together. There are other organizations that we can collaborate with. For example, I’m on the board of the YMCA of Dane County. Their number one mantra is healthy living, and they’re focused obviously on kids, and the incredible statistics about child obesity and what that ultimately leads to. We have to reach out to different organizations, organizations like the YMCA, the Boys and Girls Club, and start to work with them. We have to think out of the box a little bit and get other non-traditional health organizations engaged.

LON: If an insurer helps someone live a healthier lifestyle, and another insurance company takes him or her away as a member two years later, the payback isn’t there for the insurer. But if we all band together in a wider region to try and get into the wellness program in a lot bigger way for a lot more employers, I think that’s where there’s going to be a little bit of secret sauce.

SCOTT: Cheryl, how many of your members have wellness attributes in their plans . . . pay for gym membership or those kinds of things?

CHERYL: The vast majority are doing something in the area of wellness, and it ranges from more modest efforts to very sophisticated strategies to align premium contributions and other incentives with lifestyle choices. We have good stories to tell about employees losing and keeping off weight, improving biometrics in terms of blood pressure and cholesterol. What we really need to do is think about what each of our roles is in improving health, improving health care, and reducing costs, and it’s not just about employers have to do this or employees need to get more engaged or provider organizations need to do more to control costs and improve quality, we all have to do what is within our power to improve health, improve care, and control costs.

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