In perhaps no other country is there a greater abundance of data about health care than there is in the United States.  And in perhaps no other country is there more confusion as to what’s really going on.

Take the recent report by powerhouse actuarial firm Milliman (disclosure:  Best Doctors uses Milliman for actuarial work).  It’s a fascinating report with some of the best information on American health care there is.

The major take-away:  U.S. health care costs continue going up.

But when people start interpreting the data, well, that’s where the trouble starts.

For example, NPR reports on why costs are going up:

For three straight years, outpatient care has led all other categories of care in cost increases. Ninety percent of the increase is in more types of care being delivered in outpatient settings.

Factually, of course, this is correct.  More and more care is being delivered in outpatient settings.

But it’s not by accident.

In an effort to cut costs, hospitals and doctors, pressed by private and public payers, have been systematically moving what was once in-patient care into outpatient settings.  It’s why more and more surgeries are being done on a same-day basis, why diagnostic studies are increasingly done at private centers and not inside of hospitals, it’s why ambulatory care centers are one of the fastest growing segments of the health care economy.

Which raises the broader point.

The American health care economy is so big, complicated and yes, dynamic, that it is difficult to make simple conclusions about it.  Causes get lost in their effects, and the success of ideas to reduce health care costs – like doing more outpatient care – end up being called key drivers for rising costs.

On the heels of its efforts to create a federal regulator for health insurance, Congress is laying the foundation for a federal regulator for other lines of insurance, too.

A draft of legislation that would create “Federal Insurance Office” was released Friday night.  According to reports:

The new agency would have the power to monitor the insurance industry, including identifying gaps in regulation that could contribute to systemic risk issues. . . . have the authority to preempt state insurance measures; consult with the states on insurance matters; and advise the secretary [of the Treasury] on domestic and prudential international insurance policy issues.

As with health insurance reform, it’s a fancy way of saying to state regulators: there’s a new sheriff in town and his address is in Washington, D.C.

The insurance industry associations are split on whether this is a good thing or a bad thing.  But what do the state regulators think?  Programs of state insurance regulation built over decades are being dismantled, and the state regulators who run them seem to be largely silent.

There’s something else interesting, too.

One of the key justifications for a federal insurance regulator is that there are some insurers that are so important that they are a “systemic risk” to the economy.  The thinking is that these companies are “too big to fail,” and so require the stricter oversight that (apparently) only a federal regulator can bring.  If you recall, the idea was one of the reasons for the massive federal intervention in the financial services and automotive industries.

Some people aren’t so sure that kind of systemic risk can exist in the insurance industry.  But even if it can, consider this: as a way of justifying federal regulation,  “systemic risk” is fast becoming the “interstate commerce” of the 21st century.

Following my earlier webinar, I said I would be doing a series of Q&A’s with benefit executives from some of the country’s most innovative companies.  The first one features the insights of Delia Vetter, Senior Director of Benefits of EMC Corporation. She shared her views on employee benefits, health care IT, and how an important company like EMC thinks about the hottest topics of the day.

I think you’ll find her thoughts very interesting.

Delia Vetter, Sr. Director of Benefits, EMC

Evan:  What is EMC’s philosophy on healthcare for its employees?  Do you see it as a burden, just another part of the benefits package, or a competitive advantage in the marketplace?

Delia:  To be competitive in the marketplace, you have to offer a good benefits package. Our philosophy and strategy is to manage costs through better overall health management.  We look to create a culture of health—a healthy environment and behavior that’s beneficial to the employee’s health. Additionally, we make a concerted effort to re-educate employees across the healthcare spectrum through advanced technology and a multitude of programs that are employee/patient centric.

Evan: So when you talk about education, is employee health and wellness an issue?  What works and what doesn’t work to address that?

Delia: We don’t do arbitrary benefit programs. We use data on the aggregate, so we understand the health of our population and how much we spend for each disease and situation. We are data rich. So we understand to the nth degree the types of programs our employees need. We know the top 10 diseases, the top 10 medications, etc. so we can tailor our programs to the population that needs them the most.

We are constantly inquiring about our population’s needs. One example is an autism program where we brought in an expert to speak to employees. After the program was completed, employees gathered and formed a support group. This shows how benefit programs not only help build community within your company, but also build sub-sets of community. Over the past seven years we have made it a goal to create the right culture. Yes, we can offer health plans. Big deal. You negotiate, you roll out the health plans, and you’re done. However, the part that’s the most powerful is to develop the right programs and culture so you really create an environment of health management.

Evan:  How big of a problem are health care costs for EMC?  Given how data rich you are I bet you have some sense of what drives those costs.  Do you have programs that have worked to control costs?

Delia: Costs are an issue for everyone. Our goal is cost containment through managing the health of the workforce, not from shifting costs.  We are managing cost containment through good health management and the use of technology for education.  We also offer personal health records (PHRs) that stay with employees. With the help of programs like Best Doctors and others that create a healthy workforce, we can take a holistic view in managing the health of our workforce. As a result, we have contained costs and are way below the national average. We are able to contain costs through the use of technology and integrated, targeted programs that meet the needs of employees.

It is critical to educate your population, not just about benefits, but also about healthcare as a societal and corporate issue; as a personal issue.  You have to educate them on quality and better outcomes.  We’ve been on that path for seven years.  When you look at the plan President Obama has on the table, it’s very much in line with what we are already doing.  This big transformation that’s being discussed in the media and in blogs will happen when employers start looking at managing corporate assets and lives, not managing the structure of a plan.

Evan: Now, at the level of the individual employee, are there common concerns you hear about the health care system?  Is it cost?

Delia: The most common concern we hear is how to navigate through the healthcare system and how to understand it.  Employee issues are not about access. It’s more about “where do I turn if I have an issue or don’t understand what to do.” That’s the most common concern or complaint. As an employer, we are constantly thinking about and discussing what types of programs can we offer to help.

In addition, increases in prescriptions or other costs are of concern. However, we have not cost shifted, so our employees appreciate that.  We educate them about the true cost of healthcare. Our PHR helps us educate employees in order to get them past entitlement and help them understand the real cost.  So within the PHR, the employee inputs the healthcare services they received, or the prescriptions they filled. It calculates for them the real cost of care with full transparency.  Then we show how much the employee paid out of pocket.  When they see that, there is a whole new level of appreciation.  Once employees make that connection, they really appreciate the benefits they are provided.

Evan: What are the big trends in the next 2-3 years as it relates to employee benefits and health care?

Delia: We should look towards the Obama Administration as they start to push employers to become more focused on managing workforce from a lifestyle perspective. Additionally, employers absolutely need to invest in technology that drives consumer behavior like PHR.  So over the next six months, I think there will be a shift in thinking.

When it comes to employee health, employers typically don’t worry about it. Their mentality is, “this isn’t something I should worry about. Let the health plan worry about that.” Well, that’s antiquated thinking.  As benefits professionals, we impact the bottom line.  You can’t let someone else manage your dollars. You need to take matters into your own hands. It’s about you as a professional, managing your business and managing your funds. Your health plan is a good partner, but they should not be driving cost efficiency. Employers need to take that on. I think that’s the big shift we’ll see very soon.

Evan: With this and all the other things happening in health care are you planning any big changes?

Delia: What we’re focused on now and what we will be focused on in the future, is the next generation of personal health records.  In terms of plans and plan design, I don’t foresee any changes. We need to continue to illustrate to employees that health benefits are a shared accountability. As a reward for that, we’ll keep things static.

Our focus is on evolving the personal health record to help employees better manage their care and navigate through the system.  PHRs today gather a lot of information like lab tests and help us eliminate redundant tests. Imaging will also be big addition to the PHR. We’re looking to eliminate costs by eliminating waste in the system; creating a system that is patient friendly or patient centric.  It costs valuable time and money for an employee to participate in an inefficient health system. Why subject yourself to more blood work or another x-ray when it’s all there in your personal health records? In short, managing your personal health should be as easy and hassle-free as managing your online bank account. At EMC, we look at our employees as critical assets to our success and in order to be successful, we need to keep them happy and healthy.

A poll released last week was billed as showing that “Employer-Based Health Care ‘Not Sustainable’.”

But is it really true?

To answer, you have to realize that there isn’t a solitary system of “employer-based” health care.  In fact there are at least three very different kinds.  And while at least one is deeply troubled, the others are actually engines of innovation in health care cost and quality.

You can divide American businesses into three categories (all data from the U.S. Census Bureau):

• Smaller businesses.  Companies with 1-500 employees.  These companies employ some 55 million Americans.

• Mid-size businesses.  These companies have between 500 and 2,500 employees, and employ about 14 million people.

• Large businesses, with more than 2,500 employees. These companies employ about 43 million people.

Put together, these groups may provide coverage for 200 million Americans, if you assume that many of these employees have their families covered in this way.  But even though they cover most Americans, the experience of each group is very different.

Smaller businesses don’t always offer health insurance, but when they do, they are what is called “fully insured.”  They take no insurance risk themselves, but buy an insurance policy and give that policy to their employees.  They have little ability to negotiate rates with insurers.  The rates they pay change (i.e. go up) each year based on the loss experience of the other smaller businesses covered by the insurer.  Sometimes the insurer may charge more based on that company’s experience during the year, too.

The cost of insurance for these groups is a burden, and it’s especially bad if you’re a very small employer or are an individual.  There isn’t much you can do about it if you’re in this category, other than make employees pay more of the premium, or buy more limited policies that cost less – the market is not very competitive.

Next, there are those employers with between 500 and 2,500 employees.  Many of these are fully insured, but the bigger they are, the more likely they are to be creative about their health coverage.  This typically means buying what is knows as “stop loss” coverage.  In stop loss, the employer “self insures” for health costs up to a certain level, and then buys insurance for everything above that.

Here’s how that works.  Imagine an employer pays $1 million a year in health insurance premiums and has claims each year that average about $500,000.  A clever employer might understand that no matter what happens it is going to pay at least $500,000 a year in health costs.  So why not just pay for everything up to $500,000 yourself and buy insurance to cover costs above that amount?  Insurance for that is much cheaper- for this example, let’s say it costs $250,000.  That means the employer’s cost is now only $750,000 ($500,000 plus the $250,000 premium) as opposed to $1 million.

But it gets better.  If for some reason the employer only has $450,000 in health expenses, that extra $50,000 goes right into the employer’s pocket.  For these groups, programs to promote employee health and well-being are increasingly attractive, because any reduction in medical losses can mean more profit for the employer (and a chance to negotiate lower stop loss rates with the insurer).

Above 2,500 employees, and especially above 5,000 employees, these trends accelerate.  By a certain size, these companies completely self-insure, which means they don’t buy health insurance at all.  To be sure, they hire a health insurer, but mainly to get access to the health plans’ negotiated rates with doctors and hospitals.  Large employers are very sophisticated about health care expenses, and very creative and innovative in their approaches to them.  In fact, some of the most  interesting innovations in health care are happening right now at large employers across the country.  These employers have the ability to do something about the cost of care – and don’t need Congress to do it for them – so they just do it.

So what does it all mean?

There’s a great desire to simplify the problem of health care, what I’ve called McAllenization.  But like with many things, the more you learn about something the more humility you ought feel about proposing sweeping changes to it.

And so I hope to help in some small way with that.  If you listened in last week for the webinar I did with EMC, you learned something about what one very innovative American company does with its health care benefits (we’re going to post the audio and slides soon).

In the next few weeks, I will post on the blog a series of Q&As with other leading U.S. companies on the innovative things they are doing with employer-based health care.  They all are having a real, meaningful impact on the cost and quality of health care, and policy makers would do well to hear these important stories.

Writing in the New Yorker, Atul Gawande says we need to get away from focusing on who writes the checks in health care.  Instead, we need a health care transformation like that which the Mayo Clinic began some decades ago:

The core tenet of the Mayo Clinic is “The needs of the patient come first”. . . . Mayo promoted leaders who focused first on what was best for patients, and then on how to make this financially possible. . . . .No one there actually intends to do fewer expensive scans and procedures than is done elsewhere in the country. The aim is to raise quality and to help doctors and other staff members work as a team. But, almost by happenstance, the result has been lower costs.

What is “core tenet” of national health care reform?

The President says it’s still cost containment:

But I also know that nearly a century after Teddy Roosevelt first called for reform, the cost of our health care has weighed down our economy and the conscience of our nation long enough. So let there be no doubt: health care reform cannot wait, it must not wait, and it will not wait another year.

The trouble is, we’ve been trying to control costs for 30 years, and haven’t even come close.  Meanwhile, our elevation of cost containment as our primary goal has distorted our system, creating problems like:

• More than half of doctor visits feature less than 15 minutes with the doctor

• Rates of deadly errors are as high now as they were in 1999

• Americans may be as unhealthy as they have ever been

Gawande is right when he calls the cost of health care a “conundrum.”  So, rather than rushing to put in place more cost containment – which decades of experience say won’t work – we should recognize that no matter what we do, health care is going to be expensive.  The more important question is this: what do we want our health care system to do?

Do we want it to be a giant cost-containment machine?

I don’t think so.  I think we want our system to be focused on making sure each patient is able to get the right care.  Like the Mayo Clinic system, our health care system ought to focus first on what is best for patients, and then on how to make this financially possible.  Maybe that this sort of system is more expensive than the one we have now, but at least we would be getting what we wanted for our money.

But if the experience of the Mayo Clinic is any guide, it might,  almost by happenstance, lead to lower costs.

I’m attending the annual meeting of the Associated Industries of Massachusetts this morning.  Some good speakers – I will update here and on twitter any interesting insights, especially if there’s anything on health care.

UPDATE: I don’t think anyone can predict the future of the economy.  After listening to a long panel discussion, my only conclusion is:  Every day that goes by, we’re a day closer to the recovery!

I also learned is that 70 of the 351 cities and towns in Massachusetts don’t have broadband internet access.  That’s pretty amazing in a state as technologically advanced as ours is.  The Lieutenant Governor said the state is spending $40 million to fix this, but there’s no clear time line on when that will be done.

There was no discussion of health care reform.

I was surprised, because the panel was made up of a major employer, the Lieutenant Governor, an economist, and a professor of public policy.  And the audience was made up of dozens of employers of all sizes from across the state.  Plus we live in the state that has done the most comprehensive health care reform of any and we have a Senator at the forefront of this discussion nationally.

Is health care reform not as hot of a topic as the media would have us believe?

Our survey of employer attitudes about health benefits told us a lot about what employers are doing, and what they want to stop doing.  Here are 5 things employers want to stop doing:

1. Stop paying for bad employee lifestyles. Bad lifestyle choices are big drivers of expense.  Our study shows that employers want to stop being solely responsible for those costs.  More than half (54%) are adopting programs that use incentives — and penalties — to encourage employees to take responsibility for their health.  A study released last week by Watson Wyatt showed similar results.

2. Stop expecting health plans to deliver customized programs. Health plan offerings are popular — there is a nearly 90% adoption rate for core health plan services.  But employers increasingly turn to outside vendors for customized programs to fix bad employee health habits.  Health plans are looked to for value-based insurance designs, with 40% of employers looking to implement VBID or similar programs.

3. Stop paying for programs that don’t work. Fifty-five percent of employers said they were reducing the number of health benefits they offer or focusing on those with a proven ROI.  With 59% saying cost savings are their top priority, it makes sense that they cut costs where they don’t see savings.

4.  Stop confusing employees with too many benefit offerings. Employers have in place 10 or more distinct health benefits, with 60% identifying at least five major programs (EAPs, nurse help lines, health coaching, wellness, etc).  Employers want to implement a single point of contact to navigate their programs, with adoption rates of these services expected to triple in the next 2 years.

5.  Stop thinking bad medical outcomes are because of bad luck. Sixty-five percent of employers said their employees struggle with making the right treatment decisions when sick.  Thirty-five percent said making sure their employees have better quality care was a high priority, with 38% saying they wanted to do more to empower employees to make good health care decisions.

At Best Doctors, we commissioned a study on employer attitudes about health benefits, surveying senior benefits leaders at 100 US companies of at least 5,000 employees.  The results reveal deep dissatisfaction among employers with health care costs and the programs they use to control them:

• 59% of employers ranked cost reduction as their “top priority” in evaluating health benefits;

• 46% said that in the current economic climate they are planning more cost-shifting to employees;

• 41% said they were planning to or were currently renegotiating premiums with their health plans;

Seventy-seven percent reported having one or more disease management program, nurse help line, EAP, case management program, or health risk assessment program.  While these programs are designed to save money, employers were not convinced they work:  55% said they were either reducing the number of these programs or focusing on those with a proven ROI.  The most highly regarded were programs of “navigational advocacy” – giving employees one number to call to orient them through their benefits and the health care system – with rates of adoption tripling over the next 2 years.

We have all read recently about the threat of possible closure faced by the Boston Globe.  A number of Boston-based bloggers who care about the continued existence of the Globe have banded together in conducting a blog rally.  We are simultaneously posting this paragraph to solicit your ideas of steps the Globe could take to improve its financial picture:

We view the Globe as an important community resource, and we think that lots of people in the region agree and might have creative ideas that might help in this situation. So, here’s your chance. Please don’t write with nasty comments and sarcasm: Use this forum for thoughtful and interesting steps you would recommend to the management that would improve readership, enhance the Globe’s community presence, and make money. Who knows, someone here might come up with an idea that will work, or at least help. Thank you.

The Globe is at its best with its original, local reporting, many of its journalists are among the best in the country.  It would be a terrible loss for the Globe to disappear.

Dr. Val blogs today about cash-only physician practices, as well as other concierge-style practices.

They’re both emerging models of primary care in which the doctor basically opts out of the traditional insurance system. By doing that, doctors typically see fewer patients, spend more time with each patient. They can even make more money per patient, by getting rid of the overhead otherwise tied up in doing medical billing. It sounds great, and it is, for patients fortunate enough to be in a practice like that. But it has its share of critics, who worry that these kinds of practices leave behind those who are less well-off.

But what if a doctor set up a low-cost concierge practice, catering to people without insurance? Wouldn’t that be a great idea?

One doctor tried it, and the state of New York tried to shut him down.

The doctor’s name is John Muney, and he created a program in his practice where patients pay $79 a month and get unlimited office visits, including certain tests and some in-office surgeries. It doesn’t cover treatment or other specialists, and is targeted at people who have no health insurance. The state of New York says that Dr. Muney’s patients actually bought insurance policies from him, and he needed a license for that. In the state’s view, every time he collected the $79 monthly fee — or even solicited people to join — he was breaking state insurance law.

New York is not the only state to look at this issue. Earlier this year, the Maryland Insurance Administration released a report (.pdf) in which it said programs like these might run afoul of state insurance law if fees charged in the program exceeded the “market value” of the services offered. The regulator recommended other restrictions on what services could be offered, and warned that programs that didn’t meet these criteria might be considered insurance. By contrast, in Washington State, there has been a law on the books since 2007 (.pdf) that expressly allows for concierge practices. Interestingly, in the run-up to the passage of that Washington law, it was the state’s largest health insurers who were most vocally opposed to retainer-based primary care practices.

At last report, Dr. Muney was trying to negotiate a deal with the state to let him continue. It will surely be interesting to see how the politics of his conflict plays out — he has called on Governor Patterson and President Obama to help him change the law in New York. While most other states haven’t taken up this issue, given the increasing popularity of this practice model, expect that they will.