The Battle for Health Care Cost Savings

I’ve been following this case for about a month now. It’s a good demonstration of how cutting health case costs is going to be harder than it seems.

Case against Blue Cross shows difficulty of cutting health costs

You see, if you cut costs – even in ways unrelated to patient care, like becoming more efficient with paperwork – you are still cutting into someone’s revenue stream.

If you spend $1 less on health care – no matter how noble or justified that reduction is – it means that someone, somewhere, is earning $1 less, and they’re likely to try and protect that revenue. A lot of companies have gotten rich off inefficiency. Indeed, in some cases, entire market segments exist to exploit inefficiency, and they’ll employ every ounce of lobbying, exploitation, coercion, and loopholing they can muster to preserve it.

In this case, an upstart company presented Ford with a way to cut their physical therapy costs by 50%. A great thing, right? Well, it appears that the incumbent provider did not take kindly to this.

Court records allege Blue Cross used its position as the state’s dominant insurer to try to crush TheraMatrix as it worked to also sign up Chrysler and General Motors. A USA TODAY review of hundreds of pages of e-mails and internal documents that are part of a lawsuit TheraMatrix filed against Blue Cross indicates that TheraMatrix’s efforts to carve out a niche market in managing outpatient physical therapy costs was seen as a threat by officials at Blue Cross and by some Michigan hospitals.

[…] Court records depict Blue Cross – a non-profit created under Michigan law to provide affordable health care – as working with a major hospital to stop expansion of TheraMatrix’s program. They also reveal that Blue Cross barred TheraMatrix from the insurer’s medical provider network, which covers most Michigan patients.

There are two sides to every story, of course, but I’ve read some emails submitted as evidence in this case, and it seems quite clear to me that Blue Cross and its network was just not going to tolerate a threat to its revenue, no matter how beneficial cuts would be to the citizens of Michigan or their corporate clients.

For this reason, I hate when politicians make simplistic claims about how they’ll cut health care costs by making health care “more efficient” (somehow, Democrats “found” billions of dollars for the new health care bill from vague promises like this). This seems hopelessly naïve to me. Calling it “efficiency” doesn’t change the fact you’re taking revenue from someone who will fight to keep it.

In reality, this is going to be much harder than anyone thinks. Each percentage in cost reduction will be gained only through much kicking and screaming, and the progress will probably be so slow that the savings will be immediately eaten up by inflation and rises in other costs.