Blue Promise: Why Are Health Care Costs Rising Faster Than Your Salary?

For most Texans, their most recent pay raise probably wasn’t enough to account for their rising health care costs. Tune in to this episode of Blue Promise to learn more about the single biggest health care issue for most Americans. This conversation is led by guest host Shara McClure, Divisional Senior Vice President of Health Care Delivery at Blue Cross and Blue Shield of Texas (BCBSTX), as part of a Women’s History Month series. It features Marianne Fazen, PhD, CEO & President of the Texas Business Group on Health.  


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What Is Blue Promise? 

Blue Promise is a podcast and online video blog that aims to address complicated health issues with candid conversations from subject matter experts. New editions are published regularly and are hosted by Dr. Dan McCoy, President of Blue Cross and Blue Shield of Texas. 

Show Transcript

SHARA: When was the last time you got a raise? Was it a significant increase? Well. For most Texans it probably wasn't enough to account for your rising health care costs. Tune in to this episode of Blue Promise to learn more about the single biggest health care issue for most Americans. 

(Music Intro) 

SHARA: I'm Shara McClure, Divisional Senior Vice President of Health Care Delivery at Blue Cross and Blue Shield of Texas. I'm sitting in for our President and host, Dr. Dan McCoy. Today we're filming in front of a live audience at the C1 innovation lab in downtown Dallas. It's part of our Women's History Month series where we'll be releasing conversations with female guests who are making an impact in health care. Dr. Marianne Fazen is joining us today. She's the CEO and President of the Texas Business Group on Health. 

We kind of intro the show about the rising cost of health care. You've worked a lot with employers you've studied the data. What is.. what do you see is the single biggest cost driver of health care. 

MARIANNE: don’t think there's a single biggest cost driver but there are several that I can talk about and some that we are able to do something about as employers that are offering their employees’ health care and other things that we can't do anything about. So for example the increase in population in this Texas market is phenomenal. We are one of the highest growth states in the country. That means more people are employed. That means more use of the health care system. So that's one of the challenges driving the costs. The other is the very high, I call it hyper inflated costs of health care. The ah from the provider side particularly this is where to start with when the highest cost health care markets in the country. And that's really frightening and also that's perhaps that's something that we can do something about. And employers are struggling to do something about that. Another big issue or a big cost driver is the provider consolidation that drives a greater market share it drives less competition and it allows providers, hospitals and physician groups to charge more in a in a market where the unemployment rate is extremely low in fact we have one of the lowest unemployment rates in the country. So there we have the employer sponsored health care is driving is costing a lot more because they have to be hiring people they have to be offering health benefits in order to attract and retain and retain these employees. 

SHARA: So that's almost a perfect storm. I mean you described several different market dynamics and all these factors that are affecting afloat employers and their bottom line. And you know that's something you and I have in common that employers are very important to both of us. So the Texas business on Groupon health you're a coalition of employers we serve many employers in this market. So you know I know that they're concerned about talent. What are their trends are they seeing  

MARIANNE: Some of the trends are just managing the cost of health care trying innovative ways to do the better management of the health care. So for example the employers are now spending about an average of about nine thousand dollars per employee. And when you have thousands of employees that's a pretty big chunk of change for the annual health care costs. But more importantly the employers are also trying to control or manage or keep as low as they can, the deductible and the share that the employee has to pay especially for working women who usually don't get paid as high as men get paid when they're earning a wage that is barely rising above maybe 1 percent but the health care costs are just accelerating dramatically and women are also the people who would do the managing of the family care. So it's the perfect storm as you describe but trying to manage that control the amount of deductible or the amount that the employee the employee's share is a real challenge. It's easy to say okay we're just going to raise your deductible that's not a good plan for the employer. They can't most people can't afford to pay out of pocket for that excess cost. 

SHARA: So I think those are very good points especially the point about women being the health care decision drivers in the family. I think there was a study that 80 percent of all health care decisions are made by women and if we're just disproportionately affecting them from a cost stand point then I think we'll probably see them expecting a little bit more so. The Texas Business Group on Health, you conduct studies with employers in studies of costs. What are some of the things that you've found that are unique to the state of Texas. 

MARIANNE: Well we do both studies and educational programs for the employers mostly. Most of our members are the larger employers, midsize and larger and all of them offer health benefits for their for their employees. Some of the things that we found in our studies is that the benefits managers are concerned about employee engagement and how to help them be better consumers of health care because they're as we said the women are the drivers. But this is usually even if the wife isn't employed by the companies she still is making those decisions. And it's it's almost impossible for a person a patient and just an ordinary person to understand the complexities of this health care system. They don't understand where they need to go how they need to where to find care when they need it how much it's going to cost them and so on. So that's one of the big challenges that a lot of employers are trying to address. And one of the ways that they're addressing the… the challenges that employers face and tried to access good health care and cost can cost manageable health care is to hire navigators or to work with their health plan which also provides the care navigators which understands all the benefits, everything that's covered, what's in network, what's out of network, that's where the challenge comes in what's an network was out of network and how much their deductible is going to be. Where to find the best group of physicians for that particular problem and which hospital to go to. So this has been really really helpful I think more companies more and more are hiring or bringing in or using the health plans navigator system. 

SHARA: I like that idea. And you know you kind of think of women we know how to shop right and generally 

MARIANNE: Do we ever! 

SHARA: We know how to shop and when we shop we think of price. Right. I mean just because we're shopping for you know clothes or groceries doesn't mean we always choose the lowest price but it's something that's part of our decisions. But then in a health care situation it's very hard because you're under stress. You might be ill you might be, you're concerned about a loved one and so giving them that extra help in selecting services for quality as well as for price I think can be really valuable. 

MARIANNE: You mentioned about the quality so it isn't really only about price and cost and when you're in a dire situation or you think you're in a dire or emergency situation as a patient everything goes out the window, cost everything. I want care now and as fast as I can. 

SHARA: and I want the best 

MARIANNCE: And I want the best. And so the expectation is that the care is really the best because there's no way for an ordinary person ordinary patient to differentiate between high quality or low quality or mid-level quality. So we really rely on the health plan to manage that side of it. We hope that the Cross Blue Shield for example is the one that will evaluate the practice patterns of the physicians and let the put them in the network and keep those good physicians and those good hospitals that have good track records low admission readmission rates and so on. Keep them in the network and then the patient is much more assured that they're going to get the quality care even though they can't differentiate quality. 

SHARA: I think that's very good advice. Marianne, So getting back to the employers. We look at total health care costs but it's a shared cost. I mean you mentioned deductibles as you mentioned employers are concerned about the cost hitting their bottom line but they also have to balance the costs that comes out of their employees pocket. So what does that share look like. What's the what's the typical cost absorbed by the employers and the top costs that trickle down to the employee. 

MARIANNE: That's a good question. And often the employee has no idea what really the cost is being borne by their employer. So the actual just to give you some round numbers the cost is about nine thousand dollars to the employer to pay per employees, the typical single person, single individual coverage deductible is about two thousand dollars but the employee is also paying about 25 percent of that nine thousand dollar premium. So add that up. So before the employee ever can have the insurance kick in they have to meet the deductible. They also have co-pays and they have the coinsurance part of it.  It's just.. it's mind boggling how much the employee has to pay out of pocket. What's even more mind boggling when you think of what the employers are paying per employee. So if we've they say now a recent study came out and showed that for a family of four. And I was just talking about the individual employee for a family of four. It's just completely out the window as some crossed the twenty thousand  dollar mark for just the premium. And then of course the deductibles for a family of four it might be six thousand dollars. 

SHARA: I saw that same study and if you think of if you think of costs being up in the twenty thousand dollar range that's like buying a new car every year. I don't buy a new car every year do you? 

MARIANNE: No, my about nine years old as matter of fact. But get this, the wages are not going up. So the average wage for just an ordinary workers about fifty one thousand dollars. If you're paying twenty thousand dollars or more for your family coverage that's almost a quarter more than 30 some percent of your entire annual salary coming out. 

SHARA: And that's absorbing cost that might otherwise go to salaries or otherwise go to help with disposable income. 

MARIANNE:  It's been one of the reasons why the salaries are being kept fairly low and the increases are not very high.  

SHARA: So that nine thousand dollars that you described on average per employee, what do you see is the dominant piece of that or the do not dominant cost. 

MARIANNE: Well a lot of it is the coverage that they have for because most of them have are in the according to the Accountable Care Act. They have to cover a lot of things that if they if for example men will need all of the maternity care regardless whether they're married or not married. Children need to be covered until they're age 26 which I think is a good thing. But so there are many rules and regulations that were..didn't they did not have to have before. The other side of it is that the Medicare pays a very low rate for all of the care the same care that the employees are getting from their providers. And Medicare's rate is extremely low so the hospitals and physicians shift that cost over to the employers and that's the biggest driver of that nine thousand dollars 

SHARA: So they shift the cost, you know we call that? 

MARIANNE: We call it cost shifting. 

SHARA: We call it shift happens 

(Crowd laughs) 

MARIANNE: Even better. I didn't want to say that but yes indeed. (Laughs) And that really is the crux of the matter for the employer sponsored health care. But again employers are caught between a rock and a hard place on that. They're offering not they're offering health benefits rich health benefits not because of the goodness of their heart. They want to retain and hire the talent that they need in order to stay in business. So it's a very vicious circle on that as long as Medicare pays low, probably… Medicare is interesting, they actually pay what they determine is the actual relative value cost. So for example in the Dallas Fort Worth area the Medicare rate, well, we'll call that a hundred dollars for a procedure in the Dallas Fort Worth area, the rate of hospital charges is 281 percent of Medicare so that means.. 

SHARA: That’s almost three times 

MARIANNE: Almost three times, that's the general average cost of health care to the employer sponsored health care in the Dallas Fort Worth area and in Texas its almost about the same. 

SHARA: So you mentioned that's the average. You mentioned almost 300 percent average. But don't we see variations within that average? So let's talk a little bit about variation for the same service in the same geographic area. 

MARIANNE:  if you would drive north towards North Texas up towards the Oklahoma border what you will see are hospitals, Urgent Care, Emergency Rooms, freestanding clinics all with cranes over them with new hospitals being built. It's a boom area and it's the wage there. The average wage is about sixty nine thousand dollars. The farther north you go because this big high tech companies coming in and paying a lot more, for paying higher salaries. So the.. the problem is that they charge more because they can and the people are willing to pay that money. The employers are willing to pay that because they want to keep as I said low unemployment. They want to keep the talent and hire new talent. 

SHARA: And I think that gets back to when something happens to you, you want the best 

MARIANNE: And you want and so immediate and you want it convenient. So it's interesting though that some of the employers, that some of the larger employers are doing things that the mid-sized and smaller employers can't do and they're actually setting up direct contracts with them or working with their health plan to set up preferred networks, centers of excellence where the employer will pay the entire deductible if the employee will go here for their heart surgery or we'll go here for their knee replacement or so they set up a managed fee for that particular service. 

SHARA:  So one way of getting around costs of a more catastrophic services. There was an article in Becker's Hospital Review this kind of gets back to shoppable service and the variation that 90 percent of the highest spending categories in the outpatient setting are shoppable. All we've talked about navigators we've talked about sharing additional information. What other advice might you have that helps people shop a little easier? 


MARIANNE:  Well, working with the health plan to make sure that they have in the network, groups of physicians that are dedicated and understand will charge only a certain amount or a hospital that will only charge a certain amount so for example a center of excellence or group of high performance physicians. The main surgeries and treatments are for musculoskeletal care. In fact that is for employers one of their highest cost because it's so prevalent and it's exacerbated by the obesity epidemic that is going on in our state especially because the obesity weighs on the back and weighs on your limbs and causes all kinds of back problems and surgery is the first thing that they go to. So we're we're actually trying to control that by exposing how the physicians and physician groups are treating musculoskeletal problems in this particular market. And we're finding out that in fact there's huge duplication there's huge waste, 30 percent of health care is actually due to waste inappropriate care and unnecessary care. So we're trying to control that by exposing that. 

SHARA: Well I think that those are admirable goals now like most insurers we offer an app to our members to help them estimate their costs as a society. So that's kind of a transparency.. transparency initiative that we have. What can be done as a society to help make some of these prices more transparent for consumers. 

MARIANNE: Well first of all there's ah they have to..starting this year the hospitals have to show their prices but of course it's like going to the car dealership. Here's the retail price and here's what you really can pay, and here we can negotiate the rate. So I would think that when ordinary people who need health care look and see what the retail prices at these different hospitals. They will have such a sticker shock. They won't I mean they will be immobilized. I would beIt's an interesting phenomenon that will happen. But the other thing is most patients don't know what to do with that information. They don't know how to interpret it they may know it's a retail price but they say well I've got insurance. So my mind is only my two thousand dollars and whatever my coinsurance is for that. So the it's hard for them to compute. I don't know that transparency is going to solve a problem immediately. I think it's going to be up to employers to really help their employees understand what they're what they're dealing with when they when they're looking at the pricing for health care. I think an app is a great idea. 

SHARA: Dr. Faison I've really enjoyed our conversation and thank you for being part of Blue Promise. And thanks to our listeners for joining us for this episode. Don't forget to subscribe to the podcast or videos from wherever you listen or watch. You can also leave a review which will help people like yourself find this content. Thanks for tuning in to Blue Promise. 

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